As filed with the Securities and Exchange Commission on November 12, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
Antigua Enterprises Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
British Columbia 2329 75-2290165
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
9319 North 94th Way
Scottsdale, Arizona 85258
(602) 860-1444
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office)
---------------------------
L. Steven Haynes
Chief Executive Officer
Antigua Enterprises Inc.
9319 North 94th Way
Scottsdale, Arizona 85258
(602) 860-1444
(Name, address, including zip code and telephone number,
including area code, of agent for service)
---------------------------
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Copies to:
P. Robert Moya, Esq. John Anderson Paul Hurdlow, Esq.
Quarles & Brady Stikeman, Elliott Gray Cary Ware & Freidenrich
One East Camelback Suite 1700, Park Place 4365 Executive Drive
Suite 400 666 Burrard Street Suite 1600
Phoenix, Arizona 85012 Vancouver, British Columbia V6C 2X8 San Diego, California 92121
(602) 230-5500 (604) 631-1300 (619) 677-1400
</TABLE>
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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Calculation of Registration Fee
=========================================================================================================================
Proposed
Title of each class Amount Proposed maximum maximum
of securities to be offering price aggregate Amount of
to be registered registered(1) per share(2) offering price(2) registration fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, no par value...... 3,450,000 $3.56 $12,282,000 $3,721.82
=========================================================================================================================
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(1) Includes 450,000 Common Shares subject to the Underwriters'
over-allotment option.
(2) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of
1933, as amended.
---------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1997
PROSPECTUS
3,000,000 Shares
ANTIGUA ENTERPRISES INC.
[LOGO]
Common Shares
---------------
All of the Common Shares offered hereby are being sold by Antigua
Enterprises Inc. ("Antigua" or the "Company"), other than those shares subject
to the Underwriters' over-allotment option which, if exercised, will be sold by
a shareholder of the Company (the "Selling Shareholder"). See "Principal and
Selling Shareholders." The Company will not receive any proceeds from the sale
of shares pursuant to an exercise of the over-allotment option.
The Company's Common Shares are listed on The Vancouver Stock Exchange
under the symbol "ANE." The Company has applied for quotation of its Common
Shares on the Nasdaq National Market under the symbol "ANTGF." On October 31,
1997, the reported closing price of the Common Shares on The Vancouver Stock
Exchange was C$5.35 , or approximately $3.79 based on the Noon Buying Rate (as
herein defined) on such date. See "Price Range of Common Shares." See
"Underwriting" for a discussion of the factors to be considered in determining
the public offering price.
----------------
See "Risk Factors" beginning on page 8 for information
prospective investors should consider.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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====================================================================================================================================
Underwriting Discounts Proceeds to
Price to Public and Commissions(1) Company(2)
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Per share ................................... $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Total(3) .................................... $ $ $
====================================================================================================================================
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(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Act"). See "Underwriting."
The Company has also agreed to sell to the Representatives of the
Underwriters warrants to purchase up to 300,000 Common Shares
exercisable at 120% of the public offering price per share (the
"Representatives' Warrants"). See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at
$____________, including the Representatives' non- accountable expense
allowance.
(3) The Selling Shareholder has granted to the Underwriters a 45-day option
to purchase up to 450,000 additional Common Shares solely to cover
over-allotments, if any. If this option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Shareholder will be $__________ ,
$_________, $__________ and $_________, respectively. See
"Underwriting."
The Common Shares are offered by the several Underwriters, when, as and
if delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject any orders in whole or in part. It
is expected that delivery of share certificates will be made against payment
therefor at the offices of Cruttenden Roth Incorporated in Irvine, California,
or through the facilities of the Depository Trust Company, on or about
_______________, 1997.
CRUTTENDEN ROTH FERRIS, BAKER WATTS
INCORPORATED INCORPORATED
The date of this prospectus is_____________, 1997
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES: The Company is a corporation incorporated
under the laws of the province of British Columbia, Canada. A majority of the
directors and controlling persons of the Company, certain of its officers, and
certain of the experts named herein, are residents of Canada, and all or a
substantial portion of their assets and a smaller portion of the Company's
assets are located outside the United States. As a result, it may be difficult
for investors to effect service of process within the United States upon certain
directors, controlling persons, officers and experts who are not residents of
the United States or to realize in the United States upon judgments of courts of
the United States predicated upon the civil liability provisions of the federal
securities laws of the United States. There is doubt as to the enforceability in
Canada against the Company or against any of its respective directors,
controlling persons, officers or experts, who are not residents of the United
States, in original actions or in actions for enforcement of judgments of United
States courts, of liabilities predicated solely upon the civil liability
provisions of the federal securities laws of the United States.
THIS PROSPECTUS DOES NOT QUALIFY THE COMMON SHARES OF THE COMPANY OFFERED HEREBY
FOR SALE UNDER THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF
CANADA AND DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY ANY OF THESE SECURITIES IN CANADA.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS
AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON SHARES
ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
Antigua(R), Antigua Sport(R), Antech(R), AII Apparel(R), and the Kachina and
Antigua Sport logos are registered trademarks of Antigua Enterprises Inc. This
prospectus also contains trademarks of other companies.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this prospectus. Unless otherwise indicated, the information contained in this
prospectus reflects (i) a one-for-five reverse split of the Company's Common
Shares effected on June 13, 1997 and (ii) assumes no exercise of the
Underwriters' over-allotment option, options granted or reserved for by the
Company prior to the date hereof or warrants or other securities exercisable for
or convertible into Common Shares. See "Certain Relationships and Related
Transactions", "Description of Securities" and "Underwriting."
Unless otherwise indicated, all dollar amounts are stated in United
States dollars with Canadian dollars designated as "C$." The Company conducts
its business in United States dollars. The noon buying rate in New York City for
cable transfers in Canadian dollars, as certified for customs purposes by the
Federal Reserve Bank of New York, is referred to herein as the "Noon Buying
Rate."
See "Risk Factors" for a discussion of important factors that should be
considered by prospective investors related to forward-looking statements
included in this prospectus.
The Company
Antigua designs, sources, embroiders, and markets men's and women's
lifestyle apparel and casual sportswear under the distinctive Antigua label. The
Company has more than 18 years of experience developing innovative seasonal and
year round collections of apparel for the premium 18-80 year old men's and
women's markets. The Company has developed a strong reputation by offering high
quality, fashion apparel with custom embroidery, screen printing and generous
fit. In addition, the Company believes it holds a competitive advantage by
having the capacity and reputation necessary for quick response to "hot markets"
(such as event-related garments) and corporate impulse orders, so called "at
once" business.
The Company sells its products through three distribution channels:
golf; licensed products; and corporate identity apparel. Antigua designs all of
its apparel to appeal to each of these channels. By selecting styles and color
stories which can be marketed to golf, licensed product and corporate
purchasers, the Company believes that it increases its sales potential and
reduces the risk of obsolescence of any particular stockkeeping unit. The
Company also believes that servicing three distribution channels from one
inventory provides the Company with the additional competitive advantage of
responding quickly to shifting demand in its three distribution channels with
fewer stockkeeping units.
Antigua offers its golf apparel in premium and mid-price market golf
professional shops, country clubs and resorts through a network of independent
sales representatives throughout the United States. Antigua supplies apparel to
more than 40 PGA, LPGA and Senior Tour tournaments, including the Ryder Cup, PGA
Championship, Buick Invitational, Motorola Western Open, Greater Hartford Open,
GTE Suncoast Classic, Bob Hope Chrysler Classic, the Shell Houston Open, Walt
Disney Oldsmobile Classic and Standard Register PING. Antigua golf shirts are
worn by sportscasters during televised NBC Sports golf programs and by a number
of top Tour players.
The Company also offers licensed sportswear and accessories of the
National Football League ("NFL"), the National Basketball Association (the
"NBA") and Major League Baseball ("MLB"). The Company also offers official
apparel under licenses granted by the National Hockey League (the "NHL"), the
National Collegiate Athletic Association (the "NCAA"), Notre Dame and more than
150 colleges and universities. The Company also produces Ryder Cup merchandise
and PGA Championship merchandise through licensing agreements with the
Professional Golfers Association of America ("PGA").
Antigua markets embroidered and screen printed apparel to corporations
for promotional material and has entered into licensing agreements with several
companies, such as the Cadillac Motor Division of General Motors, to sell
apparel bearing the names and logos of these companies and preferred supplier
agreements with other companies, such as Mercedes Benz, that the Company
believes enjoy high consumer awareness.
3
<PAGE>
Business Strategy
The Company's strategic goals focus on growth in brand identity and
sales in all three of its distribution channels. The Antigua corporate strategic
goals are as follows:
* Three Channel Products: All of Antigua's products must be viable in
the three channels of distribution: golf, licensed product and
corporate identity. The Company believes that this strategy affords it
a competitive advantage because the products are moved from one channel
to another as demand shifts. Antigua can be responsive to fluctuating
demand because it has one inventory for three distribution channels,
rather than one separate inventory for each of the three channels.
* Product Mix: Antigua strives to maintain a product mix of 60%
Essentials (i.e., solid color shirts, sweaters, jackets, windshirts,
fleece, slacks and shorts) and 40% All Seasons Collections and the
Spring and Fall Collections (i.e., seasonal designs which reflect a
trending or fashion forward appearance). The Company believes that this
product mix gives Antigua a competitive advantage by positioning the
Company to serve "at once" business and "hot markets" as well as
prebooked fashion collection business. This strategy also allows the
Company a safer inventory risk position in that Essentials generally
have longer life spans in the three distribution channels into which
the Company sells.
* Small and Large Customer Mix: Antigua serves an even balance of large
and small customers and has over 15,000 open accounts (open accounts
include all customers whose credit has been approved by the Company and
who have purchased products from the Company on at least one occasion).
The Company's strategy is to maintain this mix of small and large
accounts to reduce the risk from concentration of accounts.
* All Seasons Products and Competitive Pricing Model: The All Seasons
Collection allows Antigua to offer apparel that is designed to have
greater longevity than the products of its competitors. Because of this
longevity, Antigua can buy large quantities and reduce its per item
cost. With this price advantage Antigua brings its All Seasons
Collection products to market below many competitors' prices. The
longevity (one year availability) of the All Season Collection appeals
to all three channels of distribution the Company serves and allows the
Company essentially to "prebook" business which is ordered later by
customers as "at once" goods. The Company believes that the All Seasons
Collection provides customers the ability to reorder familiar, proven
product without requiring repeat cuts by manufacturers (which may not
be economic) and to include fashion items in their own catalogs with a
reduced risk of offering product which is sold out prior to their
catalogs reaching their end users.
* Sales Expansion in Three Channels: The Company intends to pursue a
strategy of simultaneously increasing sales in all three distribution
channels.
Golf: Antigua will look to grow its golf business by renewing
business relationships with inactive accounts, refining and
providing additional training for its sales force,
capitalizing on its strategic alliances with golf facility
management companies and offering additional product
categories (outerwear, women's and special event products).
Licensed Products: Antigua plans to increase its licensed
products sales by increasing the range of licensed products
offered through key national and regional retailers. The
Company believes that it currently holds a competitive
advantage in this channel because of its product design mix,
the depth of its portfolio of licensed logos and its position
as one of the higher end providers of licensed apparel.
Corporate Identity: The Company believes that corporate
identity products provide an important growth opportunity for
the Company. Antigua seeks to add to its corporate identity
business by substantially increasing its sales force and
expanding its direct mail activities. The increasing trend of
casual dress in the workplace will increase opportunities for
the Company as consumers wear more lifestyle apparel,
embroidered and screen printed identity apparel.
4
<PAGE>
Company History
Antigua Enterprises Inc. ("AEI") was incorporated under the laws of the
province of British Columbia on December 9, 1986 as Fair Harbour Mining
Corporation and changed its name to Fair Resources Group Inc. on December 17,
1991. On August 12, 1992, Fair Resources Group Inc. acquired Southhampton
Enterprises, Inc., a Texas corporation ("SEI") in a transaction which left the
former shareholders of SEI with approximately 75% of the issued and outstanding
share capital of the Company. To reflect the change of ownership and the shift
in the business of the Company (see "Business"), the Company changed its name to
Southhampton Enterprises Corp. ("Southhampton") on December 2, 1992, and the
Common Shares began trading on the Vancouver Stock Exchange (the "VSE") under
the symbol "SOH." Southhampton, through SEI, has operated a screen printing
business in Dallas, Texas since 1993. On June 13, 1997, Southhampton effected a
consolidation, or reverse split, of its Common Shares (pursuant to which
shareholders received one share for every five shares) and changed its name to
Antigua Enterprises Inc. On June 16, 1997, Southhampton, through SEI, acquired
(the "Acquisition") The Antigua Group, Inc. ("AGI"). In connection with the
Acquisition, the Company changed its VSE trading symbol to "ANE," and the VSE
redesignated the Company as an advanced company (a category of reporting company
previously referred to as a senior board or senior listed company). See "The
Acquisition and Related Financing."
The "Company" or "Antigua" refers to Antigua Enterprises Inc. and its
consolidated subsidiaries. The Company's principal executive offices are located
at 9319 North 94th Way, Scottsdale, Arizona 85258, and its telephone number is
(602) 860-1444.
5
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The Offering
<S> <C>
Common Shares offered by the Company ......... 3,000,000 shares
Common Shares to be outstanding
after this offering .......................... 7,338,365 shares (1)
Use of Proceeds .............................. The net proceeds from this offering will be used to repay or secure
approximately $14.5 million of indebtedness incurred in connection with
the Acquisition and for working capital and other general corporate
purposes. See "The Acquisition and Related Financing" and "Use of
Proceeds."
Proposed Nasdaq National
Market symbol ................................ ANTGF
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- ----------------
(1) Includes 3,692,209 Common Shares issued and outstanding, 646,156 Common
Shares for which the Company has received consideration and is
committed to issue but has not yet issued and 3,000,000 Common Shares
offered hereby. Excludes 4,336,770 Common Shares underlying warrants,
300,000 Common Shares underlying the Representatives' Warrants and
517,000 Common Shares underlying options to employees and Directors.
Also excludes 1,146,000 Common Shares into which Convertible Preferred
Shares Series A (the "Series A Preferred") may be converted upon
payment of a premium increasing over time and 1,858,954 Common Shares
into which two convertible debentures may be converted upon payment at
specified exercise prices. See "The Acquisition and Related Financing,"
"Use of Proceeds," "Management -- Executive Compensation," "Certain
Relationships and Related Transactions," "Description of Securities,"
"Shares Eligible for Future Sale" and "Underwriting."
Summary Financial Data
(in thousands, except per share data)
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Three Months
Year Ended December 31, Ended March 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
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Statement of Operations Data - The Antigua
Group, Inc. (1):
Net sales ................................ $ 31,279 $ 32,019 $ 31,794 $ 31,403 $ 33,510 $ 6,455 $ 9,219
Gross profit ............................. 10,207 10,454 6,290 10,577 11,019 1,873 3,268
Income (loss) from operations ............ 2,166 1,655 (3,639) 1,751 1,577 (196) 803
Net income (loss)(1) ..................... 1,782 1,192 (4,328) 740 620 (470) 196(2)
</TABLE>
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Six Months Ended
Year Ended December 31, June 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
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Statement of Operations Data - Antigua
Enterprises Inc:
Net sales ................................ $ 131 $ 404 $ 1,793 $ 1,843 $ 2,858 $ 1,257 $ 2,722
Gross profit ............................. (22) 73 124 144 595 201 898
Income (loss) from operations ............ (389) (616) (828) (1,068) (652) (421) (851)
Net income (loss) ........................ (383) (645) (912) (1,094) (722) (420) (1,988)
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6
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Year Ended Six Months Ended
December 31, June 30,
---------------- ----------------
1996 1997
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Statement of Operations Data - Company Pro Forma:
Net sales ............................................ $ 36,368 $ 20,903
Gross profit ......................................... 11,615 7,342
Income (loss) from operations ........................ 520 1,207
Net income (loss) .................................... (316) 479
Adjusted pro forma net income (loss) per share ....... (.04) .06
Adjusted pro forma weighted average shares outstanding 8,427,938 8,599,832
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June 30, 1997
------------------------------------
Actual Pro Forma(3)
---------------- ----------------
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Balance Sheet Data:
Working capital (deficit) ............................ $(3,293) $1,898
Total assets ......................................... 38,375 37,055
Short term debt ...................................... 14,107 9,503
Long term debt ....................................... 8,045 2,051
Total liabilities, excluding preferred stock ......... 28,656 16,150
Preferred stock ...................................... 3,581 2,070
Shareholders' equity ................................. 6,138 18,835
</TABLE>
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(1) Net income (loss) of The Antigua Group, Inc. ("AGI") does not include
any provision for income tax because AGI operated as an S Corporation
prior to the Acquisition.
(2) Includes an extraordinary charge of $354,000 from early extinguishment
of debt.
(3) On a pro forma basis, as adjusted to give effect to the application of
the net proceeds of this offering in the manner described in "Use of
Proceeds." See "Unaudited Pro Forma Consolidated Financial Statements."
7
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, prospective
investors should carefully consider the following risk factors prior to making
an investment in the Common Shares offered hereby.
Limited Capital Resources; Leverage
AEI is principally a holding company whose material assets are its
investments in its subsidiaries. AEI does conduct limited business through a
division but is chiefly dependent on distributions from its subsidiaries to
service its obligations. AEI incurred approximately $12.3 million in debt (net
of discounts) in connection with the Acquisition. The debt is carried on the
financial statements of AGI because the lenders require payment primarily from
AGI. After giving pro forma effect to this offering and the application of the
net proceeds therefrom, approximately $10.0 million of that debt will be repaid,
and the Company has the right to cause conversion of the remaining debt into
Common Shares. AGI will still have approximately $8.4 million of indebtedness
(including the line of credit and assuming conversion of the convertible debt),
and AEI, on a consolidated basis and after giving pro forma effect to this
offering and the application of the net proceeds therefrom, will have
approximately $9.9 million of indebtedness (assuming conversion of the
convertible debt and including $6.2 million on a revolving line of credit),
representing 49.5% of total capitalization (or 18.4% of total capitalization
excluding the revolving line of credit). The Company believes that, after the
application of the net proceeds from this offering, cash generated from the
operations of AGI will be sufficient to meet AGI's remaining obligations and to
fund its operations for the next twelve months. However, AGI's borrowing
agreements prohibit AGI from making payments to AEI except as needed for
scheduled principal and interest payments on AEI's debt obligations to AGI's
former shareholders, and the operations of SEI provide AEI with limited other
resources. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." As part of the terms of the Acquisition the Company
agreed to pay Mr. Dooley additional cash consideration in an amount currently
estimated at $700,000 (less an advance of $75,000), to be paid in four quarterly
installments. The terms of AGI's borrowing agreements do not permit AGI to make
payments to AEI to satisfy this obligation to Mr. Dooley. See "The Acquisition
and Related Financing." The first installment was due on September 16, 1997. AEI
was unable to make the entire payment at that time but such obligation has since
been paid in full. AEI will be required to pay Mr. Dooley approximately $150,000
on December 16, 1997, as the second of the four quarterly payments, and would
currently be unable to make that payment with cash generated from operations of
SEI. The terms of the Acquisition accelerate payment of any amount remaining on
the approximate $700,000 obligation to Mr. Dooley upon certain securities
offerings of the Company, and the Company anticipates satisfying such obligation
from the net proceeds of this offering. See "Use of Proceeds." AEI has also
defaulted on payment of an approximately $100,000 obligation to Sea/Q of
America, Inc. ("Sea/Q"). Sea/Q commenced suit to recover this amount but has
agreed not pursue this claim until after January 15, 1998, in consideration for
the Company having caused the transfer of warrants to Sea/Q. The Company
anticipates satisfying the obligation to Sea/Q from proceeds of this offering.
See "Use of Proceeds" and "Business - Legal Proceedings." If the Company were
unable to meet the obligations to Mr. Dooley and to Sea/Q with net proceeds of
this offering, the Company would need additional financing to satisfy the
obligations, and there can be no assurance that such financing would be
available, or, if available, that such financing would be on terms favorable to
the Company.
Absence of Combined Operating History
The Company was incorporated on December 9, 1986 in the province of
British Columbia as Fair Harbour Mining Corporation and changed its name to Fair
Resources Group Inc. on December 17, 1991. On August 12, 1992, Fair Resources
Group Inc. acquired Southhampton Enterprises, Inc., a Texas corporation ("SEI").
On December 2, 1992 the Company changed its name to Southhampton Enterprises
Corp. ("Southhampton") and the Common Shares began trading on the Vancouver
Stock Exchange (the "VSE") under the symbol "SOH." Through SEI, the Company
operates a screen printing business in Dallas, Texas. The Company incurred
operating losses of $.9, $1.1, $.7 and $.9 million in 1994, 1995, 1996 and the
six months ended June 30, 1997, respectively. On June 13, 1997, Southhampton
effected a consolidation, or reverse split, of its Common Shares (pursuant to
which shareholders received one share for every five shares) and changed its
name to Antigua Enterprises Inc. and its VSE trading symbol to "ANE." On June
16, 1997, Southhampton, through SEI, acquired (the "Acquisition") The Antigua
Group, Inc. ("AGI"). On a pro forma basis, revenues of AGI comprised 95.0%,
94.5%, 92.1% and 94.8%, respectively, of the Company's total revenues for the
years ended December 31, 1994, 1995 and 1996 and for the six months ended June
30, 1997. Prior to the Acquisition, management of AGI was under the direction of
Thomas E. Dooley, Jr., the founder of AGI. In connection with the Acquisition,
Mr. Dooley ceased having day to day responsibility for AGI's operations and has
agreed to serve as a consultant to the Company for a period of two years ending
in May 1999 and has been appointed a Director and Chairman of the Board of AGI.
While a management team of seven individuals with as much as 18 years of tenure
with AGI will continue to manage daily combined operations in conjunction with
executive management of the Company, there can be no assurance that the Company
will be able to manage effectively the combined operations of SEI and AGI or
achieve the Company's operating and growth strategies. The integration of the
management, operations and facilities of AGI could involve unforeseen
difficulties, which could have a material adverse effect on the Company's
business, operating results and financial condition. See "The Acquisition and
Related Financing." Accordingly, neither the historical results of the Company
prior to its acquisition of AGI nor the historical results of AGI are
necessarily indicative of the results that would have been achieved if
Southhampton and AGI had been operated on an integrated basis or the results of
the Company in the future.
Competition
The Company encounters intense competition in all three of its
distribution channels, much of which is from significantly larger competitors.
The Company considers its main competitors in its golf distribution channel to
be Ashworth, Inc., Izod Club, Polo Ralph Lauren Corporation, Tommy Hilfiger,
Cutter & Buck Inc. and Sport-Haley, Inc. The Company considers its main
competitors in the licensed goods channel to be Nike, Reebok, Starter, Champion
Products Inc. and Vanity Fair. The Company considers its main competitors in the
corporate channel to be Polo Ralph Lauren Corporation, Tommy Hilfiger, the
Dockers brand of Levi Strauss & Co. and the Gear brand of L.A. Gear, Inc.
Competition in these distribution channels is intense and is based primarily on
brand recognition, as well as loyalty, quality, price, style, decoration
(embroidery) capacity, design, service and availability of shelf space in the
golf apparel and licensed apparel distribution channels. The Company also
competes, particularly in its golf distribution channel, with manufacturers of
high quality men's and women's sportswear and general leisure wear, including
Nike, Tommy Hilfiger and Nautica Enterprises, Inc. Many of these competitors, as
with competitors within particular distribution channels, have substantially
greater experience, financial and marketing resources, manufacturing capacity,
distribution and design capabilities than the Company. Increased competition in
the fashion golf apparel market, such as Nautica's recent entry into golf
apparel, from these manufacturers or others could result in price reductions,
reduced margins or loss of market share, all of which could have a material
adverse effect on the Company's business, operating results and financial
condition. There can be no assurance that the Company will compete successfully
with its present or potential competition. Further, recent entries in these
distribution channels by competitors offering apparel comparable to that of the
Company will likely intensify competitive pressures. There can be no assurance
that the Company will be able to maintain market share, to increase its market
share at the expense of its existing competition or that the Company will not
experience pricing pressures as a result of intensifying competition within
these markets. See "Business -- Competition."
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Changes in Apparel Design; Forecasting and Scheduling
Fashion trends in the golf apparel, licensed apparel and corporate
identity markets are subject to rapid innovation and change. Because the Company
typically designs and arranges for the manufacture of its apparel substantially
in advance of sales to customers, there can be no assurance the Company will
accurately anticipate shifts in design trends. Should the Company be
unsuccessful in responding to fashion trends or changes in market demand, the
Company may experience insufficient or excess inventory levels, missed market
opportunities or higher markdowns, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company develops forecasts for each of its apparel products and establishes
production schedules based upon these forecasts in order to build sufficient
inventory to meet expected customer demand. If the Company misjudges market
demand for a particular product, or if shipment delays are incurred from
suppliers, the Company's delivery schedules may be disrupted. The Company has
been required to mark down inventory in the past in order to reduce inventory of
specific styles. In particular, the Company's gross margins were adversely
affected during fiscal 1994 and 1996 as a result of close-out sales of
discontinued garments. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." There can be no assurance that the
Company's forecasts and production schedules will accurately anticipate market
demand or that the Company's results of operations will not be adversely
affected by design trends, changes in the market or other factors. See "Business
- -- Products and Product Design."
Dependence on Licensing Arrangements
Licensed products sales accounted for approximately 42% of AGI's sales
in 1996 and 38% of sales for the six months ended June 30, 1997. The Company's
licensed apparel lines are based on its use of insignia, logos, names, color
schemes and other identifying marks and images borne by its products under
licenses from professional sports leagues, golf organizations, colleges and
universities. The Company relies on these licensors for their right to grant and
maintain licenses and for their ability to preserve the value of the licenses by
promoting and protecting the licensed properties. The Company's licensing
arrangements are non-exclusive and expire at various times between December 31,
1997 and July 31, 1999 and, generally, allow the licensor to terminate the
license on short notice. Historically, the Company's licenses have been renewed,
and none have been terminated. Non-renewal, termination or modification of a
material license, in particular the Company's license from the NFL, would have a
material adverse effect on the Company's financial condition and results of
operations. There can be no assurance that the Company will continue to be able
to maintain or renew its licenses or that the licensors will not grant more
favorable licenses to competitors. See "Business -- Overview -- Licensed
Apparel."
The Company's licenses limit the types of product, which limits may be
modified from time to time, that may be sold under the license. Accordingly, the
Company may be limited in its ability to respond to changing market demands.
Royalty rates under the licenses have generally been rising over the past
several years, and the Company expects them to continue to rise. Although the
Company believes that it has been able to offset the impact of increasing
royalty rates, there can be no assurance that the Company will continue to be
able to do so. Any inability to offset royalty rates would reduce current
margins, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
Dependence on Foreign Suppliers and Outside Contractors
The Company obtains its raw materials from third party independent
suppliers, nearly all of which are foreign. The Company does not have formal
contracts with any of its suppliers or contractors and does not anticipate
entering into such contracts in the future. Because the Company does not have
formal contracts for mill production or for cutting and sewing of products, the
Company competes with other companies for production capacity. The Company
believes that it has good relationships with its principal vendors. However, in
the event any of the Company's suppliers or contractors are unable or unwilling
to ship the Company's products in a timely manner or to continue to manufacture
the Company's products, the Company would have to rely on other current sources
or identify and qualify new vendors. In such event, there can be no assurance
that the Company would be able to qualify such vendors for existing or new
products in a timely manner or that such vendors would allocate sufficient
capacity to the Company in order to meet its requirements. Delays in shipments
to the Company or inconsistent or inferior apparel quality may adversely affect
the Company's relationships with its customers and independent sales
representatives. Although the loss of major suppliers or contractors, and
resulting delays, could have a significant adverse effect on the Company's
immediate operating results, the Company believes alternate sources of fabric
and cutting and sewing capability for most product categories are available at
comparable prices and that it could replace these vendors without any long-term
adverse effect on the Company. Should the Company experience significant
unanticipated demand, the Company will be required to significantly expand its
access to manufacturing, both from current and new manufacturing sources. There
can be no assurance that such additional manufacturing capacity will be
available on terms as favorable as those obtained from current sources. See
"Business -- Product Development and Sourcing." Reliance on foreign suppliers
subjects
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the Company to risks including changes in economic policies and political or
labor conditions and could result in the imposition of new or additional
currency or exchange controls. Although the Company contracts to purchase
products in United States dollars, changes in exchange rates could increase the
effective prices the Company pays for its products.
Import Restrictions
The Company's import operations are subject to constraints imposed by
the bilateral textile agreements between the United States and certain foreign
countries. These agreements impose quotas on the amount and type of goods that
can be imported into the United States from these countries. Such agreements
also allow the United States to impose restraints on the import of merchandise
that are not subject to specified limits. The Company's imported products are
also subject to United States customs inspections, which could result in delays
in delivery of the Company's products. While the Company has experienced no
material disruption of its business due to quota or customs restrictions, there
can be no assurance that it will not face such disruptions in the future. A
substantial increase in customs duties, decrease in quotas or inability of the
Company to import its supplies before quotas have been filled could have an
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, the United States and the countries in which the
Company's products are manufactured may, from time to time, impose new quotas,
duties, tariffs or other restrictions, or adversely adjust presently prevailing
quota, duty or tariff levels.
Operations of Foreign Manufacturers
The Company obtains most of its fabric from suppliers in Asia. Certain
foreign fabric manufacturers have been found to operate under conditions which
are commonly referred to "sweat shops," in some cases employing children in
violation of local law. Recently, some United States distributors have been
adversely affected by their association with such operations. The Company
requires its suppliers to sign a policy statement confirming that they do not
operate in such conditions. The Company's Sourcing Manager or Vice President of
Product Development visits all factories a minimum of once annually to confirm
compliance with Antigua's labor policies. Nevertheless, the Company does not
control such suppliers or their labor practices. The violation of labor or other
laws by any manufacturer used by the Company, or the divergence of an
independent manufacturer's labor practices from those generally accepted as
ethical in the United States, could result in adverse publicity for the Company
and retailers carrying the Company's products, which, in turn, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Future Status of Hong Kong and China
On July 1, 1997, China resumed sovereignty over Hong Kong in accordance
with the 1984 Sino-British Joint Declaration, and Hong Kong became a Special
Administrative Region of China. There can be no assurance that Hong Kong will
not experience political, economic or social disruption following resumption of
Chinese sovereignty. In addition, there have been a number of recent trade
disputes between China and the United States during which the United States
threatened to impose tariffs and duties on some products imported from China and
to withdraw China's "most favored nation" trade status. A large portion of the
Company's production is arranged through direct company contacts or contacts
with representatives in Hong Kong. In addition, approximately 25% of the fabric
for apparel is sourced from China and the Company has arranged in the past, and
could arrange in the future, for manufacture of product in China. Therefore, a
significant disruption in the operations of the Company's agents or fabric
manufacturers located in Hong Kong or China or the loss of most favored nation
trade status for China could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Independent Sales Representatives
The Company sells its apparel and accessory products predominantly
through a network of independent sales representatives. The Company's
independent sales representative agreements are generally terminable for any
reason by either party on 30 days notice. A number of the Company's independent
sales representatives carry apparel or other products lines which may compete
directly or indirectly with the Company's existing and anticipated apparel
lines. The Company's continued growth is dependent in part on existing
representatives increasing their sales per account, increasing their account
base, or upon the Company increasing the number of sales representatives
offering its products. There can be no assurance that existing representatives
will be successful in increasing their sales or will not highlight product lines
of other companies to the detriment of the Company's products, or that the
Company will retain existing representatives or be successful in expanding the
number of sales representatives. The Company has experienced a loss of sales
representatives in the past. The loss of existing
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representatives, for any reason, could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Distribution and Sales."
Risks Associated with Product Line Expansion
One element of the Company's business strategy is to increase sales by
leveraging the Company's brand name identification to offer an expanded product
line within established distribution channels. Products in development include
an expanded line of outerwear and fleece tops. In part, the Company's future
growth and profitability will be dependent on achieving market acceptance of,
and expanding the market share for, these and other new products. The Company
could encounter manufacturing and marketing obstacles which could adversely
impact sales of these product lines and the Company's results of operations.
There can be no assurance that efforts to expand the Company's product line will
be successful or that the allocation of resources to the expansion of product
offerings will prove to be more beneficial than allocation of the same resources
to design and marketing of existing products.
Fluctuations in Quarterly Results; Seasonality
The Company may experience significant fluctuations in future quarterly
operating results due to a number of factors including, among other things,
changes in the Company's product and customer mix, the difficulty of accurately
forecasting apparel demand, market acceptance of apparel designs introduced by
the Company or its competitors, seasonality in apparel purchases by customers,
poor weather conditions in the spring and summer seasons, loss of independent
sales representatives, changes in material and manufacturing costs, failure to
deliver products timely, pricing trends in the golf apparel industry, the level
and pricing of international sales, foreign currency exchange rates, general
economic conditions and other factors. The Company's business is seasonal, with
sales in the second and third fiscal quarters typically exceeding the other two
quarters of each fiscal year. Although the effect of seasonality and other
factors on the Company's operating results has been obscured to date by the
Company's growth, any of these factors could cause quarterly operating results
to vary significantly from prior periods. Certain of the Company's expenses are
fixed in the short term and are based on forecasts of product orders.
Significant variations between the Company's forecasts and actual orders may
adversely affect operating results if the Company is unable to proportionately
reduce its expenses in a timely manner. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business
- --Product Development and Sourcing."
Dependence on Key Personnel
The Company's success depends to a significant extent on several key
individuals, including L. Steven Haynes, Chief Executive Officer, Ronald A.
McPherson, President of AGI, Gerald K. Whitley, Vice President of Finance of
AGI, Brett Moore, Vice President of Product Development of AGI, and Joseph M.
Blanchette, Vice President of Information Technology of AGI. The Company has
employment and non-competition agreements with each of these executives but does
not maintain "key person" life insurance on the lives of any of its executive
officers. The success of the Company will depend, among other factors, on the
successful recruitment and retention of quality management and other personnel.
See "Management."
Limited High-End Market for Golf Apparel
AGI's sales into the golf distribution channel accounted for 46.5%,
44.0%, 37.3% and 36.8% of its sales in the years ended December 31, 1994, 1995
and 1996 and for the six months ended June 30, 1997, respectively. The Company
targets distribution of its fashion golf apparel toward high quality golf
professional shops, country clubs and resorts. According to Golf Shop Operations
magazine, there are approximately 17,500 golf retailers in the United States,
including golf professional shops (green grass shops) and off course shops. Of
these retailers, the Company targets 75%, or approximately 13,000, as its golf
distribution channel customer base (discounting the total number because of
possible credit problems or non-viability as an apparel retailer). Because the
Company currently has open accounts with approximately 7,900 golf professional
shops and off course shops (approximately 55% of which are active in any given
year), the domestic market for distribution of golf apparel lines may be
limited. High quality sportswear and general leisure wear, being similar to
fashion golf apparel, can be purchased from a variety of sources including
department stores, sporting goods stores, catalog retailers and other
11
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retail outlets. Customers seeking to purchase high quality sportswear may elect
to purchase apparel from any of these sources, thus creating competition for
discretionary consumer spending. See "Business."
Management of Growth
AGI's sales increased from approximately $31.4 million for the fiscal
year ended December 31, 1995 to approximately $33.5 million for the fiscal year
ended December 31, 1996 and from approximately $15.7 million for the six months
ended June 30, 1996 to approximately $19.8 million for the six months ended June
30, 1997. During the six months ended June 30, 1997 this growth has required AGI
to transport some product by air rather than by less expensive shipping in order
to fill a limited number of customer orders in a timely manner. While the
Company believes that the use of air freight has not had a material effect on
its results of operations, a significant and sudden increase in orders could
require the Company to increase its use of air freight in the future, which
could adversely affect operating results during periods of such use. This growth
has placed and, if sustained, will continue to place, a substantial strain on
the operational, administrative and financial resources of the Company and has
resulted in an increase in the level of responsibility of the Company's
management personnel. The increase in sales activity and the addition of new
product lines, although complementary to the Company's existing product lines,
will require the Company to improve its operating and financial systems and to
continue to expand, train and manage its employee base and network of
independent sales representatives. The Company's future operating results will
depend in part on management's ability to manage future growth, the success of
which cannot be assured. See " -- Absence of Combined Operating History" and
"Business -- Management of Growth."
Absence of Prior United States Market; Possible Volatility of Share Price
The Company's Common Shares have been listed on the VSE since May 1989
(trading under the "SOH" symbol between December 2, 1992 and June 13, 1997 and
under the symbol "ANE" after June 13, 1997), but there has been no United States
public market for the Common Shares prior to this offering. There can be no
assurance that an active trading market for the Common Shares will develop in
the United States or be sustained after this offering or that the market price
of the Common Shares will not decline below the public offering price. The
public offering price was determined by negotiations among the Company, the
Selling Shareholder and the Representatives and may not be indicative of the
market price for the Common Shares in the future. See "Underwriting" for a
discussion of the factors considered in determining the public offering price.
The trading price of the Common Shares in the future could be subject to wide
fluctuations in response to quarterly variations in operating results of the
Company or its competitors, actual or anticipated announcements of product
developments by the Company or its competitors, changes in analysts' estimates
of the Company's financial performance, acquisition or loss of licenses, general
industry conditions and other events and factors, including broad-based market
fluctuations.
Shares Eligible for Future Sales; Rights to Acquire Shares
Upon completion of this offering, the Company will have 7,338,365
Common Shares outstanding. Sales of substantial amounts of Common Shares in the
public market, or the perception that such sales could occur, could adversely
affect prevailing market prices and could impair the Company's future ability to
raise capital through the sale of its equity securities. With respect to sales
in the Province of British Columbia, the securities laws of the Province of
British Columbia generally impose a hold period of one year from the date of
issuance of securities sold in a private placement transaction without the
benefit of a prospectus. During the hold period, common shares are unable to be
traded in British Columbia, or through the facilities of the VSE, without the
filing of a prospectus in respect thereof, but such hold period may not apply to
sales outside of British Columbia. Between the fourth quarter of 1997 and the
end of the fourth quarter of 1998, the hold period will expire with respect to
approximately 11,442,385 Common Shares and Common Shares underlying convertible
securities (not at all of which will necessarily be converted) which have been
privately placed by the Company within the last year. With respect to sales in
the United States, the common shares sold in this offering will be freely
tradeable in the Unites States public market without restriction or further
registration under the Act unless held by an "affiliate" of the Company, as that
term is defined in Rule 144 under the Act. The remaining 4,338,365 Common
Shares, and the Common Shares underlying warrants, options and other convertible
securities are, or will be when issued, "restricted securities" as that term is
defined in Rule 144 and may be sold only in compliance with Rule 144, pursuant
to registration under the Act or pursuant to an exemption therefrom. See "Shares
Eligible For Future Sale."
As of the date of this prospectus, the Company has reserved 517,000
Common Shares for issuance on exercise of options. Warrants to purchase
4,536,770 Common Shares, excluding the Representatives' Warrants for 300,000
Common Shares at a per share exercise price equal to 120% of the public offering
price in this offering, were also outstanding, with a weighted average exercise
price per share of $5.38. See "Description of Securities - Common Share Purchase
Warrants." The Company has additionally reserved 3,004,954 Common Shares into
which shares of the Series A Preferred (as defined) and other convertible
debentures may be converted upon payment of premiums which increase over time.
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Holders of certain outstanding warrants and other convertible securities have
certain demand and incidental registration rights which could require the
Company to register the Common Shares underlying such warrants for a period of
five years from the dates of such warrants. Sales of Common Shares underlying
options or warrants may adversely affect the price of the Common Shares. See
"Management -- Compensation Plans" and "Description of Securities."
Anti-Takeover Effect of Charter
The Company's Memorandum, as amended, authorizes the issuance of up to
30,000,000 Preferred Shares, of which, 10,000,000 shares were designated as and
5,730,000 shares were issued as Convertible Preferred Shares Series A (the
"Series A Preferred") in connection with financings related to the Acquisition.
The Series A Preferred is non-voting, has a fixed cumulative preferential cash
dividend at a rate of 12% per annum, is convertible for five years into Common
Shares (five Series A Preferred shares being convertible into one Common Share)
upon payment of a premium which escalates over the five-year period, may be
redeemed by the Company upon certain circumstances, is retractable at the option
of the holder (i.e., the holder holds a put option with respect to these shares)
upon completion of a public offering with proceeds to the Company in excess of
$8,000,000, restricts the payment of dividends on or redemption of other classes
of shares and restricts the creation of classes or series of shares which would
rank senior to or pari passu with the Series A Preferred. See "The Acquisition
and Related Financing." The Company intends to retire a portion of the Series A
Preferred with proceeds of this offering. Other Preferred Shares may be issued
in series with the material terms of any series determined by the Board of
Directors. Such material provisions would likely include dividend rights, which
may be cumulative, conversion features, voting rights, redemption rights,
retraction rights and liquidation preferences. The Company does not currently
anticipate any new issuances of Preferred Shares. However, if the Company does
issue any series of Preferred Shares in the future, it is likely that such
shares will have dividend privileges and liquidation preferences superior to
those of the Common Shares. Further, the Preferred Shares may be issued with
voting, conversion or other terms determined by the Board of Directors which
could be used to delay, discourage or prevent a change in control of the
Company. Such terms could include, among other things, dividend payment
requirements, redemption provisions, preferences as to dividends and
distributions and preferential voting rights. See "Description of Securities"
and "Canadian Governmental Regulation."
Control by Executive Officers and Directors
Upon the closing of this offering, the executive officers and Directors
of the Company will beneficially own approximately 32% of the outstanding Common
Shares (approximately 30% if the Underwriters' over-allotment option is
exercised in full). Because of such share ownership, these shareholders will
continue to be able substantially to influence or control the election of
members of the Company's Board of Directors and to determine corporate actions
requiring shareholder approval, including mergers or other business
combinations. See "Principal and Selling Shareholders."
Benefits to Management, Creditors and Underwriters; Potential Conflict of
Interests
The successful completion of this offering will benefit certain
Directors and officers of the Company by enabling the Company to repay
indebtedness to Mr. Dooley and others which has been guaranteed by Mr. Haynes
and Mr. Lloyd, Directors of the Company, and to satisfy various other
obligations of the Company. See "Certain Relationships and Related
Transactions." Additionally, the Company will repay certain financing extended
by lenders in connection with the Acquisition, including a bridge loan from an
affiliate of Cruttenden Roth Incorporated. See "The Acquisition and Related
Financing" and "Use of Proceeds."
Dilution
Purchasers of Common Shares offered hereby will suffer an immediate and
substantial dilution in the net tangible book value per share from the public
offering price. To the extent outstanding options to purchase Common Shares are
exercised, there will be further dilution. See "Dilution."
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Enforceability of Judgments
The enforceability by investors of civil liabilities under the federal
securities laws of the United States may be affected adversely by the fact that
the Company is organized under the laws of a foreign country, that some of its
officers and Directors may be residents of a foreign country, that some of the
experts named in the registration statement of which this prospectus forms a
part may be residents of a foreign country and that some portion of the assets
of the Company are located outside the United States.
Important Factors Related to Forward-Looking Statements and Associated Risks
This prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Act and Section 21E of the Exchange Act and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. These forward-looking statements include the plans and
objectives of management for future operations, including plans and objectives
relating to the products and future economic performance of the Company. The
forward-looking statements and associated risks set forth in this prospectus
include or relate to (i) development of brand name recognition and loyalty to
Antigua apparel, (ii) increasing sales through the introduction to its existing
network of independent sales representatives of the additional outerwear and
fleece products, as well as other apparel products and designs, (iii) success of
additional marketing initiatives to be undertaken by the Company, (iv) increases
in international sales as a result of the pursuit of distribution agreements in
the European community, the Pacific Rim and other countries, (v) increased
distribution through expansion of its network of independent sales
representatives and its customer base, (vi) expansion of sales to corporate and
tournament customers through brand name recognition and capitalizing on
embroidery capacity, (vii) achievement of increases in per-account sales by
broadening the Company's product line, (viii) success of the Company in
forecasting demand for particular apparel styles and its success in establishing
production and delivery schedules and forecasts which accurately anticipate and
respond to market demand, (ix) success in increasing sales in the corporate
identity channel of distribution, (x) achievement of high gross profit margins
by targeting the premium and mid-priced lifestyle apparel market, controlling
production costs and expanding the Company's apparel lines to include other high
margin products and (xi) success of the Company in achieving increases in net
sales such that costs of goods sold and selling, general and administrative
expenses decrease as a percentage of net sales.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that the Company will
continue to design, market, have manufactured, embroidered and ship new apparel
products on a timely basis, that competitive conditions within the lifestyle
apparel industry will not change materially or adversely, that demand for the
Company's lifestyle apparel will remain strong, that the market will accept the
Company's new lifestyle apparel lines, that the Company will retain existing
independent sales representatives and key management personnel and be able to
add independent sales representatives, that inventory risks due to shifts in
market demand will be minimized, that the Company's forecasts will accurately
anticipate market demand and that there will be no material adverse change in
the Company's operations or business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions, and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements, many of which are beyond the control
of the Company, are reasonable, any of the assumptions could prove inaccurate
and, therefore, there can be no assurance that the results contemplated in
forward-looking information will be realized. In addition, as disclosed
elsewhere under "Risk Factors," the business and operations of the Company are
subject to substantial risks which increase the uncertainty inherent in such
forward-looking statements. Any of the other factors disclosed under "Risk
Factors" could cause the Company's net sales or net income, or growth in net
sales or net income, to differ materially from prior results. Growth in absolute
amounts of cost of goods sold and selling, general and administrative expenses
or the occurrence of extraordinary events could cause actual results to vary
materially from the results contemplated by the forward-looking statements.
Budgeting and other management decisions are subjective in many respects and
thus susceptible to interpretations and periodic revisions based on actual
experience and business developments, the impact of which may cause the Company
to alter its marketing, capital expenditure or other budgets, which may in turn
affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
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THE ACQUISITION AND RELATED FINANCING
On May 7, 1997, the Company entered into an agreement (the
"Agreement"), through SEI, to purchase all of the outstanding shares of The
Antigua Group, Inc. ("AGI") from Thomas E. Dooley, Jr., direct and indirect
holder of approximately 82% of the shares of AGI, and from Mr. Dooley as agent
for the other shareholders of AGI, such that AGI became a wholly owned
subsidiary of the Company. At the closing of the transaction on June 16, 1997
(the "Acquisition Closing Date"), the Company paid Mr. Dooley, personally and as
agent, cash in the amount of $12,636,482, convertible long-term promissory notes
in the total amount of $6,378,000, which notes the Company intends to repay with
proceeds of this offering, and distributed assets, consisting primarily of
forgiveness of a note payable to the Company, to Mr. Dooley in the amount of
$134,706. The Company also contributed $2,112,000 in cash to AGI to allow AGI to
pay certain promissory notes due and payable to Mr. Dooley and his wife. As
additional consideration, the Company issued to Mr. Dooley, personally and as
agent, 250,000 shares of Series A Preferred, which are convertible into 50,000
Common Shares and a five-year warrant to purchase 50,000 Common Shares at an
escalating per share exercise price, commencing at C$7.20 per share if exercised
within twelve months of May 1997 and rising in steps to C$12.10 per share if
exercised within the final twelve months of its term. Additionally, Mr. Dooley,
as agent, was issued an option to purchase 50,000 Common Shares at $5.00 per
Common Share and, in connection with a consulting agreement between himself and
the Company, received an option to acquire 10,000 Common Shares at $5.00 per
Common Share and will receive additional cash consideration in the Acquisition
in an amount currently estimated at $700,000 to be paid in four equal quarterly
installments beginning September 16, 1997, subject to prepayment upon the
completion of a securities offering by the Company with gross proceeds to the
Company in excess of $12,000,000. See "Use of Proceeds" and "Certain
Relationships and Related Transactions."
AGI has an existing $12,000,000 line of credit (the "Credit Facility")
from LaSalle Business Credit, Inc., against which, as of June 30, 1997, AGI had
drawn approximately $6.2 million and had outstanding letters of credit of
approximately $2.7 million in the aggregate. The Company also borrowed funds
from the following lenders to finance the acquisition of AGI: (i) LaSalle
Business Credit, $3,500,000 (the "LaSalle Acquisition Loan"); (ii) Imperial
Bank, $2,500,000 (the "Imperial Acquisition Loan"); and (iii) Cruttenden Roth
Bridge Fund, L.L.C., $1,020,000 (the "Cruttenden Bridge Acquisition Loan") with
proceeds of this offering. The Company intends to repay $2,000,000 of the
LaSalle Acquisition Loan and the Cruttenden Bridge Acquisition Loan and
anticipates that it will receive a demand from Imperial Bank to either prepay
the Imperial Acquisition Loan or pledge $2,500,000 as cash collateral for such
loan. See "Use of Proceeds." To obtain these loans, the Company issued warrants
to these lenders to purchase an aggregate of 2,479,598 Common Shares, subject to
adjustment, at an aggregate exercise price of approximately $12.4 million ($5.00
per Common Share).
In addition to bank and bridge financing for the Acquisition, cash
consideration paid to Mr. Dooley, personally and as agent for AGI's
shareholders, consisted in part of cash raised from a series of private
placements of equity and debt securities of the Company. See "Description of
Securities."
The Company issued 5,730,000 shares of Series A Preferred for aggregate
consideration received of C$7,385,500 in two transactions, one of which was not
funded and completed until after the Acquisition. The proceeds of the second
placement were used in part to pay costs incurred in the Acquisition. The Series
A Preferred is non-voting, has a fixed cumulative preferential cash dividend at
a rate of 12% per annum, is convertible for five years into Common Shares (five
Series A Preferred shares being convertible into one Common Share) upon payment
of a premium which escalates over the five-year period, may be redeemed by the
Company upon certain circumstances, is retractable at the option of the holder
(i.e., the holder holds a put option with respect to these shares at a purchase
price equal to the subscription price plus any accrued dividends) upon
completion of a public offering with proceeds to the Company in excess of
$8,000,000, restricts the payment of dividends on or redemption of other classes
of shares and restricts the creation of classes or series of shares which would
rank senior to or pari passu with the Series A Preferred. The Company intends to
retire a portion of the Series A Preferred with proceeds of this offering. The
Series A Preferred is coupled with detachable five-year warrants to purchase
Common Shares, which warrants entitle the Series A Preferred holders to purchase
1,146,000 Common Shares in connection with the placement of the Series A
Preferred. The warrants may be exercised at an escalating per share exercise
price, commencing at C$7.20 per share if exercised within twelve months after
issuance and rising in steps to C$12.10 per share if exercised within the final
twelve months of their respective terms.
15
<PAGE>
The Company also issued units consisting of Common Shares and warrants
to purchase additional Common Shares in five private transactions. In the first
of such transactions, the Company issued 162,200 Common Shares and two-year
warrants to purchase a like number of Common Shares (of which 42,800 have been
exercised) at a price of C$6.25 per Common Share in the first year and C$7.50 in
the second year. In a second transaction, the Company issued 210,000 Common
Shares and two-year warrants to purchase a like number of Common Shares at a
price of C$5.80 per Common Share in the first year and C$6.65 in the second
year. In a third transaction, the Company issued 180,144 Common Shares and
two-year warrants to purchase 90,072 shares at a price of C$6.75 per Common
Share in the first year and C$8.00 in the second year. In the fourth of such
transactions, the Company issued 151,778 Common Shares and two-year warrants to
purchase 75,889 shares at a price of C$4.50 per Common Share in the first year
and C$5.20 in the second year. In connection with the fourth private placement
the Company paid a finder's fee of 12,142 Common Shares to Eron Mortgage Corp.,
an entity of which Brian W. Slobogian, a former Director of the Company, is the
President. The fifth private placement consisted of an issuance by the Company
of 60,000 Common Shares and two-year warrants to purchase a like number of
shares at a price of C$5.35 per Common Share in the first year and C$6.15 in the
second year. The Company raised C$4,451,722 from these five private placements.
Additionally, the Company issued two convertible debentures, one in the
amount of $1,791,048.45 (the "KOZ Debenture") to KOZ Capital Corp., a Cayman
Islands corporation ("KOZ Capital"), and one in the amount of C$4,200,000 (the
"Westcoast Debenture") to Westcoast Golf Promotions Ltd., a Canadian corporation
("Westcoast"), of which Mr. Slobogian is an officer and director. The KOZ
Debenture bears interest at 12% per annum and is due in June 1998. The KOZ
Debenture (including interest) is convertible into 714,454 Common Shares and
two-year warrants to purchase an additional 714,454 Common Shares at a price of
C$4.00 per Common Share in the first year and C$4.60 in the second year. As
additional inducement to invest in the Company, the Company agreed to issue to
KOZ Capital 124,378 Common Shares as bonus shares. See "Certain Relationships
and Related Transactions." The Westcoast Debenture bears interest at 15% per
annum and matures in June 1998. The Westcoast Debenture (including accrued but
unpaid interest) is convertible into 1,144,500 Common Shares and two-year
warrants to purchase an additional 1,144,500 Common Shares at a price of C$4.00
per Common Share in the first year and C$4.60 in the second year. In connection
with the Westcoast Debenture, the Company granted each of Mr. Lloyd and Mr.
Haynes, Directors of the Company, 88,500 Common Shares as a bonus for their
having guaranteed the Westcoast Debenture (see "Certain Relationships and
Related Transactions"), issued 177,000 Common Shares to Westcoast as an
inducement to invest in the Company and paid a finder's fee of C$315,000 to Eron
Mortgage Corp.
In connection with the Acquisition and related financings the Company
has issued Common Shares and warrants to purchase Common Shares as finders'
fees, in addition to the finders' fees described above. In connection with
identifying AGI as a potential acquisition candidate the Company issued 131,758
Common Shares to Sportswear Investors, LLC, a member of which, Gary McCauley, is
a director of AGI. In connection with the three bridge financings, the Company
issued 97,054 Common Shares as a finders' fee to an unaffiliated third party. In
connection with placing 4,730,000 shares of Series A Preferred, the Company paid
finders fees by issuing to an unaffiliated third party (i) two-year warrants to
purchase an aggregate of 118,627 Common Shares at an exercise price of C$4.00 in
the first year and C$4.60 in the second year and (ii) 37,680 Common Shares and
two-year warrants to purchase 160,000 Common Shares at an exercise price of
C$5.00 in the first year and C$5.75 in the second year. TradeCo Global
Securities, Inc. ("TradeCo"), of which Mr. Lewis, a Director of the Company, is
Chairman, has acquired the right to obtain from an unaffiliated third party the
37,680 Common Shares and warrants to acquire 160,000 Common Shares upon the
expiration of relevant hold periods under VSE policies. See "Certain
Relationships and Related Transactions." In connection with placing the second
tranche (1,000,000 shares) of Series A Preferred the Company issued 16,000
Common Shares and two-year warrants to purchase an aggregate of 16,000 Common
Shares at an exercise price of C$5.91 in the first year and C$6.95 in the second
year to an unaffiliated third party. In connection with placing 85,089 Common
Shares as part of the third common equity private placement described above the
Company issued 6,537 Common Shares to an unaffiliated third party. In connection
with the fifth common equity private placement described above the Company
issued 3,653 Common Shares to an unaffiliated third party. For finding KOZ
Capital as an investor, the Company issued two-year warrants to purchase 115,344
Common Shares at an exercise price of C$4.00 in the first year and C$4.60 in the
second year to an unaffiliated third party.
16
<PAGE>
S CORPORATION DISTRIBUTIONS
Prior to the Acquisition Closing Date, AGI had elected (beginning July
1, 1988) to be treated as an S Corporation under Subchapter S of the Internal
Revenue Code and comparable state tax laws. As a result, until the Acquisition
Closing Date the earnings of AGI were attributable for federal and certain state
income tax purposes to their existing shareholders rather than to AGI.
Distributions of approximately $300,000 and $725,000 were paid to AGI
shareholders in 1994 and 1997, respectively. These distributions were made to
provide funds to AGI shareholders with which to pay income taxes on the earnings
of AGI attributable to them. No such distributions were paid in 1995 and 1996,
and tax related distributions paid to AGI shareholders were discontinued as of
the Acquisition Closing Date. See "Certain Relationships and Related
Transactions."
USE OF PROCEEDS
The net proceeds (after deducting the estimated offering expenses,
including the underwriting discounts and commissions) to the Company from the
sale of 3,000,000 Common Shares offered by the Company are estimated to be
approximately $15,500,000. The Company will not receive any proceeds from the
sale of Common Shares by the Selling Shareholder.
Upon completion of this offering, the Company is required to repay
approximately $3.02 million in bridge loans incurred in connection with the
Acquisition, as follows: (i) $2,000,000 of the LaSalle Acquisition Loan,
currently bearing interest at 3% over the banks' prime rate with a final
maturity, in the absence of a public offering, of January 23, 2000; and (ii) the
$1,020,000 Cruttenden Bridge Acquisition Loan, currently bearing interest at 13%
with a final maturity, in the absence of a public offering, of May 7, 1998. The
Company also anticipates that it will receive a demand from Imperial Bank to
either prepay the Imperial Acquisition Loan or pledge $2.5 million as cash
collateral for such loan. The Imperial Acquisition Loan currently bears interest
of 13%, but such rate is reduced to 11% upon a pledge of cash collateral. The
Imperial Acquisition Loan matures on May 7, 1998, subject to Imperial Bank's
option to extend the term for an additional two-year period. The Company intends
to use up to $6.4 million of the net proceeds to retire notes outstanding to Mr.
Dooley as agent for the former shareholders of AGI incurred in the Acquisition,
subject to the creditor's right to convert this debt to equity. These notes
currently bear interest at 8.25% and mature, in the absence of a public
offering, on May 7, 1999, with respect to $1.18 million, and on May 7, 2000,
with respect to the balance. The Company intends to use approximately $500,000
to pay the balance of the approximately $700,000 which remains owed to Mr.
Dooley and which must be paid upon the completion of a securities offering by
the Company with gross proceeds to the Company in excess of $12,000,000. The
Company intends to use up to $2.0 million of the net proceeds to retire a
portion of the Series A Preferred, which was issued to finance the Acquisition.
The Company intends to use remaining net proceeds for working capital and for
other general corporate purposes.
The foregoing represents the Company's best estimate of the use of the
net proceeds to be received in this offering based on current planning and
business conditions. To the extent the Company is not contractually committed to
making payments upon the closing of this offering, the Company reserves the
right to change such uses when and if market conditions or unexpected changes in
operating conditions or results occur. The amounts actually expended for each
use may vary significantly depending upon a number of factors, including future
sales growth and the amount of cash generated by the Company's operations. Net
proceeds not immediately required for the purposes described above will be
invested principally in U.S. Government securities, short-term certificates of
deposit, money market funds or other short-term, interest-bearing securities.
17
<PAGE>
PRICE RANGE OF COMMON SHARES
The Company's Common Shares are traded on the Vancouver Stock Exchange
under the symbol "ANE" (previously, "SOH"), and the Company has applied to have
its Common Shares listed on the Nasdaq National Market under the proposed symbol
"ANTGF." The Company's Common Shares began trading on the VSE under the SOH
symbol on December 2, 1992 and under the symbol ANE after June 16, 1997. The
symbol was changed to ANE in connection with the Acquisition. The following
table sets forth the range of the high and low sale prices for the Company's
Common Shares for the periods indicated as reported by the VSE. The Company
acquired all of the issued and outstanding shares of AGI on June 16, 1997.
Therefore, prices for the Company's Common Shares prior to that time reflect the
business of Southhampton only. All prices have been adjusted to give effect to
the one-for-five reverse stock split effected on June 16, 1997 and have been
converted into United States dollars equivalents based on the Noon Buying Rate
then in effect. In connection with the closing of the Acquisition, trading of
the Common Shares on the VSE was halted after the close of that market on June
13, 1997 and reopened for trading on the VSE on September 3, 1997.
High Low
---- ---
1995:
First Quarter ........................................ 3.4592 1.7649
Second Quarter ....................................... 3.6229 1.5631
Third Quarter ........................................ 2.7889 0.9186
Fourth Quarter ....................................... 3.3388 1.1593
1996:
First Quarter ........................................ 6.9674 1.6123
Second Quarter ....................................... 9.1102 4.5861
Third Quarter ........................................ 7.1293 4.1916
Fourth Quarter ....................................... 6.7481 4.5055
1997:
First Quarter ........................................ 5.7763 3.6502
Second Quarter ....................................... 5.4210 3.3869
Third Quarter ........................................ 5.9261 3.9560
Fourth Quarter (through October 31, 1997) ............ 4.5578 3.4197
The last reported sale price of the Common Shares on the VSE on October
31, 1997 was C$5.35 per share, or approximately $3.79 based on the Noon Buying
Rate on such date. As of September 26, 1997, the Company had 89 shareholders of
record. For a description of securities convertible into Common Shares and which
may be sold pursuant to Rule 144 under the Act, see "The Acquisition and Related
Financing," "Description of Securities" and "Shares Eligible for Future Sale."
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Shares. The
Company anticipates that for the foreseeable future all earnings will be
retained for use in the Company's business and that no cash dividends will be
paid to shareholders. The Company is restricted by the terms of the Series A
Preferred from paying a dividend on the Common Shares, or on any other class of
shares which might be designated in the future, unless dividends on the Series A
Preferred are current. The terms of the Credit Facility prevent AGI from paying
dividends without the prior written consent of the lender. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--The
Antigua Group, Inc.--Liquidity and Capital Resources." Prior to the Acquisition,
AGI had elected to be treated as an S Corporation and had paid distributions of
approximately $300,000 and $725,000 to AGI stockholders in 1994 and 1997,
respectively, to provide funds to such stockholders with which to pay income
taxes on the earnings of AGI attributable to them. See "The Acquisition and
Related Financing," "Description of Securities," "Certain Income Tax
Considerations" and "Canadian Governmental Regulation."
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997, as adjusted for financings subsequent to June 30, 1997 and as
adjusted to give effect to the sale of Common Shares offered by the Company at
the offering price of $6.00 per share (and after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company). The following additionally gives effect to the one-for-five reverse
stock split effected on June 13, 1997.
<TABLE>
<CAPTION>
June 30, 1997
(in thousands)
----------------------------------------------
As adjusted As
for adjusted
subsequent for this
Actual financings offering
-------- ----------- --------
<S> <C> <C> <C>
Short term debt:
Current portion of long-term debt ....................... $ 1,088 $ 1,088 $ 1,088
Revolving line of credit ................................ 6,220 6,220 6,220
Notes payable to bridge lenders ......................... 3,661 3,661 --
Current portion of due to directors and officers ........ 535 535 535
Current portion of notes payable to sellers ............. 384 384 --
Convertible debentures, net of discounts ................ 2,219 2,219 2,219
-------- -------- --------
$ 14,107 $ 14,107 $ 10,062
======== ======== ========
Due to directors and officers ............................. $ 336 $ 336 $ 336
-------- -------- --------
Long-term debt ............................................ 1,715 1,715 1,715
-------- -------- --------
Notes payable to sellers................................... 5,994 5,994 --
-------- -------- --------
Redeemable preferred stock, 30,000,000
shares authorized, 10,000,000
designated as Convertible Preferred
Shares Series A, and 4,730,000 shares
issued and outstanding, 5,730,000
shares issued and outstanding, as
adjusted for subsequent financings,
and 3,730,000 issued and outstanding,
as adjusted for this offering(1) .................. 3,581 4,501 2,990
-------- -------- --------
Shareholders' equity:
Common Shares, without par value;
300,000,000 shares authorized,
4,260,565 shares issued and
outstanding, 4,338,365 shares issued
and outstanding, as adjusted for
subsequent financings, and 7,338,365
issued and outstanding, as adjusted
for this offering(1)(2) ............................... 7,421 7,733 23,231
Additional paid-in capital .............................. 5,810 5,810 5,810
Retained earnings ....................................... (7,093) (7,093) (11,786)
-------- -------- --------
Total shareholders' equity .............................. 6,138 6,450 17,255
-------- -------- --------
Total capitalization ............................. $ 17,764 $ 18,996 $ 22,296
======== ======== ========
</TABLE>
- ------------------
(1) Financings subsequent to June 30, 1997, include the issuance on
September 5, 1997, of 1,000,000 shares of Series A Preferred together
with 16,000 Common Shares as a finders' fee, and the issuance of 61,800
Common Shares as a result of exercises of warrants and options.
(2) The figure of 4,260,565 Common Shares issued and outstanding includes
630,156 Common Shares for which the Company has received consideration
and is committed to issue but had not yet issued. The figures of
4,338,365 and 7,338,365 Common Shares includes 646,156 Common Shares
for which the Company has received consideration and is committed to
issue but has not yet issued. Excludes 4,377,690 Common Shares
underlying warrants, 300,000 Common Shares underlying Representatives'
Warrants and 557,000 Common Shares underlying options to employees and
Directors. Also excludes 946,000 Common Shares into which Series A
Preferred ("Series A Preferred") may be converted upon payment of a
premium increasing over time, 200,000 Common Shares into which the
Series A Preferred Shares issued September 5, 1997, may be converted
and 1,858,954 Common Shares and warrants for an additional 1,858,954
Common Shares into which the convertible debentures may be converted
upon payment at specified exercise prices. See "The Acquisition and
Related Financing," "Use of Proceeds," "Management -- Executive
Compensation," "Certain Relationships and Related Transactions,"
"Description of Securities," "Shares Eligible for Future Sale" and
"Underwriting."
19
<PAGE>
DILUTION
The net tangible book value of the Company at June 30, 1997 was
$(14,906,326), or $(3.49) per share. Without taking into account any changes in
net tangible book value subsequent to June 30, 1997, other than to give effect
to the sale of the 3,000,000 Common Shares offered by the Company at $6.00 per
share and after deduction of the estimated underwriting discount and estimated
offering expenses payable by the Company, the pro forma net tangible book value
of the Company's Common Shares at June 30, 1997 would have been $598,674, or
$.08 per share. This represents an immediate increase in net tangible book value
of $3.57 per share to existing shareholders and an immediate dilution in net
tangible book value of $5.92 per share to investors purchasing shares in this
offering. The following table illustrates the per share dilution at June 30,
1997:
Public offering price per Common Share ........................ $6.00
-----
Pro forma net tangible book value per
Common Share as of June 30, 1997 ..................... $(3.49)
------
Increase in net tangible book value per share
attributable to this offering ........................ 3.57
------
Adjusted pro forma net tangible book value
per Common Share after this offering .......................... .08
-----
Dilution per Common Share to new investors .................... $5.92
=====
The following table sets forth, on a pro forma basis at June 30, 1997,
the number of Common Shares purchased from the Company, the total consideration
paid and the average price per share paid by the existing shareholders and to be
paid by new investors based upon the initial public offering price of $6.00 per
share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------- ------------------------ Price Per
Number Percent Amount Percent Share
--------- ------- ----------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders ..... 4,260,565 58.7% $ 9,962,106 35.6% $2.33
New investors ............. 3,000,000 41.3% 18,000,000 64.4% $6.00
--------- ----- ----------- -----
Total ............ 7,260,565 100.0% $27,962,106 100.0%
========= ===== =========== =====
</TABLE>
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements
(the "Pro Forma Financial Statements") are based on the financial statements of
the Company and The Antigua Group, Inc., which are included elsewhere in the
prospectus, adjusted to give pro forma effect to the Acquisition and this
offering (collectively, the "Transactions").
The Unaudited Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1996 is derived from the audited statements of
operations of the Company and The Antigua Group, Inc. for the year ended
December 31, 1996 and assumes the Transactions were consummated on January 1,
1996. The Unaudited Pro Forma Consolidated Statement of Operations for the six
months ended June 30, 1997 is derived from the unaudited financial statements of
the Company for the six months ended June 30, 1997 and the unaudited financial
statements of The Antigua Group, Inc. for the period from January 1, 1997 to
June 16, 1997 and assume the Transactions were consummated on January 1, 1997.
The Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1997 is
derived from the unaudited balance sheet of the Company as of June 30, 1997 and
assumes the consummation of this offering on that date. The Unaudited Pro Forma
Consolidated Financial Statements should be read in conjunction with the
historical financial statements of the Company and The Antigua Group, Inc. and
the Notes thereto included elsewhere in this prospectus.
The Unaudited Pro Forma Consolidated Financial Statements do not
purport to represent what the Company's results of operations or financial
condition would actually have been if the Transactions had occurred on the dates
indicated or to project the Company's results or financial condition for or at
any future period or date. The Unaudited Pro Forma Consolidated Financial
Statements are presented for comparative purposes only. The pro forma
adjustments, as described in the accompanying data, are based on available
information and certain assumptions that management believes are reasonable.
Unaudited Pro Forma Consolidated Statements of Operations
For the Six Months Ended June 30, 1997
<TABLE>
<CAPTION>
Antigua
Antigua Enterprises
Group, Inc. Inc.
------------ -------------
January 1, January 1,
1997 through 1997 through Pro Forma Pro Forma
June 16, 1997 June 30, 1997 Adjustments Consolidated
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sales, net of returns ................ $ 18,181,083 $ 2,722,077 $ -- $ 20,903,160
Cost of sales ........................ 11,736,650 1,824,058 -- 13,560,708
------------ ------------ ------------ ------------
Gross profit ................ 6,444,433 898,019 -- 7,342,452
------------ ------------ ------------ ------------
Selling expenses ..................... 2,898,244 353,755 3,251,999
General and administrative expenses .. 1,979,999 695,143 (192,790) (b) 2,528,185
45,833 (b)
Amortization of licenses ............. -- 27,522 327,218 (c) 354,740
Expenses related to acquisition ...... -- 672,455 (672,455) (n) --
------------ ------------ ------------ ------------
4,878,243 1,748,875 180,261 6,134,924
------------ ------------ ------------ ------------
Income (loss) from operations 1,566,190 (850,856) (180,261) 1,207,528
------------ ------------ ------------ ------------
Other income (expenses)
Interest .................... (571,956) (1,176,587) (1,126,884) (d) (642,110)
(1,858,601) (e)
(1,480,822) (f)
146,334 (h)
88,000 (i)
5,338,406 (n)
Other ....................... 192,988 39,762 -- 232,750
------------ ------------ ------------ ------------
(378,968) (1,136,825) 1,106,433 (409,360)
------------ ------------ ------------ ------------
Income (loss) before income taxes .... 1,187,222 (1,987,681) 926,172 798,168
Provision for income taxes ........... -- -- 319,267 (k) 319,267
------------ ------------ ------------ ------------
Net income (loss) ................. $ 1,187,222 $ (1,987,681) $ 606,905 $ 478,901
============ ============ ============ ============
Earnings per share ......................... (o) $ 0.06
============
Weighted average common
shares outstanding ....................... 8,599,832
============
</TABLE>
21
<PAGE>
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Antigua
Antigua Enterprises Pro Forma Pro Forma
Group, Inc. Inc. Adjustments Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales, net of returns ................ $ 33,510,364 $ 2,857,962 $ -- $ 36,368,326
Cost of sales ........................ 22,490,634 2,263,000 -- 24,753,634
------------ ------------ ------------ ------------
Gross profit ................ 11,019,730 594,962 -- 11,614,692
------------ ------------ ------------ ------------
Selling expenses ..................... 5,843,314 259,109 -- 6,102,423
General and administrative expenses .. 3,598,886 987,548 (407,593) (b) 4,278,841
100,000 (b)
Amortization of licenses ............. -- -- 713,930 (c) 713,930
Expenses related to acquisition ...... 315,000 (j)
-- -- (315,000) (n) --
------------ ------------ ------------ ------------
9,442,200 1,246,657 406,337 11,095,194
------------ ------------ ------------ ------------
Income (loss) from operations 1,577,530 (651,695) (406,337) 519,498
------------ ------------ ------------ ------------
Other income (expenses)
Interest .................... (1,342,859) (160,864) (1,165,790) (d) (1,311,723)
(1,942,000) (e)
(1,500,000) (f)
192,000 (i)
4,607,790 (n)
Other ....................... 385,730 90,485 -- 476,215
------------ ------------ ------------ ------------
(957,129) (70,379) 192,000 (835,508)
------------ ------------ ------------ ------------
Income (loss) before income taxes .... 620,401 (722,074) (214,337) (316,010)
Provision for income taxes ........... -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) ........... $ 620,401 $ (722,074) $ (214,337) $ (316,010)
============ ============ ============ ============
Earnings (loss) per share .................. (o) $ (0.04)
============
Weighted average common
shares outstanding ....................... 8,427,938
============
</TABLE>
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1997
Assets
<TABLE>
<CAPTION>
Antigua
Enterprises Pro Forma Pro Forma
Inc. Adjustments Consolidated
------------ ------------ ------------
<S> <C> <C> <C>
Current assets
Cash ................................. $ 4,923 $ 1,000,250 (l) $ 1,005,173
Accounts receivable-net .............. 5,970,048 -- 5,970,048
Inventory ............................ 8,576,981 -- 8,576,981
Prepaid assets ....................... 220,183 -- 220,183
Deferred loan fees ................... 2,545,890 (75,186) (m) 125,483
(864,399) (d)
(1,480,822) (f)
------------ ------------ ------------
Total current assets ................ 17,318,025 (1,420,157) 15,897,868
Property and equipment-net .................... 2,544,399 -- 2,544,399
Licenses-net of amortization .................. 18,446,411 -- 18,446,411
Other assets .................................. 65,853 -- 65,853
------------ ------------ ------------
$ 38,374,688 $ (1,420,157) $ 36,954,531
============ ============ ============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
22
<PAGE>
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
Antigua
Enterprises Pro Forma Pro Forma
Inc. Adjustments Consolidated
------------ ------------ ------------
<S> <C> <C> <C>
Current liabilities
Current portion of long term debt .............. $ 1,088,492 $ -- $ 1,088,492
Revolving credit line .......................... 6,220,203 -- 6,220,203
Notes payable to bridge lenders, net of discount 3,661,400 (5,520,000) (l) --
1,858,600 (e)
Current portion of due to directors and officers 534,619 -- 534,619
Current portion of notes payable to sellers .... 383,733 (383,733) (l) --
Convertible debentures, net of discount ........ 2,218,949 (2,218,949) (m) --
Accounts payable ............................... 1,659,341 -- 1,659,341
Accrued liabilities ............................ 2,712,718 (10,305) (m) 2,364,898
(600,000) (l)
262,485 (d)
Accrued loan fees due to directors and officers 2,131,826 -- 2,131,826
------------ ------------ ------------
Total current liabilities ...................... 20,611,281 (6,611,902) 13,999,379
Due to directors and officers ........................... 336,106 -- 336,106
Long term debt .......................................... 1,714,589 -- 1,714,589
Notes payable to seller ................................. 5,994,267 (5,994,267) (l) --
Preferred stock, net of discount ........................ 3,580,743 (2,000,000) (l) 2,069,789
489,046 (g)
Shareholders' equity
Common stock ................................... 7,421,446 15,498,250 (l) 25,073,764
2,154,068 (m)
Additional paid in capital ..................... 5,809,556 -- 5,809,556
Retained earnings .............................. (7,093,300) (1,126,884) (d) (12,048,652)
(1,858,600) (e)
(1,480,822) (f)
(489,046) (g)
------------ ------------ ------------
Total shareholders' equity ..................... 6,137,702 12,696,966 18,834,668
------------ ------------ ------------
$ 38,374,688 $ (1,420,157) $ 36,954,531
============ ============ ============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
23
<PAGE>
Notes to Unaudited Pro Forma Consolidated Financial Statements
(a) The pro forma consolidated financial statements reflect the
Acquisition, which was accounted for as a purchase. See "The
Acquisition and Related Financing." The purchase price and the
estimated allocation of such costs is as follows:
Purchase price components:
Cash paid to sellers $12,636,482
Notes payable to sellers 6,378,000
Series A Preferred with attached warrants issued to sellers 250,000
Assets of AGI distributed to the sellers 134,706
Amounts to be paid to the sellers 759,656
Transaction costs 2,920,360
-----------
Total purchase price 23,079,204
Book value 4,677,674
-----------
Excess of purchase price over net book value
of assets acquired $18,401,530
===========
Allocated to:
Licenses $18,473,933
Inventory (488,956)
Eliminate LIFO reserve 186,221
Accrued interest 230,333
-----------
$18,401,530
===========
(i) The excess purchase price has been allocated to the
identified intangible assets consisting of the
license agreements with the major league professional
sports team organizations.
(ii) As part of the allocation process, inventory carrying
value has been reduced to net realizable value for
those items the new management has decided to
liquidate rather than sell through normal close out
channels.
(iii) To eliminate the LIFO reserve as FIFO will be
adopted.
(iv) To eliminate accrued interest that is no longer
payable as the principal on the debt has been paid in
connection with the Acquisition. The note agreement
provides for forgiveness of interest if the principal
is paid before December 31, 1997.
(b) Reflects the elimination of salaries, benefits and consulting fees of
specific shareholders not continuing as employees with the combined
Company. Also reflects the addition of consulting fees to be paid to
the former owner and CEO of AGI.
(c) Reflects the amortization expense resulting from the allocation of the
purchase of AGI to licenses. The amortization period assigned to the
licenses is 25 years.
(d) Reflects the write off of debt issuance and termination costs incurred
in connection with the bridge financing. This is necessary since the
bridge financing is being paid off with the proceeds of this offering.
(e) Reflects the write off of discounts on bridge loans. These discounts
represent the valuation assigned to the warrants issued to the bridge
lenders.
(f) Reflects the write off of loan fees on sellers notes as the seller
notes are to be paid off with the proceeds of this offering. The loan
fees are the amounts paid to related parties for their guarantee of the
payment of the principal and interest of the seller notes.
(g) Reflects the write off of discounts on preferred stock. These discounts
represent the valuation assigned to warrants issued to holders of
preferred stock and the valuation assigned to warrants issued for
finders' fees.
24
<PAGE>
(h) Elimination of interest on convertible debentures since these are
assumed to be converted as of the offering date. These are convertible
at the option of the Company.
(i) Reflects elimination of interest expense incurred on the notes to the
majority stockholder as these notes were paid off in connection with
the Acquisition.
(j) To write off fees paid for debt financing that was not consummated.
(k) To provide income tax provisions on pro forma income at a rate of 40%.
No provision is made in the historical income of AGI since it
previously operated as an S corporation.
(l) This adjustment reflects the estimate of the net proceeds and use of
proceeds of this offering. See "Use of Proceeds."
Proceeds of this offering $18,000,000
Expenses of this offering (2,501,750) $15,498,250
-----------
Use of proceeds
To pay off bridge loans 5,520,000
To pay off seller notes 6,378,000
To redeem preferred stock 2,000,000
To pay off profits bonus to seller 500,000
To pay off note due to Sea/Q of America, Inc. 100,000 14,498,000
--------- ----------
Net cash received $ 1,000,250
===========
(m) To reflect conversion of the convertible debentures. These are
convertible at the option of the Company.
(n) To eliminate nonrecurring expenses which relate directly to the
Acquisition. These include expenses related to the Acquisition, the
write off of debt issuance and termination costs and discounts on the
bridge financing, the write off of loan fees on the seller notes and
the interest on the convertible debentures.
(o) Weighted average shares outstanding reflects the 3,000,000 Common
Shares to be issued in this offering. It does not reflect common stock
equivalents related to stock options and stock purchase warrants as
these are not dilutive.
25
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data of AGI as of and for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the Financial
Statements of AGI, which have been audited by Arthur Andersen LLP, independent
public accountants. The selected financial data of AEI as of and for the years
ended December 31, 1993, 1994 and 1995 are derived from the Financial Statements
of AEI, which have been audited by BDO Dunwoody, chartered accountants. The
selected financial data of AEI as of and for the year ended December 31, 1992
are derived from the Financial Statements of AEI, which have been audited by
Loewen Stronach & Co., Chartered Accountants. The selected financial data of AEI
as of and for the year ended December 31, 1996 are derived from the Financial
Statements of AEI, which have been audited by Arthur Andersen LLP, independent
public accountants. The financial data should be read in conjunction with the
Financial Statements and the Notes thereto appearing elsewhere in this
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected financial data as of and for the three
months ended March 31 and six months ended June 30, 1996 and 1997 have been
derived from the unaudited financial statements of AGI and AEI, which, in the
opinion of management, have been prepared on a basis consistent with the audited
information and include all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the information set forth therein.
Results of operations for the three months ended March 31 and six months ended
June 30, 1996 and 1997 may not necessarily be indicative of the results to be
expected for the entire year or any other period. The Financial Statements are
denominated in United States dollars.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
-------------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data - AGI: (in thousands)
Net sales .............................. $ 31,279 $ 32,019 $ 31,794 $ 31,402 $ 33,510 $ 6,455 $ 9,219
Cost of sales .......................... 21,072 21,565 25,504 20,825 22,491 4,582 5,951
-------- -------- -------- -------- -------- -------- --------
Gross profit .................. 10,207 10,454 6,290 10,577 11,019 1,873 3,268
Selling expenses ....................... 5,741 6,071 6,424 5,688 5,843 1,114 1,433
General and administrative expenses .... 2,300 2,728 3,505 3,138 3,599 955 1,032
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations . 2,166 1,655 (3,639) 1,751 1,577 (196) 803
Interest expense ....................... (587) (824) (1,037) (1,445) (1,343) (332) (297)
Other income ........................... 203 361 348 434 386 58 44
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item ............ 1,782 1,192 (4,328) 740 620 (470) 550
Extraordinary item - debt extinguishment -- -- -- -- -- -- (354)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)(1) ................... $ 1,782 $ 1,192 $ (4,328) $ 740 $ 620 $ (470) $ 196
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
--------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data - AEI: (in thousands)
Net sales .............................. $ 131 $ 404 $ 1,793 $ 1,843 $ 2,858 $ 1,257 $ 2,722
Cost of sales .......................... 153 331 1,669 1,699 2,263 1,056 1,824
------- ------- ------- ------- ------- ------- -------
Gross profit .................. (22) 73 124 144 595 201 898
Selling expenses ....................... 50 67 163 250 259 68 354
General and administrative expenses .... 317 622 789 962 988 554 695
Amortization of licenses ............... -- -- -- -- -- -- 28
Expenses related to acquisition ........ -- -- -- -- -- -- 672
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations . (389) (616) (828) (1,068) (652) (421) (851)
Interest expense ....................... -- (26) (41) (86) (161) (39) (1,177)
Other income (expense) ................. 6 (3) (43) 60 91 40 40
------- ------- ------- ------- ------- ------- -------
Net income (loss) ............. $ (383) $ (645) $ (912) $(1,094) $ (722) $ (420) $(1,988)
======= ======= ======= ======= ======= ======= =======
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
------------ ----------
1996 1997
------------ ----------
(unaudited)
<S> <C> <C>
Statement of Operations Data - Company Pro Forma (2): (in thousands)
Net sales ......................................... $ 36,368 $ 20,903
Cost of sales ..................................... 24,753 13,561
-------- --------
Gross profit ............................. 11,615 7,342
Selling expenses .................................. 6,102 3,252
General and administrative expenses ............... 4,279 2,528
Amortization of licenses .......................... 714 355
Expenses related to acquisition ................... -- --
-------- --------
Income from operations ................... 520 1,207
Interest expense .................................. (1,312) (642)
Other income (expense) ............................ 476 233
-------- --------
Income (loss) before income taxes (316) 798
Provision for income taxes ........................ -- 319
-------- --------
Net income (loss) ........................ $ (316) $ 479
======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31,
--------------------------------------------------------------- ---------
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: AGI (in thousands)
Cash and cash equivalents $ 318 $ 120 $ 120 $ 17 $ 94 $ 131
Working capital ......................... 5,236 10,955 786 4,732 4,797 5,450
Total assets ............................ 19,070 21,599 17,992 18,258 15,753 16,469
Short term debt ......................... 7,987 4,856 10,658 7,756 5,946 6,358
Long term debt .......................... 1,130 7,681 1,645 3,374 2,465 2,940
Shareholders' equity .................... 7,056 7,024 2,395 4,135 4,756 4,952
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
---------------------------------------------------------------- --------
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: AEI (in thousands)
Cash and cash equivalents ............... $ -- $ 144 $ 90 $ 2 $ 666 $ 5
Working capital (deficit) ............... (234) (52) (131) (608) (918) (3,293)
Total assets ............................ 608 621 909 465 2,908 38,375
Short term debt ......................... 81 50 128 200 1,431 14,107
Long term debt, excluding preferred stock -- 314 432 136 49 8,045
Preferred stock ......................... -- -- -- -- -- 3,581
Shareholders' equity .................... 51 (138) (637) (1,439) (1,069) 6,138
</TABLE>
27
<PAGE>
June 30,
--------------
1997
--------------
(unaudited)
(in thousands)
Balance Sheet Data - Company Pro Forma (2):
Cash and cash equivalents ............................................. $ 1,105
Working capital ....................................................... 1,898
Total assets .......................................................... 37,055
Short term debt ....................................................... 9,503
Long term debt, excluding preferred stock.............................. 2,051
Preferred stock........................................................ 2,070
Shareholders' equity .................................................. 18,835
- -----------------
(1) Net income (loss) of The Antigua Group, Inc. ("AGI") does not include
any provision for income tax because AGI operated as an S Corporation
prior to the Acquisition.
(2) On a pro forma basis, as adjusted to give effect to the application of
the net proceeds of this offering in the manner described in "Use of
Proceeds." See "Unaudited Pro Forma Consolidated Financial Statements."
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information includes forward-looking statements, the
realization of which may be impacted by certain important factors discussed
under "Risk Factors -- Important Factors Related to Forward-Looking Statements
and Associated Risks."
Through a series of strategic acquisitions and divestitures, the
Company has shifted from its origins of manufacturing molded and printed plastic
products to designing, screen printing or embroidering, and marketing a full
line of men's and women's sportswear and lifestyle apparel and accessories. The
Company entered the apparel business in 1993 with the acquisition of a screen
printing company. The Company began selling both (i) screen printing services on
apparel provided by customers and (ii) apparel purchased and printed by the
Company. Beginning in 1994, the Company expanded its apparel operations by
providing personalized, printed fleece products for a national retailer's
catalog business. When the retailer discontinued this catalog category in 1995,
the Company leveraged its experience to sell screen printing services and
apparel to other corporate customers. The Company also acquired an embroidering
machine in 1995 to sell embroidery-embellished apparel without subcontracting.
The Company further expanded its customer base with the January 1996 acquisition
of the assets of CHL Services, a broker of customized sportswear and lifestyle
apparel and plastic sports accessories for Canadian Junior Hockey and corporate
customers. In June 1997, the Company dramatically expanded its embroidered
apparel business with the acquisition of AGI, which is the subsidiary through
which the Company currently conducts its primary operations.
The following discussion and analysis of financial condition and
results of operations of AGI and AEI should be read in conjunction with their
respective Financial Statements, including the related notes thereto, appearing
elsewhere herein.
THE ANTIGUA GROUP, INC. ("AGI")
AGI sells quality embroidered lifestyle apparel through golf, licensed
product and corporate marketing channels. The Company also generates sales from
one outlet store and one company store in Arizona, which together account for
less than two percent of revenues. AGI's revenue is primarily derived from the
design of apparel and the value added to non-embroidered apparel by embroidering
logos. AGI sells its products through a network of independent sales
representatives. Beginning in 1995, AGI also developed an internal telemarketing
force targeting the corporate market.
AGI maintains a broad inventory of blank apparel to meet short
turn-around demands of its customers. AGI's production cycle is typically from
five to eight days. The Company also receives advance orders for delivery over
60 days from the sale. Orders are cancelable until the apparel is embroidered.
Revenue is recognized at the time product is shipped to the customer. AGI's net
sales consist of gross sales less discounts and credit memos for customer
returns. Cost of goods sold consists primarily of the purchase cost of blank
apparel, embroidery supplies and services, royalties for licensed apparel and
overhead attributable to storing, handling and shipping product. AGI purchases
all of its inventory as finished garments from manufacturers, to approximately
87% of which AGI adds embroidery. The remaining 13% of purchased garments are
sold without embroidery. AGI's selling expenses consist primarily of sales force
commissions, sales management, advertising and marketing, customer service and
order coordination services to control the quality of color and placement of
embroidery on the apparel. In the third quarter of 1996, AGI began accounting
for order coordination services as part of the cost of goods sold. General and
administrative expenses primarily consist of product development and sourcing,
accounting and financial management, bad debt expense, management information
services and administrative staff expenses.
29
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain
historical financial data for AGI as a percentage of net sales:
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
---------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales .................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales .............................. 68.2% 66.9% 80.2% 66.3% 67.1% 71.0% 64.6%
----- ----- ----- ----- ----- ----- -----
Gross profit ............................. 31.8% 33.1% 19.8% 33.7% 32.9% 29.0% 35.4%
Selling expenses ........................... 18.4% 19.0% 20.2% 18.1% 17.4% 17.3% 15.5%
General and administrative expenses ........ 7.4% 8.5% 11.0% 10.0% 10.7% 14.8% 11.2%
----- ----- ----- ----- ----- ----- -----
Income (loss) from operations ............ 6.1% 5.6% (11.4%) 5.6% 4.7% (3.0%) 8.7%
Interest expense ........................... 1.9% 2.6% 3.3% 4.6% 4.0% 5.1% 3.2%
Other income ............................... (0.6%) (1.1%) (1.1%) (1.4%) (1.2%) (0.9%) (0.5%)
----- ----- ----- ----- ----- ----- -----
Income (loss) before extraordinary item .. 4.9% 4.1% (13.6%) 2.4% 1.9% (7.3%) 6.0%
Extraordinary item-debt extinguishment ..... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.8%
----- ----- ------ ----- ----- ----- -----
Net income (loss) (1) .................... 4.9% 4.1% (13.6%) 2.4% 1.9% (7.3%) 2.1%
===== ===== ====== ===== ===== ===== =====
</TABLE>
- ------------------
(1) Net income (loss) of AGI does not include any provision for income tax
because AGI operated as an S Corporation prior to the Acquisition.
Comparison of the Three Months Ended March 31, 1996 and 1997
Net Sales. Net sales for the three months ended March 31, 1997 were
$9.2 million, an increase of $2.7 million, or 42.8%, from $6.5 million in the
same three months in 1996. This increase in sales was primarily due to an
increase in sales of licensed products as AGI became more accepted as a major
supplier by the professional sports leagues. Licensed product sales also
increased due to major orders from AGI's largest retailing customer, J.C.
Penney. Corporate sales also increased due to the productivity of AGI's inside
sales group which started in the third quarter of 1995 and had grown to twelve
salespeople by the first quarter of 1997. AGI's sales in the golf distribution
channel were comparable from period to period.
Gross Profit. AGI's gross profit for the three months ended March 31,
1997 was $3.3 million or 35.4% of net sales, an increase of $1.4 million, or
74.5%, from $1.9 million or 29.0% of net sales in the same three months in 1996.
Gross profit as a percentage of net sales increased 22.1%. This increase in
gross profit is attributable to the decrease in the number of credit memos and
customer claims corresponding with AGI's greater experience with its retail
customers. AGI also sold more product at lower margins during the first quarter
of 1996 to eliminate inventory as product styles and fashion changed. These
style changes occur periodically throughout the industry and are based on
customer demand which cannot be accurately predicted. Gross profits also
increased as the costs of its garments decreased due to arrangements with new
suppliers and improved relationships with existing suppliers. Increased profit
margins were offset by a shift in the mix of product sales towards licensed
products, which have smaller margins due to required royalty payments.
Selling Expenses. Selling expenses for the three months ended March 31,
1997 were $1.4 million or 15.5% of net sales, an increase of $319,136, or 28.6%,
from $1.1 million or 17.3% of net sales in the same three months in 1996.
Expenses as a percent of net sales decreased 10.4%. This decrease was primarily
due to a shift in product mix to licensed products which have a lower
sales commission. The decrease was offset by the costs of AGI's inside sales
group. However, such costs were spread over a greater sales volume.
30
<PAGE>
General and Administrative Expenses. General and administrative
expenses for the three months ended March 31, 1997 were $1.0 million or 11.2% of
net sales, an increase of $76,776, or 8.0%, from $955,313 or 14.8% of net sales
in the same three months in 1996. This increase was due to the cost of a new,
experienced controller, increased accounting staff salaries and higher bad debt
expense offset by lower depreciation expense as AGI's local area network system
was fully depreciated and replaced by an IBM AS/400 system. General and
administrative expenses as a percentage of net sales decreased 24.3%. This
decrease was a result of the expenses being spread over a greater sales volume.
AGI also experienced a lower rate of bad debt expenses resulting from fewer
customer claims as AGI continued to build experience with retail customers.
Interest Expense and Extraordinary Item. Interest expense for the three
months ended March 31, 1997 was $296,913 or 3.2% of net sales, a decrease of
$34,000, or 10.5%, from $331,751 or 5.1% of net sales in the same three months
in 1996. This decrease was primarily attributable to refinancing AGI's operating
credit with a new bank under more favorable terms. AGI also incurred an
extraordinary expense of $354,000 due to the termination penalty and unamortized
deferred loan fees associated with the refinancing.
Comparison of Years Ended December 31, 1995 and 1996
Net Sales. Net sales for 1996 were $33.5 million, an increase of $2.1
million, or 6.7%, from $31.4 million in 1995. This increase was due to increased
sales of AGI's licensed products as AGI was able to respond to hot market items
during the year. Hot market items are products for which demand arises
unpredictably due to the performance of the particular organizations which
license their trademarks for embroidering on AGI's apparel. The increase in
licensed product sales was partially offset by a decrease in sales of AGI's golf
products resulting from increased competition as other companies continued to
develop market share while AGI recovered from its restructuring to decrease
costs and offset losses from 1994. AGI also experienced significant turnover in
its sales representatives with the corresponding lower productivity of new
representatives. Additionally, AGI had revenue from Ryder Cup sales in 1995.
Because that golf event is held biannually, the sales did not recur in 1996.
Sales of corporate identity apparel were similar in both years.
Gross Profit. Gross profit for 1996 was $11.0 million, an increase of
$442,234, or 4.2%, from $10.6 million in 1995. Gross profit as a percentage of
net sales decreased 2.4%, from 33.7% in 1995 to 32.9% in 1996. This decrease was
due to sales of discontinued garment styles at reduced prices through customary
close-out channels.
Selling Expenses. Selling expenses for 1996 were $5.8 million, an
increase of $154,984, or 2.7%, from $5.7 million in 1995. This increase was
primarily due to the cost of developing an inside sales group. Selling expenses
as a percentage of net sales decreased 3.9%, from 18.1% in 1995 to 17.4% in
1996. This decrease was due to a spreading of fixed costs over greater sales
volume as well as a growth in sales of licensed products with lower sales
commissions.
General and Administrative Expenses. General and administrative
expenses in 1996 were $3.6 million, an increase of $460,996, or 14.7%, from $3.1
million in 1995. General and administrative expenses as a percentage of net
sales increased 7.0%, from 10.0% in 1995 to 10.7% in 1996. This increase was
attributable to the increased labor costs incurred as AGI sought to control
turnover. AGI also increased staffing to support current and anticipated growth.
Interest Expense. Interest expense was $1.3 million or 4.0% of net
sales in 1996, a decrease of $102,010, or 7.1%, from $1.4 million or 4.6% of net
sales 1995. This reduction was the result of costs of acquiring a new credit
line in 1995 as well as reduced need to draw upon AGI's credit line.
Comparison of Years Ended December 31, 1994 and 1995
Net Sales. Net sales for 1995 were $31.4 million, a decrease of
$391,025 or 1.2% from $31.8 million in 1994. This decrease resulted from lower
sales of AGI's golf products as AGI's cash flow did not permit the acquisition
of sufficient inventory to fill orders. Sales of golf products also declined
because key independent sales representatives became captive representatives of
a competitor. Additionally, AGI did not repeat its 1994 decision to sell
products below cost which was necessary in the last quarter of 1994 to raise
required cash. These decreases in 1995 were offset by a moderate increase in
licensed product sales. Licensed product sales were moderated by intense
competition. Sales of corporate identity apparel were similar in both years.
During this period, AGI
31
<PAGE>
was also working both (i) to change its reputation from a provider of western
apparel, and (ii) to recover from its reputation as a provider of deeply
discounted apparel which was necessary to provide cash in 1994. In the third
quarter of 1995, AGI also began implementing new strategies which included a
focus on products which could be sold through all of its distribution channels
and a new balance between basic and fashion apparel and an All Seasons
collection. AGI had not yet fully realized the benefits of these new strategies
in 1995.
Gross Profit. Gross profit in 1995 was $10.6 million, an increase of
$4.3 million, or 68.2%, from $6.3 million in 1994. The gross profit as a
percentage of net sales increased 70.2%, from 19.8% in 1994 to 33.7% in 1995.
Margins improved in 1995 due to the discontinuance of the below cost sales
required for liquidity in 1994. AGI also discontinued its practice of selling
low margin, full-front embroidered products on low-cost apparel.
Selling, General and Administrative Expenses. Selling expenses in 1995
were $5.7 million, a decrease of $735,670, or 11.5%, from $6.4 million in 1994.
Selling expenses as a percentage of net sales decreased by 10.4%, from 20.2% in
1994 to 18.1% in 1995. General and administrative expenses in 1995 were $3.1
million, a decrease of $367,137, or 10.5%, from $3.5 million in 1994. General
and administrative expenses as a percentage of net sales decreased 9.1%, from
11.0% in 1994 to 10.0% in 1995. These decreases were due to reduced overhead
mandated by lower cash flow.
Interest Expense. Interest expense in 1995 was $1.4 million or 4.6% of
net sales, an increase of $407,560, or 39.3%, from $1.0 million or 3.3% of net
sales in 1994. This increase was due to delinquency and default fees on AGI's
bank line as well as diligence fees charged by prospective new lenders and
increased rates charged by AGI's new bank effective in July 1995.
Liquidity and Capital Resources
AGI has historically financed its operations primarily through cash
generated from operations and borrowing under a bank line of credit. However, as
overhead increased in 1994, AGI sold inventory to raise cash and create a
capital loss carryback. This carryback was passed through to AGI's shareholders
because AGI was organized as an S corporation. AGI's principal shareholder
loaned the proceeds from the tax benefit to AGI. In 1995, AGI also sold $1.0
million in common equity to generate cash needed for operations. After AGI
reduced overhead and implemented new strategic plans, cash generated from
operations, together with its new debt arrangements, have been sufficient to
finance operations. The loan to the principal shareholder was repaid when AEI
acquired AGI in June 1997. See "The Acquisition and Related Financing."
Cash generated from operations totalled $955,319 in the three months
ended March 31, 1996 compared with $604,187 of cash used in operations in the
same three months of 1997. This cash use resulted from increased sales
generating receivables as AGI maintained its 50 to 60-day collection cycle.
AGI's principal uses of cash historically have been to pay operating expenses,
make capital expenditures and service debt. AGI also made a $300,000
distribution to its shareholders in 1994. AGI's next shareholder distribution
was $725,000 in the second quarter of 1997.
Cash generated from operations totalled $1.1 million, $506,725 and $3.4
million in fiscal years 1994, 1995 and 1996, respectively. Cash generated in
1994 was attributable to below-cost sales of inventory. AGI also reduced
inventory in 1996 through low-margin sales to eliminate discontinued styles.
Beginning at that time, AGI implemented inventory control systems to attempt to
avoid excessive inventory levels and reduce the need for close-out sales. The
success of AGI's inventory control programs is dependent on its ability to
generate and maintain strong relationships with overseas suppliers over which
AGI has little control. See "Risk Factors -- Dependence on Suppliers and Outside
Contractors." Cash generation decreased in 1995 because AGI's bank terminated
its relationship with AGI due to cash flow problems creating defaults in the
prior year. AGI's new bank required AGI to permit the bank to collect
receivables. The bank's collection programs were unsuccessful, and AGI resumed
collecting its own receivables in May 1996.
AGI's accrued expenses and payables also reflected AGI's operating
patterns from 1994 through the first quarter of 1997. These accounts were high
in 1994 due to AGI's need for cash. As AGI began generating cash from profitable
operations in 1995, it was able to reduce accrued expenses and payables. As
sales grew in the first quarter of 1997, accrued expenses grew due to accrued
royalties and commissions on such sales.
32
<PAGE>
In January 1997, AGI entered into a $12 million asset-based revolving
line of credit with a new lender, LaSalle National Bank, permitting AGI to
borrow amounts equivalent of up to 85% of certain of its receivables and 55% of
certain of its inventory and to issue letters of credit to finance inventory
purchases up to $5 million. The line of credit bears interest at the rate of
prime plus one percentage point (9.5% as of June 30, 1997) and expires on
January 23, 2000. As of June 30, 1997, AGI had $2.7 million in outstanding
letters of credit, and the amount outstanding on the line of credit was $6.5
million, with another $1.3 million available. The January 1997 debt arrangement
also provides for a $775,000 term loan which is repayable at $9,226 per month
with the balance due January 2000. Interest is at the prime rate plus 1.25
percentage points. The balance on the term loan was $729,000 as of June 30,
1997. AGI used the proceeds from this loan to retire approximately $500,000
worth of equipment leases, making the then fully owned capital collateral for
the loan. The remaining portion of the proceeds was used for general working
capital.
The lenders providing financing in connection with AEI's acquisition of
AGI require AGI to be the named debtor because AGI owns most of the
post-acquisition assets of the Company. See "The Acquisition and Related
Financing" and Notes 9 through 13 of the Notes to the Consolidated Financial
Statements. Therefore, AGI incurred approximately $13.4 million of debt due to
the acquisition. The financing includes a term loan from LaSalle Business
Credit, Inc. for $3.5 million with interest at prime plus three percentage
points, payable in monthly installments of approximately $100,000 beginning July
1, 1997, with certain required prepayments based on cash flow. The proceeds of
this offering will be used to make a required $2.0 million prepayment on this
LaSalle loan. The acquisition financing also included a one-year $2.5 million
loan bearing interest at 13% per year from Imperial Bank. Interest on the
Imperial loan is paid monthly, and the principal is due at the end of the
one-year term. However, Imperial can demand full repayment or cash collateral
upon the completion of this offering. If Imperial demands the collateral, the
interest rate on the loan becomes 11% per year. Imperial can extend the term of
the loan for an additional 24 months, in which case AGI would make monthly
principal payments of approximately $70,000 plus annual payments of a percentage
of certain cash flow. The other debt incurred in connection with the Acquisition
will be converted to AEI common equity or repaid with the proceeds of this
offering. See "Use of Proceeds." When the debt is repaid upon closing of this
offering, the Company will recognize an expense of approximately $4.2 million
representing the unamortized portion of loan fees and discounts.
AGI's borrowing agreements contain covenants which place various
restrictions on financial ratios, levels of indebtedness, capital expenditures,
minimum levels of income, transactions with related parties and the payment of
dividends. In addition, the borrowing agreements contain a cross default
provision and an event of default provision wherein all outstanding amounts will
be due and payable should there be any material adverse change in AGI's
performance or operations or a change in control of AGI. AGI's borrowing
agreements also prohibit payments to AEI except as needed for scheduled
principal and interest payments on AEI's debt obligations to AGI's former
shareholders. AGI's debt arrangements are secured by substantially all of the
Company's assets and are guaranteed by AEI and SEI. AGI has previously sought
and obtained waivers from two lenders with respect to timely reporting of
financial information and for having exceeded its capital expenditures limit.
Capital expenditures totaled $93,000 and $246,000 for the three months
ended March 31, 1996 and 1997, respectively. The increase in expenditures in
1997 was due to the acquisition of sales force automatization systems. Capital
expenditures totaled $581,000, $575,000 and $610,000 in the fiscal years 1994,
1995 and 1996, respectively. Approximately $200,000 of such expenditures each
year are to capitalize embroidery design programs. The expenditures also
included gravity fed warehouse shelving in 1994, an upgrade to the IBM AS/400
computer system and related software development in 1995, furniture and fixtures
for the new outlet store in 1996, as well as routine replacements and upgrades.
These purchases were financed through cash generated by operations, except that
the AS/400 upgrade was financed through an installment sale contract. AGI's
fiscal 1997 capital budget is $500,000. The budget is to complete the sales
force automatization system, new personal computers, an upgrade to the IBM
AS/400 system, a new embroidery machine and a show van. The costs of these
expenditures will be funded with cash generated by operations, except the IBM
upgrade and van were purchased with installment contracts.
AGI believes that the net proceeds from this offering and cash
generated from operations will be sufficient to fund its operations for the next
twelve months. However, there can be no assurance that AGI will not require
additional capital in the future. If AGI were required to obtain additional
financing in the future, there can be no assurance that sources of capital will
be available on terms favorable to the Company, if at all.
33
<PAGE>
ANTIGUA ENTERPRISES, INC. ("AEI")
AEI became the corporate parent of AGI on June 16, 1997. Results from
AGI after that date are included in AEI's consolidated financial statements. At
the time of the acquisition, AEI derived most of its revenue from the service of
creating and applying printed and embroidered designs on apparel through its CHL
Services division and SEI subsidiary. AEI sells its services primarily through
its internal sales force. Approximately 25% of AEI's 1996 sales were through
contracts by which AEI added designs to apparel provided by customers, with the
remaining 75% from full-content orders for which AEI sold both the apparel and
the design embellishment to customers. Because AEI typically purchases any blank
apparel needed after an order is placed and fills orders in approximately two
weeks, it operates with little inventory or backlog. When necessary to meet its
production cycle commitments to customers, AEI subcontracts certain design,
embroidery or printing operations. If AEI cannot purchase sufficient blanks to
fulfill an order, it will cancel the remaining portion of the order and request
the customer to re-order the balance in the future. In late 1996, AEI began
warehousing finished inventory to provide order-fulfillment services for
customers who offer apparel to employees as uniforms or through customized
catalogs.
AEI recognizes revenue from the sale of a product at the time it is
shipped to the customer. Orders placed with AEI are cancelable until the product
is altered with printing or embroidery. AEI's warehoused finished goods for its
order-fulfillment programs must be purchased by the customer annually or at the
termination of a warehousing agreement. AEI's net sales consist of gross
revenues less returns, early payment discounts and adjustments for customer
discrepancy claims. Cost of goods sold includes the purchase cost of blank
material, embroidery and screen printing supplies and services, direct labor,
costs of subcontracted operations, and product shipping and handling expenses.
AEI's selling expenses consist of sales force commissions, royalties and
marketing. General and administrative expenses primarily consist of management
and administrative staff expenses, depreciation and amortization and bad debt.
Results of Operations
The following table sets forth, for the periods indicated, certain
historical financial data for AEI as a percentage of net sales:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31 June 30
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales .............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales .......................... 116.8% 81.9% 93.1% 92.2% 79.2% 84.0% 67.0%
------ ------ ------ ------ ------ ------ ------
Gross profit ......................... (16.8%) 18.1% 6.9% 7.8% 20.8% 16.0% 33.0%
Selling expenses ....................... 38.1% 16.6% 9.1% 13.5% 9.1% 5.4% 13.0%
General and administrative expenses .... 242.1% 154.0% 44.0% 52.2% 34.6% 44.2% 25.5%
Amortization of licenses ............... - - - - - - 1.0%
Expenses related to acquisition ........ - - - - - - 24.7%
------ ------ ------ ------ ------ ------ ------
Income (loss) from operations ........ (297.0%) (152.5%) (46.2%) (57.9%) (22.8%) (33.5%) (31.3%)
Interest expense ....................... - 6.4% 2.3% 4.7% 5.6% 3.1% 43.2%
Other income (expense) ................. 4.6% (0.7%) (2.4%) (3.3%) (3.2%) 3.2% 1.5%
------ ------ ------ ------ ------ ------ ------
Net Income (loss) .................... (292.4%) (159.6%) (50.9%) (59.3%) (25.3%) (33.4%) (73.0%)
====== ====== ====== ====== ====== ====== ======
</TABLE>
Comparison of the Six Months Ended June 30, 1996 and 1997
Net Sales. Net sales for the six months ended June 30, 1997 were $2.7
million, an increase of $1.5 million, or 117%, from $1.3 million in the same six
months in 1996. Included in the 1997 figure is approximately $1.6 million of
post-acquisition sales by AGI. This increase in sales was offset by a decrease
in sales by CHL Services as AEI discontinued unprofitable products, primarily
34
<PAGE>
brokered hockey uniforms and pucks. However, sales by SEI increased as it
expanded its customer base, including new customers attracted by the inventory
SEI could purchase from AGI.
Gross Profit. AEI's gross profit for the six months ended June 30, 1997
was $898,019, an increase of $696,740 or 346%, from $201,279 in the same six
months in 1996. Gross profit as a percentage of net sales increased 106%, from
16.0% in the first six months of 1996 to 33.0% in the same period in 1997. This
increase in gross profit is due to higher margins on sales by AGI, and lower
cost of materials as CHL Services discontinued certain brokered products and
obtained screen printing services from SEI rather than independent contractors.
AEI's direct labor costs increased in 1997, but the costs were spread over a
greater sales volume.
Selling Expenses. Selling expenses for the six months ended June 30,
1997 were $353,755, an increase of $285,825, or 421%, from $67,930 in the same
six months in 1996. Selling expenses as a percent of net sales increased 141%,
from 5.4% in the first six months of 1996 to 13.0% in the same period in 1997.
This increase was due to the inclusion of a partial month of AGI's selling
expenses and a shift toward a greater percentage of commissioned sales in AEI's
other businesses.
General and Administrative Expenses. General and administrative
expenses for the six months ended June 30, 1997 were $695,143 or 25.5% of net
sales, an increase of $140,308, or 25.3%, from $554,835 or 44.2% of net sales in
the same six months in 1996. The increase was the result of the Company's
growth. The increase was offset by the need for only one audit for AEI in 1997.
A second audit occurred in 1996 because the annual shareholders meeting was held
late in the year, and VSE rules require a second audit for shareholders to
receive audited financial statements dated within the specified period. General
and administrative expenses as a percentage of net sales decreased 42.3%. This
decrease was primarily because of the need for only one audit in 1997 and the
lower rate of expenses incurred by AGI. The Company anticipates that the rate of
such expenses will decrease as the accounting functions of its subsidiaries are
consolidated in late 1997.
Loss from Operations. Loss from operations for the six months ended
June 30, 1997 was $850,856 or 31.3% of net sales, an increase of $429,370, or
102%, from $421,486 or 33.5% of net sales in the same six months in 1996. This
increase was primarily due to expenses related to the Acquisition.
Interest Expense. Interest expense for the six months ended June 30,
1997 was $1.2 million or 43.2% of net sales, an increase of $1.1 million, or
2,890%, from $39,348 or 3.1% of net sales in the same six months in 1996. This
increase was due to interest on funds accumulated in anticipation of the
acquisition of AGI and interest on working capital advances from officers and
employees required to supplement unprofitable operations. See "Certain
Relationships and Related Transactions."
Comparison of Years Ended December 31, 1995 and 1996
Net Sales. Net sales for 1996 were $2.9 million, an increase of $1.0
million, or 55.0%, from $1.8 million in 1995. This increase was primarily
attributable to the acquisition of CHL Services in January 1996, by which AEI
expanded the customer base for its apparel operations and augmented CHL's
product offerings with SEI's printing and embroidering services. The increase
also was due to expanded customer base of AEI's previously existing business and
an increase in the amount of product purchased per customer.
Gross Profit. Gross profit in 1996 was $594,962 or 20.8% of net sales,
an increase of $450,881, or 313%, from $144,081 or 7.8% of net sales in 1995.
This increase was due to AEI's ability to negotiate higher margins on its
apparel business as its reputation and customer base grew, spreading fixed costs
over higher sales volume and an increase of the sales price of AEI's products.
The increase also is attributable to improved quality control and production
efficiency. AEI significantly reduced the incidence of defective products as it
discontinued a club sports uniform program experiencing high returns. AEI
reduced its product defect rate in 1996 by improving procedures for
communicating customer design concepts to manufacturing personnel.
Selling Expenses. Selling expenses for 1996 were $259,109, an increase
of $9,675, or 3.9%, from $249,434 in 1995. Selling expenses as a percentage of
net sales decreased 32.6%, from 13.5% of net sales in 1995 to 9.1% of net sales
in 1996. In 1995, AEI incurred significant selling expenses associated with
hiring and training a professional sales force. These expenses decreased in 1996
35
<PAGE>
because AEI terminated unproductive sales personnel, and existing personnel
increased their productivity as they began to develop repeat customers. AEI also
changed the compensation structure for the remaining sales force from salary to
commission.
General and Administrative Expenses. General and administrative
expenses in 1996 were $987,548, an increase of $25,220, or 2.6%, from $962,328
in 1995. General and administrative expenses as a percentage of net sales
decreased 32.5%, from 52.2% in 1995 to 34.6% in 1995. This decrease was due to a
reduction in administrative personnel offset by the addition of expenses
incurred by the acquisition of CHL Services and the need for a second audit. Bad
debt expense also decreased due to an increase in orders from customers with
more reliable payment patterns and the termination of the club sports uniform
program which had unfavorable bad debt experience.
Interest Expense. Interest expense was $160,864 or 5.6% of net sales in
1996, an increase of $75,011, or 87.4%, from $85,853 or 4.7% of net sales in
1995. This increase was due to the incidence and servicing of debt incurred to
finance continued operations and the increased cost of factoring receivables.
AEI discontinued factoring in May 1996.
Comparison of Years Ended December 31, 1994 and 1995
Net Sales. Net sales for 1995 were $1.8 million, an increase of
$50,085, or 2.8%, from 1994. This increase was due to larger volume of units
sold offset by the discontinuance of AEI's customized fleece printing program
with a national retailer.
Gross Profit. Gross profit in 1995 was $144,081, an increase of
$20,309, or 16.4%, from $123,772 in 1994. Gross profit as a percentage of sales
increased 13.0%, from 6.9% in 1994 to 7.8% in 1995. This increase was due to a
shift toward more profitable full-content apparel orders and the termination of
most molded plastic product lines. AEI's manufacturing personnel turnover also
decreased in 1995. These margin increases were offset by a one-time expense of
approximately $200,000 resulting from the termination of patented plastic
product inventory.
Selling Expenses. Selling expenses in 1995 were $249,434, an increase
of $86,765, or 53.3%, from $162,669 in 1994. Selling expenses as a percentage of
net sales increased 48.4%, from 9.1% in 1994 to 13.5% in 1995. This increase was
due to expenses associated with hiring and training a professional sales force.
General and Administrative Expenses. General and administrative
expenses in 1995 were $962,328, an increase of $173,333, or 22.0%, from $788,995
in 1994. General and administrative expenses as a percentage of net sales
increased 18.6%, from 44.0% in 1994 to 52.2% in 1995. This increase was due to
bad debt resulting from uncollectible receivables associated with unproductive
sales people and a new club sports uniform program offered through a membership
warehouse. AEI also incurred high liability insurance premiums for a skate board
product sold in 1995 and made more extensive use of a temporary service to
provide accounting staff during that year.
Interest Expense. Interest expense in 1995 was $85,853 or 4.7% of net
sales, an increase of $44,663, or 108%, from $41,190 or 2.3% of net sales in
1994. This increase was due to the incidence and servicing of debt incurred to
finance continued operations.
Liquidity and Capital Resources
AEI's capital needs have fluctuated throughout its history with the
requirements of the businesses operated at the time. AEI has historically
financed its operations through private equity sales to and advances from AEI's
principals and investors. Such funds have been supplemented by proceeds from
factoring receivables through May 1996. This capital was sufficient to operate
AEI's business until 1996 when the Company began private equity placements in
connection with the Acquisition. AEI used significant debt to finance the
Acquisition. This debt is carried on the financial statements of AGI because the
lenders require payment primarily from AGI. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- The Antigua Group,
Inc. --Liquidity and Capital Resources" above. For a description of governmental
economic fiscal, monetary, or potential policies or factors that could
materially affect, directly or indirectly, the operations of the Company or an
investment by United States nationals in the Company, see "Certain Income Tax
Considertions--Certain Canadian Federal Income Tax Considerations" and "Canadian
Governmental Regulation."
36
<PAGE>
Net cash used in operations was $628,639, $699,373, $746,389 and
$1,632,535 in 1994, 1995, 1996 and the first six months of 1997, respectively.
The cash use is primarily attributable unprofitable operations. AEI also
expended significant cash to accumulate funds for the Acquisition. AEI's
payables increased in 1996 with the acquisition of CHL Services.
AEI intends to rely on inventory and receivables financing to satisfy
its working capital requirements for at least the next twelve months. AEI
believes that it will continue to experience increased receivables and inventory
as it generates larger corporate customers who demand longer payment terms and
as it continues to shift its product mix toward higher-margin order-fulfillment
programs. There can be no assurance, however, that AEI will not require
additional capital in the future, particularly for replacement of equipment and
acquisition of new equipment to support anticipated growth. The terms of the
financing for the Acquisition prohibit use of funds from AGI to support AEI's
other operations. Therefore, if AEI were required to obtain additional financing
in the future, there can be no assurance that such sources of capital will be
available on terms favorable to the Company, if at all.
AEI has incurred significant expenditures to comply with the reporting
and listing requirements associated with maintaining a public market for its
Common Shares on the VSE. AEI expects that these expenditures will increase as
it seeks to comply with the requirements to maintain a public market for its
shares in the United States. However, because these expenses will be supported
by significantly more revenues due to the Acquisition, their relative impact
should not be as significant in the future.
The terms of the Acquisition require that AEI pay AGI's former
principal shareholder the equivalent of all AGI profits earned from April 1,
1997 until June 16, 1997. AEI has accounted for this obligation as an accrued
liability. See "The Acquisition and Related Financing." This approximately
$700,000 obligation is to be paid quarterly, and the first payment was due on
September 16, 1997. AEI was unable to make the entire payment at that time but
such obligation has since been paid in full. AEI will be required to make the
second quarterly payment on December 16, 1997 and would currently be unable to
make that payment with cash generated from operations of SEI. The terms of the
Acquisition accelerate payment of any amount remaining on the approximate
$700,000 obligation to Mr. Dooley upon certain securities offerings of the
Company, and the Company anticipates satisfying such obligation from the net
proceeds of this offering. The terms of AGI's borrowing agreements do not permit
AGI to make payments to AEI to satisfy this obligation to Mr. Dooley. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - The Antigua Group, Inc. - Liquidity and Capital Resources." If the
Company were unable to meet this obligation to Mr. Dooley with net proceeds of
this offering, the Company would need additional financing to satisfy the
obligation, and there can be no assurance that such financing would be
available, or, if available, that such financing would be on terms favorable to
the Company.
Additional obligations associated with AEI's operations include: (i) a
note payable to Texas Commerce Bank with a principal balance of $16,000 as of
June 30, 1997 bearing interest at 10% per year which AEI intends to repay in
full by December 1997; (ii) a $2,000 monthly payment to the State of Texas
continuing until March 1998 representing delinquent sales taxes and penalties
incurred as the result of AEI's acquisition of Promo, Inc. in 1993; (iii) a note
to a director with a principal and accrued interest balance of $342,733 as of
June 30, 1997, due on demand, bearing interest at 7% per year; (iv) an aggregate
of $193,373 in zero interest notes due on demand after June 1998 by Directors or
shareholders; and (v) notes payable of $334,619 to officers of AGI, due in 1997,
bearing interest at 9% per year. Since June 30, 1997, AEI has repaid $200,000 on
the 7% director note, $334,619 on notes due to AGI officers and $452,707 of
other outstanding debt. Additionally, AEI has approximately $3,500 in monthly
commitments under existing capital equipment leases. AEI has defaulted on
payment of an approximately $100,000 obligation to Sea/Q of America, Inc.
("Sea/Q"). Sea/Q commenced suit to recover this amount but has agreed not to
pursue this claim until after January 15, 1998, in consideration for the Company
having caused the transfer of warrants to Sea/Q. See "Business - Legal
Proceedings." The Company anticipates satisfying the obligation to Sea/Q from
proceeds of this offering. See "Use of Proceeds." The terms of AGI's borrowing
agreements do not permit AGI to make payments to AEI to satisfy this obligation.
If the Company were unable to meet the obligation to Sea/Q with net proceeds of
this offering, the Company would need additional financing to satisfy the
obligation, and there can be no assurance that such financing would be
available, or, if available, that such financing would be on terms favorable to
the Company. The Company's principal financing agreements contain cross default
provisions, and nonpayment of the obligation to Sea/Q, or the institution of
proceedings by Sea/Q, or both, created a primary default under at least one of
its principal financing agreements and may have created cross defaults under
other principal financing agreements. Waivers from lenders with respect to the
event, or events, of default have been obtained. AGI previously sought and
obtained waivers from two lenders in connection with financial reporting
requirements and capital expenditure limits. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - The Antigua Group,
Inc. - Liquidity and Capital Resources."
37
<PAGE>
Quarterly Results and Seasonality
The following table presents certain unaudited consolidated financial
information for fiscal 1995, 1996 and applicable quarters of fiscal 1997. In the
opinion of the Company, this information has been prepared on the same basis as
the audited consolidated financial statements appearing elsewhere in this
prospectus and includes all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the unaudited quarterly results set
forth herein. Operating results for any quarter are not necessarily indicative
of results for any future period or for a full fiscal year. See "Risk Factors --
Important Factors Related to Forward-Looking Statements and Associated Risks."
AGI
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------------------------------------------------------------
1995 1996 1997
-------------------------------------------- -------------------------------------------- --------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31
-------- -------- -------- -------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............. $ 7,245 $ 7,288 $ 9,432 $ 7,457 $ 6,455 $ 9,262 $ 10,476 $ 7,316 $ 9,219
Cost of goods sold .... 4,918 4,907 6,063 4,937 4,582 6,137 6,812 4,959 5,951
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit .......... 2,327 2,361 3,369 2,520 1,873 3,125 3,664 2,357 3,268
Selling, general and
administrative expense 2,358 2,178 2,391 1,898 2,069 2,407 2,598 2,368 2,465
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations ........... (31) 183 978 622 (196) 718 1,066 (11) 803
Other income (expense),
net .................. (143) (314) (242) (312) (274) (260) (265) (158) (252)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item (1) $ (174) $ (131) $ 736 $ 310 $ (470) $ 458 $ 801 $ (169) $ 551
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(as a percentage of sales)
1995 1996 1997
-------------------------------------------- -------------------------------------------- --------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross profit ......... 32.1% 32.5% 35.7% 33.8% 29.0% 33.7% 35.0% 32.2% 35.4%
Income (loss) from
operations ......... -0.4% 2.5% 10.4% 8.3% -3.0% 7.8% 10.2% -0.2% 8.7%
Income (loss) before
extraordinary item (1) -2.4% -1.8% 7.8% 4.2% -7.3% 4.9% 7.6% -2.3% 6.0%
</TABLE>
- ------------------
(1) Net income (loss) of AGI does not include any provision for income tax
because AGI operated as an S Corporation prior to the Acquisition.
38
<PAGE>
AEI
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------------------------------------------------------------
1995 1996 1997
-------------------------------------- -------------------------------------- -----------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales .............. $ 546 $ 673 $ 313 $ 311 $ 520 $ 737 $ 714 $ 887 $ 550 $ 2,172
Cost of goods sold ..... 455 424 334 486 421 634 478 730 369 1,455
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit ........... 91 249 (21) (175) 99 103 236 157 181 717
Selling, general and
administrative expense 321 186 383 322 214 338 175 519 206 843
Amortization of licenses -- -- -- -- -- -- -- -- -- 28
Expenses related to
acquisition ........... -- -- -- -- -- -- -- -- -- 672
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations ........... (230) 63 (404) (497) (115) (235) 61 (362) (25) (826)
Other income (expense), (12) (8) (45) 39 (40) (30) (13) 12 10 (1,146)
net
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) ...... $ (242) $ 55 $ (449) $ (458) $ (155) $ (265) $ 48 $ (350) (15) $(1,972)
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(as a percentage of sales)
1995 1996 1997
-------------------------------------- -------------------------------------- -----------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30
------- ------- -------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross profit ......... 16.7% 37.0% -6.7% -56.3% 19.0% 14.0% 33.1% 17.7% 32.9% 33.0%
Income (loss) from
operations ........... -42.1% 9.4% -129.1% -159.8% -22.1% -31.9% 8.5% -40.8% -4.5% -38.0%
Net income (loss) .... -44.3% 8.2% -143.5% -147.3% -29.8% -36.0% 6.7% -39.5% -2.7% -90.8%
</TABLE>
AGI's business has been seasonal with the highest sales typically
occurring in the second and third quarters of the year. The Company believes
that this seasonality is the result of increased licensed apparel purchases as
consumers prepare for a return to colleges that have license agreements with
AGI. Such seasonality is also affected by the increased interest in licensed
sports apparel during those quarters. The peak in licensed sports apparel often
carries into the fourth quarter depending upon consumer interest in the teams
involved in bowls and championships. AGI's golf apparel business also
contributes to this seasonality as AGI's snowbelt customers increase purchases
during the late first quarter and early second quarter, and sunbelt purchasers
increase purchases in the late third and early fourth quarters, both in
preparation for their busy seasons. AGI's corporate apparel business is less
seasonal because such sales are generally one-time transactions typically
resulting from trade shows, sales calls, and similar marketing efforts. Prior to
the acquisition of AGI, AEI's business did not show seasonal trends because
AEI's performance had been significantly impacted by the timing of major orders
and significant acquisitions or dispositions. Because AGI currently is the major
component of AEI's business, the Company expects AGI's seasonality to be
reflected in AEI's overall performance. The Company also believes that its
business is susceptible to economic cycles as its customers' spending patterns
on marketing and promotional items such as those offered by the Company are
expected to decrease during economic downturns. Significant variability in
orders during quarters may have a material adverse impact on the Company's cash
flow, and a significant decrease in orders could have a material adverse impact
on the Company's results of operations of financial conditions. See "Risk
Factors -- Fluctuations in Quarterly Operating Results; Seasonality."
Inflation
The Company does not believe that inflation has had a material impact
on its business during the last three years. To the extent inflation occurs in
the future, the Company may not be able to pass on increased costs to customers
due to competitive pressures.
39
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BUSINESS
Overview
Antigua designs, sources, embroiders, screen prints and markets men's
and women's lifestyle apparel and casual sportswear under the distinctive
Antigua label. The Company has more than 18 years of experience developing
innovative seasonal and year round collections of apparel for the premium 18-80
year old men's and women's markets. The Company has developed a strong
reputation in its respective distribution channels by offering high quality,
fashion apparel with custom embroidery, screen printing and generous fit. In
addition, the Company believes it holds a competitive advantage by having the
capacity and reputation necessary for quick response to "hot markets" (such as
event-related garments) and corporate impulse orders, so called "at once"
business.
The Company sells its products through three distribution channels:
golf; licensed products; and corporate identity apparel. Antigua designs all of
its apparel to appeal to each of these channels. By selecting styles and color
stories which can be marketed to golf, licensed product and corporate
purchasers, the Company believes that it increases its sales potential and
reduces the risk of obsolescence of any particular stockkeeping unit. The
Company also believes that servicing three distribution channels from one
inventory provides the Company with the additional competitive advantage of
responding quickly to shifting demand in its three distribution channels with
fewer stockkeeping units. The inventory comprises three product categories:
* Essentials: Antigua's complete offering of basics, solid knit
shirts, jackets, windshirts and sweaters designed to be in
stock for one to three years.
* All Seasons: A large collection of innovatively designed,
fancy, knit shirts and overtops in stock for one year.
* Spring and Fall Fashion Collections: Small groups of fancy,
knit shirts and overtops designed for a four to six month
selling season.
Golf distribution is the most mature of Antigua's three distribution
channels and is divided into two complementary areas, retail stores and
tournaments and special events. The retail stores include golf shops located on
resort, private, semi-private and public golf courses and off course specialty
stores. Tournaments and special events include major and minor golf tournaments
and events related to golf. All three product categories sell into this
distribution channel in the premium and mid-priced markets through a network of
approximately 35 independent sales representatives. The golf distribution
channel targets approximately 13,000 golf retailers at green grass shops and off
course locations. The Company's account base in this channel includes
approximately 7,900 open accounts. The Company's open accounts are customers
whose credit has been approved by the Company and who have purchased from the
Company on at least one occasion. Of these accounts, approximately 55% are
active in any calendar year, yielding a market penetration of between
approximately 43% and 49% at any point. Approximately 87% of Antigua's product
sold into the golf channel is embroidered with an insignia which depicts the
golf course or club, usually on the left chest or sleeve. The golf distribution
channel accounted for approximately 37% of AGI's sales in 1996 and for the six
months ended June 30, 1997. Antigua has contracts for distribution of its golf
line in Canada, Australia and Japan, but historically most of its golf sales
have been in the United States. The Company plans to expand into Europe and
South America and to increase marketing efforts in Asia in the near future.
Antigua's sales of licensed apparel consists of sportswear embroidered
with professional team, college team and institutional insignias sold to
leagues, teams, area stores and large retail chains with team sport departments
and other general business and institutional accounts. This distribution channel
represents an area of recent volume growth and potential future growth both in
terms of amount and percentage of sales to Antigua. Licensed products sales
accounted for approximately 42% of AGI's sales in 1996 and 38% of sales for the
six months ended June 30, 1997. Positioned by experience, design, quality and
control of outlets as a market leader of the licensed apparel industry,
Antigua's superior quality and innovative designs have led to its growth in this
market. To protect margins and the value built into the brand name, the Company
has limited its distribution of its licensed products line to the higher end
sporting goods and retail department stores. All three product categories
(Essentials, All Seasons and the Spring and Fall Collections) sell into this
distribution channel. Antigua believes that its success in the licensed apparel
industry has been its control of brand identity and its use of lifestyle color
stories which are complementary to team colors, rather than relying solely on
team specific color stories creating greater customer acceptance of licensed
apparel.
40
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The Company holds licenses to manufacture, sell and distribute products
bearing the marks of Major League Baseball ("MLB") and the World Series and the
Diamond Club, National Football League ("NFL"), Pro Line and Super Bowl, the
National Basketball Association ("NBA"), the National Hockey League ("NHL") and
the Stanley Cup, the National Collegiate Athletics Association ("NCAA") and the
Final Four, Notre Dame, as well as numerous colleges and universities. The
Company is also licensed by the PGA of America for its championships and its
1997 Ryder Cup matches. The Company believes that its license position with
professional and other sports organizations is the strongest of any of its
competitors in its lifestyle apparel and casual sportswear market.
Antigua views the corporate distribution channel as the largest
potential growth area for the Company. AGI's corporate identity sales in 1996
were approximately 18% of the Company's sales, compared to approximately 23% of
AGI's sales for the six months ended June 30, 1997. With the casualization of
corporate America and as "Casual Friday" moves into the work week, there is a
strong demand for lifestyle sportswear. Corporate outings, employee recognition,
customer appreciation, corporate catalogs are just a few of the product uses.
The year round in stock concept of Essentials and the All Seasons Collections
supply the "at once" impulse needs of this market place.
Antigua's corporate identity products are positioned in the mid- to
premium-price range and are sold through a network of ten independent sales
representatives and through a direct sales force of approximately 20 sales
people in the United States and Canada. The Company's Inside Sales department is
an in-house telemarketing group. This group generates approximately 60% of the
Company's corporate distribution channel sales. The Company's corporate clients
represent all of the screen printing sales and approximately 20% of its net
sales. The Company recently signed a licensing agreement with the Cadillac
Division of General Motors and believes that this license will create additional
brand building in the future.
Market
The Golf Industry. According to Golf Pro magazine, the domestic golf
apparel industry totaled approximately $893 million in 1996 at the wholesale
level. In the past 7 years, the golf apparel market in green grass and resort
shops has become fragmented to where no one company has been able to capture
more than a 10% market share. While golf is Antigua's most mature distribution
channel, the Company has been able to maintain a strong presence in green grass
shops and off course specialty shops over a continued period. AGI has been
selling into this channel since 1979 and has maintained levels of penetration in
this market between 1989 and 1995, according to the 1997 Golf Shop Operations
Survey of the Golf Market, of between 22% in 1989 and 31% in 1995. According to
the same survey, the top companies by brand penetration in the average facility
were Ashworth, Inc., Slazenger, Nike, Izod and Antigua. The Company believes
that its current green grass shops and off course specialty shops penetration is
now even higher than the industry estimates from 1995 because these industry
estimates are completed through sampling and do not include events or growth in
the Company's accounts. According to Golf Shop Operations magazine, there are
approximately 17,500 golf retailers in the United States, including green grass
shops and off course shops. Of these retailers, the Company targets
approximately 13,000 for its golf distribution channel customer base
(discounting the total number because of possible credit problems and
non-viability as an apparel retailer). Based on these industry estimates,
Antigua's golf apparel is sold in approximately 60% of its golf distribution
channel targets and in approximately 45% of golf retailers. The Company has open
accounts with approximately 3,240 private clubs and resorts, 2,500 daily fee
course shops, 1,130 off course specialty stores, 60 direct international buyers,
150 military installation courses and various other golf associations and
miscellaneous buyers. Approximately 55% of the Company's open accounts in this
channel are active during any calendar year.
All product categories of Antigua's inventory sell directly into the
golf channel. The All Seasons Collection, a group of fashionably designed shirts
and outerwear at prices below the majority of its competitors, has met an
increasing market demand for this type of product. In stock throughout the year,
the Essentials and All Seasons Collection sell to large and small tournaments,
retail operations and to various accounts for staff uniforms. The fashion
collections, released in the Spring and Fall offer a more upscale product at
slightly higher prices and are sold into retail and at events. This product
positioning gives Antigua the opportunity to sell its products in a variety of
applications to all levels of the industry from public golf facilities to
upscale resorts and country clubs.
Antigua was an early market entrant in targeting tournaments and
special events as a channel of distribution, and the Company sold to over 2,700
tournaments and special events in 1996 and has sold to over 2,900 through
September 1997. In 1987,
41
<PAGE>
the Company established a tournament services department which manages all
product ordering by and delivery to tournaments and special events. This
dedicated capacity provides, in the Company's belief, a competitive advantage by
focusing an in-house group on the special timing and production needs of
tournaments. In addition to processing and supervising tournament orders, the
tournament services department coordinates delivery and last minute order
details with the Company's sales representatives in the tournament's area. The
Company has established strong ties with major tournament sponsors such as the
PGA of America and has an aggressive product presence at the Ryder Cup, PGA
Seniors Championship and PGA Championship. The Company utilizes select celebrity
endorsements, including PGA Tour and NCAA champions, to build its brand
identity. The Company's apparel sales to tournaments benefits the Company by
association with high-profile tournaments and events and provides much larger
than normal sales volume and generally allows tournament sponsors to offer
merchandise at a lower than ordinary credit risk.
Antigua plans to expand its distribution in the golf channel by adding
product categories that will increase square footage at current account
locations and offer more tournament and special event products. This includes
expanding the outerwear collections and the women's collection and creating an
additional pricing tier in the "better" category.
Licensed Apparel. The licensed apparel market totaled approximately
$2.0 billion at the wholesale level in 1996 according to Sports Style Magazine
and is dominated by companies such as Nike, Starter, Reebok, Champion Products
Inc. and The Vanity Fair Corporation, which has acquired Nutmeg Mills and Lee
Sport. The market is dominated by major retailers such as J.C. Penney and Sports
Authority, both of which are customers of Antigua. Open accounts in this channel
include approximately 50 department stores, 900 sporting goods stores, five
large sporting goods stores, 840 specialty stores, 300 high schools and middle
schools, 300 athletic teams and 140 other miscellaneous buyers. Of these open
accounts, approximately 51% are active in any calendar year. In addition to
retailers, Antigua is positioned for, and has an industry reputation for,
providing quick turn around embroidery on quality apparel to serve "hot markets"
and special events such as the Super Bowl and the World Series. Apparel for "hot
markets" and other "at once" business generally is provided by in-stock
Essentials, the All Seasons Collection and selected fancy styles.
The following table shows types of products which may be produced under
selected licenses held by the Company:
NFL NBA MLB NHL NCAA
-----------------------------------------------
Men's
- ----------------------
Polo's X X X X X
Fashion Tops X X X X X
T-Shirts
Embroidered X X X X X
Silk Screen X - X X X
Fleece X X X X X
Sweaters X X X X X
Outerwear/Windwear X X X X X
Bottoms-Shorts/Pants X X X X X
Women's
- ----------------------
Polo's X X X X X
Fleece X X X X X
Sweaters X X X X X
Outerwear/Windwear X X X X X
Bottoms-Shorts X X X X X
Accessories
- ----------------------
Golf Headcovers X X X X X
Golf Towels X X X X X
Golf Travel Accessories X X X X X
Golf Straw Hats - X X X -
Antigua's growth in licensed apparel the last two years has been
approximately 13% in 1995, compared to 1994, and 28% in 1996, compared to 1995,
while the industry has not grown appreciably over that period. The Company
believes that its growth is substantially due to its introduction of the All
Seasons Collection. Taking a subtle and upscale approach to design, the Company
has broadened the demographics of the licensed consumer and reached more
affluent customers. Antigua's customers are able to wear
42
<PAGE>
their licensed apparel to work, a sporting event or to other recreational
activities. Colors in the collections are not team specific but rather lifestyle
driven, allowing the retailer to use the team color in the logo. Antigua selects
these color stories based on its own historical sales data, potential shifts in
the marketplace and the creation of new teams in the professional sports
leagues. This careful color selection process reduces close-out risk and allows
the products to sell into all three of the Company's distribution channels
instead of only the licensed product channel.
Corporate Identity Apparel. Antigua currently has approximately 4,600
open corporate accounts. Of these open accounts, approximately 59% are active in
any calendar year. This channel of distribution represents the strongest
potential growth channel for Antigua. AGI's net sales in this channel grew 73%
for the six months ended June 30, 1997 as compared to the same period in 1996.
The overall lifestyle apparel industry is led by companies much larger than
Antigua, such as Tommy Hilfiger, Polo Ralph Lauren Corporation and Levi Strauss
& Co. The Company believes, however, that it competes for its corporate identity
apparel niche in this overall lifestyle apparel marketplace with such other
companies as Vantage, Land's End, Gear for Sport, LaMode and others who
specialize in embroidering or screen printing apparel for corporations and small
businesses. Some of these competitors are also much larger than the Company,
although the Company believes that its portfolio of approximately 18,000 logos
gives it a competitive advantage in this market. The growth of this market has
been aided significantly by the trend toward more relaxed standards of dress in
the workplace. According to the NFD Group, Inc.'s Dressing in America report,
retail sales of casual workplace attire were approximately $12 billion in 1995.
Antigua distributes in this distribution channel through direct sales
to corporations and small businesses for their use in uniform programs, as
corporate gifts and premiums and in catalogs. Antigua also sells to advertising
specialty companies and other brokers who resell Antigua products to
corporations, small businesses and other end users. The Antigua product
categories of Essentials, All Seasons and the Spring and Fall Collections fit
the needs of the corporate apparel market because of price point attractiveness
and the Company's quick turn embroidery and screen printing capacity.
Business Strategy
The Company's strategic goals focus on growth in brand identity and
sales in all three of its distribution channels. The Antigua corporate strategic
goals are as follows:
* Three Channel Products: All of Antigua's products must be viable in
the three channels of distribution: golf, licensed and corporate
identity. The Company believes that this strategy affords it a
competitive advantage because the products are moved from one channel
to another as demand shifts. Antigua can be responsive to fluctuating
demand because it has one inventory, some with long shelf life, for
three distribution channels, rather than one separate inventory for
each channel.
* Product Mix: Antigua strives to maintain a product mix of 60%
Essentials (i.e., solid color shirts, sweaters, jackets, windshirts,
fleece, slacks and shorts) and 40% All Seasons Collections and the
Spring and Fall Collections, (i.e., seasonal designs which reflect a
trending or fashion forward appearance). Management believes that this
product mix gives Antigua a competitive advantage in that the Company
can serve "at once" business and "hot markets" as well as prebooked
fashion collection business. This strategy also allows the Company a
safer inventory risk position in that Essentials have much longer life
spans in the three distribution channels into which the Company sells.
* Small and Large Customer Mix: Antigua serves both large (for example,
The Sports Authority) and small (small businesses or local country club
pro shops) customers. The Company has built a large customer base (over
15,000 open accounts) with an even balance of large and small
customers. The Company's strategy is to maintain this approximate mix
to reduce the Company's risk from concentration of accounts.
* All Seasons Products and Competitive Pricing Model: The All Seasons
Collection allows Antigua to offer apparel that is designed to have
greater longevity than the products of its competitors. Because of this
longevity, Antigua can buy large quantities and reduce its per item
cost. With this price advantage Antigua brings its All Seasons
Collection products to market below many competitors' prices. The
longevity (one year availability) of the All Season Collection appeals
to all three channels of distribution the Company serves and allows the
Company essentially to "prebook" business which is ordered later by
customers as "at once" goods. The Company believes that the All Seasons
Collection provides customers the ability to
43
<PAGE>
reorder familiar, proven product without requiring repeat cuts by
manufacturers (which may not be economic) and to include fashion items
in their own catalogs with a reduced risk of offering product that is
sold out prior to their catalogs reaching their end users.
* Sales Expansion in Three Channels: The Company intends to pursue a
strategy of simultaneously increasing sales in all three distribution
channels.
Golf: Antigua will look to grow its golf business by renewing
business relationships with inactive accounts, refining and
providing additional training for its sales force,
capitalizing on its strategic alliances with golf facility
management companies, including Club Corporation of America,
American Golf and Cobblestone and offering additional product
categories (outerwear, women's and special event products).
Licensed Products: Antigua plans to increase its licensed
products sales by offering other products through key national
and regional retailers like J.C. Penney, Sports Authority,
Belks and Jumbo Sports. The Company believes that it currently
holds a competitive advantage in this channel because of its
product design mix, the depth of its portfolio of licensed
logos and its position as one of the higher end providers of
licensed apparel.
Corporate Identity: Because of the relatively large size of
this market and the relatively small size of the Company's
sales force dedicated to this distribution channel, the
Company believes that corporate identity products provide an
important growth opportunity for the Company. Antigua seeks to
add to its corporate identity business by substantially
increasing its sales force (mostly in the Inside Sales
department) and expanding its direct mail activities. The
increasing trend of casual dress in the workplace will
increase opportunities for the Company as consumers wear more
lifestyle apparel, embroidered and screen printed identity
apparel.
Products and Product Design
Antigua's product mix covers a wide range of classifications including
men's and women's shirts, sweaters, outerwear, fleece products, slacks, shorts
and accessories. These classifications break into two specific groups, Basic
items (Essentials) and Fashion items (the All Season Collection and the Spring
and Fall Collections). Basic items represent 60% of Antigua sales and have
long-term marketability, one to three years, in all distribution channels. Basic
items are in-stock and provide the Company with most of its ability to respond
to "at once" orders.
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<PAGE>
Fashion items have shorter term marketability in all of the Company's
distribution channels. Fashion items presented in the All Season Collection have
the longest availability (approximately 12 months), and Spring and Fall
Collections have the shortest availability (four to six months). The Fashion
component of Antigua's product offerings allows the Company to prebook orders,
necessary due to shorter product life span and limited inventory. The Fashion
component also gives the Company the newness required to stimulate the
marketplace consistently and to satisfy the recurring needs of customers in all
three distribution channels.
Product Matrix
- -------------------------------------------------------------------------------
Golf Corporate at Once Corporate Fulfillment Licensed
-----------------------------------------------------------
Essentials X X X X
All Seasons X X X X
Spring Collection X X X
Fall Collection X X X
Outerwear X X X X
Sweaters and vests X X X X
Headwear X X X
Travel Accessories X X X
Head Covers X X X X
Towels X X X X
T Shirts X X X X
Fleece X X X X
The Basic and Fashion items are combined in two catalogs per year.
Catalogs are presented to all of the Company's accounts in July and January of
each year. The July catalog presents the Spring line of the next year. The
January catalog presents the Fall line of the same year. Each catalog allows for
five to six month prebooking period on any new Fashion products and also allows
for immediate booking of in-stock Essentials products.
This twice yearly cycle of product presentation and product mix is
designed expressly to serve all three distribution channels. All of the
Company's products are viable in every channel. By not embroidering a logo or
design until after receipt of an order, the Company tailors a product to that
particular customer's needs, regardless of the distribution channel, and removes
the risk of producing a product in advance that would appeal only to one
customer or to one channel.
Prior to the Acquisition, the Company, between 1993 and 1995, produced
and marketed a range of plastic printed consumer products, including automotive
aftermarket products, toys and various custom products. The Company no longer
markets such products but does continue to produce one screen printed plastic
golf accessory product. From the date of incorporation through acquisition of
SEI in August 1992, the Company invested in various oil and gas properties. The
Company has since disposed of or written off interests in any such properties.
See "Prospectus Summary--Company History."
Distribution and Sales
The Company distributes its products in three distinctive but
complementary distribution channels: golf, licensed products and corporate
identity apparel. The customers in each of these channels use Antigua's products
and services because they desire apparel customized with an embroidered or
screen printed logo. These distribution channels are reached and sales are
consummated through a network of independent and Company employed sales people.
Sales people have specific geographic and distribution channel responsibilities.
The Company currently has 35 golf sales people, 43 licensed product sales people
and 21 corporate identity apparel sales people. The corporate identity apparel
sales force is primarily made up of Company employed telemarketers. This
department, called Inside Sales, is responsible for approximately 60% of the
Company's corporate identity channel sales.
45
<PAGE>
All members of the Company's sales forces are provided computer access
to their respective account rosters and the status of all Company inventory by
style, size and color. The Inside Sales telemarketing department utilizes the
company's IBM AS/400 computer system with Business Planning and Control Systems
(BPCS) software, and the outside sales representatives utilize laptop computers
with a custom software package called VRLink, which allows the Company's
salesforce to view from a remote location inventory availability by style, color
and size. This automation of the sales process gives the Company the ability to
react quickly to the marketplace by providing management with accurate, timely
sales information. VRLink also provides sales representatives with greater
certainty that orders written are being written against actual, current
inventory and, therefore, reduces the risk of orders which cannot be filled
timely. The Company is aware that certain of its competitors use VRLink and
similar software programs to allow their respective salesforces to access
inventory and place orders through a computer system. While the Company believes
that its current level of sales force automation is a competitive advantage in
all channels of distribution, the Company is aware that technology is changing
rapidly and that competitors could replicate or exceed this level of computer
automation. To avoid becoming obsolete or uncompetitive, the Company intends to
reassess its capabilities continually and to exploit new technology.
Each channel and respective sales force is managed by a National Sales
Manager who creates a yearly business plan, manages human resource issues,
trains sales people and monitors progress on the business plan. The three sales
managers, one for each distribution channel, report to the President of AGI.
Marketing
General. In the past 18 years the Company has built its brand identity
through promoting its products to retailers in golf and licensed products
channels and to the corporate apparel users, as opposed to the ultimate
consumer. The core of the Company's marketing efforts has traditionally been
support of the Professional Golf Association in small and large tournaments,
junior golf, customer co-op programs (whereby the Company partners with a
retailer in print advertising), league promotions and participation in trade
advertising. Antigua intends to reduce what has been its historical reliance on
trade initiatives in marketing and to create greater consumer awareness of the
brand and consumer demand for the Company's products at the trade level through
a more dynamic marketing plan. The Company intends to integrate the following
components into its revised marketing efforts:
* Product Positioning: Emphasize the Company's use of one inventory to
supply all three distribution channels to send a consistent design and
image message directly to the end consumer.
* Advertising and Public Relations: All print advertising designs and
layouts are completed in-house. Antigua advertises in both trade and
consumer media with a combination of image and product concepts. The
Company also has a monthly direct mail program which focuses on
specific product classifications. Great care is taken to ensure all
print ads reflect a consistent company-wide image and message. Antigua
enlists the services of a public relations firm which has a sports
focus. All press releases are directed to all three distribution
channels.
* Sales Support:
Catalog: The Company produces one catalog for all three
distribution channels with distinctive covers designed for
each channel. As with the advertising, the artwork is produced
in-house and displays the same consistent style and image of
other print media.
Swatchcards: To meet the selling strategy of 60% Basic
(Essentials) product and 40% Fashion, the Company has created
Essentials Swatch cards. This is a comprehensive sampling of
all of the fabrics and colors of each basic product in a
notebook format. The look of this notebook is consistent with
the style and image presented in print advertising, catalogs
and direct mailings.
Point of Purchase: Point of purchase displays depicting the
Antigua image are also given to retail accounts to build brand
recognition.
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<PAGE>
Direct Mail: Antigua mails 6,000 to 15,000 direct mail pieces
during peak marketing periods to its customer base to promote
new and existing products. Mailings are customized for each
distribution channel.
Merchandising Program: In 1997 the Company began an in-store
merchandising program designed to assist the retailer with
visual display, stock analysis and sales support. This program
was designed to increase sales and acquire additional square
footage in the stores.
Internet: The Company maintains a homepage at
"www.Antiguasportswear.com" on the Internet. The page is
purely informational at present, providing limited information
about the Company and links to sites which may be of interest
to the Company's customers. The Company intends to upgrade the
page to allow interactive capacity.
Trade Shows. Antigua markets its golf products nationally at the
Orlando PGA Show in January and the Las Vegas PGA Show in September. Licensed
products are marketed at the Atlanta Super Show, a National Sporting Goods
Association ("NSGA") event, in February and the Chicago NSGA Show in July. The
Company also attends other corporate trade shows, including the Motivation Show
in October and the Premium Incentive Show in May, both held each year in New
York.
Strategic Alliances. Antigua has carefully positioned its distribution
to enhance brand identity and recognition. Upscale licensed products stores such
as The Sports Authority, high profile golf resorts such as Pebble Beach,
Pinehurst and Coeur D'Alene, and premium catalogs such as the Herrington Catalog
have reinforced the brand to both the trade and retail consumers. Agreements
with prestigious companies such as Mercedes Benz and the PGA have provided
positive media attention and serve to enhance the brand further.
Celebrity Endorsements and Key Account and Corporate Sampling Programs.
* Golf: The Company utilizes select professional golf endorsements to
build its brand recognition. Mark Brooks, the 1996 PGA Champion, Billy
Mayfair, 1995 Tour Champion, Chris Johnson, LPGA tour veteran and
reigning LPGA champion and Jim Carter, former NCAA Champion, wear
Antigua products on tour. Antigua also has numerous clothing-only
programs with golf professionals on other smaller tours. The Company
also maintains a very price competitive staff uniform program for golf
course shops and retail stores. The Company believes that having staff
at golf retail shops and off course specialty stores wear the Company's
products is one of the best possible point of sale promotions.
* License: In the licensed products channel, Antigua is the preferred
supplier to the Coaches Club, where selected NFL Coaches wear Antigua
products on non-game days. Antigua is also a Diamond Club supplier. The
Diamond Club supplies clothing for equipment managers of Major League
Baseball teams to wear during the games. As in the golf distribution
channel, Antigua maintains a very price competitive staff uniform
program for stadium and arena employees to provide point of sale
product promotion.
* Corporate: In the corporate channel, Antigua aggressively pursues
relationships with key decision makers such as chief executive
officers, presidents and vice presidents of sales or marketing by
sending sample products to these people. In addition, NBC Sports
announcers wear Antigua shirts while hosting and announcing golf
events. The Company has plans to increase the number of celebrity
endorsements in the near future.
Sponsorships and Promotions.
* Golf: Antigua is an active sponsor of numerous golf tournaments, both
with tour and local club professionals. Among other events, Antigua
sponsors the Antigua South Florida Open, Antigua's Southwest Section
Team Championship and the Kachina Invitational in Scottsdale, Arizona.
The Company also participates in tour event promotions such as tent
sponsorships at major tournaments. The Company sponsors many Junior
tour activities nationally.
47
<PAGE>
* License: The Company participates in numerous "in arena" promotions
during sporting events. These promotions assist retailers in selling
products and help to distinguish the brand from competitive products.
Celebrity and league fund raisers are also supported by the licensed
products channel.
* Corporate: Antigua plans and participates in corporate customers'
gatherings and promotions to create brand awareness.
Customer Communication. In the past seven years Antigua has invested
significantly in its Customer Service, Inside Sales, Embroidery Facility and
Quality Control. During peak demand periods, the Inside Sales and Customer
Service departments process over 10,000 incoming communications and initiate
more than 12,000 outgoing communications each month. Antigua's infrastructure
serves to maintain consumer confidence in the Company and fosters long-term
loyalty to the Company's products and services.
Product Development and Sourcing
The product design cycle begins about one year before product is
shipped. Two in-house departments, Sales and Product Development, establish the
general parameters of new product offerings. These departments conduct design
research through market trend and color forecasts and fabric exhibitions. Retail
stores are shopped extensively at the beginning of each cycle for trends and
ideas. Designs are completed and reviewed in an open forum with Sales and
Product Development, and revisions are made to respond to changing sales needs.
The Company then selects appropriate factories for fabrication of the line.
Because of the complexity of the designs, fabrics are the key to successful
product development. Antigua insists on working with the fabric mills directly,
rather than through the garment factory, in order to maintain product quality
and the integrity of the Company's design. Controlling the fabric source also
allows Antigua flexibility when placing re-orders. The Company is able to place
the same style in different cut and sew facilities depending upon production
capacity, offering the Company more options for timely product delivery.
In the past two years, Antigua has changed its production sourcing
dramatically. Prior to 1996, the majority of Antigua's production was based in
Hong Kong. Due to the then pending return of Hong Kong to China and Hong Kong's
relatively high labor prices, efforts were made to develop sources in other
Asian countries which provide attractive prices while maintaining quality.
Production testing and the process of changing resources is a rigorous and
difficult process, lasting a minimum of six to ten months. Over the last two
years, the Company has diversified its production to Pakistan, Indonesia,
Malaysia, Singapore and Saipan. These efforts have significantly lowered prices
at the mill level and diversified production to safeguard against factory or
natural disasters or political disruptions. As a result of sourcing changes, the
Company has significantly decreased its delivery price for most styles,
providing significant margin growth for the future.
Antigua has an extensive quality control program in support of its goal
of delivering generous cut garments of high and uniform quality to its
customers. Garments are checked against Level 4, the highest level, of the
Acceptable Quality Level standard of testing, an international standard for the
garment industry. Each production run is checked at three stages: in-line
(during production); finished product (at the mill after completion); and once
more at Antigua's warehouses in the United States. Quality control personnel
check garments at the Scottsdale warehouses against the same set of
specifications to which the runs are subject during manufacturing and are
checked for fabric weight, shrinkage, design, construction, fire retardance,
adherence to size specification and color correctness. The Company checks
garments a final time prior to shipping after embroidery for correct logo
placement, clarity of stitching and correct color application.
Approximately 95% of the Company's current products are produced in
Pakistan, Indonesia, Malaysia, Singapore and Saipan. The Company plans to double
its sources in these countries and add more internal quality control capacity by
the end of 1998. In addition, the Company is planning to investigate more
opportunities in Central and Latin America and to establish test production in
that region by the first quarter of 1998.
Antigua has taken precautions to ensure that its contract manufacturing
facilities all comply with local child labor laws and have safe working
conditions for their employees. Antigua requires factories to sign a declaration
of fair labor compliance with every order shipped. In addition, the Company's
Sourcing Manager or Vice President of Product Development visits all factories a
minimum of once annually to confirm compliance with Antigua's labor policies.
48
<PAGE>
Manufacturing, Embroidery and Screen Printing
Antigua's garment manufacturing is done at various contracted
manufacturing facilities, but almost all of Antigua's decoration (i.e., custom
embroidery and custom screen printing) is done in its Scottsdale or Dallas
facilities. The Company believes that Antigua's decoration quality and capacity
gives the Company a competitive advantage in both the quality of the decoration
and the speed of delivery of the finished product. Antigua has daily embroidery
capacity ranging from 7,000 to 10,000 units per day, utilizing 190 embroidery
sewing heads on machines with various capacities. The Company outsources a
limited amount of embroidery to pre-qualified embroidery contractors which use
similar thread, embroidery equipment and production practices. The Company has
outsourced approximately 11% of embroidery during recent demand periods but
believes that it can outsource as much as 15% to 20%. All outsourced work is
subjected to the same quality assurance standards for in-house embroidery and
must pass Antigua's quality control prior to shipment to Antigua's customers.
The Company's screen print capacity also approaches 10,000 units per working
day.
Management Information Systems & Inventory Management
AGI utilizes an IBM AS/400 computer system to manage all business
transactions and historical data, and the Company is in the process of designing
a program to integrate SEI's record keeping into this system. The Company
anticipates completing the integration of systems during the first half of 1998.
Application systems, known as BPCS (Business Planning and Control Systems),
provide integrated real time information to all departments in Antigua's
infrastructure. The Company currently has over 100 workstations connected to the
internal networks and stores over 15 gigabytes of information on its various
systems. The AS/400 and BPCS databases are also utilized in association with
VRLink, the Company's Sales Force Automation Software system. The VRLink system
provides Antigua's sales representatives with access to their respective
customer rosters and all of Antigua's inventory. Inventory availability for
immediate delivery and for future shipping dates is provided down to the
style/color and size level. The Company's MIS systems are responsive to all
facets of the business, from sourcing to warehousing and embroidery
manufacturing to shipping.
The MIS systems have improved the Company's fill rate percentages for
customer orders in three important ways. First, the MIS systems have improved
the forecasting department's ability to manage and purchase inventory through a
tool set which analyzes sales history, purchasing history and future customer
commitments. Second, the Company's sales force has a clear and concise view of
available inventory which helps assure that customer orders are written and
allocated against actual inventory availability. Third, the Inventory Manager
uses physical inventory and cycle counting tools and systems to control and
manage inventory. As a result of these control mechanisms, the 1996 year end
physical inventory count net adjustments were only .3% of the total inventory
amount.
The Company will continue to exploit technology to improve its business
processes, its distribution of sales information and its communication with
suppliers, customers and business partners. See " -- Distribution and Sales."
Order Booking Cycle and Backlog
The Company receives its orders over a nine month period beginning when
samples are first shown to customers and continuing into the season. The Company
must schedule production in advance of order placement, although it can respond
to order trends over the period by sequencing production in advance of different
groupings of its seasonal collection. The Company maintains Essentials and All
Seasons products in stock throughout the year to enable it to quickly fill "at
once" orders for all three channels of distribution.
The Company begins to take orders for Fall collections in January for
delivery between May and October and for Spring collections between July and
January for delivery between January and May. The Company's backlog, which
consists of open, unfilled customer orders, was approximately $10.8 million as
of September 1, 1997, compared to $5.2 million as of September 1, 1996. Because
of the Company's policy of accepting order cancellations under certain
circumstances, and the lack of contractual provisions prohibiting such
cancellations, the Company typically ships 85-90% of its backlog.
49
<PAGE>
The following table compares AGI's booking comparison for the past five
years (numbers marked with an asterisk are estimated numbers generated during a
change in computer system):
1993 1994 1995 1996 1997
---------- ----------- ---------- ---------- ----------
(in thousands)
January $2,067 $2,695 $2,181 $2,179 $3,081
February 2,623 2,635 2,653 2,131 3,291
March 3,167 3,614 3,589 4,218 7,158
April 4,407 4,100 2,930 4,489 4,385
May 3,174 3,689 3,177 4,415 3,315
June 3,173 3,412 3,260 2,999 2,622
July 2,982 2,876 2,988 3,159 3,804
August 3,006 3,605 *3,500 3,305 4,765
September 3,548 3,425 *3,400 4,132 5,453
October 3,050 4,067 *3,600 4,075
November 2,675 4,074 3,497 3,659
December 3,481 3,060 2,426 3,096
---------- ----------- ---------- ---------- ----------
Total $37,353 $41,252 $37,201 $41,857 $37,874
========== =========== ========== ========== ==========
Competition
The Company encounters intense competition in all three of its
distribution channels, much of which is from significantly larger competitors.
The Company considers its main competitors in its golf distribution channel to
be Ashworth, Inc., Izod Club, Polo Ralph Lauren Corporation, Tommy Hilfiger,
Cutter & Buck Inc. and Sport-Haley, Inc. The Company considers its main
competitors in the licensed goods channel to be Nike, Reebok, Starter, Champion
and Vanity Fair. The Company considers its main competitors in the corporate
channel to be Polo Ralph Lauren Corporation, Tommy Hilfiger, the Dockers brand
of Levi Strauss & Co. and the Gear brand of L.A. Gear, Inc. Competition in these
distribution channels is intense and is based primarily on brand recognition, as
well as loyalty, quality, price, style, decoration capacity, design, service and
availability of shelf space in the golf apparel and licensed apparel
distribution channels. The Company also competes, particularly in its golf
distribution channel, with manufacturers of high quality men's and women's
sportswear and general leisure wear, including Nike, Tommy Hilfiger and Nautica
Enterprises Inc. Many of these competitors, as with competitors within
particular distribution channels, have substantially greater experience,
financial and marketing resources, manufacturing capacity, distribution and
design capabilities than the Company. Increased competition in the fashion golf
apparel market, such as Nautica's recent entry into golf apparel, from these
manufacturers or others could result in price reductions, reduced margins or
loss of market share, all of which could have a material adverse effect on the
Company's business, operating results and financial condition. Although the
Company believes that it competes favorably with respect to certain competition
points, particularly style, decoration (embroidery) capacity, service, design
and the diversity of its distribution channels, there can be no assurance that
the Company will compete successfully with its present or potential competition.
Further, recent entries in these distribution channels by competitors offering
apparel comparable to that of the Company will likely intensify competitive
pressures. There can be no assurance that the Company will be able to maintain
market share as new competition develops, to increase its market share at the
expense of its existing competition, or that the Company will not experience
pricing pressures as a result of intensifying competition within these markets.
50
<PAGE>
Customers
The Company's customers represent an appreciable cross section of the
United States market. The Company sells to accounts nationwide, which range from
the smallest companies or green grass shops to the largest conglomerates and
retailers in the United States. A sampling of the representative customers of
the Company is set forth below:
<TABLE>
<CAPTION>
Licensed/Retail Licensed Accounts - Golf Accounts - Golf Accounts -
Corporate Accounts Accounts Leagues and Teams Events Country Club
- -------------------- ------------------- --------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
Anheuser Busch J.C. Penney NFL Properties Walt Disney World - Four Seasons Resort
Oldsmobile Classic
Coca Cola Sports Authority NBA Properties GTE Suncoast Pebble Beach Corp.
NBC Jumbo Sports Cleveland Indians PGA Championship Century Club
U-Haul Dillard's Green Bay Packers Ryder Cup Kapalua C.C.
Jacobson Textron Belks Phoenix Suns Greater Hartford Open Medinah C.C.
Mercedes Benz Sears Colorado Rockies Motorola Open Grayhawk
Hilton Joslin's Texas Rangers Nynex Corp. Oak Hill
Brinker International Gart Brothers Univ. of Florida Quad Cities Classic Mission Hills
Southwest Airlines Caesar's World Notre Dame LPGA Turquoise Classic Grand Cypress
Ameritech Modells San Diego Padres Liberty Mutual Legends Breakers
</TABLE>
No single customer accounts for more than 10% of the Company's revenues.
However, the Company sells into three distribution channels, generally sells
more product during certain seasons and sells to a mix of large and small
accounts. As the Company receives orders, the concentration of accounts will
fluctuate. The Company's strategy is to avoid customer concentration and
believes that the loss of any single account would not have a material adverse
impact on the Company's business, financial condition and results of operations
over a long term. Nevertheless, it is possible that at any one point in time the
loss of a significant account, such as J.C. Penney or Sports Authority, could
have a material adverse impact on the Company.
Intellectual Property
The Company has developed significant value in its "Antigua," "Antigua
Sport," "Kachina," "Antech" and "AII Apparel" names and logos. Antigua has
registered and trademarked the Antigua name in the United States, Canada and
Japan and has pending applications for the same in Australia, New Zealand and
the European Community. The Kachina design logo has been trademarked and
registered in the United States, Canada and Japan. The Antigua/Kachina
combination is registered in Germany and Sweden, and there are pending
applications in Ireland, Italy, Korea and the United Kingdom. The Antech and AII
Apparel names are trademarked and registered in the United States. Leading
brands in the apparel industry have historically been subject to competition
from imitators which infringe the trademarks and trade dress of the brand. While
the Company to date has not been aware of a high level of imitation of the
Antigua brand or other marks, there can be no assurances that its business will
not suffer from such imitation in the future.
The Company has created a library of digitized designs on behalf of its
clients. These designs consists of approximately 18,000 logos and names of golf
courses, resorts, sports teams and corporate logos.
Employees
As of August 31, 1997 the Company had 258 employees in Scottsdale, 19
employees in Dallas and seven employees in Toronto. Approximately 60% of the
Company's employees are in manufacturing and maintenance and 10% are in each of:
management; design and customer service; sales; and MIS, administration and
accounting. None of the Company's employees is a member of a union. The Company
considers its relations with its employees to be good.
51
<PAGE>
Facilities
The Company leases approximately 42,500 square feet of space in
Scottsdale, Arizona from a partnership of which Mr. Dooley is a partner. See
"Certain Relationships and Related Transactions." The current term of the lease
expires December 31, 1997, but the Company may extend the term of the lease for
two additional one-year periods. This facility houses management, data
processing, customer service, warehousing and embroidery and manufacturing
machines. The Company also leases approximately 30,000 square feet of space for
manufacture, storage and sale (at a Company store) of apparel in a facility in
close proximity to its main facility. The lease for this space expires in
October 1999, and the Company may renew the lease for two additional one-year
periods. The Company leases approximately 16,000 square feet of space in Dallas
from a Director to house its screen printing and corporate sales group. The
lease is month to month. The Company has occupied the building since 1992. The
Company leases approximately 1,500 square feet of space in Toronto to house
sales and customer service. The lease is month to month. There can be no
assurances that the month-to-month facilities will continue to be available to
the Company. However, the Company believes that other adequate facilities could
be located, if necessary. The Company has leased approximately 2,000 square feet
of retail space for an outlet store north of Phoenix, Arizona for a five year
term ending in September 2001. The Company believes that existing facilities are
adequate for its current requirements and that suitable additional or substitute
space is readily available as needed.
Legal Proceedings
Other than as set forth below, the Company is not currently involved in
any material legal proceedings. The Company is subject to claims and lawsuits
from time to time in the ordinary course of its business. While the outcome of
such ordinary course proceedings cannot be predicted with certainty, the Company
believes that the resolution of such current or future ordinary course matters
individually or in the aggregate will not have a material adverse effect on the
Company's business, financial condition and results of operations.
Sea/Q of America, Inc., a New York corporation, filed a lawsuit,
bearing cause No. C975720, against the Company in the Supreme Court of British
Columbia, Canada, on October 23, 1997. The principal beneficial owner of Sea/Q
is Ronnie Strasser, a former director of the Company. In the Statement of Claim,
Sea/Q alleged that the Company had borrowed $100,000 from Sea/Q in or about
August, 1996 and had agreed to repay Sea/Q in full without interest on or before
May 30, 1997. Sea/Q further alleged that the Company had failed to repay Sea/Q.
Sea/Q requested a judgment against the Company for $100,000, plus interest from
May 30, 1997, as well as costs. The Company entered into a settlement with Sea/Q
on October 30, 1997, which was reflected in Minutes of Settlement filed with the
court in British Columbia. Under the settlement, the Company agreed: (i) to pay
Sea/Q $100,000 on or before January 15, 1998; and (ii) to transfer to Sea/Q
warrants to purchase 12,000 Common Shares of the Company with an exercise price
of C$5 until June 1988, and C$5.75 thereafter until the expiration date of June
1999. Sea/Q agreed to waive any interest payable from May 30, 1997 to the date
of repayment, to cease prosecuting the lawsuit until January 15, 1998 and to
dismiss the lawsuit entirely if the Company paid Sea/Q $100,000 on or before
January 15, 1997.
Western Pacific Developments LTD., a British Columbia company, filed a
lawsuit, bearing cause No. C975772, against the Company, Eron Mortgage
Corporation ("Eron"), West Coast Golf Promotions LTD., Brian Slobogian and Frank
Biller in the Supreme Court of British Columbia on October 24, 1997, but
voluntarily dismissed its claim against the Company by filing with the court a
Notice of Discontinuance on October 29, 1997. The Company did not offer or
provide any consideration to Western Pacific in exchange for Western Pacific
filing the Notice of Discontinuance. The effect of the Notice of Discontinuance
is to dismiss Western Pacific's claim against the Company, but is not a bar to
any subsequent legal action by Western Pacific against the Company. In its
Statement of Claim, Western Pacific alleged, among other things, that on or
about February 7, 1997, Western Pacific entered into a loan agreement with Eron,
West Coast and the Company pursuant to which Western Pacific loaned West Coast
C$100,000, with interest payable on a monthly basis in the amount of C$2,000.
Western Pacific also alleged that it was not paid three consecutive monthly
interest payments, and asked for relief in the amount of $106,038.74 with
interest until paid in full. On November 3, 1997, Western Pacific amended its
Statement of Claim to eliminate any reference to the Company. Brian Slobogian,
who was also named as a defendant in the original Statement of Claim for cause
No. C975772, is a former Director of the Company, having served, without
attending any meetings, from June 30, 1997 through his October 10, 1997
resignation. As a result of allegations of misconduct, Mr. Slobogian was ordered
to resign as a director of any issuer by the British Columbia Securities
Commission on October 3, 1997. On that same date, the Registrar of Mortgage
Brokers in British Columbia suspended the registration of Eron, froze related
corporate bank accounts and made application to appoint a judicial trustee for
the investors and receivers of Eron. Eron acted as a finder for the Company in
connection with the Westcoast Debenture (see "The Acquisition and Related
Financing"), but the Company has not engaged in any transactions with Mr.
Slobogian or related entities which are currently the subject of pending
regulatory actions. However, there can be no assurance that the Company will not
receive inquiries in the future concerning its past association with Mr.
Slobogian and Eron or that such past associations with Mr. Slobogian and Eron
will not become the subject of regulatory action.
52
<PAGE>
MANAGEMENT
Directors, Executive Officers and Certain Significant Employees
<TABLE>
<CAPTION>
Name Age Position(s)
- ----------------------------- ------------- ----------------------------------------------------------------
<S> <C> <C>
Louis B. Lloyd (1) 54 Chairman of the Board of Directors
L. Steven Haynes (2) 36 Chief Executive Officer, Director
Ronald A. McPherson 47 President of AGI
Gerald K. Whitley 57 Vice President of Finance of AGI
Brettina M. Moore 37 Vice President of Product Development of AGI
Joseph M. Blanchette 45 Director of Management Information Services
John W. Wood 45 President of SEI
Thomas E. Dooley, Jr. 57 Chairman of the Board of Directors of AGI, Consultant to AGI
James E. Miles (2) 68 Director
Robert J. McCammon (1) 56 Director
J. Christopher Woods 48 Secretary, Director
James W. Lewis (1)(2) 56 Director
Natale Bosa 52 Director
</TABLE>
- ------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
The Company Act (British Columbia) requires that a minimum of one
Director of the Company be ordinarily resident in British Columbia and that a
majority of the Company's Directors be ordinarily resident in Canada. Mr. Woods
and Mr. Bosa are ordinarily resident in British Columbia, and Mr. Miles and Mr.
McCammon are ordinarily resident in Canada.
Louis B. Lloyd has served as Chairman of the Board of Directors of the
Company since August 1992. He is the President and principal beneficial owner of
Belfinance Haussmann, L.L.C. ("Belfinance"), a private investment vehicle and is
the President of Belfinance Securities, Inc., an NASD member. Mr. Lloyd is also
a founder of Absolute Bank, located in the Republic of Georgia, and has served
as a Director of the bank and as the bank's Vice Chairman since its founding in
January 1995. From November 1991 through May 1994, Mr. Lloyd was associated with
Republic New York Securities Corporation, a New York Stock Exchange member firm,
most recently as President and Chief Executive Officer. From November 1981
through July 1990, Mr. Lloyd served in various capacities at Shearson Lehman
Brothers, most recently as a Senior Executive Vice President and head of that
firm's Worldwide Institutional Equity Trading and Sales Departments.
L. Steven Haynes has served as President and Chief Executive Officer of
the Company since its founding in 1992. Mr. Haynes was the Chief Financial
Officer of Concept Communications, a video conference company, from May 1986 to
July 1988. From June 1983 to April 1987, Mr. Haynes was associated with Shearson
Lehman Brothers, most recently as a Vice President in the Capital Markets
division.
Ronald A. McPherson, a former golf professional, has served AGI as
either manager of national sales or Vice President of Sales and Marketing from
September 1979 through August 1997. In September 1997 Mr. McPherson was named
President of AGI.
53
<PAGE>
Mr. McPherson is a member of the Board of Directors of the Golf Manufacturers
and Distributors Association and has served on that Board since August 1992. He
is also a member of the Board of Directors of the Samaritan Foundation, a
nonprofit philanthropic corporation supporting the work of Samaritan hospitals.
Gerald K. Whitley has served as Vice President of Finance of AGI since
May 1997 and served AGI as Vice President of Finance and Administration between
August 1985 and May 1997, except for the period from November 1994 to July 1995.
From 1962 to 1984, Mr. Whitley was with Arthur Andersen LLP, becoming an audit
partner of that firm in 1974. Mr. Whitley is a certified public accountant.
Brettina M. Moore is Vice President for Product Development, a position
she has held since November 1994. From September 1984 through November 1994, Ms.
Moore was the Assistant General Manager of the Gainey Ranch Golf Club in
Scottsdale, Arizona. Ms. Moore is the founder of the Association of Golf
Merchandisers. She co-authored that trade association's training manual and has
authored articles on merchandising, buying and managing retail operations for
Golf Shop Operations magazine.
Joseph M. Blanchette has served AGI as Vice President of Information
Technology since September 1997, and from October 1994 to September 1997 as
Director of Management Information Systems. From November 1993 until October
1994, Mr. Blanchette provided Mid-Range (IBM AS/400) computer systems services
to businesses in the Phoenix and Southern California area through JDR Consulting
Group Inc., a company he founded. From November 1988 through November 1993, Mr.
Blanchette was associated with the Information Systems Consulting Group of Ernst
& Young LLP, most recently as Senior Manager, specializing in managing Mid-Range
(IBM AS/400) computing systems engagements.
John W. Wood has served SEI, a subsidiary of the Company, since
November 1993. From April 1992 through May 1993, Mr. Wood served as Vice
President of Compliance Partners, Inc., then a development stage environmental
and engineering company. From January 1988 through April 1992, Mr. Wood was the
Branch Manager of an industrial chemical distribution facility of Unocal Corp.
Thomas E. Dooley, Jr. founded AGI, now a subsidiary of the Company, in
1975 and directed its operations through the Acquisition in June 1997. Mr.
Dooley currently serves AGI as Chairman of the Board of Directors and as a
consultant.
James E. Miles has been a Director of the Company since August 1994.
Mr. Miles is a Professor Emeritus of Psychiatry at the University of British
Columbia and has been a psychiatrist in private practice since November 1990.
Robert J. McCammon was elected to the Board of Directors at the
Company's meeting of shareholders on June 30, 1997. Mr. McCammon has been an
Assistant Coach of the Edmonton Oilers Hockey team since July 1994, was the
President and General Manager of the Tri-Cities Junior "A" Hockey Team from July
1991 through April 1994 and a coach of the Vancouver Canucks Hockey Team from
May 1987 through April 1991.
J. Christopher Woods has served as a Director of the Company since
October 1996. Mr. Woods is engaged in the management of personal investments and
has provided paralegal services to the Company through an affiliation with the
law firm of Tupper, Jonsson & Yeadon of Vancouver, British Columbia. Since
February 1993 Mr. Woods has been the General Manager of 440458 B.C. Ltd., a
private company providing management consulting services to various businesses
including the Company. See "Certain Relationships and Related Transactions." Mr.
Woods also serves as Secretary and a Director of Emerald Dragon Mines Ltd., a
position he has held since February 1993. He additionally has served as
Secretary of Bismillah Ventures Inc. since January 1993 and has been a director
of that entity since October 1994.
James W. Lewis was elected to the Board of Directors at the Company's
meeting of shareholders on June 30, 1997. Mr. Lewis has been the President of
Tradeco Global Securities Inc. since May 1989. Mr. Lewis is also engaged in the
management of personal investments.
Natale Bosa was appointed a Director of the Company on October 23,
1997. For more than the past five years Mr. Bosa has served as President of Bosa
Bros. Construction Ltd. and as President of Bosa Development Corporation, a real
estate development company.
54
<PAGE>
Committees of the Board of Directors
The Audit Committee consists of Mr. Haynes, Mr. Miles and Mr. Lewis.
The Audit Committee makes recommendations to the Board of Directors regarding
the selection of independent auditors, reviews the results and scope of the
audit and other services provided by the Company's independent auditors and
reviews and evaluates the Company's audit and control functions.
The Board of Directors established a Compensation Committee in June
1997 and appointed Messrs. Lloyd, McCammon and Lewis, all non-employee
directors, to the Committee. The primary function of the Compensation Committee
is to establish compensation, including bonuses, of the Company's officers.
In 1996 the Board of Directors held two meetings. All Directors
attended more than 75% of the aggregate of board and committee meetings held
during 1996.
Director Compensation
Directors of the Company do not receive fees or other cash compensation
for service as Directors. The Directors may be reimbursed for actual expenses
reasonably incurred in the course of or in connection with the performance of
their duties as Directors. Directors are eligible to receive options for the
purchase of Common Shares.
The Company does not have a stock option plan, but the Company has
granted stand-alone options to Directors pursuant to applicable policy
statements and law. The Company has an outstanding option to a Director of SEI
for 35,000 Common Shares at an exercise price of C$2.90 per Common Share which
expires on August 25, 2000. In connection with the Acquisition, the Company
granted options to acquire 60,000 Common Shares, 20,000 Common Shares, 50,000
Common Shares, 5,000 Common Shares, 5,000 Common Shares, 5,000 Common Shares and
5,000 Common Shares to Mr. Haynes, Mr. McCammon, Belfinance, Mr. Lewis, Mr.
Lloyd, Mr. Miles and Mr. Woods, respectively, all of whom (other than
Belfinance, which is controlled by Mr. Lloyd) are Directors of the Company. The
foregoing options are fully vested, expire on June 16, 1999 and are exercisable
at $5.00 per Common Share. The Company, at the same time, granted two-year
options to acquire an aggregate of 50,000 Common Shares at $5.00 per Common
Share to Directors of SEI and AGI.
Executive Compensation
Summary Compensation. The following table sets forth the compensation
earned by the Company's Chief Executive Officer during 1996 for services
rendered to the Company and its subsidiaries during such year.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
----------------- -----------------------
Securities
Name and Principal Position Salary Underlying Options
- ---------------------------------------------------------- ----------------- -----------------------
<S> <C> <C>
L. Steven Haynes, Chief Executive Officer ............... $81,000 9,000(1)
</TABLE>
- ------------------
(1) These options were originally granted on August 25, 1995 at C$2.05 per
share and were adjusted in accordance with VSE policy to C$2.90 on
January 16, 1996.
See "Management -- Employment and Consulting Contracts, Termination of
Employment and Change-in-Control Arrangements" for a discussion of the
employment agreements of certain executive officers and consultants entered into
in connection with the Acquisition.
55
<PAGE>
Option Grants. The following table provides information with respect to
stock option grants made to the Company's Chief Executive Officer for the year
ended December 31, 1996. No stock appreciation rights were granted during 1996.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
- --------------------------------------------------------------------------------------------- at Assumed Annual Rates
Percent of of Stock Price
Total Appreciation For Option
Number of Options Term (2)
Securities Granted to Exercise ----------------------------
underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted (#) Year (1) ($/Sh) Date 5% ($) 10% ($)
- -------------------------- ---------------- -------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
L. Steven Haynes ........ 9,000(3) 5.1% C$2.90 8/25/97 - -
</TABLE>
- ------------------
(1) Based on total grants during the year of 178,000.
(2) Mr. Haynes exercised all of these options on January 29, 1997.
(3) These options were originally granted on August 25, 1995 at C$2.05 per
share and were adjusted in accordance with VSE policy to C$2.90 on
January 16, 1996.
Aggregated Fiscal Year-End Option Values. The following table sets
forth for the Company's Chief Executive Officer the number and value of
securities underlying unexercised options and warrants held at December 31,
1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at December 31, 1996 December 31, 1996 (1)
--------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------- -------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
L. Steven Haynes ........................... 9,000 - $34,560 -
</TABLE>
- ------------------
(1) Based on the difference between the assumed public offering price of
$6.00 per Common Share and the exercise price. However, Mr. Haynes
exercised all of these options on January 29, 1997.
401(k) Plan
In May 1993, the Board of Directors of AGI, adopted a tax qualified
employee savings and retirement plan covering its employees (the "401(k) Plan").
Pursuant to the 401(k) Plan, eligible employees, which does not include officers
of AGI, may elect to reduce their current compensation by up to statutorily
prescribed annual limit and have the amount of such reduction contributed to the
401(k) Plan. The 401(k) Plan provides discretionary matching by AGI. Employees
become 20% vested in the Company's matching contributions after two years of
service, and increase their vested percentages by an additional 20% for each
year of service thereafter. The 401(k) Plan is intended to qualify under Section
401 of the Code, so that contributions to the 401(k) Plan, and income earned on
the 401(k) Plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and so that contributions by the Company will be deductible by
the Company when made.
56
<PAGE>
Employment and Consulting Contracts, Termination of Employment and
Change-in-Control Arrangements
The Company entered into employment agreements, effective as of the
closing of the Acquisition, with the following executive officers: (1) L. Steven
Haynes, Chief Executive Officer; (2) Ronald A. McPherson, Vice President of
Sales (and since September 1997, President of AGI); (3) Gerald K. Whitley, Vice
President of Finance; (4) Brettina M. Moore, Vice President of Product
Development; and (5) Joseph M. Blanchette, Director of Management Information
Systems (and since September 1997, Vice President of Information Technology).
Pursuant to such agreements, Messrs. Haynes, McPherson, Whitley, Ms. Moore and
Mr. Blanchette receive annual salaries of $175,000, $120,000, $95,000, $108,000
and $86,000, respectively, and bonuses of 15% (not less than 15% in the case of
Ms. Moore) of annual salary (prorated for a partial year of employment).
Additionally, upon execution of the agreements Messrs. Haynes, McPherson,
Whitley, Ms. Moore and Mr. Blanchette received stock option grants for 55,000
shares, 60,000 shares, 60,000 shares, 40,000 shares and 10,000 shares,
respectively. The stock options granted to Mr. McPherson, Mr. Whitley, Ms. Moore
and Mr. Blanchette are fully vested and are exercisable, at a strike price of
C$6.25 per Common Share, for the options to Mr. McPherson and Mr. Whitley, and
$5.00 per share for the options to Ms. Moore and Mr. Blanchette, over the
two-year period following the grant date. The stock options granted to Mr.
Haynes vested as to fifty percent of the options on the effective date of the
employment agreement, with the second fifty percent vesting on the first
anniversary of the date of grant. Mr Haynes' options are exercisable at C$6.75
during the first year following grant and C$7.75 during the second year. The
term of Mr. Haynes' agreement is three years, and the Company may extend the
term for an additional two-year period. The agreements of Mr. McPherson, Mr.
Whitley, Ms. Moore and Mr. Blanchette provide for an indefinite period of
employment, subject to customary termination provisions. The agreements of Mr.
McPherson and Mr. Whitley provide that if employment is terminated for cause by
the Company or by the employee without good reason, the employee shall receive
only the salary payments earned prior to the date of termination; if employment
is terminated without cause or by the employee for good reason, the employee
will continue to receive salary and health and other benefits for a period of
six months following termination, and all unvested stock options shall vest in
full. The agreements of Mr. Haynes, Ms. Moore and Mr. Blanchette provide that if
employment is terminated by the Company for any reason, the employee will
continue to receive salary and health and other benefits for a period of six
months following termination, and all unvested stock options shall vest in full.
The Company has agreed to provide term life insurance for Mr. Haynes. Each of
the employment agreements further provide that during the term of employment and
for a period of six months, two years in the case of Mr. Haynes, after
termination of employment, the employee will not, subject to certain
limitations, compete with the Company.
In connection with the Acquisition and the execution of employment
agreements, AGI refinanced debts owed to Mr. McPherson and Mr. Whitley. The
approximately $251,000 owed to each of Mr. McPherson and Mr. Whitley under loans
originally made in 1993 have been repaid since the Acquisition. A contingent
payment due to each in respect of their notes, $150,600, was converted into
30,120 Common Shares of the Company and two-year warrants to acquire 15,060
Common Shares at an exercise price of C$6.75 per share during the first year
following grant and C$7.75 during the second year. Under their amended notes,
Mr. McPherson and Mr. Whitley each have the right, prior to the first
anniversary of the closing of the Acquisition, to require the Company to
repurchase, in whole or in part, these shares and warrants for $150,600.
Also in connection with the Acquisition, the Company entered into a
two-year consulting and non-competition agreement with Thomas E. Dooley, Jr. Mr.
Dooley is the founder of AGI and currently serves as Chairman of the Board of
Directors of AGI. See " -- Directors, Executive Officers and Certain Significant
Employees." Pursuant to the consulting and noncompetition agreement, Mr. Dooley
provides AGI with consulting services with respect to manufacturing operations,
marketing and sales activities and relationships with licensors as requested by
the Chief Executive Officer or Board of Directors of AGI. The Company pays Mr.
Dooley an annual fee of $100,000 for services provided under the consulting
agreement, and Mr. Dooley is eligible for an annual bonus based, in part, on the
performance of AGI. In connection with the Acquisition, Mr. Dooley was issued an
option, which expires May 28, 1999, to purchase 50,000 Common Shares at an
exercise price of $5.00 per Common Share. Mr. Dooley will also receive
additional cash consideration in the Acquisition in an amount currently
estimated at $700,000 to be paid in four equal quarterly installments beginning
September 16, 1997, subject to prepayment upon the completion of a securities
offering by the Company with gross proceeds to the Company in excess of
$12,000,000. See "The Acquisition and Related Financing" and "Use of Proceeds."
Mr. Dooley has agreed for a period of two years not to compete with AGI, solicit
business of customers or clients of the Company or solicit or offer employment
to employees of the Company.
57
<PAGE>
Subject to VSE approval, the Company has entered into a consulting
agreement with Belfinance, the sole beneficial owner of which is Mr. Lloyd, the
Chairman of the Company's Board of Directors. The agreement has a two year term
commencing September 15, 1997. Pursuant to the agreement, Belfinance will
provide AEI consulting services with respect to potential acquisitions and
strategic matters in the golf apparel industry as requested by the Board of
Directors of AEI. For consulting services under the Agreement, AEI will pay
Belfinance $96,000 annually, Belfinance will be eligible for bonuses or
incentive payments and the Company will issue Belfinance options, which vest in
equal installments over two years, to acquire 50,000 Common Shares at an
exercise price of $5.00 per Common Share. In the event of a termination of the
consulting agreement upon a "Change of Control" (as defined in the consulting
agreement) Belfinance is entitled to receive a lump sum cash payment equal to
three times Belfinance's "Cash Compensation" (also as defined in the consulting
agreement), subject to reduction in certain circumstances to preserve favorable
tax treatment to the Company or in connection with other severance payments to
be made by the Company and, for two years following such termination, benefits
substantially similar to those provided to Belfinance for Mr. Lloyd immediately
prior to such termination.
The Company has agreed to retain Robert J. McCammon as a consultant to
assist AGI with its relationship with the National Hockey League. The Company
will retain Mr. McCammon for a three-year term commencing September 1, 1997 and
has agreed with Mr. McCammon to compensate Mr. McCammon at the rate of $30,000
annually. Mr. McCammon is a Director of the Company.
Limitation of Liability and Indemnification of Officers and Directors
The Company Act (British Columbia) permits a company, with the approval
of the British Columbia Supreme Court, to indemnify a director or officer of the
Company in respect of all costs, charges and expenses actually and reasonably
incurred by him in connection with a civil, criminal or administrative action to
which he is made a party by reason of having been a director, provided that he
acted honestly and in good faith and had reasonable grounds for believing that
his conduct was lawful.
The Articles of the Company provide that, subject to the provisions of
the Company Act, the directors shall cause the Company to indemnify its
directors and may cause the Company to indemnify its officers and the directors
of companies in which the Company is a shareholder.
The Company entered into written indemnity agreements with two
directors, J. Christopher Woods and Fiama Walker, in connection with approval of
the Acquisition. Ms. Walker is no longer a director of the Company.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee was established in August 1997. Prior to its
establishment, the entire Board of Directors performed the functions now
delegated to that Committee, and Mr. Haynes, the Chief Executive Officer,
participated in deliberations of the Company's Board of Directors concerning
executive officer compensation.
58
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has obtained VSE approval for a bonus of up to 50,676
Common Shares to Belfinance for having extended a $1,000,000 credit to the
Company in order for the Company to meet short term obligations under the escrow
agreement in connection with, and prior to closing of, the Acquisition. The loan
was repaid with proceeds of the private placement of Series A Preferred. The
Board has not yet caused the issuance of such shares. The Company has approved
the payment of a bonus of 47,192 Common Shares to Mr. Lloyd for having made two
short-term loans to the Company prior to and in connection with the Acquisition
and for having personally guaranteed the notes to Mr. Dooley, as agent for the
shareholders of AGI. The amount of the bonus and payment of the bonus is subject
to the Company obtaining approval from the VSE and the shareholders of the
Company. If approved, the Company anticipates that the bonus will be paid in
Common Shares. The Company has entered into a consulting agreement with
Belfinance. See "Management --Employment and Consulting Contracts, Termination
of Employment and Change-in-Control Arrangements." Mr. Lloyd, through
Belfinance, is also a creditor of the Company. As of September 1, 1997, the
principal and interest, at 7% per annum, due was approximately $333,000. The
Company repaid $200,000 during September 1997, with proceeds of the private
placement of Series A Preferred. Mr. Lloyd leases the Dallas, Texas facility to
the Company at no cost on a month to month basis. A lease for the facility is
under negotiation. For having given a personal guarantee of the Westcoast
Debenture, the Company granted Mr. Lloyd 88,500 Common Shares. The Company
intends to apply to the VSE for the transfer of 95,000 Common Shares to Mr.
Lloyd and Mr. Haynes (in equal parts) from Mr. McCammon. These shares are held
in escrow pursuant to the Escrow Agreement and will remain subject to such
agreement.
The Company has approved the payment of a bonus to Mr. Haynes for
having made a short-term loan to the Company prior to and in connection with the
Acquisition and for having personally guaranteed the notes to Mr. Dooley, as
agent for the shareholders of AGI. The amount of the bonus and payment of the
bonus is subject to approval of the VSE and the shareholders of the Company. If
approved, the Company anticipates that the bonus will be paid in Common Shares.
Mr. Haynes has advanced to the Company approximately $126,500. The advances bear
interest, at 10% per annum, and have no specific terms of repayment. For having
given a personal guarantee of the Westcoast Debenture, the Company granted Mr.
Haynes 88,500 Common Shares. The Company intends to apply to the VSE for the
transfer of 95,000 Common Shares to Mr. Lloyd and Mr. Haynes (in equal parts)
from Mr. McCammon. These shares are held in escrow pursuant to the Escrow
Agreement and will remain subject to such agreement.
On September 15, 1995 the Company entered into a three-year Management
Services Agreement with Renaissance Financial Securities Corp. ("Renaissance").
Robert Moody, Jr., a director of SEI, owns approximately twenty percent of the
share capital of Renaissance. Pursuant to that agreement, Renaissance agreed to
provide management advisory, investment banking and financial services to the
Company for $3,000, $4,000 and $5,000 per month during the first, second and
third years of the term of the agreement, respectively, and an option to acquire
60,000 Common Shares at an exercise price of C$3.50 per share. In order to
secure payment of the fees owed to Renaissance under the agreement, Mr. Haynes
pledged warrants to acquire 214,000 Common Shares of the Company in May 1996.
Following such pledge, the Company paid Renaissance $75,000 and terminated the
agreement, and Renaissance released the pledge of Mr. Haynes' warrants.
Between November 1, 1996 and June 16, 1997, Mr. Lloyd, Mr. Haynes and
Mr. Wood, the President of SEI, advanced funds in the following aggregate,
respective amounts: $501,589, $492,534 and $169,918. Using promissory notes as
consideration, KOZ Capital purchased these payables from Messrs. Lloyd, Haynes
and Wood and also purchased payables representing professional fees owed by the
Company and fees owed by the Company to 440458 B.C. Ltd., of which Mr. Woods, a
Director of the Company, is the General Manager. KOZ Capital purchased an
aggregate amount of payables equal to $1,791,048.45, used the same amount to
subscribe for the KOZ Debenture and secured payment of the notes to the
individuals with the Common Shares underlying the KOZ Debenture.
The Company acquired AGI from Mr. Dooley and its minority shareholders
in June 1997. See "The Acquisition and Related Financing." In connection with
the Acquisition, the Company entered into a consulting agreement with Thomas E.
Dooley, Jr., the founder of AGI. Mr. Dooley currently serves as Chairman of the
Board of Directors of AGI. See "Management -- Employment and Consulting
Contracts, Termination of Employment and Change-in-Control Arrangements." The
Company also leases its primary office space, production facility and warehouse
from D&D Development Co., an Arizona general partnership, of which Mr. Dooley
beneficially owns 50%. See "Business -- Facilities." In the event Mr. Dooley
acquires the partnership interests of the other partners of D&D Development Co.,
the rental rate payable under the lease increases from $.45 per square foot to
$.60 per square foot, representing an annual rental increase of approximately
$76,500. Prior to the Acquisition Closing Date, AGI had elected (beginning July
1, 1988)
59
<PAGE>
to be treated as an S Corporation under Subchapter S of the Internal Revenue
Code and comparable state tax laws. Distributions of approximately $300,000 and
$725,000 were paid to AGI shareholders in 1994 and 1997, respectively. These
distributions were made to provide funds to AGI shareholders with which to pay
income taxes on the earnings of AGI attributable to them. See "S Corporation
Distributions."
In connection with the Acquisition and the execution of employment
agreements, AGI refinanced debts owed to Mr. McPherson and Mr. Whitley and
issued, to each, 30,120 Common Shares of the Company and two-year warrants to
acquire 15,060 Common Shares at an exercise price of C$6.75 per share during the
first year following issuance and C$7.75 during the second year in connection
with a contingent payment due to each in respect of their notes. See "Employment
and Consulting Contracts, Termination of Employment and Change-in-Control
Arrangements."
Mr. Wood, the President of SEI, has advanced to the Company
approximately $106,000. The advances bear interest at ten percent (10%) per
annum and have no specific terms of repayment.
The Company has agreed to retain Mr. McCammon as a consultant. Mr.
McCammon is a Director of the Company. See "Management -- Employment and
Consulting Contracts, Termination of Employment and Change-in-Control
Arrangements."
The Company entered into an agreement (the "TradeCo Agreement") in
January 1997 with TradeCo Global Securities, Inc. ("TradeCo"), of which Mr.
Lewis, a Director of the Company, is the President. Due to an oversight, the
Company did not submit the TradeCo Agreement to the VSE for approval within the
required time period, and, accordingly, the Company believes that it may be
without authority to perform under the TradeCo Agreement. The Company has agreed
with TradeCo to enter into a substantially similar agreement, subject to VSE
approval. If approved, TradeCo would provide financial advisory, corporate
finance, merger and acquisition and capital raising advice for a monthly
retainer of $5,000 (subject to increase to not more than $10,000 following a
closing of a public offering of Common Shares) for a one year period. In
addition to the monthly retainer, TradeCo will be eligible under the agreement
to receive fees, in the form of cash, Common Shares or warrants to purchase
Common Shares, upon completion of new financings it initiates. TradeCo has
received from a third party Common Shares and warrants to purchase Common Shares
in connection with financing of the Acquisition. See "The Acquisition and
Related Financing." The Company has also agreed to nominate a nominee of TradeCo
for election to the Company's Board of Directors, Mr. Lloyd and Mr. Haynes have
agreed to vote their shares in favor of such nominee and the Company has agreed
to appoint that nominee to the Compensation Committee of the Board of Directors
and has also agreed to indemnify TradeCo on terms yet to be decided.
The Company entered into a management contract, which has not been
reduced to writing, pursuant to which 440458 B.C. Ltd., a British Columbia
company ("440458 B.C. Ltd."), is entitled to receive compensation for the
performance of management services. For rendering such services, 440458 B.C.
Ltd. is paid C$2,500 per month, reasonable related out-of-pocket expenses plus
applicable taxes. The sole beneficial owner of the shares of 440458 B.C. Ltd. is
a person related to J. Christopher Woods, the Secretary and a Director of the
Company.
In connection with the Acquisition, the Company paid a finder's fee of
131,758 Common Shares to Sportswear Investors, LLC. Gary McCauley, a Director of
AGI, is a member of Sportswear Investors, LLC. See "The Acquisition and Related
Financing."
60
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following tables set forth certain information regarding the
beneficial ownership of the Company's Common Stock as of September 30, 1997 by
(i) each director, (ii) each named executive officer in the Summary Compensation
Table, (iii) each person who is known by the Company to own beneficially 5% of
more of the Common Stock and (iv) all Directors and executive officers as a
group. Unless otherwise indicated, each person has sole voting and dispositive
power over the shares indicated as owned by such person, subject to community
property laws where applicable. The address of each person or entity listed is
9319 North 94th Way, Scottsdale, Arizona 85258, except as otherwise indicated.
<TABLE>
<CAPTION>
Shares beneficially Shares beneficially
owned prior to the owned after the
Offering Offering (1)
-------------------- -------------------
Name and Address of Beneficial Owner Number Percent Number Percent
- ------------------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Louis B. Lloyd (2) ................................. 1,028,443 20.40% 1,028,443 12.79%
L. Steven Haynes (3) ............................... 428,170 9.61 428,170 5.74
James E. Miles (4) ................................. 85,361 1.96 85,361 1.16
Robert J. McCammon (5) ............................. 124,600 2.86 124,600 1.69
J. Christopher Woods (6) ........................... 5,000 * 5,000 *
James W. Lewis (7) ................................. 834,680 16.93 834,680 10.53
Natale Bosa (8) .................................... 60,555 1.39 60,555 *
Westcoast Golf Promotions Ltd, (9) ................. 2,100,000 32.62 2,100,000 22.25
Suite 500, 1380 Burrard Street
Vancouver, British Columbia, Canada
Thomas E. Dooley, Jr. (10) ......................... 1,223,000 21.99 1,223,000 14.29
12401 East Saddlehorn
Scottsdale, Arizona 85259
Geovest Capital Partners, L.P. (11) ................ 412,000 8.67 412,000 5.32
666 Fifth Avenue, 24th Floor
New York, New York 10103
All Directors and executive officers
as a group (12 persons) (12) ..................... 2,913,169 48.45 2,913,169 32.32
</TABLE>
- --------------
* Less than 1%
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting." If such option is exercised in full, Mr. Dooley will
beneficially own 773,000 Common Shares, or 9.08%, following this
offering.
(2) Includes 458,075 Common Stock underlying options and warrants to
purchase Common Shares that are exercisable within 60 days (245,000 of
which are held by Belfinance). Also includes 245,000 Common Shares into
which shares of Series A Preferred held by Belfinance may be converted
within 60 days.
(3) Includes 118,720 Common Shares underlying options and warrants to
purchase Common Shares that are exercisable within 60 days.
(4) Includes 12,407 Common Shares underlying options and warrants to
purchase Common Shares that are exercisable within 60 days.
(5) Includes 20,000 Common Shares underlying options and warrants to
purchase Common Shares that are exercisable within 60 days. Also
includes 95,000 Common Shares held in escrow which Mr. McCammon has
agreed to transfer to Mr. Lloyd and Mr. Haynes, in equal parts, subject
to VSE approval. See "Certain Relationships and Related Transactions"
and "Description of Securities - Performance Shares."
(6) Includes 5,000 Common Shares underlying options and warrants to
purchase Common Shares that are exercisable within 60 days.
(7) Includes 160,000 Common Shares into which shares of Series A Preferred
may be converted within 60 days. Also includes 371,000 Common Shares
underlying options and warrants to purchase Common Shares that are
exercisable within 60 days. The 371,000 Common Shares includes warrants
that are exercisable within 60 days to acquire 206,000 Common Shares
owned by Geovest Capital Partners, L.P. ("Geovest"), of which Mr. Lewis
is an investor and Manager. Also includes 206,000 Common shares owned
by Geovest. Mr. Lewis disclaims beneficial ownership of shares owned by
Geovest except to the extent of his pecuniary interest therein arising
from his partnership intrest. Also includes 37,680 Common Shares owned
by TradeCo Global Securities, Inc., of which Mr. Lewis is the Chairman.
Mr. Lewis disclaims beneficial ownership of such shares. Also includes
30,000 Common Shares and warrants to purchase 30,000 Common Shares held
by Investarit AG, of which Mr. Lewis is a shareholder. Mr. Lewis
disclaims beneficial ownership of such shares. See "Certain
Relationships and Related Transactions."
(8) Includes 18,818 Common Shares underlying options and warrants to
purchase Common Shares that are exercisable within 60 days. Mr. Lewis
disclaims beneficial ownership of such shares
(9) Includes units underlying a convertible debenture, which is convertible
within 60 days into 1,050,000 Common Shares and warrants, which are
also exercisable within 60 days, for 1,050,000 Common Shares.
(10) Includes 1,233,000 Common Shares underlying options and warrants to
purchase Common Shares and instruments convertible into Common Shares
within 60 days. See "The Acquisition and Related Financing."
(11) Includes warrants to acquire 206,000 Common Shares that are exercisable
within 60 days.
(12) Includes 1,003,140 Common Shares underlying options and warrants to
purchase Common Shares that are exercisable within 60 days and 405,000
Common Shares into which shares of Series A Preferred may be converted
within 60 days.
61
<PAGE>
DESCRIPTION OF SECURITIES
The following description of the Company's capital stock is a summary
only and is qualified in its entirety by reference to the Company's Memorandum
and Articles, copies of which are filed as exhibits to the Registration
Statement of which this prospectus is a part, and by reference to British
Columbia law under which the Company is incorporated.
General
The Company was incorporated in 1986. Since that time it has effected
two consolidations, or reverse-splits, of its common shares, on December 17,
1991 and June 13, 1997, in each case on the basis of 5 pre-consolidation common
shares for 1 post-consolidation common share. The current authorized capital of
the Company consists of 300,000,000 Common Shares without par value (the "Common
Shares") and 30,000,000 Preferred shares without par value, issuable in series
(the "Preferred Shares"). The Preferred Shares are issuable at any time and from
time to time in one or more series, each series consisting of such number of
shares and, subject to the provisions attached to the Preferred Shares as a
class, having such designation and such rights, privileges, restrictions and
conditions attaching thereto as may be determined by the directors of the
Company. The Company has designated 10,000,000 Preferred Shares as Convertible
Preferred Shares Series A (the "Series A Preferred").
As at September 30, 1997, there were 4,338,365 Common Shares (the
Company has received consideration for and is committed to issue, but has not
yet issued, 630,156 of such shares) and 5,730,000 Series A Preferred Shares
(certificates for which have not yet been delivered) issued and outstanding.
Common Shares
The holders of Common Shares are entitled to notice of and to attend at
all meetings of shareholders and to one vote for each share held on all matters
to be voted on by shareholders at such meetings (other than meetings at which
only holders of another class or series of shares are entitled to vote). Subject
to the rights of the holders of the Preferred Shares, the holders of Common
Shares are entitled to receive, pro rata with all other holders of Common
Shares, such dividends as may from time to time be declared in the discretion of
the directors of the Company and are entitled to receive the remaining assets of
the Company in the event of the Company's liquidation, dissolution or
winding-up.
The holders of Common Shares are not entitled to pre-emptive,
subscription or conversion rights, and there are no redemption or sinking fund
provisions applicable to the Common Shares. The holders of Common Shares are not
subject to further calls or assessments by the Company.
Performance Shares
Pursuant to an escrow agreement dated August 4, 1992, among the
Company (then Fair Resources Group Inc.), Montreal Trust Company and certain of
it shareholders (the "Escrow Agreement"), the Company issued 456,992 common
"performance shares" (the "Performance Shares") to certain of its founders and
future principal stockholders. The Performance Shares were issued pursuant to
Local Policy #3-07 of the British Columbia Securities Commission (the "BCSC")
and Policy 19 of the VSE.
The Performance Shares include 25,500 shares which are the remaining
portion of 750,000 shares issued pursuant to an escrow agreement dated December
22, 1988, among the Company (then Fair Harbour Mining Corporation), C. Phillip
Yeandle, and Montreal Trust Company of Canada (the "Original Performance
Shares"). On October 1, 1991, C. Phillip Yeandle transferred the remaining
25,500 Original Performance Shares to Franco s. Cecconi, another then principal
of the Company. Such shares were rolled into the Escrow Agreement in connection
with the acquisition of SEI by Fair Resources Group Inc. in August 1992.
The Performance Shares are held in escrow to be released as the Company
achieves positive operating cash flow on a cumulative basis. The holders of
Performance Shares will be entitled to a pro rata release from escrow on the
basis of one share to be released for each $0.1345 of cash flow to the Company,
calculated as a performance share percentage of 31% of the issued capital of the
Company and an earn-out factor of .3844, subject to approval by BCSC and the
VSE. Performance Shares are permitted to be released on an annual basis.
A total 305,000 of these shares have been returned to treasury and none
of the remaining Performance Shares have been released from escrow, all as a
result of a failure by the Company to meet the performance criteria. The current
total of Performance Shares held in escrow is 151,992. Once released, the
Performance Shares will be freely tradeable in the province of British Columbia.
If any of the 25,500 Original Performance Shares remain unreleased from
the escrow on December 22, 1998, they will be cancelled on such date. Any of the
remaining 126,492 Performance Shares not yet released will be cancelled on
August 4, 2002.
Preferred Shares
Voting. The holders of Series A Preferred shares are not entitled to
notice of or to attend or to vote at any meeting of the shareholders of the
Company, except to approve amendments to the terms of the Series A Preferred
shares or otherwise as required by law. The Series A Preferred shares will rank
on a parity with the Preferred Shares of every other series and will be entitled
to preference over the Common Shares and any other shares ranking junior to the
Series A Preferred with respect to the payment of dividends and the distribution
of assets in the event of the liquidation, dissolution or winding up of the
Company.
Dividends. For a period of 5 years from the date of issuance thereof,
shares of the Series A Preferred shares are entitled to a fixed, cumulative
preferential cash dividend of 12% per annum on the subscription price therefor.
Conversion. The holders of Series A Preferred shares have the right,
for a period of 5 years from their issuance, to convert their Series A Preferred
shares (including accrued and unpaid interest) into Common Shares, on a one for
one basis, without further payment at any time prior to the first anniversary of
their issuance, or with a payment of $1.25, $2.50, $3.75 or $5.00 in the second,
third, fourth, or fifth year following their issuance, respectively.
Retraction. To the extent the Company completes a sale of its
securities by way of an initial public offering through the facilities of the
National Association of Securities Dealers Automatic Quotation System, the
holders of the Series A Preferred shares shall have the right to retract the
Series A Preferred shares at the subscription price thereof together with
accrued but unpaid
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dividends thereon, but only to the extent that such retraction can be funded
through net proceeds of such initial public offering in excess of US$8,000,000.
Redemption. The Company may at any time redeem the whole or part of the
issued and outstanding Series A Preferred shares upon payment of the sum of
C$6.75 per share together with accrued but unpaid dividends thereon.
Restrictions. Unless otherwise approved by a special resolution of the
holders of the Series A Preferred shares, the Company may not declare or pay any
dividends on the Common Shares, redeem, purchase or make any capital
distribution on the Common Shares or issue any additional Series A Preferred
shares or other shares ranking in priority to or pari passu with the Series A
Preferred shares in respect of the payment of dividends or the return of
capital.
Common Share Purchase Warrants
The Company has the following warrants outstanding as of September 30,
1997:
<TABLE>
<CAPTION>
Number of Common
Shares Issuable
Maturity Date Exercise Price Upon Exercise
- ------------------- ---------------------------------------------------------------------------------- -------------------
<S> <C> <C>
July 11, 1998 C$6.25 until July 11, 1997; C$7.50 from July 12, 1997 until maturity 119,400
October 16, 1998 C$5.80 until October 16, 1997; C$6.65 from October 17, 1997 until maturity 210,000
November 30, 1998 C$6.75 until November 30, 1997; C$8.00 from December 1, 1997 until maturity 49,952
May 16, 1999 C$4.50 until May 16, 1998; C$5.20 from May 17, 1998 until maturity 75,889
June 16, 1999 C$6.75 until June 16, 1998; C$8.00 from June 17, 1998 until maturity 40,120
June 16, 1999 C$4.00 until June 16, 1998; C$4.60 from June 17, 1998 until maturity 78,627
June 16, 1999 C$4.00 until June 16, 1998; C$4.60 from June 17, 1998 until maturity 40,000
June 16, 1999 C$5.00 until June 16, 1998; C$5.75 from June 17, 1998 until maturity 120,000
June 16, 1999 C$5.35 until June 16, 1998; C$6.15 from June 17, 1998 until maturity 60,000
July 18, 1999 C$5.91 until July 18, 1998; C$6.95 from July 19, 1998 until maturity 16,000
September 2, 1999 C$4.00 until September 2, 1998; C$4.60 from September 3, 1998 until maturity 115,344
May 7, 2002 $5.00 323,426
May 7, 2002 $5.00 1,078,086
May 7, 2002 $5.00 1,078,086
June 16, 2002 C$7.20 until June 16, 1998; C$8.40 from June 17, 1998 until June 16, 1999; C$9.70 946,000
from June 17, 1999 until June 16, 2000; C$10.85 from June 17, 2000 until June 16,
2001; C$12.10 from June 17, 2001 until maturity
July 18, 2002 C$7.20 until July 18, 1998; C$8.40 from July 19, 1998 until July 18, 1999; C$9.70 200,000
from July 19, 1999 until July 18, 2000; C$10.85 from July 19, 2000 until July 18,
2001; C$12.10 from July 19, 2001 until maturity
</TABLE>
Convertible Debentures
The Company has issued two convertible debentures, one in the amount of
$1,791,048.45 (the "KOZ Debenture") to KOZ Capital Corp., a Cayman Islands
corporation, and one in the amount of C$4,200,000 (the "Westcoast Debenture") to
Westcoast Golf Promotions Ltd., a Canadian corporation. The KOZ Debenture bears
interest at 15% per annum and is due in June 1998. The KOZ Debenture is
convertible into 714,454 Common Shares and two-year warrants to purchase an
additional 714,454 Common Shares at a price of C$4.00 per Common Share in the
first year and C$4.60 in the second year. The Westcoast Debenture bears interest
at 15% per annum and matures in June 1998. The Westcoast Debenture is
convertible into 1,144,500 Common Shares and two-year warrants to purchase an
additional 1,144,500 Common Shares at a price of C$4.00 per Common Share in the
first year and C$4.60 in the second year. In connection with the Westcoast
Debenture, the Company granted each of Mr. Lloyd and Mr. Haynes, Directors of
the Company, 88,500 Common Shares as a bonus for their having guaranteed the
Westcoast Debenture and a finder's fee in the form of 177,000 Common Shares to
Eron Mortgage Corp. See "Certain Relationships and Related Transactions."
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Representatives' Warrants
The Company has also agreed to sell to the Representatives warrants to
purchase up to 300,000 Common Shares at a price of $0.001 per warrant (the
"Representatives' Warrants"). The Representatives' Warrants will be exercisable
for a period of four years, commencing one year after the date of this
prospectus, at an initial per share exercise price equal to 120% of the price to
the public set forth on the cover page of this prospectus. The Representatives'
Warrants are not redeemable by the Company under any circumstances. Neither the
Representatives' Warrants nor the Common Shares issuable upon exercise thereof
may be transferred, assigned or hypothecated until one year from the date of
this prospectus, except that they may be assigned, in whole or in part, to any
successor, officer, director, member or partner of the Representatives.
The holders of the Representatives' Warrants will have no voting,
dividend or other rights as shareholders of the Company unless and until the
exercise of the Representatives' Warrants. The number of securities deliverable
upon any exercise of the Representatives' Warrants or its underlying securities
and the exercise price of the Representatives' Warrants are subject to
adjustment to protect against any dilution upon the occurrence of certain
events, including issuance of stock dividends, stock splits, subdivision or
combination of outstanding stock and reclassification of stock.
The Company has agreed with the Representatives that if, during the
four-year period commencing one year following the date of this prospectus, the
Company registers any of its Common Shares for sale pursuant to a registration
statement (with the exception of Form S-4, Form S-8 or other similar form), it
will use its best efforts, upon request of any of the holders of the
Representatives' Warrants and/or the underlying shares, to include such
securities as a part of the registration statement. The Company will bear all
the costs, except underwriting discounts and the Representatives' legal fees,
for one piggyback registration. In addition, the Company and the Representatives
have agreed that, during the five-year period commencing one year after the date
of this prospectus, the holders of a majority of the Representatives' Warrants
shall have the right to require the Company to prepare and file one registration
statement with respect to a public offering of the Common Stock underlying the
Representatives' Warrants. Such a registration statement shall be kept effective
for a period of up to 120 days, and the Company shall bear all of the costs,
exclusive of underwriting discounts and selling commissions, of one such demand
registration.
Registration Rights
In connection with the Acquisition, the Company entered into a
Registration Rights Agreement with Thomas E. Dooley, Jr., as agent for the
shareholders of AGI. The registration agreement grants Mr. Dooley, as agent, the
right to a demand registration, an additional demand registration if at the time
of the second request the Common Shares may be registered on Commission Form S-3
and piggyback registration rights in the event the Company proposes to register
any of its securities or is required to register securities of any other
shareholders pursuant to registration rights. Registrable securities under the
registration agreement include Common Shares issued in the Acquisition and
Common Shares underlying convertible notes or issuable upon exercise of
warrants. All fees and expenses of such registration will be borne by the
Company. The Company is required to use its best efforts to effect demand
registrations, subject to certain conditions and limitations.
The Company has granted registration rights covering 2,479,598 Common
Shares, subject to adjustment, underlying warrants issued in connection with the
LaSalle Acquisition Loan, the Imperial Acquisition Loan and the Cruttenden
Bridge Acquisition Loan. See "The Acquisition and Related Financing." The
Company granted the right to two demand registrations to Imperial Bank and one
demand registration to each of LaSalle Business Credit, Inc. and Cruttenden Roth
Bridge Fund, L.L.C. The Company also granted piggyback registration rights to
each of these three lenders. All fees and expenses of such registration will be
borne by the Company. The Company is required to use its best efforts to effect
demand registrations, subject to certain conditions and limitations. The Company
has agreed to register the Representatives' Warrants and underlying Common
Shares, subject to certain limitations. See "-- Representatives' Warrants." The
Company also agreed to register Common Shares issued to TradeCo under the
Company's financial advisory agreement with TradeCo upon a public offering. See
"Certain Relationships and Related Transactions."
Transfer Agent and Registrar
Montreal Trust Company of Canada is the transfer agent and registrar
for the Company's Common Shares.
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CERTAIN INCOME TAX CONSIDERATIONS
Certain Canadian Federal Income Tax Considerations
The following summary presents the principal Canadian federal income
tax consequences of acquiring, holding and disposing of Common Shares generally
applicable to U.S. Holder (as defined below) who purchases Common Shares
pursuant to this offering. This summary is based on the current provisions of
the Income Tax Act (Canada) (the "Tax Act") and the regulations thereunder, all
specific proposals to amend the Tax Act and the regulations thereunder that have
been publicly announced by the Minster of Finance (Canada) prior to the date
hereof and counsel's understanding of the current published administrative
practices of Revenue Canada. This summary does not take into account any other
changes in the law, whether by judicial, governmental or legislative decision or
action, nor does it take into account provincial, territorial or foreign laws.
This summary is of a general nature only and is not intended to be, and should
not be construed to be, legal or tax advice to any prospective investor.
Prospective investors should consult with their own tax advisors with respect to
their own particular circumstances.
The Tax Act contains recently enacted rules (the "mark-to-market
rules") relating to securities held by certain financial institutions. This
summary does not take into account these mark-to-market rules and Holders that
are "financial institutions" for the purposes of these rules should consult
their own tax advisors.
For the purposes of this discussion, a "U.S. Holder" means a person
who, throughout the period during which such holder owns the Common Shares, (i)
is not resident in Canada for purposes of the Tax Act, (ii) is a resident of the
United States for purposes of the Canada-United States Income Tax Convention
(the "Convention"), (iii) holds the Common Shares as capital property for
purposes of the Tax Act, (iv) deals at arm's length with the Company, (v) does
not use or hold, and is not deemed to use or hold, the Common Shares in, or in
the course of, carrying on a business or providing independent personal services
in Canada and (vi) does not own (and is not treated as owning) 10% or more of
the outstanding voting shares of the Company.
Dividends paid or credited on the Common Shares to a U.S. Holder who is
the beneficial owner of such dividends will generally be subject to Canadian
non-resident withholding tax at the rate of 25%. Under the Convention, the rate
of such withholding tax will generally be limited to 15%.
A U.S. Holder will not be subject to tax under the Tax Act in respect
of gains realized on the disposition or deemed disposition (including a deemed
disposition on death) of the Common Shares unless such shares are "taxable
Canadian property" (within the meaning of the Tax Act) to such holder at the
time of the disposition. The Common Shares will generally not constitute taxable
Canadian property to a U.S. Holder unless, at any time during the five-year
period immediately preceding the disposition or deemed disposition of the Common
Shares, the U.S. Holder or persons with whom such holder did not deal at arm's
length or any combination thereof owned or had an interest in or option to
acquire not less than 25% of the issued shares of any class or series of the
capital stock of the Company. Even if the Common Shares are "taxable Canadian
property" to a U.S. Holder, any gain realized
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by such holder on a disposition of such shares will generally be exempt from
Canadian tax under the Convention provided that at the time of the disposition
the Common Shares do not derive their value primarily from real property
situated in Canada.
United States Federal Income Tax Considerations
This summary is based on the United States Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations promulgated thereunder and
judicial and administrative interpretations thereof, all as in effect on the
date hereof and all of which are subject to change thereby changing the United
States federal income tax considerations discussed below. This summary does not
address all aspects of United States federal income taxation that may be
relevant to a particular United States Holder based on such United States
Holder's particular circumstances and does not address foreign, state, local or
other tax consequences. In particular, the following summary does not address
the tax treatment of United States Holders who are broker-dealers or who own,
actually or constructively, 10% or more of the Company's outstanding voting
shares, and other certain United States Holders (including, but not limited to,
insurance companies, tax-exempt organizations, financial institutions, S
corporations, mutual funds, small business investment companies, regulated
investment companies, and persons subject to the alternative minimum tax) who
may be subject to special rules not discussed below. This summary applies only
to United States Holders who hold Common Shares as capital assets within the
meaning of section 1221 of the Code, and does not cover all aspects of United
States federal taxation that may be relevant to a purchaser in light of his or
her particular circumstances. Furthermore, estate and gift tax consequences are
not discussed herein. No ruling from the IRS will be requested with respect to
any of the matters discussed herein.
Dividends. For United States federal income tax purposes, a United
States Holder of Common Shares generally will realize, to the extent of the
Company's current and accumulated earnings and profits (as determined for United
States federal income tax purposes), ordinary income (treated as foreign source
dividend income) on the receipt of cash dividends on the Common Shares equal to
the United States dollar value of such dividends on the date of receipt (based
on the exchange rate on such date). The amount realized will not be reduced by
the amount of any Canadian withholding tax (see discussion below regarding
claiming the amount of Canadian tax withholding as a deduction or foreign tax
credit). To the extent, if any, that distributions made by the Company to a
United States Holder of Common Shares exceed the current and accumulated
earnings and profits of the Company, such distributions will be treated as a
tax-free return of capital to the extent of such United States Holder's adjusted
basis for such Common Shares, and to the extent in excess of adjusted basis, as
capital gain, thus reducing the United States Holder's adjusted tax basis in
such Common Shares and increasing the amount of gain (or reducing the amount of
loss) which may be realized by such United States Holder upon a sale or exchange
of the Common Shares. The amount of any distribution which exceeds the United
States Holder's adjusted basis in the Common Shares will be long-term capital
gain if the United States Holder's holding period for such Common Shares exceeds
eighteen months. If the Holder is an individual taxpayer, such long-term capital
gain will be subject to a maximum tax rate of 20%. If an individual Holder has
held Common Shares for eighteen months or less, but more than one year, gains on
the sale or exchange of such stock will be subject to a maximum tax rate of 28%.
Dividends paid on the Common Shares will not be eligible for the dividends
received deduction available in certain cases to United States corporations. In
the case of foreign currency received as a dividend that is not converted by the
recipient into United States dollars on the date of receipt, a United States
Holder will have a tax basis in the foreign currency equal to its United States
dollars value on the date of receipt. Any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including an
exchange for United States dollars, will be ordinary income or loss. Subject to
certain requirements and limitations imposed by the Code, a United States Holder
may elect to claim the Canadian tax withheld or paid with respect to dividends
on the Common Shares either as a deduction or as a foreign tax credit against
the United States federal income tax liability of such United States Holder. In
general, a United States Holder may utilize foreign tax credits only to the
extent of the United States income tax attributable to such holder's foreign
source income, which foreign source income would include any dividends paid by
the Company but generally would not include any gain realized upon a disposition
of Common Shares. The requirements and limitations imposed by the Code with
respect to the foreign tax credit are complex and beyond the scope of this
summary, and consequently prospective purchasers of Common Shares should consult
with their own tax advisers to determine whether and to what extent they would
be entitled to such credit.
Sale or Exchange of Common Shares. For United States federal income tax
purposes, upon a sale or exchange of a Common Share, a United States Holder will
recognize gain or loss equal to the difference between the amount realized on
such sale or exchange and the tax basis of such Common Share. If a Common Share
is held as a capital asset, any such gain or loss will be capital gain or loss,
and will be long-term capital gain or loss if the United States Holder has held
such Common Share for more than eighteen months at the time of the sale or
exchange. In the case of an individual taxpayer, such gain would be subject to a
maximum tax rate of 20%. If an individual
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Holder holds Common Shares for 18 months or less, but more than one year, gains
on the sale or exchange of stock will be subject to a maximum tax rate of 28%.
The gain, if any, will generally be United States source income. If the amount
realized on such sale is not denominated in United States dollars, the amount
realized will be equal to the United States dollar value thereof determined at
the spot rate on the date of the sale or exchange.
Backup Withholding. Under section 3406 of the Code and applicable
United States Treasury regulations, a non-corporate U.S. Holder of Common Shares
may be subject to backup withholding at the rate of 31% with respect to
"reportable payments," which include dividends paid on, or the proceeds of a
sale, exchange or redemption of, the Common Shares. The payor will be required
to deduct and withhold the prescribed amounts if (i) the payee fails to furnish
a taxpayer identification number ("TIN") to the payor in the manner required,
(ii) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (iii) there has been a "notified payee underreporting" described in
section 3406(c) of the Code or (iv) there has been a failure of the payee to
certify under penalty of perjury that the payee is not subject to withholding
under section 3406(a)(1)(C) of the Code. As a result, if any one of the events
listed above occurs, the Company will be required to withhold an amount equal to
31% from any dividend payment made with respect to the Common Shares to a
non-corporate U.S. Holder. Amounts paid as backup withholding do not constitute
an additional tax and will be credited against the U.S. Holder's United States
federal income tax liabilities, so long as the required information is provided
to the IRS. The Company will report to the U.S. Holders of the Common Shares and
to the IRS the amount of any "reportable payments" for each calendar year and
the amount of tax withheld, if any, with respect to payment on those securities.
Passive Foreign Investment Company ("PFIC"). Shareholders of a PFIC
must pay an interest charge on the portion of any "excess distributions" of the
PFIC allocable to prior years, unless an election has been made by the
shareholder and the PFIC to treat the PFIC as a qualified electing fund ("QEF").
An excess distribution includes (1) all gains from dispositions of PFIC stock,
whether actual or deemed, and whether or not the disposition would ordinarily be
subject to a nonrecognition provision of the Code, and (2) the amount by which
the current year's actual distributions exceed 125% of the average distributions
over the prior three years. The excess distributions are allocated to prior
years during which the corporation was a PFIC, are taxed at the highest marginal
rate in effect for such years and are subject to an interest charge. If the
shareholder has made an election to treat the PFIC as a QEF, the shareholder
generally will be treated as receiving an annual distribution of its share of
the PFIC's earnings and profits, classified as either ordinary income or capital
gain, depending on the underlying income of the PFIC. A foreign corporation will
be characterized as a PFIC if either (1) 75% or more of its gross income is
passive; or (2) the average percentage of assets (as determined under the Code)
held by such corporation during the taxable year which produced passive income
or was held for the production of passive income is at least 50%. For both tests
look-through rules apply such that (1) where a foreign corporation directly or
indirectly owns 25% or more (by value) of the stock of another corporation (the
subsidiary) the assets and income of the subsidiary are treated as owned by the
foreign corporation for purposes of determining PFIC status; (2) dividends,
interest, rents, and royalties received from related persons and the assets to
which such payments relate, are characterized based upon the income of the
related person; and (3) if a foreign corporation owns at least 25% of the stock
of a U.S. corporation then any stock held by the U.S. corporation in a U.S. C
corporation, which is not a regulated investment company or a REIT, is treated
as a nonpassive asset, and the income from the stock is treated as nonpassive
income, when attributed to the foreign corporation for purposes of determining
PFIC status. Under recently enacted tax legislation, a PFIC will not be treated
as such with respect to any shareholders' holding period after December 31, 1997
during which the shareholder is subject to the controlled foreign corporation
rules discussed below. In addition, a shareholder of a PFIC may now make a
mark-to-market election for marketable PFIC stock. If such an election is made,
the shareholder includes in income each year an amount equal to the excess, if
any, of the fair market value of the PFIC stock as of the close of the tax year
over the shareholder's adjusted basis in the stock. If the adjusted basis of
such stock exceeds the fair market value of the stock as of the close of the
taxable year, the shareholder will be allowed a deduction for such taxable year
equal to the lesser of (i) the amount of such excess, or (ii) "unreserved
inclusions." "Unreserved inclusions" means the excess, if any, of the
mark-to-market gains for the stock included by the shareholder for earlier tax
years over the mark-to-market losses for the stock that were allowed as
deductions for earlier tax years. The Company intends to conduct its business in
the future in such a manner that its income and assets will be such that it will
continue not to constitute a PFIC.
Controlled Foreign Corporation ("CFC"). If a U.S. person owns directly
or indirectly 10% or more of the voting power of all classes of stock entitled
to vote of a CFC, such person is taxed on the subpart F income (generally,
passive income (defined below), certain income from transactions with related
parties and certain income from shipping, oil and insurance activities) of such
corporation in the year in which it is earned whether or not such amounts are
actually distributed. A CFC is a foreign corporation
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more than 50% of the stock of which (by vote or value) is owned directly or
indirectly by U.S. persons who each own 10% or more of the voting power of all
classes entitled to vote. Passive income generally includes: (1) interest (or
income equivalent thereto), dividends, royalties, rents, and annuities; (2) net
gains from the sale or exchange of property which gives rise to any of the above
types of income or does not give rise to income; (3) net gains from the sale or
exchange of an interest in a partnership, trust or REMIC; and (4) net gains from
commodities or foreign currency transactions. The Company is not a CFC and does
not believe that it will become a CFC after this offering.
Personal Holding Companies. A non-United States corporation may be
classified as a personal holding company (a "PHC") for United States federal
income tax purposes if both of the following two tests are satisfied: (i) if at
any time during the last half of the Company's taxable year, five or fewer
individuals (without regard to their citizenship or residency) own or are deemed
to own (under certain attribution rules) more than 50% of the stock of the
corporation by value (the "PHC Ownership Test") and (ii) such non-United States
corporation receives 60% or more of its United States related gross income, as
specifically adjusted, from certain passive sources such as dividends and
royalty payments (the "PHC Income Test"). Such a corporation is taxed (currently
at a rate of 39.6%) on certain of its undistributed United States source income
(including certain types of foreign source income which are effectively
connected with the conduct of a United States trade or business) to the extent
amounts at least equal to such income are not distributed to shareholders. The
Company does not believe that the PHC Ownership Test is currently satisfied, nor
that it will be satisfied after this offering. While there can be no assurance
that the Company will fail to satisfy the PHC Income Test, the Company does not
believe that the PHC Income Test is currently satisfied, nor that it will be
satisfied after this offering.
Foreign Personal Holding Companies. A non-United States corporation
will be classified as a foreign personal holding company (a "FPHC") for U.S.
federal income tax purposes if both of the two following tests are satisfied:
(i) if at any time during the tax year five or fewer individuals who are United
States citizens or residents own or are deemed to own (under certain attribution
rules) more than 50% of all classes of the corporation's stock measured by
voting power or value and (ii) at least 60% (50% in later years) of the
corporation's gross income (regardless of source), as specifically adjusted, is
Foreign Personal Holding Company Income (as that term is defined in the Code).
If such a corporation is classified as an FPHC, a portion of its "undistributed
foreign personal holding company income" (as defined for United States federal
income tax purposes) would be imputed to all of its shareholders who are U.S.
Holders on the last day of the corporation's taxable year, or, if earlier, the
last day on which it is classifiable as an FPHC. Such income would be taxable as
a dividend, even if no cash dividend is actually paid. U.S. Holders who dispose
of their shares prior to such date would not be subject to tax under these
rules. In addition, each United States citizen or resident who is an officer,
director or 10% shareholder of the FPHC is required to file with his or her
income tax return an information return on Form 5471, Information Returns of
United States Persons With Respect to Certain Foreign Corporations (along with
applicable schedules). The Company is not an FPHC and believes that it will not
be classified as an FPHC after this offering.
Foreign Investment Company ("FIC"). A shareholder of an FIC must treat
as ordinary income any gain on the sale of FIC stock to the extent of such
shareholder's ratable share of the FIC's earnings and profits, where such gain
would otherwise be long-term capital gain. An FIC is any foreign corporation (1)
registered under the Investment Company Act of 1940, or (2) engaged primarily in
the business of investing, reinvesting, or trading in securities, commodities or
any interest in securities or commodities during any year in which 50% or more
of its stock (by vote or value) is held, directly or indirectly, by United
States persons. The PFIC rules were enacted after the FIC rules, but did not
repeal the FIC provisions. However, the FIC rules do not apply to the earnings
and profits of a company for any taxable year beginning after 1986 if the
company was a PFIC for that year. The Company is not an FIC and believes that it
will not be classified as an FIC after this offering.
CANADIAN GOVERNMENTAL REGULATION
Canada has no foreign exchange restrictions on the export or import of
capital, nor on the remittance of dividends, interest or other payment to
non-resident security holders. There are no foreign exchange controls other than
applicable withholding taxes. There is no limitation imposed by Canadian law or
by the Articles or other charter documents of the Company on the right of a
non-resident to hold or vote Common Shares or Preferred Shares of the Company
with voting rights (collectively, "Voting Shares"), other than as provided in
the Investment Canada Act (the "Investment Act"). The Investment Act requires
certain "non-Canadian" individuals, governments, corporations or other entities
who wish to acquire a "Canadian business" (as defined in the Investment Act) to
file either a notification or an application for review with the Director of
Investments, Department of Industry, Government of
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Canada. The Investment Act requires that certain acquisitions of control of a
Canadian business by a "non-Canadian" must be reviewed and approved in advance
by the Minister responsible for the Investment Act on the basis that he is
satisfied that the acquisition is likely to be of benefit to Canada. The
Investment Act provides detailed rules for the determination of whether control
has been acquired and, pursuant to those rules, the acquisition of one-third or
more of the voting shares of a corporation may, in some circumstances, be
considered to constitute an acquisition of control. Failure to comply with the
Investment Act could result in, among other things, an injunction or court order
directing disposition of the assets or shares.
The Competition Act (Canada) (the "Competition Act") is a law of
general application regulating "mergers" (as defined in the Competition Act). A
"merger" is defined in the Competition Act to include the acquisition of control
over a significant interest in the whole or a part of a business of a person.
Where the Competition Tribunal, established under the Competition Tribunal Act
(Canada), finds that a merger "prevents or lessens, or is likely to prevent or
lessen, competition substantially," it has the power, among others, to prohibit
or dissolve the merger. The Competition Act also requires that persons proposing
certain transactions, before completing these transactions, notify the Director
of Investigation and Research appointed under the Competition Act that the
transactions are proposed and supply the Director with certain information. In
such situations, the Competition Act prescribes the time periods following
notification which must expire before the transactions may proceed. In the case
of the acquisition of voting shares of a corporation which are publicly traded,
the acquisition by a person of the voting shares which would result in such
person, together with its affiliates, owning 20 percent or less of the votes of
all outstanding voting shares would not require a notification to be made.
69
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 7,338,365
Common Shares outstanding. The securities laws of the Province of British
Columbia generally impose a hold period of one year from the date of issuance.
During the hold period, Common Shares are unable to be traded in British
Columbia, or through the facilities of the VSE, without the filing of a
prospectus in respect thereof, but the hold period would not apply to sales
outside of British Columbia or through facilities other than the VSE. The one
year hold period also applies to warrants, and the hold period does not
recommence for Common Shares issued upon exercise of warrants. During the fourth
quarter of 1997, the hold period will expire with respect to approximately
278,901 Common Shares and Common Shares underlying warrants. During the first
quarter of 1998, the hold period will expire with respect to 2,643,000 Common
Shares and Common Shares underlying warrants. Hold periods with respect to
Common Shares and Common Shares underlying warants for 6,504,328 shares,
1,576,156 shares and 440,000 shares expire during the second quarter of 1998,
the third quarter of 1998 and the fourth quarter of 1998, respectively.
The Common Shares sold in this offering will be freely tradeable in the
public market without restriction or further registration under the Act unless
held by an "affiliate" of the Company, as that term is defined in Rule 144 under
the Act. The remaining 4,338,365 Common Shares, and the Common Shares underlying
warrants, options and other convertible securities are, or will be when issued,
"restricted securities" as that term is defined in Rule 144 and may be sold only
in compliance with Rule 144, pursuant to registration under the Act or pursuant
to an exemption therefrom. Of such 4,338,365 Common Shares, upon the
availability of public information as required by Rule 144 under the Act,
approximately 2,751,199 will be available for sale under Rule 144. An additional
53,000 Common Shares will become eligible for sale under Rule 144 during the
fourth quarter of 1997, an additional 124,924 Common Shares will become eligible
during the first quarter of 1998, and an additional 880,490 Common Shares will
become eligible for sale under Rule 144 during the second quarter of 1998.
During the third and fourth quarters of 1998 a further 318,752 and 210,000
Common Shares, respectively, will become eligible for sale under Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held at least one year from
the date of issuance by the Company or acquisition from an affiliate, may sell
such shares in brokers' transactions or directly to market makers, provided that
the number of shares sold within any three-month period does not exceed the
greater of 1% of the then outstanding Common Shares or the average weekly
trading volume in the Company's Common Shares in the over-the-counter market
during the four calendar weeks preceding the date on which notice of sale was
filed under Rule 144.
Sales under Rule 144 are also subject to certain provisions relating to
notice of sale and availability of current public information about the Company.
Affiliates may sell shares not constituting restricted securities in accordance
with the same volume limitations and other restrictions, but without regard to
the one-year holding period.
Further, under Rule 144(k), after two years have elapsed from the
latter of the issuance of the restricted securities by the Company or their
acquisition from an affiliate, a holder of such restricted securities who has
not been an affiliate of the Company for at least three months prior to the sale
would be entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above.
The Company has granted registration rights to certain of its
shareholders, warrant holders and option holders. See "Description of Securities
- - Registration Rights."
Prior to this offering there has been no public market in the United
States for the Common Shares of the Company, and no prediction can be made as to
the effect, if any, that market sales of Common Shares or the availability of
Common Shares for sale will have on the market price of Common Shares from time
to time. Nevertheless, sales of substantial amounts of Common Shares in the
public market, or the perception that such sales could occur, could adversely
affect prevailing market prices and could impair the Company's future ability to
raise capital through the sale of its equity securities.
70
<PAGE>
UNDERWRITING
Cruttenden Roth Incorporated and Ferris, Baker Watts, Incorporated are
acting as the representatives (the "Representatives") of each of the
underwriters named below (the "Underwriters"). Subject to the terms and
conditions set forth in an underwriting agreement dated as of the date hereof
(the "Underwriting Agreement"), the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, the aggregate
number of Common Shares set forth opposite their respective names:
Name Number of Shares
- ---- ----------------
Cruttenden Roth Incorporated ........................
Ferris, Baker Watts, Incorporated ...................
--------------------
Total ......................................
====================
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel and
various other conditions. The nature of the Underwriters' obligations is such
that they are committed to purchase all of the above shares if any are
purchased. The Underwriters propose to offer the Common Shares directly to the
public at the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per share to certain other dealers. After this
offering, the offering price and other selling terms may be changed by the
Representatives.
The Company's Common Shares are traded on the Vancouver Stock Exchange.
Until the consummation of this offering, there has been no United States public
market for the Common Shares of the Company. Accordingly, the initial public
offering price has been determined by negotiation between the Company , the
Selling Shareholder and the Representatives. Among the factors considered in
determining the initial public offering price were recent prices of the Common
Shares, the Company's results of operations, current financial condition and
future prospects, the market for its products and services, the experience of
its management, the economics of the industry in general, the general condition
of the equity securities market, the market capitalization and stages of
development of other companies which the Company, the Selling Shareholder and
the Representatives believed to be comparable to the Company and other relevant
factors. There can be no assurance that any active trading market for the Common
Shares will continue or as to the price at which the Common Shares may trade in
the public market from time to time subsequent to the offering made hereby.
A shareholder of the Company has granted to the Underwriters an option,
expiring 45 days from the date of this prospectus, to purchase up to 450,000
additional Common Shares on the same terms as set forth on the cover page of
this prospectus, solely to cover over-allotments, if any, incurred in the sale
of the Common Shares offered hereby. If the Underwriters exercise the option,
each Underwriter will have a firm commitment, subject to certain conditions, to
purchase such number of additional Common Shares as is proportionate to such
Underwriter's initial commitment to purchase shares from the Company.
In connection with this offering, certain Underwriters and selling
group members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Shares.
Such transactions may include stabilization transactions effected in accordance
with the Securities Exchange Act of 1934 pursuant to which such persons may bid
for or purchase Common Shares for the purpose of stabilizing its market price.
The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Shares in connection with this offering than
they are committed to purchase from the Company, and in such case may purchase
Common Shares in the open market following completion of this offering to
convert all or a portion of such Common Shares or may exercise the Underwriters'
over-allotment option referred to above. In addition, the Representatives, on
behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or dealer participating in this offering), for the account of the other
Underwriters, the selling concession with respect to Common Shares that is
distributed in this offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Shares at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph are required, and, if they are
undertaken, they may be discontinued at any time.
71
<PAGE>
The Company has also agreed to sell to the Representatives warrants to
purchase up to 300,000 Common Shares at a price of $0.001 per warrant. The
Representatives' Warrants will be exercisable for a period of five years,
commencing one year after the date of this prospectus, at an initial exercise
price per share equal to 120% of the price to the public set forth on the cover
page of this prospectus. The Representatives' Warrants are not redeemable by the
Company under any circumstances. Neither the Representatives' Warrants nor the
Common Shares issuable upon exercise thereof may be transferred, assigned or
hypothecated until one year from the date of this prospectus, except that they
may be assigned, in whole or in part, to any successor, officer, director,
member or partner of the Representatives.
The holders of the Representatives' Warrants will not have voting,
dividend or other rights as shareholders of the Company unless and until such
warrants are exercised. The number of securities deliverable upon any exercise
of the Representatives' Warrants and the exercise price of the Representatives'
Warrants are subject to adjustment to protect against dilution upon the
occurrence of certain events, including any stock dividend, stock split,
subdivision or combination of outstanding stock or reclassification of the
Common Shares.
The Company has agreed with the Representatives that if the Company
registers any of its Common Shares for sale pursuant to a registration statement
(other than on Form S-4, Form S-8 or other inappropriate form) during the
five-year period commencing on the date of this prospectus, upon request of any
of the holders of the Representatives' Warrants or the underlying shares, the
Company will use its best efforts to include such securities as a part of such
registration statement. The Company shall bear all of the costs, exclusive of
underwriting discounts and selling commissions, of one such piggyback
registration.
In addition, the Company and the Representatives have agreed that,
during the five-year period commencing one year after the date of this
prospectus, the holders of a majority of the Representatives' Warrants shall
have the right to require the Company to prepare and file one registration
statement with respect to a public offering of the Common Stock underlying the
Representatives' Warrants. Such a registration statement shall be kept effective
for a period of up to 120 days, and the Company shall bear all of the costs,
exclusive of underwriting discounts and selling commissions, of one such demand
registration.
A shareholder of the Company agreed that for a period of 365 days after
the date of this prospectus, and the Company and its executive officers,
directors, certain shareholders and optionholders have agreed that for a period
of 180 days after the date of this prospectus, they will not, with certain
limited exceptions, directly or indirectly offer, sell, contract to sell, grant
any option to sell, or otherwise dispose of Common Shares or other securities
which are substantially similar to the Common Shares or securities convertible
into or exercisable or exchangeable for or any rights to purchase or acquire
Common Shares or securities which are substantially similar to the Common Shares
without the prior written consent of Cruttenden Roth Incorporated.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Underwriters may be required to make in respect thereof.
The Company has also agreed to pay to the Representatives a
non-accountable expense allowance equal to 2.5% of the aggregate offering price
to the public in this offering for due diligence and other out-of-pocket
expenses.
The Representatives have informed the Company that the Underwriters do
not intend to confirm sales to any accounts over which they exercise
discretionary authority.
In May 1997, the Cruttenden Roth Bridge Fund, LLC ("Bridge Fund"), an
affiliate of Cruttenden Roth Incorporated, loaned the Company the principal
amount of $1,020,000 (the "Cruttenden Bridge Acquisition Loan") The Cruttenden
Bridge Acquisition Loan bears interest at a rate of thirteen percent (13%) per
annum, is due May 7, 1998 and by its terms must be prepaid within ten (10) days
of consummation of this Offering. The Company intends to repay the outstanding
balance on the Cruttenden Bridge Acquisition Loan from the proceeds of this
Offering. The Company also issued to Bridge Fund a warrant to purchase 1,078,086
Common Shares at an exercise price of $5.00 per share, which expires on May 7,
2002. Cruttenden Roth Incorporated acted as placement agent in connection with
the Cruttenden Bridge Acquisition Loan. The Company paid Cruttenden Roth
Incorporated a funding fee equal to five percent (5%) of the principal amount of
the Cruttenden Bridge Acquisition Loan. See "The Acquisition and Related
Financing," "Use of Proceeds" and "Certain Relationships and Related
Transactions."
72
<PAGE>
LEGAL MATTERS
The validity of the Common Shares offered hereby will be passed upon
for the Company by Stikeman, Elliott, Vancouver, British Columbia and Quarles &
Brady, Phoenix, Arizona, and for the Underwriters by Gray Cary Ware &
Freidenrich, San Diego, California.
EXPERTS
The audited financial statements included in this prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP and BDO
Dunwoody, independent public accountants, and are included herein in reliance
upon the authority of said firms as experts in giving said reports.
CHANGES IN INDEPENDENT AUDITOR
Effective April 1, 1997, Arthur Andersen LLP was engaged as principal
independent auditors for the Company. Arthur Andersen LLP succeeded BDO
Dunwoody, Chartered Accountants. The decision to change independent auditors was
approved by the Board of Directors of the Company. In connection with the audits
of the Company's consolidated balance sheet at December 31, 1995 and the
Company's consolidated statements of operations, changes in shareholders' equity
(deficit) and cash flows for the years ended December 31, 1994 and 1995, there
were no disagreements with BDO Dunwoody on any matter of accounting principles
or practices, financial disclosure or auditing scope or procedures. The audit
report of BDO Dunwoody on the consolidated balance sheet at December 31, 1995
and the consolidated statements of operations, changes in shareholders equity
(deficit) and cash flows for the years ended December 31, 1994 and 1995 did not
contain any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principle.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement under the Act
with respect to the Common Shares offered hereby (the "Registration Statement").
This prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. Certain items are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Shares offered hereby, reference is made to the
Registration Statement and the exhibits filed therewith. Statements contained in
this prospectus as to the contents of any contract or other document are not
necessarily complete, and, in each instance where such contract or other
document is an exhibit to the Registration Statement, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement, and the exhibits thereto, may
be inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. In addition, the Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's web site is http://www.sec.gov.
73
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Antigua Enterprises Inc. Page
----
Report of Independent Public Accountants - Arthur Andersen LLP........... F-2
Report of Independent Public Accountants - BDO Dunwoody ................. F-3
Consolidated Balance Sheets ............................................. F-4
Consolidated Statements of Operations ................................... F-5
Consolidated Statements of Changes in Shareholders' Equity (Deficit) .... F-6
Consolidated Statements of Cash Flows ................................... F-7
Notes to Consolidated Financial Statements .............................. F-9
The Antigua Group, Inc.
Report of Independent Public Accountants ............................... F-30
Balance Sheets ......................................................... F-31
Statements of Income (Loss)............................................. F-32
Statements of Changes in Stockholders' Investment ...................... F-33
Statements of Cash Flows ............................................... F-34
Notes to Financial Statements .......................................... F-35
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Antigua Enterprises Inc.:
We have audited the accompanying consolidated balance sheet of ANTIGUA
ENTERPRISES INC. (a Canadian registered corporation) formerly known as
Southhampton Enterprises Corp. and Subsidiaries as of December 31, 1996, and the
related consolidated statements of operations, changes in shareholders' deficit
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The consolidated financial statements of the Company as of December 31,
1995, and for the years ended December 31, 1995 and 1994, were audited by other
auditors whose report dated September 13, 1996, expressed an unqualified opinion
on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Antigua Enterprises
Inc. and Subsidiaries as of December 31, 1996, and the results of its operations
and cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
May 7, 1997.
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Antigua Enterprises Inc.
We have audited the Consolidated Balance Sheet of Antigua Enterprises Inc.
(formerly Southhampton Enterprises Corp.) as of December 31, 1995 and the
related Consolidated Statements of Operations, Changes in Shareholders' Equity
(Deficit) and Cash Flows for the years ended December 31, 1995 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States and Canada. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company at
December 31, 1995 and the results of its operations and its cash flows for the
years ended December 31, 1995 and 1994 in conformity with generally accepted
accounting principles in the United States and Canada.
BDO DUNWOODY
Vancouver, Canada
September 13, 1996 CHARTERED ACCOUNTANTS
(Internationally BDO Binder)
F-3
<PAGE>
ANTIGUA ENTERPRISES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
--------------------------- ------------
1995 1996 1997
------------ ------------ ------------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash ................................................. $ 1,873 $ 30,240 $ 4,923
Funds in trust ....................................... -- 635,646 --
Accounts receivable, net of allowance for doubtful
accounts of $94,300, $63,500, and $266,587
respectively ....................................... 119,697 540,785 5,970,048
Inventory ............................................ 112,818 174,533 8,576,981
Prepaid expenses ..................................... 10,332 214 220,183
Deferred loan fees, net of accumulated
amortization ....................................... -- -- 2,545,890
------------ ------------ ------------
Total current assets ................ 244,720 1,381,418 17,318,025
DEFERRED ACQUISITION COSTS ............................. -- 1,275,866 --
PROPERTY AND EQUIPMENT, net of
accumulated depreciation ............................. 201,079 190,479 2,544,399
LICENSES, net of accumulated amortization .............. -- -- 18,446,411
OTHER ASSETS ........................................... 19,361 60,189 65,853
------------ ------------ ------------
$ 465,160 $ 2,907,952 $ 38,374,688
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt .................... $ 199,861 $ 423,702 $ 1,088,492
Revolving line of credit ............................. -- -- 6,220,203
Notes payable to bridge lenders, net discount of
$1,858,600 ......................................... -- -- 3,661,400
Current portion of due to directors and officers ..... -- 1,007,908 534,619
Current portion of notes payable to sellers .......... -- -- 383,733
Convertible debentures, net of discount of
$2,602,741 ......................................... -- -- 2,218,949
Accounts payable ..................................... 289,910 536,872 1,659,341
Accrued liabilities .................................. 363,080 330,705 2,712,718
Accrued loan fees due to directors and officers ...... -- -- 2,131,826
------------ ------------ ------------
Total current liabilities ........... 852,851 2,299,187 20,611,281
DUE TO DIRECTORS AND OFFICERS .......................... 402,025 -- 336,106
LONG-TERM DEBT ......................................... 136,471 48,574 1,714,589
NOTES PAYABLE TO SELLERS ............................... -- -- 5,994,267
EQUITY SECURITY SUBSCRIPTION DEPOSITS .................. 513,063 1,629,178 --
REDEEMABLE PREFERRED STOCK, net of
discount of $1,149,257, 30,000,000 shares
authorized and 4,730,000 shares outstanding at
June 30, 1997 ........................................ -- -- 3,580,743
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, 300,000,000 shares authorized and
2,238,691, 2,641,999 and 4,260,565 shares
outstanding at December 31, 1995 and 1996, and
June 30, 1997, respectively, no par value ........... 1,490,389 2,470,461 7,421,446
Additional paid-in capital ........................... 1,414,501 1,512,606 5,809,556
Accumulated equity (deficit) ......................... (4,344,140) (5,052,054) (7,093,300)
------------ ------------ ------------
Total shareholders' equity (deficit) ..... (1,439,250) (1,068,987) 6,137,702
------------ ------------ ------------
$ 465,160 $ 2,907,952 $ 38,374,688
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
ANTIGUA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Sales .................................... $ 1,793,227 $ 1,843,312 $ 2,857,962 $ 1,256,578 $ 2,722,077
Cost of Sales ............................ 1,669,455 1,699,231 2,263,000 1,055,299 1,824,058
----------- ----------- ----------- ----------- -----------
Gross Profit .................... 123,772 144,081 594,962 201,279 898,019
----------- ----------- ----------- ----------- -----------
Selling Expenses ......................... 162,669 249,434 259,109 67,930 353,755
General and Administrative Expenses ...... 788,995 962,328 987,548 554,835 695,143
Amortization of Licenses ................. -- -- -- -- 27,522
Expenses Related to Acquisition .......... -- -- -- -- 672,455
----------- ----------- ----------- ----------- -----------
Operating Expenses .............. 951,664 1,211,762 1,246,657 622,765 1,748,875
----------- ----------- ----------- ----------- -----------
Loss From Operations ..................... (827,892) (1,067,681) (651,695) (421,486) (850,856)
----------- ----------- ----------- ----------- -----------
Other Income (Expense)
Interest Expense ................ (41,190) (85,853) (160,864) (39,348) (1,176,587)
Other ........................... (42,632) 60,661 90,485 40,563 39,762
----------- ----------- ----------- ----------- -----------
(83,822) (25,192) (70,379) 1,215 (1,136,825)
----------- ----------- ----------- ----------- -----------
Net Loss ................................. $ (911,714) $(1,092,873) $ (722,074) $ (420,271) $(1,987,681)
=========== =========== =========== =========== ===========
Net Loss Per Share ....................... $ (0.60) $ (0.56) $ (0.33) $ (0.21) $ (0.77)
=========== =========== =========== =========== ===========
Weighted Average Common Shares Outstanding 1,531,384 1,959,423 2,188,056 2,035,606 2,611,911
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
ANTIGUA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional
Paid-in Accumulated
Shares Amount Capital Deficit Total
---------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 .................................. 1,815,280 $ 576,271 $1,421,742 $ (2,337,506) $ (339,493)
Net loss .................................................. -- -- -- (911,714) (911,714)
Translation of monetary items ............................. -- -- -- 1,732 1,732
Exercise of options ....................................... 100,600 205,532 -- -- 205,532
Issuance of stock through private placement ............... 92,430 182,111 -- -- 182,111
Exercise of warrants ...................................... 109,869 129,746 -- -- 129,746
Issuance of stock for acquisition of subsidiary ........... 17,500 23,171 -- -- 23,171
Purchase of treasury shares ............................... (2,185) (8,590) -- -- (8,590)
Issuance of stock in exchange for debt .................... 8,385 42,000 -- -- 42,000
Redemption of shares ...................................... (61,000) (5,535) (7,241) -- (12,776)
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994 .................................. 2,080,879 1,144,706 1,414,501 (3,247,488) (688,281)
Net loss .................................................. -- -- -- (1,092,873) (1,092,873)
Translation of monetary items ............................. -- -- -- (3,779) (3,779)
Exercise of options ....................................... 1,000 2,016 -- -- 2,016
Issuance of stock through private placement ............... 93,867 205,860 -- -- 205,860
Exercise of warrants ...................................... 42,945 86,560 -- -- 86,560
Issuance of stock for acquisition of subsidiary ........... 20,000 51,247 -- -- 51,247
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 .................................. 2,238,691 1,490,389 1,414,501 (4,344,140) (1,439,250)
Net loss .................................................. -- -- -- (722,074) (722,074)
Translation of monetary items ............................. -- -- -- 14,160 14,160
Exercise of options ....................................... 88,000 263,195 -- -- 263,195
Exercise of warrants ...................................... 52,000 109,773 -- -- 109,773
Issuance of shares in private placement ................... 227,929 513,063 -- -- 513,063
Proceeds on sale of treasury stock in
excess of acquisition costs ............................... 2,165 9,695 2,792 -- 12,487
Capital contribution from noninterest bearing notes ....... -- -- 95,313 -- 95,313
Issuance of stock in exchange for debt .................... 33,214 84,346 -- -- 84,346
--------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 .................................. 2,641,999 2,470,461 1,512,606 (5,052,054) (1,068,987)
Net loss (unaudited) ...................................... -- -- -- (1,987,681) (1,987,681)
Translation of monetary items (unaudited) ................. -- -- -- (24,260) (24,260)
Dividends on preferred stock (unaudited) .................. -- -- -- (29,305) (29,305)
Exercise of options (unaudited) ........................... 45,000 114,318 -- -- 114,318
Issuance of stock through private placement (unaudited) ... 1,361,883 3,911,787 -- -- 3,911,787
Exercise of warrants (unaudited) .......................... 79,925 203,900 -- -- 203,900
Issuance of stock for acquisition of subsidiary (unaudited) 131,758 720,980 -- -- 720,980
Issuance of options (unaudited) ........................... -- -- 271,350 -- 271,350
Issuance of warrants (unaudited) .......................... -- -- 4,025,600 -- 4,025,600
--------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1997 (unaudited) .......................... 4,260,565 $ 7,421,446 $ 5,809,556 $(7,093,300) $ 6,137,702
========= =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
ANTIGUA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
----------- ------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $ (911,714) $ (1,092,873) $ (722,074) $ (420,271) $ (1,987,681)
Adjustments to reconcile net loss to cash used in
operating activities -
Translation of monetary items .................... 1,732 (3,779) 14,160 -- (24,260)
Depreciation and amortization .................... 90,308 84,948 114,394 44,273 182,282
Accretion of discounts on debt instruments ....... -- -- -- -- 210,335
Loss on disposal of property and equipment or
other assets ................................... 93,635 14,606 11,168 -- --
Changes in assets and liabilities, net of effect
of business acquired -
(Increase) decrease in accounts receivable, net .. (138,280) 147,471 (432,249) (17,067) 416,478
(Increase) decrease in inventory, net ............ 1,456 134,195 78,328 -- (30,310)
(Increase) decrease in prepaid assets ............ 10,165 (9,624) 10,118 -- (2,888,984)
Increase in accounts payable
and accrued liabilities ...................... 224,059 25,683 179,766 -- 2,489,605
----------- ------------ ------------ ------------ ------------
Net cash used in operating activities ........ (628,639) (699,373) (746,389) (393,065) (1,632,535)
----------- ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and licenses acquired, net effect
of business acquired ............................... (115,124) (71,100) (36,290) (11,906) (64,192)
Proceeds from sale of property and equipment or
other assets ....................................... 27,362 65,096 -- -- --
Cash paid for business acquired ...................... (19,311) (30,059) (37,647) (37,647) (14,613,410)
Deferred acquisition costs ........................... -- -- (1,275,866) (348,765) 1,266,033
----------- ------------ ------------ ------------ ------------
Net cash used in investing activities ........ (107,073) (36,063) (1,349,803) (398,318) (13,411,569)
----------- ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from directors .............................. 4,528 160,204 605,883 20,466 --
Net borrowing from revolving line of credit .......... -- -- -- -- 68,324
Repayment of long-term debt .......................... (35,067) (29,062) (69,657) (15,802) (2,290,512)
Proceeds from the issuance of notes payable, net of
effect of business acquired ........................ 9,995 66,195 125,000 60,443 1,500,000
Proceeds from the issuance of convertible debentures,
net of discounts ................................... -- -- -- -- 1,628,515
Proceeds from the issuance of bridge loans, net of
discounts .......................................... -- -- -- -- 3,578,000
Equity security subscription deposits ................ 357,293 155,770 1,116,115 -- --
Sale of preferred stock, net of discounts ............ -- -- -- -- 3,322,438
Dividends on preferred stock ......................... -- -- -- -- (29,305)
Sale of common stock ................................. 378,083 294,436 970,377 732,713 2,580,081
Sale (acquisition) of treasury shares ................ (23,590) -- 12,487 -- --
Redemption of shares ................................. (10,000) -- -- -- --
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
----------- ------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Warrants issued ...................................... -- -- -- -- 4,025,600
----------- ---------- --------- --------- ------------
Net cash provided by financing activities .... 681,242 647,543 2,760,205 797,820 14,383,141
----------- ---------- --------- --------- ------------
INCREASE (DECREASE) IN CASH AND FUNDS IN
TRUST ............................................... (54,470) (87,893) 664,013 6,437 (660,963)
CASH AND FUNDS IN TRUST, beginning of period ........... 144,236 89,766 1,873 1,873 665,886
----------- ---------- --------- --------- ------------
CASH AND FUNDS IN TRUST, end of period ................. $ 89,766 $ 1,873 $ 665,886 $ 8,310 $ 4,923
=========== ========== ========= ========= ============
CASH PAID FOR INTEREST ................................. $ 7,255 $ 62,885 $ 64,186 $ 32,093 $ 179,711
=========== ========== ========= ========= ============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In 1994, the Company purchased equipment for $87,993 under capital lease.
In 1994, the Company issued 17,500 Common Shares in connection with the
acquisition.
In 1994, the Company converted notes in the amount of $42,000 into 8,385
Common Shares.
In 1995, the Company issued 20,000 Common Shares in connection with the
acquisition (see Note 3).
In 1996, the Company converted notes in the amount of $55,146 into 21,786
Common Shares and settled certain accrued liabilities of $29,200 in
exchange for the issuance of 11,429 Common Shares.
In 1997, the Company issued 131,758 Common Shares, 245,000 options for
Common Shares, and 250,000 shares of Series A Preferred in connection
with the Acquisition.
In 1997, the Company issued $6,378,000 of notes payable to seller in
connection with the Acquisition.
In 1997, the Company reduced due to directors by $471,803 by issuing
convertible debentures.
In 1997, the Company reduced equity security subscription deposits by
$1,629,178 by issuing Common Shares.
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<PAGE>
ANTIGUA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(1) NATURE OF BUSINESS:
Antigua Enterprises Inc. (formerly Southhampton Enterprises Corp.), a British
Columbia Corporation, and its subsidiaries (collectively the Company) are
engaged in the business of production and distribution of various screen-printed
and embroidered apparel products and novelty items in the United States and
Canada. The Common Shares of the Company are currently listed on the Vancouver
Stock Exchange (VSE).
Acquisition
On June 16, 1997, the Company acquired The Antigua Group, Inc, (AGI), a Nevada
company involved in the wholesale distribution of embroidered sportswear and
related accessories (Acquisition). This Acquisition was accomplished by
purchasing 100% of the issued and outstanding capital stock of AGI. This
Acquisition was accounted for as a purchase and the unaudited June 30, 1997
consolidated financial statements of the Company include 14 days of AGI
operations (see Note 3).
Reverse Stock Split
All per share amounts have been adjusted to give effect to the one for five
reverse stock split effected on June 13, 1997.
Management Plans
The Company has increased its revenue base and shareholder equity through the
completion of the AGI acquisition.
The products of AGI are sold in the United States through three primary apparel
markets; Golf, Licensed Goods and Corporate Lifestyle. The Company plans to
increase its penetration in all of these markets by focusing on the following
key elements:
o Brand Identity - The Company intends to leverage the Antigua brand name, built
over the past 18 years, to open up new accounts, markets and opportunities
outside the Golf and Licensed Goods distribution channels.
o Expansion of Product Offerings - The Company plans to expand the product
offerings in the apparel line to better serve the needs of the existing customer
base, including the introduction of outerwear and caps.
o Expansion of Golf Network - The Company intends to increase distributions
through the expansion of its network of independent sales representatives and
through reactivation of inactive accounts.
F-9
<PAGE>
o International Expansion - The Company believes that international markets
provide a significant opportunity to increase sales of its fashion apparel and
its Licensed Goods. The Company plans to increase distribution efforts outside
the United States and Canada, particularly in Europe and Asia.
o Expansion of Licensed Products Network - The Company plans to increase margins
and average account size in this channel by expanding the sales representative
network for Licensed Goods and increasing its retail chain customer base. The
Company also plans to exploit opportunities to sell licensed screen printed
products through market programs and dual branding with major corporate clients.
o Full Service - Through the addition of the Company's textile screen printing
capability to Antigua's current lines of business, the Company has the ability
to increase sales to corporate, university and tournament customers. The Company
believes that offering services from screen printing through embroidery market
channels gives the Company a competitive advantage in the casual apparel market.
In addition to the private placements (see Note 13) and the financing
transactions made to finance the Acquisition (see Notes 9, 11 & 12), the Company
is also negotiating with potential new lenders in order to obtain additional
public or private debt or equity financing. Although there can be no assurance
that such debt or equity financing will be available to the Company on
commercially favorable terms, or at all, the Company believes that current
available cash provided by operations of the combined companies, and debt and
equity financing available to the Company will be sufficient to fund operations
over the next year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States and are stated in
United States (US) dollars. These consolidated financial statements include the
accounts of the Company and its subsidiaries. All transactions and balances
between the companies have been eliminated.
Funds in Trust
The funds in trust represent amounts received from various individuals for the
purchase of common stock under private placement agreements which are subject to
VSE approval (see Note 13). A third-party investment manager has been retained
to manage the funds based on direction agreed upon by the Company and the
individual subscribers. The individual subscribers have permitted the
third-party investment manager to expend the funds received as equity security
subscription deposits for Acquisition related costs. As such, these amounts are
considered cash equivalents for statement of cash flow purposes. Subsequent to
December 31, 1996, the trust funds were utilized to make payments to the sellers
in connection with the Acquisition.
Inventory
Inventory is stated at the lower of cost or market determined on a first-in,
first-out basis. Inventory includes apparel and primary raw materials such as
T-shirts, garment dies and inks, and towels.
F-10
<PAGE>
Deferred Loan Fees and Debt Discount
Deferred loan fees and debt discounts are amortized over the term of the related
loans using the effective interest rate method.
Other Assets
Other assets are net of accumulated amortization and consist of costs in excess
of the fair value of net assets of acquired business of $72,000 at December 31,
1996 and incorporation costs of $19,000 and $21,000 at December 31, 1995 and
1996, respectively. The excess of the fair value of net assets acquired and
incorporation costs are amortized over periods up to five years using the
straight-line method. Accumulated amortization of these assets was approximately
$1,000 and $33,000 at December 31, 1995 and 1996, respectively.
The Company has evaluated whether events and circumstances have occurred that
indicate the remaining estimated useful life of intangible assets may warrant
revision or that the remaining balance of the intangible costs may not be
recoverable. When factors indicate that intangible assets should be evaluated
for possible impairment, the Company uses an estimate of the related
undiscounted future cash flows over the remaining life of the intangible assets
in measuring whether the intangible assets are recoverable.
Based upon the Company's evaluations, $48,095 and $30,059 of other assets were
written off in 1994 and 1995, respectively.
At June 30, 1997, other assets also include refundable deposits.
Loss Per Share
Loss per share is computed by dividing the net loss by the weighted average
number of shares of common stock issued and outstanding, excluding shares held
in escrow (see Note 15) as rights to dividends and assets and property on
dissolution have been waived by the escrow shareholders. Common stock
equivalents are excluded as their inclusion is not dilative. Primary and fully
diluted earnings per share are the same in all periods presented.
Foreign Currency
Transactions in currencies other than US dollars are translated into US dollars
using the current exchange rates as of the dates they are reported. Assets and
liabilities denominated in other currencies are adjusted to reflect the exchange
rate in effect at the balance sheet date. Revenues, expenses, gains and losses
are translated using a weighted average exchange rate for the period.
Translation adjustments arising from the translation of monetary items in the
financial statements are included as a separate component of shareholders'
deficit for the reporting period.
Exchange rates between the Canadian dollar and the US dollar for the periods
reported in these consolidated financial statements are as follows:
December 31, December 31, December 31, June 30,
1994 1995 1996 1997
------------ ------------ ------------ --------
F-11
<PAGE>
Average ................ .7321 .7285 .7352 .7287
Period end ............. .7134 .7331 .7296 .7241
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
In management's opinion, methodologies used to determine estimates are adequate
and consistent with prior periods.
Fair Value of Financial Instruments
At December 31, 1995 and 1996, carrying values of cash, funds in trust, accounts
receivables, accounts payable and accrued liabilities and notes payable
approximate fair values since they are short-term in nature or payable upon
demand. It is not practical to estimate fair value of the amounts due to
Directors and officers as the agreements are between related parties.
The Company estimates fair values of financial instruments by using available
market information. Considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates may not
be indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions or valuation methodologies
could have a material effect on the estimated fair value amounts.
Concentrations of Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of accounts receivable. Concentrations of credit
risk with respect to accounts receivable are limited due to the large number of
customers comprising the Company's credit base and the geographical dispersion
of the customers.
Recently Issued Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share (SFAS No. 128). This statement establishes standards for
computing and presenting earnings per share (EPS) and simplifies the standards
for computing EPS previously found in APB Opinion No. 15, Earnings per Share. It
replaces the presentation of primary earnings per share with the presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
The Company is required to adopt SFAS No. 128 for the years ending subsequent to
December 15, 1997. Based on equity and convertible debt instruments currently
outstanding, the new standard is not expected to have a material impact on the
Company's EPS.
Financial Accounting Standards Board has issued SFAS No. 130, Reporting
Comprehensive Income (SFAS No. 130). SFAS No. 130 established standards for
reporting comprehensive income and its components. SFAS No. 130 is effective for
financial statements for periods beginning after December 15, 1997. The Company
has not yet determined the effects of adopting SFAS No. 130.
F-12
<PAGE>
Financial Accounting Standards Board has issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS No. 131). SFAS No. 131
establishes standards for reporting information about operating statements
within an enterprise. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company has not yet determined
the effects of adopting SFAS No. 131.
Interim Periods
The results of operations for the six months ended June 30, 1996 and 1997, are
not necessarily indicative of the results to be expected for the full year. All
information as of and for the six month periods ended June 30, 1996 and 1997, is
unaudited and, in the opinion of management, contains all adjustments consisting
only of normal recurring adjustments necessary for a fair presentation of such
information for the respective periods.
(3) ACQUISITION OF THE ANTIGUA GROUP, INC. (AGI) (unaudited):
On June 16, 1997, the Company acquired AGI, a Nevada company involved in the
wholesale distribution of embroidered sportswear and related accessories. The
Acquisition was accounted for as a purchase. The accompanying consolidated
financial statements include the operations of AGI for the 14 day period from
June 17, 1997 to June 30, 1997.
The Company entered into an consulting agreement with the former majority
shareholder of AGI which results in an annual commitment of approximately
$100,000. This agreement terminates in June 1999.
In order to facilitate the above transaction, the Company deposited $1,000,000
into an escrow account. The deposit was non-refundable in the event the
Acquisition was not consummated. This amount was paid to the AGI shareholders
subsequent to December 31, 1996.
At December 31, 1996, costs incurred in connection with the Acquisition are
included in Acquisition deposit and related costs. Costs incurred as of December
31, 1996, are as follows:
Deposit paid to AGI shareholders $ 1,000,000
Acquisition costs 275,866
-----------
$ 1,275,866
===========
Selected financial data for AGI as of and for the year ended December 31, 1996,
is as follows:
Working capital $ 4,610,085
Total assets 15,567,399
Current portion of notes payable (inclusive of line of credit) 5,945,490
Notes payable, net of current portion 2,465,321
Common stock 10,373
Total shareholders' equity 4,569,751
Revenue 33,510,364
Net income before taxes 932,867
The purchase price and estimated allocation of such costs are as follows:
F-13
<PAGE>
<TABLE>
<S> <C>
Cash paid to sellers $12,636,482
Notes payable to sellers 6,378,000
Preferred stock and attached warrants issued to sellers (250,000 shares) 250,000
Assets of AGI distributed to the sellers 134,706
Amounts to be paid to the sellers 759,656
Transaction costs 2,920,360
-----------
Total purchase price 23,079,204
Net book value of assets acquired 4,677,674
-----------
Excess of purchase price over net book value
of assets acquired $18,401,530
===========
Allocation of excess of purchase price over net book value of assets
acquired and adjustments to fair value:
Licenses $18,473,933
Inventory (488,956)
Eliminate lifo reserve 186,221
Accrued interest 230,333
-----------
$18,401,530
===========
</TABLE>
The licenses are being amortized over 25 years using the straight line method.
(4) OTHER ACQUISITIONS:
Acquisition of CHL Services
On January 31, 1996, the Company acquired certain rights, customer lists and
inventory constituting the business of CHL Services, a division of a Canadian
company involved in the manufacture and distribution of hockey jerseys and
supplies.
Total consideration for the acquisition was:
Cash $ 37,647
Installments payable in two equal installments,
unsecured and noninterest bearing with the final installment
due in April 1997, net of discount of $7,353. 84,310
Note payable, secured by acquired inventory,
noninterest bearing and repayable out of proceeds on sale
of acquired inventory until due in February 1997, net of
discount of $14,935. 126,109
----------
$ 248,066
==========
The business combination was accounted for using the purchase method. The
purchase price was allocated as follows:
Intangible assets $ 72,713
F-14
<PAGE>
Office equipment 35,310
Inventory 140,043
----------
$ 248,066
==========
Additionally, a royalty equal to 50% of gross profit from CHL Services on
inventory acquired is payable to the vendor in quarterly installments for a
period up to the first anniversary of the sale. For the year ended December 31,
1996, royalties of approximately $14,600 are included in accounts payable and
accrued liabilities in the accompanying consolidated financial statements.
The Company has entered into an employment agreement with certain management
personnel of CHL Services which results in an annual commitment of approximately
$70,000 per annum plus 10% - 20% of divisional profits until expiration in
January 2001.
The following unaudited pro forma combined results of operations data is
presented as though the merger had occurred on January 1:
1995 1996
------------- --------------
Sales $ 2,424,860 $ 2,903,962
============= ==============
Net loss $ (1,134,873) $ (727,074)
============== ===============
These pro forma combined results of operations are presented for comparative
purposes only and do not purport to be indicative of the actual results that
would have occurred had the CHL Services acquisition been consummated on January
1, 1995, or of future operations of the combined Company.
Acquisition of T-Sports, Inc.
On August 5, 1994, the Company acquired 100% of the issued and outstanding
shares of T-Sports, Inc., a Texas company involved in the manufacturing and
distribution of screen printed golf and novelty towels.
Total consideration for the acquisition was:
Cash $ 25,000
Notes payable, unsecured, noninterest bearing, settled
with the issuance of common shares in 1996 42,250
20,000 common shares at a fair market value of $2.55
issued in 1995 51,247
------------
$ 118,497
============
The business combination was accounted for using the purchase method. A summary
of the fair value of the assets and liabilities assumed at August 5, 1994, is as
follows:
Machinery and equipment $ 15,000
F-15
<PAGE>
Accounts receivable 64,000
Inventory 102,369
------------
Total assets 181,369
Total liabilities 95,967
------------
Shareholders' equity $ 85,402
============
The purchase price difference of $33,095 was written off in 1994 due to the
uncertainty regarding continuing future benefits resulting from the acquisition.
In 1995, Texas State filed a lien to enforce payment of $32,400 in past due
taxes which was an existing liability of this acquired subsidiary. This amount
is included in accrued liabilities at December 31, 1996.
(5) LICENSES (unaudited):
As a result of the Acquisition, the Company has a number of license agreements.
Licenses are stated at cost allocated in the Acquisition (see Note 3). Licenses
are amortized over twenty-five years using the straight line method.
The Company has a licensing agreement with National Basketball Association
Properties, Inc. (NBA) which grants the Company the right to use the names,
symbols, emblems, designs and logos of the NBA on certain of its garments. The
license requires royalty payments of approximately 9.25% of sales of NBA
products, subject to an annual minimum required payment of $130,000. The license
expired on July 31, 1997. The Company has renewed the license for an additional
two years.
The Company has licensing agreements with the National Football League (NFL)
which grant the Company the right to use "NFL Marks" on certain of its garments.
These agreements require royalty payments of approximately 10% of sales of NFL
products, subject to certain minimum required payments. These agreements expire
in March 1999. Future minimum required royalty payments range from approximately
$355,000 to $415,000 per year.
The Company has licensing agreements with Major League Baseball Properties, Inc.
(MLB) which grant the Company the right to use the names, characters, symbols,
designs and other similar identifications of the MLB on certain of its garments.
The licenses require royalty payments of 9% of sales of MLB products, subject to
certain annual minimum required payments ranging from $120,000 to $150,000. The
licenses expire December 31, 1999.
The Company has licensing agreements with the National Hockey League (NHL) which
grant the Company the right to use "NHL Marks" on certain of its garments. The
agreement requires royalty payments of 9% on sales of NHL products. Total future
minimum royalties over the term are $20,000. The agreement expires on December
31, 1997.
In addition, the Company is party to numerous market license agreements with
colleges, universities, bowl administrators and prominent sports figures which
allow the Company to use the names of the institution, sporting event or sports
personality on certain of its garments for varying terms.
Royalty expense of AGI was approximately $977,000, $1,245,000 and $717,000 for
the years ended December 31, 1995 and 1996 and the six months ended June 30,
1997, respectively.
F-16
<PAGE>
(6) PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost and are depreciated or amortized
using the straight line method over estimated useful lives as follows:
<TABLE>
<CAPTION>
December 31,
Estimated --------------------- June 30,
Useful Lives 1995 1996 1997
------------ -------- --------- -------
(unaudited)
<S> <C> <C> <C> <C>
Office and computer equipment
and furniture 3-5 years $ 29,717 $ 70,307 $ 936,901
Embroidery machine designs 4 years 22,207 51,959 476,035
Leasehold improvements 15 years 18,092 18,092 18,092
Machinery and equipment 3-5 years 251,798 253,096 1,393,472
------- ------- ---------
321,814 393,454 2,824,500
Less: Accumulated depreciation (120,735) (202,975) (280,101)
--------- --------- -----------
$201,079 $ 190,479 $2,544,399
======== ========= ==========
</TABLE>
In the event that facts and circumstances indicate that the cost of property and
equipment may be impaired, an evaluation of recoverability would be performed.
This evaluation would include the comparison of the future estimated
undiscounted cash flows associated with the assets to the carrying amount of the
assets to determine if a writedown of the assets is required.
(7) LONG-TERM DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------- June 30,
1995 1996 1997
-------- --------- ----------
(unaudited)
<S> <C> <C> <C>
Term loans due to bank (Note 8) $ - $ - $2,228,670
Notes and installments due on acquisition of
CHL Services, noninterest bearing (imputed
at 10%) due in 1997 - 232,707 232,707
Unsecured noninterest bearing demand note
payable to a related party - 100,000 100,000
Other notes payable, interest rates up to 10% due
in various installments through December 1997 259,657 73,776 66,732
Notes payable for equipment purchases,
interest rates up to 21.5% due in various
installments through December 1999 76,675 65,766 174,972
-------- --------- ----------
336,332 472,249 2,803,081
Less: Current portion (199,861) (423,702) (1,088,492)
-------- --------- ----------
$136,471 $ 48,547 $1,714,589
======== ========= ==========
</TABLE>
F-17
<PAGE>
To provide for interest expense on noninterest bearing notes, interest is
generally measured by the difference between the market value of the goods
received or the note, whichever is more readily determinable, and the face
amount of the note. The market value of a note is determined by discounting all
future payments on the note using an imputed rate of interest. When the note is
between related parties and it is issued for cash and no other stated or
unstated rights are involved, the difference between the cash consideration and
the discounted amount of the payments on the note is treated as additional
paid-in capital. The discount is accounted for as an element of interest over
the life of the note. For amounts due on demand, the notes are reflected at face
value and interest is imputed each period by charging interest expense. This
method allows for the recognition of interest related to the transactions giving
rise to the notes.
Future maturities of long-term debt are as follows:
December 31, 1996 June 30, 1997
----------------- -------------
(unaudited)
1997 $423,702 $1,088,492
1998 25,156 652,468
1999 23,391 644,676
2000 - 119,865
2001 - 120,754
Thereafter - 176,826
-------- ----------
$472,249 $2,803,081
======== ==========
(8) LOAN AGREEMENT WITH BANK (unaudited):
In connection with the Acquisition, the Company assumed the obligations of AGI
under a Loan and Security Agreement (the Loan Agreement) with a bank. The Loan
Agreement provides for a credit facility of up to $12 million, including a
revolving line of credit and outstanding letters of credit. Interest is at the
bank's prime rate plus 1%. The maximum borrowing under the new Loan Agreement
cannot exceed 85% of eligible receivables plus 55% of eligible inventory, as
defined. The Loan Agreement is secured by all of AGI's assets. The Loan
Agreement requires AGI to maintain certain financial covenants including minimum
tangible net worth, interest coverage ratios, debt service coverage ratios and a
ratio of liabilities to tangible net worth. Dividends cannot be paid or
unscheduled payments cannot be made without the prior consent of the bank.
The Loan Agreement includes a term loan of $775,000 with interest at 1.25% over
the bank's prime rate, payable in monthly installments over seven years
beginning March 1, 1997. It also includes a term loan for $1,500,000 with
interest at 3% over the bank's prime rate, payable in monthly installments over
three years beginning July 1, 1997. The amount due on these two loans at June
30, 1997 is $2,228,670 and is included in long-term debt (see Note 7).
(9) ACQUISITION BRIDGE FINANCING (unaudited):
In connection with the Acquisition, effective June 16, 1997 the Company entered
into three bridge financing transactions:
F-18
<PAGE>
Financing Transaction One
A lender (Lender One) loaned $2,500,000 (the Promissory Note) to the Company for
the purpose of completing the Acquisition. The Promissory Note has a term of one
year and bears interest at a rate of 13% per annum. Interest only is payable
until the end of the one-year term; principal will be paid at the end of the
term, or at the election of Lender One, the one-year note may be converted into
a further promissory note having a term of three years, with regular periodic
payments of blended principal and interest. Lender One was issued warrants to
purchase 1,078,086 common shares for a period of five years at a price of $5.00
per warrant in payment of a bonus for its advance of $2,500,000 in bridge
financing with respect to the Acquisition. These warrants were valued at
$950,000 which is included in the accompanying financial statements as a
discount on the note.
A finder's fee equivalent to 8% of the sum advanced to the Company by Lender One
was paid to the finder by issuing 68,930 common shares valued at $198,518. These
common shares are subject to a statutory hold period of one year. In addition,
loan costs of $201,423 were paid. Total fees and costs of $399,941 are recorded
as deferred loan fees.
Financing Transaction Two
A lender (Lender Two) loaned $1,020,000 to the Company for the purpose of
completing the Acquisition. The promissory note has a term of one year and bears
interest at a rate of 13% per annum. Lender Two was issued warrants to purchase
1,078,086 common shares for a period of five years at a price of $5.00 per
warrant in payment of a bonus for its advance of $1,020,000 in bridge financing
with respect to the Acquisition. These warrants were valued at $612,000 which is
included in the accompanying financial statements as a discount on the note.
A finder's fee equivalent to 8% of the sum advanced to the Company by Lender Two
was paid to the finder by issuing 28,124 common shares valued at $80,997. These
common shares are subject to a statutory hold period of one year. In addition,
loan costs of $279,100 were paid. Total fees and costs of $360,097 are recorded
as deferred loan fees.
Financing Transaction Three
The senior secured lender for AGI loaned the Company $3,500,000 of which
$2,000,000 is bridge financing and $1,500,000 is a three year term loan (see
Note 8). This term loan bears interest at 3% over the lenders prime rate. The
loan is due in monthly installments over three years beginning June 1, 1997,
however, in the event of a securities offering a $2,000,000 payment must be
made. The lender was issued warrants to purchase 323,426 common shares for a
period of five years at a price of $5.00 per share in payment of a bonus for its
advance of $2,000,000 in bridge financing with respect to the Acquisition. These
warrants were valued at $380,000 which is included in the accompanying financial
statements as a discount on the note. In addition, loan costs of $143,267 were
paid and recorded as deferred loan fees.
(10) DUE TO DIRECTORS AND OFFICERS:
Subsequent to December 31, 1996, certain of the terms related to repayment of
amounts due to Directors and officers were renegotiated. The terms below reflect
the changes which occurred subsequent to May 7, 1997.
F-19
<PAGE>
The following amounts were due to Directors and officers at December 31 and June
30:
<TABLE>
<CAPTION>
December 31 June 30,
1995 1996 1997
-------- --------- --------
(unaudited)
<S> <C> <C> <C>
Advances from a Director, unsecured bearing interest
at 7% per annum commencing October 1994, $200,000 due
September 1997 and $142,733 due on demand after June 1998. $280,843 $564,535 $342,733
Advances from Directors, unsecured, noninterest bearing
(imputed at 10%) and due on demand after June 1998. 121,182 193,373 193,373
Advances from Directors, unsecured, bearing interest at
7.5% per annum commencing November 1996, and due
in November 1997. - 250,000 -
Notes payable to officers, unsecured, bearing interest at
9% per annum, and due July 1 and September 1, 1997. - - 334,619
-------- --------- --------
402,025 1,007,908 870,725
Less - Current portion - (1,007,908) (534,619)
-------- --------- --------
$402,025 $ - $336,106
======== ========= ========
</TABLE>
The Company intends to repay the above amounts due to Directors and officers
with funds from equity security offerings.
(11) NOTES PAYABLE TO SELLERS (unaudited):
In connection with the Acquisition the Company issued notes payable to sellers
as follows:
Payment Terms Interest Amount
Rate
- ------------------------------------------------------ ----------- -----------
Due in quarterly installments of $95,933 beginning
September 16, 1997 with the unpaid balance
due June 16, 2000 8.25% $5,198,000
Due June 16, 1999 8.25% 855,000
Due June 16, 1999 8.25% 325,000
-----------
$6,378,000
===========
Upon a securities offering with gross proceeds of $12,000,000 the unpaid
principal balances are due and payable. Upon any securities offering a minimum
principal payment of $1,594,500 is due and payable.
Upon a securities offering, or at any time thereafter, the sellers may convert
their outstanding principal amount of these notes into shares of the Company's
common stock at the lesser of $7.50 per share or the actual price of such common
stock in the security offering.
These notes are secured by certain security agreements and pledge agreements
executed by the Company.
F-20
<PAGE>
In connection with the Acquisition, the Board of Directors of the Company
approved payment of bonuses to two Directors and officers as fees for 1)
personally guaranteeing the seller notes and estimated interest payments, and 2)
making loans to the Company.
The amount of these fees is dependent upon the approval of the shareholders and
the VSE. As of June 30, 1997, the Company has recorded $2,131,826 as an estimate
of this obligation. This is reflected as accrued loan fees due to Directors and
officers in the accompanying financial statements. It is anticipated that this
obligation will be satisfied by the issuance of shares of common stock.
(12) CONVERTIBLE DEBENTURES (unaudited):
As of March 1, 1997, the Company issued $3,023,999 of 15% convertible debentures
due June 1, 1998. These are convertible into 1,144,500 units, each of which
consists of one common share and one two-year non-transferable warrant to
purchase an additional common share at $2.88 in the first year and $3.31 in the
second year. Certain payments were made in connection with this placement:
- A bonus to the lender paid by the issuance of 177,000 common
shares valued at $509,760.
- A guarantee fee to two directors and officers paid by the
issuance of 177,000 common shares valued at $509,760.
- A finder's fee of $226,800.
- An inducement fee of $491,760 paid to a party related to the
lender.
- Legal fees of $27,536.
The above bonus and fees total $1,899,832 and are recorded as discounts on
convertible debentures. In addition, the interest payable during the period
March 1, 1997 to June 16, 1997, is considered a discount on debentures since the
proceeds of the debentures were not available to the Company until the closing
of the Acquisition. The discounts are amortized over the period June 16, 1997 to
June 1, 1998, using the effective interest method.
As of June 16, 1997, the Company issued $1,791,048 of 15% convertible debentures
due in one year, to a company which is related to certain officers and directors
of the Company. These are convertible into 714,454 units, each of which consists
of one common share and one two-year non-transferable warrant to purchase an
additional common share at $2.88 in the first year and $3.31 in the second year.
Certain payments were made in connection with this placement;
- A bonus to the lender paid by the issuance of 124,378 common
shares valued at $356,486.
- A loan fee to the lender of $105,000.
- A finder's fee paid by issuance of two year warrants to
purchase 115,344 common shares at $2.88 in the first year and
$3.31 in the second year. These warrants are valued at
$254,334.
- Legal fees of $105,720.
The above bonus and fees total $821,540 and are recorded as discounts on
convertible debentures.
(13) PRIVATE PLACEMENTS OF EQUITY SECURITIES (unaudited):
On June 16, 1997, the Company completed several private placements of its common
and preferred stock. These private placements were initiated in 1996 and closed
concurrently with the completion of the Acquisition.
F-21
<PAGE>
As of December 31, 1996, a third-party investment manager had received
approximately $1.6 million under a combination of these private placements. Such
amounts were held in trust for the subscribers and were available to the Company
upon VSE approval of the Acquisition. As the Company did not have a legal right
to these funds, they were not included in the accompanying financial statements
at December 31, 1996. The Company recorded these amounts as funds in trust once
VSE approval was received or once the subscribers permitted the use of the funds
for the original intended purpose as evidenced in writing. Amounts released by
the subscribers were recorded as equity security subscription deposits until VSE
approval was obtained for the issuance of the stock in accordance with the
private placement.
The following is a summary of the private placements:
<TABLE>
<CAPTION>
Number and Price of Units Description of Placement Gross Proceeds
- -------------------------------- ----------------------------------------------------------- --------------------
<S> <C> <C>
162,200 units at $4.58 One common share plus one two-year $742,354
non-transferable warrant to purchase an additional
common share at a price of $4.58 in the first year
and at a price of $5.50 in the second year.
210,000 units at $4.25 One common share plus one two-year $891,923
non-transferable warrant to purchase an additional
common share at a price of $4.25 in the first year
and at a price of $4.87 in the second year.
180,144 units at $4.86 One common share plus one two-year $875,500
non-transferable warrant, two of which will entitle
the shareholder to purchase an additional common
share at a price of $4.86 in the first year and at a
price of $5.55 in the second year. A finder's fee
for this placement was paid by issuing 6,537
common shares valued at $30,657.
4,730,000 convertible To each Share is attached one five-year $4,730,000
limited retractable Series non-transferable detachable share purchase warrant
"A" 12% cumulative to purchase an additional common share at a price
preferred shares at $1.00. of $5.18 in the first year, $6.05 in the second
year, $6.91 in the third year, $7.81 in the
fourth year and at $8.71 in the fifth year.
Each Share is convertible into one common
share within five years upon payment of a
conversion premium above the Purchase Price of
nil during the first year, $0.90 during the
second year, $1.85 during the third year,
$2.75 during the fourth year and $3.65 during
the fifth year after issuance.
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
Number and Price of Units Description of Placement Gross Proceeds
- -------------------------------- ----------------------------------------------------------- --------------------
<S> <C> <C>
60,000 units at $3.85 One common share plus one non-transferable $231,120
warrant to purchase an additional common share
at a price of $3.85 in the first year and at a price
of $4.43 in the second year. A finder's fee for this
placement was paid by issuing 3,654 common
shares valued at $13,267.
151,778 units at $3.24 One common share plus one two-year $491,760
non-transferable warrant, two of which entitle the
shareholder to purchase an additional common
share at a price of $3.24 in the first year and at a
price of $3.74 in the second year. A finder's fee
for this placement was paid by issuing 12,142
common shares valued at $36,426.
</TABLE>
The equity security subscription deposits as of December 31, 1996, related to
funds received under private placements, as discussed above, for use in the
Acquisition.
(14) INCOME TAXES:
The Company records income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes (SFAS No. 109). SFAS No.109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities and the tax rates in effect
when these differences are expected to reverse.
The components of the benefit for income taxes consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------- June 30,
1994 1995 1996 1997
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Current income taxes:
Federal - U.S. and Canadian $ - $ - $ - $ -
State and Provincial - - - -
----------- ----------- ---------- -----------
- - - -
----------- ----------- ---------- -----------
Deferred income taxes:
Federal - U.S. and Canadian - - - -
State and Provincial - - - -
----------- ----------- ---------- -----------
- - - -
----------- ----------- ---------- -----------
Total provision (benefit) for
income taxes $ - $ - $ - $ -
=========== =========== =========== ===========
</TABLE>
F-23
<PAGE>
The effective income tax rate is different than the amount that would be
computed by applying the United States corporate income tax rate to the income
(loss) before income taxes. The differences are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------- June 30,
1994 1995 1996 1997
----------- ----------- ----------- ------------
(unaudited)
<S> <C> <C> <C> <C>
Tax at the statutory rate (34%) $(309,000) $(372,000) $(246,000) $(796,000)
State income taxes, net of federal benefit (54,000) (66,000) (43,000) (141,000)
Expiration of unutilized net operating loss - 72,000 68,000 -
Increase in deferred tax asset
valuation allowance 363,000 366,000 221,000 937,000
---------- ---------- ---------- -----------
Actual tax expense (benefit) $ - $ - $ - $ -
=========== =========== =========== ===========
</TABLE>
Significant components of the Company's deferred tax assets (liabilities) are as
follows:
December 31,
---------------------------- June 30,
1995 1996 1997
---- ---- ------
(unaudited)
Net operating loss carryforwards $ 1,920,000 $ 2,141,000 $ 3,033,000
Valuation allowance (1,920,000) (2,141,000) (3,033,000)
------------- ------------ ------------
$ - $ - $ -
============= ============ ============
Prior to the acquisition date, AGI was an S Corporation under the Federal Income
Tax laws of the United States.
The Company's ability to utilize its net operating losses to offset future
taxable income may be limited under the Internal Revenue Code Section 382 change
in ownership rules. A valuation allowance has been provided since the Company
believes the realizability of the deferred tax asset does not meet the more
likely than not criteria under SFAS No. 109. The Company's accumulated net
operating losses expire in varying amounts between 1997 and 2012.
(15) SHAREHOLDERS' EQUITY:
Escrowed Share Arrangements
At December 31, 1995 and 1996, the Company had 395,992 common shares held in
escrow subject to earn-out provisions involving cash flow. The escrow
shareholders have waived the rights to dividends and assets and property on
dissolution. If the performance measures are not met in the future, the common
shares held in escrow are canceled.
Stock Options and Warrants Issued to Employees and Directors
As permitted under Statement of Financial Standards No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123), the Company has elected to account for
stock transactions with employees pursuant to
F-24
<PAGE>
the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees.
No compensation expense has been recognized for the stock options and warrants
granted. Had compensation cost for the Plan been recorded consistent with SFAS
No. 123, the Company's net loss would have been increased to the following pro
forma amounts:
December 31
--------------------------
1995 1996 June 30, 1997
------------- ------------ -------------
(unaudited)
Net income (loss):
As reported $(1,092,873) $ (722,074) $(1,987,681)
Pro forma (1,154,813) (766,658) (2,128,459)
Earnings (loss) per share:
As reported (.56) (.33) (.77)
Pro forma (.59) (.35) (.81)
The fair value of each option and warrant grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1995, 1996 and 1997, risk free interest
rates ranging from 5.00% to 6.95%, expected terms ranging from two to five
years, and an expected volatility factors ranging from 35% to 55%. The Company
has granted stock options to employees and directors for the purchase of common
shares. The stock option activity is as follows:
<TABLE>
<CAPTION>
Six Months Ended
1995 1996 June 30, 1997
---------------------- ---------------------- ---------------------
(unaudited)
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------ ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period 41,000 $3.95 120,000 $2.75 129,000 $2.12
Granted 80,000 2.10 98,000 2.10 237,000 5.00
Exercised (1,000) 2.10 (88,000) 3.00 (45,000) 2.12
Expired - - (1,000) 2.10 - -
------ ------- -------
Outstanding at end of period 120,000 2.75 129,000 2.12 303,000 4.31
======= ======= ======
Exercisable at end of period 120,000 2.75 129,000 2.12 303,000 4.31
======= ======= ======
Weighted average fair value
of options granted $ 0.60 $ 0.50 $ 0.99
======= ======= ======
</TABLE>
Options outstanding at June 30, 1997, have exercise prices ranging from $2.12 to
$5.00, with a weighted average remaining contractual term of 1.5 years.
The Company also has non-transferable share purchase warrants outstanding which
entitle the holder to purchase common shares at a specified exercise prices in
exchange for either one or two warrants, as detailed in the applicable warrant
agreement. The warrant activity is as follows:
F-25
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
1995 1996 June 30, 1997
---------------------- ---------------------- ----------------------
(unaudited)
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Warrants Price Warrants Price Warrants Price
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period 47,413 $2.00 93,867 $1.25 118,859 $ .72
Granted 93,867 1.25 84,992 2.55 - -
Exercised (42,945) 2.00 (60,000) 2.20 (118,859) .72
Expired (4,468) 2.00 - - - -
------- ------- --------
Outstanding at end of period 93,867 1.25 118,859 1.72 - -
======= ======= ========
Exercisable at end of period 93,867 1.25 118,859 1.72 - -
======= ======= ========
Weighted average fair value
of options granted $ 0.60 $ 0.30 $ -
======= ======= ========
</TABLE>
Stock Options and Warrants Issued in Connection with the Acquisition
and Related Financing Transactions
In connection with the Acquisition, the Company granted stock options to AGI
employees in exchange for options outstanding at the acquisition date entitling
these employees to purchase 245,000 common shares at specified exercise prices
ranging from $4.52 to $5.09, with a term of 2 years. The fair value of these
options, of $271,350, has been included in the purchase price of the
acquisition. All options are exercisable, however, as of June 30, 1997, none of
these options have been exercised.
In connection with the financing transactions related to the Acquisition, the
Company issued nontransferable share purchase warrants entitling the holders to
purchase 4,377,690 common shares at specified exercise prices in exchange for
either one or two warrants, as detailed in the applicable warrant agreement.
These warrants have exercise prices ranging from $2.88 to $8.71, with a weighted
average remaining term of 4.4 years and a weighted average exercise price of
$5.30. The fair value of these warrants, of $4,025,600, has been included as
deferred loan fees and discounts in debt in the accompanying financial
statements. All warrants are exercisable, however, as of June 30, 1997, none of
these warrants have been exercised.
Stock Purchase Agreement
In connection with the Acquisition, two officers of AGI each purchased 30,120
Common Shares and two-year warrants to acquire 15,060 Common Shares at an
exercise price of $4.86 per Common Share during the first year and $5.55 per
Common Share during the second year for $150,600 in a private placement (see
Note 13). The officers each have the right, prior to June 16, 1998, to require
the Company to repurchase, in whole or in part, these shares and warrants for
$150,600.
(16) COMMITMENTS AND CONTINGENCIES:
Operating Leases
F-26
<PAGE>
The Company leases various building space and equipment under noncancelable
lease agreements. Minimum annual rental commitments are as follows:
As of As of
December 31, 1996 June 30, 1997
----------------- -------------
(unaudited)
1998 $13,399 $621,202
1999 3,622 490,529
2000 3,623 199,750
2001 2,543 67,569
2002 - 23,201
Rental expense charged to operations under these leases was approximately
$15,000, $16,000, $36,000, and $43,000 for the years ended December 31, 1994,
1995, 1996, and the six months ended June 30, 1997 respectively.
Letters of Credit (unaudited)
At June 30, 1997 AGI has outstanding issued letters of credit for approximately
$2,675,000 in connection with its bank credit lines.
Purchase Commitments (unaudited)
At June 30, 1997 AGI had inventory purchase commitments of approximately
$10,000,000.
(17) RELATED PARTY TRANSACTIONS:
Related party transactions not disclosed elsewhere in these financial statements
include:
(a) The Company utilizes 16,000 square feet of office and
warehouse space in a building in Dallas, Texas owned by a
director. This is a month-to-month agreement and no rent is
charged for the use of the facilities. The average annual rent
for similar space is $2.90 per square foot.
(b) Interest expense includes approximately $6,000, $18,000,
$89,000 and $31,000 on advances from Directors for the years
ended December 31, 1994, 1995, 1996 and the six months ended
June 30, 1997, respectively.
(c) AGI utilizes 43,000 square feet of office and warehouse space
in a building in Scottsdale, Arizona owned by a director of
AGI. Rent expense for the building included in the statement
of operations was $8,000 for the six months ended June 30,
1997. The annual rental commitment is $234,000.
(18) PROFIT SHARING PLAN (unaudited):
AGI has a defined contribution profit sharing plan covering substantially all
its employees. All full-time (at least 1000 hours) employees who have completed
one year of service and reached the age of 18 are eligible to participate in the
Plan. Annual Company contributions are made at the discretion of
F-27
<PAGE>
management. The discretionary contribution is allocated to participants based on
their eligible contributions. All employee contributions are 100% vested.
Participants vest in Company contributions as follows:
Year of Percentage
Service Vested
------- ---------
1 0
2 0
3 20
4 40
5 60
6 80
7 100
Profit sharing expense for AGI was approximately $24,000, $18,000, $19,000 and
$12,000 for the years ended December 31, 1994, 1995, 1996 and the six months
ended June 30, 1997, respectively.
The Company is in the process of amending the plan to cover all its employees.
(19) SEGMENT INFORMATION:
The Company expanded its operations into Canada as a result of the acquisition
of CHL Services in January 1996 (see Note 4). Financial information by
geographic segment is as follows:
<TABLE>
<CAPTION>
US Canada Total
------------- ------------- -------------
<S> <C> <C> <C>
Year Ended December 31, 1996
Revenues $ 1,356,948 $ 1,501,014 $ 2,857,962
Net loss (557,827) (164,247) (722,074)
Identifiable assets 611,674 2,296,278 2,907,952
Six Months Ended June 30, 1997 (unaudited)
Revenues $ 2,284,454 $ 437,623 $ 2,722,077
Net loss (526,211) (1,461,470) (1,987,681)
Identifiable assets 37,307,347 441,666 37,744,013
</TABLE>
(20) OTHER SUBSEQUENT EVENTS:
Subsequent to December 31, 1996, the Company is planning an initial public
offering of its common stock in the U.S. The Company plans to issue
approximately 3,000,000 shares at an estimated public offering price between
$5.00 and $7.00 per share. There can be no assurance, however, that the offering
will be completed at a per share price within the estimated range, or at all.
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Antigua Group, Inc.:
We have audited the accompanying balance sheets of THE ANTIGUA GROUP, INC. (a
Nevada corporation) as of December 31, 1996 and 1995, and the related statements
of income, changes in stockholders' investment and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Antigua Group, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
As explained in Note 2 to the financial statements, the Company has given
retroactive effect to the change in the method of accounting for inventory
costs.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 23, 1997 (except with respect to
the matter discussed in Note 2, as to
which the date is September 23, 1997).
F-29
<PAGE>
THE ANTIGUA GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
--------------------------- ------------
ASSETS 1995 1996 1997
------------- ------------- ------------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash ................................................. $ 16,507 $ 94,099 $ 130,877
Accounts receivable, net of allowance for doubtful
accounts $251,000 in 1997, $249,000 in 1996, and
$170,000 in 1995 (Notes 4 and 5) ..................... 5,435,518 4,304,251 5,160,561
Inventories, net (Note 5) ............................ 9,543,144 8,655,490 8,668,528
Prepaid expenses and other current assets ............ 484,345 274,666 65,978
------------- ------------- ------------
Total current assets ............................ 15,479,514 13,328,506 14,025,944
------------- ------------- ------------
PROPERTY AND EQUIPMENT, at cost (Notes 2, 5 and 6)
Machinery and equipment .............................. 2,430,530 2,760,429 2,791,729
Embroidery machine designs ........................... 1,164,496 916,308 961,308
Office and computer equipment and furniture .......... 2,371,253 2,458,655 2,609,961
Automotive equipment ................................. 57,345 57,345 76,041
------------- ------------- ------------
6,023,624 6,192,737 6,439,039
Less - Accumulated depreciation and amortization. (3,274,812) (3,784,209) (4,010,709)
------------- ------------- ------------
Net property and equipment ...................... 2,748,812 2,408,528 2,428,330
------------- ------------- ------------
OTHER ASSETS ............................................. 29,257 16,459 14,294
------------- ------------- ------------
$18,257,583 $15,753,493 $16,468,568
============= ============= ============
LIABILITIES AND STOCKHOLDERS' INVESTMENTS
CURRENT LIABILITIES:
Current portion of long-term debt (Notes 1, 5 and 6) . $ 791,205 $ 840,594 $ 510,358
Revolving line of credit (Notes 1 and 5) ............. 6,965,131 5,104,896 5,847,406
Accounts payable ..................................... 1,758,303 1,440,243 869,758
Accrued expenses and other current liabilities (Note 3) 1,233,505 1,146,594 1,348,512
------------- ------------- ------------
Total current liabilities ....................... 10,748,144 8,532,327 8,576,034
------------- ------------- ------------
LONG-TERM DEBT, less current portion (Notes 1, 5 and 6) .. 3,373,995 2,465,321 2,940,312
COMMITMENTS AND CONTINGENCIES (Notes 1, 3 and 8)
STOCKHOLDERS' INVESTMENT (Note 7):
Common stock, $.005 stated value, 5,000,000 shares
authorized, 2,074,600 shares issued and outstanding .. 10,373 10,373 10,373
Additional paid-in capital ........................... 1,027,193 1,027,193 1,027,193
Retained earnings .................................... 3,097,878 3,718,279 3,914,656
------------- ------------- ------------
4,135,444 4,755,845 4,952,222
------------- ------------- ------------
Total stockholders' investment .................. $18,257,583 $15,753,493 $16,468,568
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
THE ANTIGUA GROUP, INC.
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
MERCHANDISE SALES, net of returns ........... $31,793,546 $31,402,521 $33,510,364 $6,455,608 $9,219,127
COST OF SALES ............................... 25,503,503 20,825,025 22,490,634 4,582,489 5,951,204
------------- ------------- ------------- ------------- ------------
Gross profit ....................... 6,290,043 10,577,496 11,019,730 1,873,119 3,267,923
------------- ------------- ------------- ------------- ------------
SELLING EXPENSES ............................ 6,424,000 5,688,330 5,843,314 1,114,028 1,433,164
GENERAL AND ADMINISTRATIVE EXPENSES ......... 3,505,027 3,137,890 3,598,886 955,313 1,032,089
------------- ------------- ------------- ------------- ------------
Total selling, general and
administrative expenses ............ 9,929,027 8,826,220 9,442,200 2,069,341 2,465,253
------------- ------------- ------------- ------------- ------------
Income (loss) from operations ...... (3,638,984) 1,751,276 1,577,530 (196,222) 802,670
------------- ------------- ------------- ------------- ------------
OTHER INCOME (EXPENSE):
Interest expense ........................ (1,037,309) (1,444,869) (1,342,859) (331,751) (296,913)
Other income ............................ 348,122 433,945 385,730 58,172 44,945
------------- ------------- ------------- ------------- ------------
(689,187) (1,010,924) (957,129) (276,982) (251,968)
------------- ------------- ------------- ------------- ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ..... (4,328,171) 740,352 620,401 (469,801) 550,702
EXTRAORDINARY ITEM - LOSS ON
EXTINGUISHMENT OF DEBT (NOTE 5) ............. - - - - (354,325)
------------- ------------- ------------- ------------- ------------
NET INCOME (LOSS) (NOTE 2) .................. $(4,328,171) $ 740,352 $620,401 $(469,801) $196,377
============= ============= ============= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
THE ANTIGUA GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Common Stock
------------------------ Additional Total
Paid-in Retained Stockholders'
Shares Amount Capital Earnings Investment
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 ......................... 1,886,000 $ 9,430 $ 28,136 $ 6,985,994 $ 7,023,560
Distributions .................................... -- -- -- (300,297) 300,297
Net Loss ......................................... -- -- -- (4,328,171) (4,328,171)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994 ......................... 1,886,000 9,430 28,136 2,357,526 2,395,092
Sale of stock .................................... 188,600 943 999,057 -- 1,000,000
Net income ....................................... -- -- -- 740,352 740,352
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 ......................... 2,074,600 10,373 1,027,193 3,097,878 4,135,444
Net income ....................................... -- -- -- 620,401 620,401
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 ......................... 2,074,600 10,373 1,027,193 3,718,279 4,755,845
Net income (unaudited) ........................... -- -- -- 196,377 196,377
----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 1997 (unaudited) ................ 2,074,600 $ 10,373 $ 1,027,193 $ 3,914,656 $ 4,952,222
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
THE ANTIGUA GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited) (unaudited)
Net income (loss) .......................... $(4,328,171) $740,352 $620,401 $(469,801) $196,377
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities
Depreciation and amortization ......... 830,839 935,988 950,749 250,800 226,500
Gain on the sale of property and equipment (6,678) (84,774) - - -
Provision for uncollectible accounts .. 250,000 150,493 289,058 19,495 1,510
Provision for slow moving inventory ... 107,314 56,943 82,500 21,715 4,821
Change in assets and liabilities
Decrease (increase) in accounts receivable (136,917) (939,736) 842,209 777,505 (857,820)
Decrease (increase) in inventories .... 2,912,187 117,320 805,154 952,705 (17,860)
Decrease (increase) in prepaid expenses
and other current assets .............. (19,926) (205,705) 209,679 (69,541) 208,688
Decrease in other assets .............. 242,597 36,933 12,799 3,128 2,164
(Decrease) increase in accounts payable 695,542 (19,447) (318,060) (394,337) (570,485)
(Decrease) increase in accrued expenses
and other current liabilities ......... 558,832 (281,642) (86,911) (136,350) 201,918
------------- ------------- ------------ ------------- ------------
Net cash (used in) provided by operating
activities ............................ 1,105,619 506,725 3,407,578 955,319 (604,187)
------------- ------------- ------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ...... (580,990) (574,790) (610,466) (93,605) (246,301)
Proceeds from the sale of property and equipment 9,315 254,339 - - -
------------- ------------- ------------ ------------- ------------
Net cash used in investing activities ...... (571,675) (320,451) (610,466) (93,605) (246,301)
------------- ------------- ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) on revolving line of
credit, net ................................ 6,715,764 (2,791,516) (1,860,235) (646,399) (742,511)
Proceeds from long-term debt ............... 984,014 2,350,030 - - 775,000
Payments on long-term debt ................. (7,933,243) (848,096) (859,285) (156,892) (630,245)
Proceeds from sale of stock ................ - 1,000,000 - - -
Distributions to stockholders .............. (300,297) - - - -
------------- ------------- ------------ ------------- ------------
Net cash provided by (used in) financing
activities ................................. (533,762) (289,582) (2,719,520) (803,291) 887,266
------------- ------------- ------------ ------------- ------------
INCREASE (DECREASE) IN CASH .................... 182 (103,308) 77,592 58,423 36,778
CASH AT BEGINNING OF PERIOD .................... 119,633 119,815 16,507 16,507 94,099
------------- ------------- ------------ ------------- ------------
CASH AT END OF PERIOD .......................... $ 119,815 $ 16,507 $ 94,099 $ 74,930 $ 130,877
============= ============= ============ ============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest ... $ 1,004,176 $ 1,160,116 $ 954,564 $ 273,085 $ 294,333
============= ============= ============ ============= ============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In 1995, the Company received a note for $25,000 from the majority
shareholder in partial exchange for the sale of the airplane. Additionally,
in 1995, the Company purchased equipment for $116,155 under capital lease.
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
THE ANTIGUA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
(1) OPERATIONS:
The Antigua Group, Inc. (Antigua or the Company) is a wholesale distributor of
sportswear and related accessories. Antigua is a closely held entity and certain
transactions involve the Chairman, who is the majority stockholder. The Company
has elected for federal and state income tax purposes to include taxable income
with that of its stockholders (S Corporation election). Accordingly, no
provision for taxes has been made in the accompanying financial statements (see
Note 8).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements reflect the application of accounting
policies as set forth below.
Inventory (reflecting change in accounting principle)
In prior years, inventories were stated at the lower of LIFO cost (last-in,
first-out) or market. Subsequent to December 31, 1996, the Company changed its
method to state inventories at the lower of FIFO cost (first-in, first-out) or
market. The new method of accounting for inventories was adopted in connection
with the purchase of all the outstanding shares of the Company's Common Stock by
Antigua Enterprises Inc. (formerly Southhampton Enterprises Corp.). The
accompanying financial statements have been restated to apply this new method
retroactively. The effect of the accounting change on net income as previously
reported is:
Year Ended December 31,
-----------------------------------------
1994 1995 1996
------------- --------- ----------
Net income (loss) as previously
reported $(4,356,123) $660,148 $932,867
Adjustment for effect of change in
accounting method 27,952 80,204 (312,466)
------------- --------- ----------
Net income (loss) as adjusted $ (4,328,171) $740,352 $620,401
============= ========= ==========
F-34
<PAGE>
Property and Equipment
Property and equipment are depreciated or amortized using the straight-line
method over estimated useful lives as follows:
Estimated
Classification Useful Lives
-------------- ------------
Machinery and equipment 3-15
Embroidery machine designs 1
Office and computer equipment and furniture 3-5
Automotive equipment 3-7
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. In
management's opinion, methodologies used to determine estimates are adequate and
consistent with prior periods.
Concentrations of Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of accounts receivable. Concentrations of credit
risk with respect to accounts receivable are limited due to the large number of
customers comprising the Company's credit base and the geographical dispersion
of the customers.
Fair Value of Financial Instruments
The carrying values of cash, accounts receivables, accounts payable, accrued
expenses and other liabilities and the revolving line of credit approximate fair
values due to the short-term maturities of these instruments. In the aggregate,
the installment purchase notes and capital lease obligations approximate fair
value based on the market rates currently available for instruments with similar
terms and remaining maturities. It is not practical to estimate the fair value
of the notes payable to the Chairman or employees, as the agreements are between
related parties.
The estimated fair value amounts have been determined by the Company using
available market information and valuation methodologies described above.
Considerable judgement is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates may not be indicative of the
amounts that the Company could realize in a current market exchange.
F-35
<PAGE>
The use of different market assumptions or valuation methodologies could have a
material effect on the estimated fair value amounts.
(3) LICENSES:
The Company has a licensing agreement with National Basketball
Association Properties, Inc. (NBA) which grants the Company the right to use the
names, symbols, emblems, designs and logos of the NBA on certain of its
garments. The license requires royalty payments of approximately 9.25% of sales
of NBA products, subject to an annual minimum required payment of $130,000. The
license expires on July 31, 1997.
The Company has licensing agreements with the National Football League (NFL)
which grant the Company the right to use "NFL Marks" on certain of its garments.
These agreements require royalty payments of approximately 10% of sales of NFL
products, subject to certain minimum required payments. These agreements expire
in March 1999. Future minimum required royalty payments range from approximately
$355,000 to $415,000 per year.
The Company has licensing agreements with Major League Baseball Properties, Inc.
(MLB) which grant the Company the right to use the names, characters, symbols,
designs and other similar identifications of the MLB on certain of its garments.
The licenses require royalty payments of 9% of sales of MLB products, subject to
certain annual minimum required payments ranging from $120,000 to $150,000. The
licenses expire December 31, 1999.
The Company has licensing agreements with the National Hockey League (NHL) which
grant the Company the right to use "NHL Marks" on certain of its garments. The
agreement requires royalty payments of 9% on sales of NHL products. Total future
minimum royalties over the term are $20,000. The agreement expires on December
31, 1997.
In addition, the Company has executed numerous market license agreements with
colleges, universities, bowl administrators, and prominent sports figures which
allow the Company to use the names of the institution, sporting event or sports
personality on certain of its garments for varying terms.
Royalty expense was approximately $1,129,000, $977,000 and $1,245,000 in 1994,
1995 and 1996, respectively.
(4) RELATED PARTY TRANSACTIONS:
Included in accounts receivable at December 31, 1996, is a note receivable from
the Chairman of approximately $125,000 due in December 1997.
During 1996, the Company paid $60,000 consulting fees to a stockholder/board
member.
(5) LOAN AGREEMENT WITH BANK:
F-36
<PAGE>
At December 31, 1995 and 1996, the Company had a credit facility of up to $12
million, including a revolving line of credit (LOC) and outstanding letters of
credit. Interest was at the bank's prime rate plus 2%. The maximum borrowing
under the LOC could not exceed 85% of eligible receivables plus 50% of eligible
inventories, as defined. The LOC was secured by all of the Company's assets. The
agreement contained certain covenants which, among other things, required the
Company to maintain an current ratio of 1.00, a minimum tangible net worth of
$5,350,000 and a fixed charge coverage ratio, as defined, of at least 1.10.
Dividends could not be paid or unscheduled payments on subordinated debt could
not be made without the prior consent of the bank. The Chairman (majority
stockholder) of the Company personally guaranteed the LOC.
In January 1997, the Company entered into a Loan and Security Agreement (the
Loan Agreement) with a new bank. The Loan Agreement provides for a credit
facility of up to $12 million, including a revolving line of credit and
outstanding letters of credit. Interest is at the bank's prime rate plus 1%. The
maximum borrowing under the new Loan Agreement cannot exceed 85% of eligible
receivables plus 55% of eligible inventory, as defined. The Loan Agreement is
secured by all of the Company's assets. The Loan Agreement contains certain
covenants which, among other things, require the Company to maintain a minimum
tangible net worth (inclusive of subordinated debt, as defined in the Loan
Agreement) of $5,500,000, an interest coverage ratio of no less than 1.50, a
debt service coverage ratio of no less than 1.25 and a ratio of liabilities to
tangible net worth of no more than 2.0. Dividends cannot be paid or unscheduled
payments cannot be made without the prior consent of the bank.
The Loan Agreement includes a term loan for $775,000 with interest at 1.25% over
the bank's prime rate, payable in monthly installments over seven years
beginning March 1, 1997. A portion of the term loan proceeds were used to retire
$478,000 of installment purchase notes and capital lease obligations subsequent
to year end (see Note 6).
The Loan Agreement was entered into in anticipation of the Acquisition discussed
in Note 8. Upon consummation of the Acquisition, the new arrangement will remain
in place.
As a result of the change in banks and the early extinguishment of the credit
facility the Company incurred a loss of $354,325 due to an early termination fee
of $240,000 and the write-off $114,325 of the unamortized deferred loan fees.
This amount has been recorded as an extraordinary item in 1997.
F-37
<PAGE>
(6) LONG-TERM DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31, March 31,
----------------------------------- ----------
1995 1996 1997
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Subordinated note payable to Chairman,
interest at 8%, interest and principal due
August 31, 1998. Accrued interest at
December 31, 1996 and 1995, was
$81,000 and $71,000, respectively. $1,150,000 $900,000 $900,000
Subordinated note payable to Chairman,
interest at 10%, due in monthly
installments beginning July 1998. If the
principal is paid in full on or before
January 31, 1998, all accrued interest is
waived. Accrued interest at
December 31, 1996 and 1995, was
$175,000 and $55,000, respectively. 1,200,000 1,200,000 1,200,000
Term loan payable to bank, interest at
1 1/4% over the bank's prime rate, due in
monthly installments through February
2000. - - 756,467
Installment purchase notes and capital
lease obligations to finance companies,
secured by equipment, interest ranging
from 7.3% to 12.25%, due in varying
individual installments ranging from
$500 to $18,500 through 2000. 1,175,777 586,049 72,409
Notes payable to employees, interest at
6%, due in total annual installments
ranging from $167,309 to $186,870
through June 1998 (see Note 8). 541,051 521,494 521,494
Note payable to related party, principal
and interest at 8% due in January 1997. 98,372 98,372 -
---------- ---------- ----------
4,165,200 3,305,915 3,450,370
Less - Current portion (791,205) (840,594) (510,358)
---------- ---------- ----------
$3,373,995 $2,465,321 $2,940,012
========== ========== ==========
</TABLE>
F-38
<PAGE>
Upon consummation of the Acquisition (see Note 8), certain of the outstanding
principal and accrued interest amounts on the subordinated notes due to the
Chairman and various capital lease obligations are due and payable. The amounts
have been classified based on current due dates and have not been classified
based on possible acceleration. Subsequent to year end, $478,000 of the
installment purchase notes and capital lease obligations were retired (see Note
5). The acquiring company anticipates restructuring of the obligations above
concurrently with the closing of the Acquisition.
Long-term debt matures as follows:
Year Ending
December 31, Amount
------------ ------
1997 $ 840,594
1998 2,459,111
1999 5,238
2000 972
----------
$3,305,915
==========
(7) STOCKHOLDERS' INVESTMENT:
Stock Options
The Company applies Accounting Principals Board Opinion 25 and related
Interpretations in accounting for its 1993 Stock Option Plan (Plan). Under the
Plan, a maximum of 210,000 shares can be issued. Options for 43,000 shares have
been granted to current employees at a purchase price of $10.00 per share. These
options are fully vested and are exercisable provided the Company completes a
qualified initial public offering prior to the expiration date of the options.
Options for 10,000 shares were granted in February 1996 to current employees at
an exercise price of $5.78 per share. These options vest at various dates
through February 2000. As of December 31, 1996, options for 1,250 shares at
$5.78 per share qualify for vesting.
Upon completion of the Acquisition (see Note 8), however, all of the outstanding
stock options shall terminate. Accordingly, the fair value of these options is
insignificant. No options have been exercised as of December 31, 1996.
(8) COMMITMENTS AND CONTINGENCIES:
Acquisition
F-39
<PAGE>
On July 18, 1996, the shareholders of Antigua entered into an Acquisition
Agreement, as amended (Acquisition), whereby 100% of the Company's issued and
outstanding stock would be acquired by Antigua Enterprises Inc. The anticipated
consideration to be paid to the shareholders of Antigua is approximately
$20,000,000 in cash and promissory notes.
Upon completion of the Acquisition, the S corporation status will be terminated
and the Company will become a taxable entity subject to provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Additionally, subsequent to the completion of the Acquisition and subject to
certain terms in the Loan Agreement (see Note 5), the Company may be eligible to
receive an additional term loan under the Loan Agreement in the amount of
$1,500,000.
Contingent Purchase Price for Stock Purchase
Under terms of shareholder agreements in 1993, the Company exercised its right
to purchase 210,800 shares of common stock owned by employees. Payment was made
by the issuance of notes payable (see Note 6). Additionally, $316,200 of the
contingent purchase price will be payable upon the occurrence, on or before May
31, 2003, of (1) a public offering of the Company's common stock resulting in
net proceeds to the Company of at least $10 million or (2) a sale of
substantially all of the stock or assets of the Company (see above Acquisition).
The Company has not recorded the contingent amount payable as of December 31,
1996.
Operating Leases
The Company leases its primary facility from an affiliate pursuant to a lease
agreement expiring on November 30, 1997. Expense associated with this related
party lease was approximately $249,000 for the year ended December 31, 1994 and
$230,000 for each of the years ended December 31, 1995 and 1996. Remaining
payments in 1997 are expected to be approximately $210,500.
F-40
<PAGE>
The Company also leases other building space and equipment under noncancelable
lease agreements. Minimum annual rentals for the other noncancelable leases are
as follows:
1997 $310,300
1998 291,500
1999 237,800
--------
$839,600
========
Lease expense for the years ended December 31, 1994, 1995 and 1996, for these
noncancelable leases was approximately $247,000, $286,000 and $283,000,
respectively.
Letters of Credit
At December 31, 1996, the Company has outstanding issued letters of credit for
approximately $1,658,000 in connection with its bank credit lines.
Purchase Commitments
At December 31, 1996, the Company had inventory purchase commitments of
approximately $8,750,000.
Profit Sharing Plan
The Company has a defined contribution profit sharing plan covering
substantially all employees. All full-time (at least 1000 hours) employees who
have completed one year of service and reached the age of 18 are eligible to
participate in the Plan. Annual Company contributions are made at the discretion
of management. The discretionary contribution is allocated to participants based
on their eligible contributions. All employee contributions are 100% vested.
F-41
<PAGE>
Participants vest in Company contributions as follows:
Years of Percentage
Service Vested
--------- -------
1 0
2 0
3 20
4 40
5 60
6 80
7 100
Profit sharing expense was approximately $24,000, $18,000 and $19,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
F-42
<PAGE>
================================================================================
No dealer, sales representative or other person has been authorized to
give any information or to make any representations other than those contained
in this prospectus, and, if given or made, such other information and
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or the Underwriters. This prospectus does not
constitute an offer to sell, or the solicitation of an offer to buy, the
securities offered hereby to any person in any jurisdiction in which such offer
or solicitation would be unlawful. Neither the delivery of this prospectus nor
any offer or sale hereunder shall, under any circumstances, create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
------------------
TABLE OF CONTENTS
Page
Prospectus Summary ...........................................................
Risk Factors .................................................................
The Acquisition and Related Financing ........................................
S Corporation Distributions ..................................................
Use of Proceeds ..............................................................
Price Range of Common Shares .................................................
Dividend Policy ..............................................................
Capitalization ...............................................................
Dilution .....................................................................
Unaudited Pro Forma
Consolidated Financial Statements ..........................................
Selected Financial Data ......................................................
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ..............................................................
Business .....................................................................
Management ...................................................................
Certain Relationships and Related Transactions ...............................
Principal and Selling Shareholders ...........................................
Description of Securities ....................................................
Certain Income Tax Considerations ............................................
Canadian Government Regulation ...............................................
Shares Eligible for Future Sale ..............................................
Underwriting .................................................................
Legal Matters ................................................................
Experts ......................................................................
Changes in Independent Auditor ...............................................
Additional Information .......................................................
Index to Financial Statements ................................................
------------------
Until _______________, 1997 (25 days after the date of this
prospectus), all dealers effecting transactions in the Common Shares, whether or
not participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligations of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
<PAGE>
================================================================================
3,000,000 Shares
[logo]
Antigua Enterprises Inc.
Common Shares
------------------
PROSPECTUS
------------------
CRUTTENDEN ROTH
INCORPORATED
FERRIS, BAKER WATTS,
INCORPORATED
_______________, 1997
================================================================================
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the offering described in this Registration Statement, all of which will be
borne by the Company.
Registration Fee ........................................... $3,522
NASD Filing Fee ............................................
Nasdaq Listing Fees ........................................ **
Blue Sky Fees and Expenses ................................. 3,000*
Legal Fees and Expenses .................................... **
Accounting Fees and Expenses ............................... **
Printing and Engraving Expenses ............................ **
Transfer Agent Fee ......................................... **
Miscellaneous .............................................. **
------------
Total ............................................. $ **
============
- ------------------
* Estimated
** To be completed by amendment
Item 14. Indemnification of Directors and Officers
The Company Act (British Columbia) permits a company, with the approval
of the British Columbia Supreme Court, to indemnify a director or officer of the
Company in respect of all costs, charges and expenses actually and reasonably
incurred by him in connection with a civil, criminal or administrative action to
which he is made a party by reason of having been a director provided that he
acted honestly and in good faith and had reasonable grounds for believing that
his conduct was lawful.
The Articles of the Company provide that, subject to the provisions of
the Company Act, the directors shall cause the Company to indemnify its
directors and may cause the Company to indemnify its officers and the directors
of companies in which the Company is a shareholder.
The Company entered into written indemnity agreements with two
directors, J. Christopher Woods and Fiama Walker, with respect to approval of
the Acquisition. Ms. Walker is no longer a director of the Company.
Item 15. Recent Sales of Unregistered Securities
All share amounts reflect a one for five reverse split of the Company's
Common Shares effected on June 13, 1997.
II-1
<PAGE>
On December 13, 1994 the Company issued 1,185 shares to a vendor of
services in settlement for a debt of approximately C$8,000. The issuance was not
registered under the Act in reliance upon the exemption from registration
provided by Section 4(2) thereof.
On March 30, 1995 the Company sold 46,933 Common Shares to Mr. Haynes
for C$140,802 and 46,933 Common Shares to an officer of the Southhampton
Enterprises, Inc., a wholly owned subsidiary of the Company, for C$140,799. The
Common Shares were coupled with warrants to acquire an additional 46,933 Common
Shares. The sale was not registered under the Act in reliance upon the exemption
from registration provided by Section 4(2) thereof. On March 1, 1996 Mr. Haynes
exercised warrants to acquire 4,000 Common Shares for an exercise price of
C$13,800. On January 29, 1997 Mr. Haynes and the officer exercised warrants to
acquire 19,467 and 19,466 Common Shares, respectively, for an aggregate exercise
price of C$134,286.
On August 25, 1995 the Company issued options to acquire 98,000 Common
Shares to eight directors. The exercise price of these options was set at C$2.05
on that date, but the options were repriced on January 16, 1996 to C$2.90 per
Common Share. The issuance was not registered under the Act in reliance upon the
exemption from registration provided Rule 701 under the Act. On November 26,
1996 a director exercised an option to acquire 9,000 Common Shares for an
exercise price of C$26,100. On January 29, 1997 four directors exercised options
to acquire 9,000 Common Shares each for an aggregate exercise price of
C$104,400. The issuance was not registered under the Act in reliance upon the
exemption from registration provided by Rule 701 under the Act.
On August 30, 1995 the Company sold 84,992 Common Shares to Mr. Haynes
for C$212,480. The Common Shares are coupled with two-year warrants to acquire
an additional 84,992 Common Shares at an exercise price of C$2.75 per Common
Share during the first year and C$3.50 per Common Share during the second year.
The sale was not registered under the Act in reliance upon the exemption from
registration provided by Section 4(2) thereof. On December 31, 1996 Mr. Haynes
exercised 44,000 share purchase warrants at C$3.50 per Common Share. The
issuance of securities was not registered under the Act in reliance upon the
exemption from registration provided by Section 4(2) thereof.
On January 16, 1996 the Company issued options to acquire 80,000 Common
Shares to six employees. The exercise price of these options was set at C$2.90
per Common Share. The issuance was not registered under the Act in reliance upon
the exemption from registration provided by Rule 701 under the Act. On April 10,
1996, May 2, 1996, July 17, 1996 and September 16, 1996, four employees
exercised options to acquire 2,000, 30,000, 2,000 and 4,000 Common Shares,
respectively. These securities were not sold in a transaction involving any
public offering in the United States and, accordingly, were exempted from
registration under the Act.
On July 9, 1996 the Company issued 11,429 shares to R. James Beadle in
settlement for a debt of approximately C$40,000. These securities were not sold
in a transaction involving any public offering in the United States and,
accordingly, were exempted from registration under the Act.
On July 9, 1996 the Company issued 21,786 shares to a single individual
in exchange for the cancellation of the then remaining indebtedness
(approximately C$76,250) under the agreement for the acquisition by the Company
of T-Sports, Inc. The issuance was not registered under the Act in reliance upon
the exemption from registration provided by Section 4(2) thereof.
On July 11, 1996 the Company sold 162,200 Common Shares and two-year
warrants to purchase a like number of shares at a price of C$6.25 per Common
Share in the first year and C$7.50 in the second year for an aggregate
consideration of C$1,013,750 to a total of 16 investors, including four
directors of the Company or subsidiaries. The sale was not registered under the
Act in reliance upon the exemption from registration provided by Section 4(2)
thereof.
II-2
<PAGE>
On July 17, 1996 an employee acquired 2,000 Common Shares from the
registrant upon exercise of an option and payment of C$5,800. The sale was
registered under the Act in reliance upon the exemption from the registration
provided by Rule 701 under the Act.
On September 16, 1996 an employee acquired 4,000 Common Shares from the
registrant upon exercise of an option and payment of C$11,600. The sale was not
registered under the Act in reliance upon the exemption from registration
provided by Rule 701 under the Act.
On October 17, 1996 the Company sold 210,000 Common Shares and two-year
warrants to purchase a like number of shares at a price of C$5.80 per Common
Share in the first year and C$6.65 in the second year for an aggregate
consideration of C$1,218,000 to five investors, four of which were directors of
the Company or subsidiaries. The sale was not registered under the Act in
reliance upon the exemption from registration provided by Section 4(2) thereof.
On January 11, 1997 a director acquired 9,000 Common Shares from the
registrant upon exercise of a warrant and payment of C$26,100. The sale was not
registered under the Act in reliance upon the exemption from registration
provided by Section 4(2) thereof.
On January 29, 1997 a director acquired 40,992 Common Shares from the
registrant upon exercise of a warrant and payment of C$143,472. The sale was not
registered under the Act in reliance upon the exemption from registration
provided by Section 4(2) thereof.
On January 29, 1997 a director and an officer acquired an aggregate of
38,932 Common Shares from the registrant upon exercises of warrants and payment
of C$134,320 in the aggregate. The sale was not registered under the Act in
reliance upon the exemption from registration provided by Section 4(2) thereof.
On March 1, 1997 the Company issued a one-year C$4,200,000 convertible
debenture bearing interest at 15% per annum to a single investor. The debenture
is convertible into 1,144,500 Common Shares of the Company and warrants to
acquire an additional 1,144,500 Common Shares at an exercise price of C$4.00
during the first year following issuance and C$4.60 during the second year after
issuance. In connection with guarantees of the debenture, two directors were
issued an aggregate of 177,000 Common Shares as bonus shares. The Company also
issued 177,000 Common Shares to the investors as an inducement to invest in the
Company. The issuances were not registered under the Act in reliance upon the
exemption from registration provided by Section 4(2) thereof.
On April 21, 1997 the Company sold 4,730,000 convertible limited
retractable Series A 12% cumulative preference shares, which are convertible
into 946,000 Common Shares and warrants to purchase a like number of Common
Shares, to twelve investors, including two directors, a director of a subsidiary
and two entities affiliated with a director, for an aggregate consideration of
C$4,730,000. The convertible preference shares are convertible at C$6.75,
C$8.00, C$9.25, C$10.50 and C$11.75 in the first, second, third, fourth and
fifth years, respectively, and the warrants are exercisable at C$7.20, C$8.40,
C$9.70, C$10.85 and C$12.10 in the first, second, third, fourth and fifth years,
respectively. In connection with the sale, the Company issued warrants to
purchase 238,627 Common Shares to an unaffiliated third party as a finder's fee.
The sale was not registered under the Act in reliance upon the exemption from
registration provided by Section 4(2) thereof.
II-3
<PAGE>
On April 21, 1997 the Company sold 151,778 Common Shares and two-year
warrants to purchase 75,889 shares at a price of C$4.50 per Common Share in the
first year and C$5.20 in the second year to a single investor for C$683,000. In
connection with such private placement the Company issued 12,142 Common Shares
to an entity controlled by a former director. The foregoing securities were not
offered or sold in transactions involving any public offering in the United
States and, accordingly, were exempted from registration under the Act.
On June 13, 1997 the Company issued a one-year $1,791,048.45
convertible debenture bearing interest at 12% per annum to a single investor.
The debenture is convertible into 714,454 Common Shares and two-year warrants to
purchase an additional 714,454 Common Shares at a price of C$4.00 per Common
Share in the first year and C$4.60 in the second year. The investor also
received 124,378 Common Shares as bonus shares in connection with the loan to
the Company. The foregoing securities were not offered or sold in transactions
involving any public offering in the United States and, accordingly, were
exempted from registration under the Act. In connection with the convertible
debenture, the Company issued warrants to purchase 115,344 Common Shares to an
unaffiliated third party as a finder's fee in connection with such financing.
The issuance of the warrants was not registered under the Act in reliance upon
the exemption from registration provided by Section 4(2) thereof.
On June 16, 1997 the Company sold 180,144 Common Shares and two-year
warrants to purchase 90,072 shares at a price of C$6.75 per Common Share in the
first year and C$7.75 in the second year for an aggregate consideration of
C$1,215,969 to eight investors, including two current executive officers and one
director of the Company. The sale was not registered under the Act in reliance
upon the exemption from registration provided by Section 4(2) thereof. In
connection with this private placement, the Company issued 6,537 Common Shares
as a finder's fee to an unaffiliated third party. The issuance was not
registered under the Act in reliance upon the exemption from registration
provided by Section 4(2) thereof.
On June 16, 1997 the Company sold 60,000 Common Shares and two-year
warrants to purchase 60,000 shares at a price of C$5.35 per Common Share in the
first year and C$6.15 in the second year. In connection with the sale the
Company issued 3,653 Common Shares to an unaffiliated third party as a finder's
fee. Neither the sale nor the issuance was registered under the Act in reliance
upon the exemption from registration provided by Section 4(2) thereof.
On June 16, 1997 the Company issued warrants for the purchase of
2,479,598 Common Shares to three bridge lenders in connection with financing the
Acquisition and 97,054 Common Shares to an unaffiliated third party as a
finder's fee in connection with such financing. The exercise price of the
warrants is $5.00 per Common Share. The issuance was not registered under the
Act in reliance upon the exemption from registration provided by Section 4(2)
thereof.
On June 30, 1997 the Company issued options to acquire 120,000 Common
Shares to two executive officers. The exercise price of the options is C$6.25
per Common Share. The issuance was not registered under the Act in reliance upon
the exemption from registration provided by Section 4(2) thereof.
On June 30, 1997 the Company issued options to acquire 277,000 Common
Shares to 11 employees and consultants. The exercise price of the options is
$5.00 per Common Share. The issuance was not registered under the Act in
reliance upon the exemption from registration provided by Section 4(2) thereof.
On June 30, 1997 the Company issued options to acquire 75,000 Common
Shares to 13 directors of the Company and its subsidiaries. The exercise price
of the options is $5.00 per Common Share. The issuance was not registered under
the Act in reliance upon the exemption from registration provided by Section
4(2) thereof.
On July 11, 1997 six individuals, including one director, acquired an
aggregate of 28,800 Common Shares from the registrant upon exercise of warrants
and payment of C$180,000 in the aggregate. The sale was not registered under the
Act in reliance upon the exemption from registration provided by Section 4(2)
thereof.
II-4
<PAGE>
On July 18, 1997 the Company sold 1,000,000 convertible limited
retractable Series A 12% cumulative preference shares, which are convertible
into 200,000 Common Shares and warrants to purchase a like number of Common
Shares to a single investor for an aggregate consideration of C$1,000,000. The
convertible preference shares are convertible at C$6.75, C$8.00, C$9.25, C$10.50
and C$11.75 in the first, second, third, fourth and fifth years, respectively,
and the warrants are exercisable at C$7.20, C$8.40, C$9.70, C$10.85 and C$12.10
in the first, second, third, fourth and fifth years, respectively. The Company
paid a finder's fee in connection with this placement of 16,000 Common Shares to
an unaffiliated third party. The issuances were not registered under the Act in
reliance upon the exemption from registration provided by Section 4(2) thereof.
On August 18, 1997 three employees acquired an aggregate of 10,000
Common Shares from the registrant upon exercise of a warrant and payment of
C$29,100 in the aggregate. The sale was not registered under the Act in reliance
upon the exemption from registration provided by Section 4(2) thereof.
On August 25, 1997 a director of the registrant acquired 9,000 Common
Shares from the registrant upon exercise of an option and payment of C$26,100.
The sale was not registered under the Act in reliance upon the exemption from
registration provided by Rule 701 under the Act.
On August 29, 1997 a former director of a subsidiary acquired 14,000
Common Shares from the registrant upon exercise of a warrant and payment of
C$105,000. The sale was not registered under the Act in reliance upon the
exemption from registration provided by Section 4(2) thereof.
On September 23, 1997 the Company issued 131,758 Common Shares to
Sportswear Investors, LLC. Mr. McCauley, a member of that entity, is a director
of a subsidiary of the registrant. The issuance was not registered under the Act
in reliance upon the exemption from registration provided by Section 4(2)
thereof.
Item 16. Exhibits and Financial Statement Schedules
a. Exhibits
See Exhibit Index following the certification of the Authorized
Representative. The Exhibit Index is incorporated herein by this reference.
b. Financial Statement Schedules
None.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance on Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offer
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Scottsdale,
State of Arizona, on the 10th day of November, 1997.
ANTIGUA ENTERPRISES INC.
By: /s/ L. Steven Haynes
------------------------------------
L. Steven Haynes
Chief Executive Officer, Director
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints L. Steven
Haynes and Gerald K. Whitley, and each of them individually, his true and lawful
attorney in-fact, with power to act with or without the other and with full
power of substitution and resubstitution, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to the Registration
Statement and file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Louis B. Lloyd
___________________________________________
Louis B. Lloyd Chairman of the Board of Directors November 10, 1997
/s/ L. Steven Haynes
___________________________________________
L. Steven Haynes Chief Executive Officer, Director (Principal November 10, 1997
Executive Officer)
/s/ Gerald K. Whitley
___________________________________________
Gerald K. Whitley Vice President of Finance of AGI (Principal November 10, 1997
Financial Officer and Principal Accounting
Officer)
___________________________________________ Secretary, Director
J. Christopher Woods
/s/ James E. Miles
___________________________________________
James E. Miles Director November 10, 1997
/s/ Robert J. McCammon
___________________________________________
Robert J. McCammon Director November 10, 1997
/s/ James W. Lewis
___________________________________________
James W. Lewis Director November 10, 1997
/s/ Natale Bosa
___________________________________________ November 10, 1997
Natale Bosa Director
</TABLE>
II-6
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, the
undersigned certifies that it is the duly authorized United States
representative of Antigua Enterprises Inc. and has duly caused this registration
statement to be signed on behalf of it by the undersigned, thereunto duly
authorized, in the city of Scottsdale, Arizona November 10, 1997.
THE ANTIGUA GROUP, INC.
(Authorized U.S. Representative)
By: /s/ L. Steven Haynes
--------------------------------------
L. Steven Haynes
Chief Executive Officer
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------------- -------------------------------------------------------------------------------------------------------
<S> <C>
*1.1 Form of Underwriting Agreement among Antigua Enterprises Inc. (the "Registrant") and Cruttenden Roth
Incorporated
2.1 Stock Purchase Agreement between Southhampton Enterprises Corp., Southhampton Enterprises, Inc., and
Thomas E. Dooley, Jr., Gail Dooley, Thomas E. Dooley and Gail Dooley Revocable Trust of 1988, E.
Louis Werner, Jr. Revocable Intervivos Trust of 1982, The Irrevocable Gift Trusts of the Children of
Thomas and Gail Dooley of 1989, dated April 21, 1997 (collectively, the "Sellers")
2.2 Letter Amendment to Stock Purchase Agreement between Southhampton Enterprises Corp., Southhampton
Enterprises, Inc. and the Sellers, dated June 2, 1997
*3.1 Memorandum of Antigua Enterprises Inc.
3.2 Articles of Antigua Enterprises Inc.
*4.1 Specimen Stock Certificate representing the Common Shares
4.2 Warrant to Purchase 50,000 shares of common stock of Antigua Enterprises Inc., Certificate No. W-#1
issued to Thomas E. Dooley, Jr. as agent for Sellers, dated May 29, 1997
4.3 Warrant to Purchase shares of common stock of Southhampton Enterprises Corp. issued to LaSalle
Business Credit, Inc., dated May 7, 1997
4.3.1 Amendment No. 1 to Warrant, dated May 7, 1997
4.4 Warrant to Purchase shares of common stock of Southhampton Enterprises Corp. issued to Imperial Bank,
dated May 7, 1997
4.4.1 Amendment No. 1 to Warrant, dated May 7, 1997
4.5 Warrant to Purchase shares of common stock of Southhampton Enterprises Corp., issued to The
Cruttenden Roth Bridge Fund, L.L.C., dated May 7, 1997
*4.6 Form of Common Share Purchase Warrant issued in private placement of 162,000 units
*4.7 Form of Common Share Purchase Warrant issued in private placement of 210,000
*4.8 Form of Common Share Purchase Warrant issued in private placement of 4,730,000 shares of Series A.
Preferred
*4.9 Form of Common Share Purchase Warrant issued in private placement of 4,730,000 Shares of Series A
Preferred
*4.10 Form of Common Share Purchase Warrant issued in private placement of 4,730,000 shares of Series A
Preferred
*4.11 Form of Common Share Purchase Warrant issued in private placement of 4,730,000 shares of Series A
Preferred
*4.12 Form of Common Share Purchase Warrant issued in private placement of 151,778 units
*4.13 Form of Common Share Purchase Warrant issued in private placement of 60,000 units
*4.14 Form of Common Share Purchase Warrant issued in private placement of 1,000,000 shares of Series A
Preferred
*4.15 Form of Common Share Purchase Warrant issued in private placement of 1,000,000 shares of Series A
Preferred
*4.16 Form of Common Share Purchase Warrant issued in connection with C$4,200,000 Convertible Debenture
*4.17 Form of Common Share Purchase Warrant issued in connection with $1,791,048.45 Convertible Note
*5.1 Opinion of Stikeman, Elliott
10.1 Registration Rights Agreement between Southhampton Enterprises Corp. and Dooley, as agent, effective
as of May 7, 1997
</TABLE>
Ex - 1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.2 Intercreditor Agreement by and between LaSalle Business Credit, Inc., Sellers, The Cruttenden
Roth Bridge Fund, L.L.C., Imperial Bank, The Antigua Group, Inc., Southhampton Enterprises Corp.
and Southhampton Enterprises, Inc., dated May 7, 1997
10.3 Employment Agreement between The Antigua Group, Inc. and Ronald A. McPherson, dated May 7, 1997
10.4 Employment Agreement between The Antigua Group, Inc. and Gerald K. Whitley, dated May 7, 1997
10.5 Employment Agreement between The Antigua Group, Inc. and L. Steven Haynes, dated June 16, 1997
10.6 Employment Agreement between The Antigua Group, Inc. and Brett Moore, dated May 29, 1997
*10.7 Employment Agreement between The Antigua Group, Inc. and Joseph M. Blanchette, dated June 16, 1997
*10.8 Form of Independent Sales Representative Agreement
10.9 Lease Agreement between D&D Development Co., an Arizona general partnership, and The Antigua
Group, Inc., dated December 1, 1994
10.9.1 Letter Agreement between D&D Development Co., an Arizona general partnership, and The Antigua
Group, Inc., dated September 20, 1996
10.10 McCormick Ranch Industrial Center III Commercial Lease Agreement between Petroleum, Inc. and
Antigua Group, Inc., dated July 26, 1996
10.10.1 Lease Modification Agreement #1 between Petroleum, Inc. and Antigua Group, Inc., dated October 7,
1996
10.10.2 Lease Modification Agreement #2 between Petroleum, Inc. and Antigua Group, Inc., dated January 7,
1997
**10.11 Term Sheet and License Agreement, National Football Leauge Properties, Inc., dated February 27, 1996
10.12 Loan and Security Agreement between LaSalle Business Credit, Inc. And The Antigua Group, Inc. for
$14,275,000, dated January 23, 1997
10.13 Term Note A (Machinery & Equipment) payable to LaSalle Business Credit, Inc. by The Antigua Group,
Inc. in the original principal amount of $775,000, dated January 23, 1997
10.14 Revolving Loan Note payable to LaSalle Business Credit, Inc. by The Antigua Group, Inc. in the original
principal amount of $12,000,000, dated January 23, 1997
10.15 Trademark Security Agreement between LaSalle Business Credit and The Antigua Group, Inc., dated
January 23, 1997
10.16 Modification Agreement between LaSalle Business Credit, Inc. and The Antigua Group, Inc., dated May
7, 1997
10.17 Loan and Security Agreement between LaSalle Business Credit, Inc. and The Antigua Group, Inc. for
$3,500,000, dated May 7, 1997
10.18 Term Note payable to LaSalle Business Credit, Inc. by The Antigua Group, Inc. in the original principal
amount of $3,500,000, dated May 7, 1997
10.19 Continuing Unconditional Guaranty between LaSalle Business Credit, Inc. and Southhampton Enterprises
Corp., dated May 7, 1997
10.20 Continuing Unconditional Guaranty between LaSalle Business Credit, Inc. and Southhampton Enterprises,
Inc., dated May 7, 1997
10.21 Security Agreement between LaSalle Business Credit, Inc. and Southhampton Enterprises Corp., dated
May 7, 1997
10.22 Security Agreement between LaSalle Business Credit, Inc. and Southhampton Enterprises, Inc., dated May
7, 1997
10.23 Trademark Security Agreement between LaSalle Business Credit, Inc. and The Antigua Group, Inc., dated
May 7, 1997
</TABLE>
Ex - 2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.24 Credit Agreement between Imperial Bank, The Antigua Group, Inc. Southhampton Enterprises Corp. and
Southhampton Enterprises, Inc., dated May 7, 1997
10.25 Amendment No. 1 to Credit Agreement and Indemnification Agreement, dated May 30, 1997
10.26 Promissory Note payable to Imperial Bank by The Antigua Group, Inc. in the original principal amount of
$2,500,000, dated May 7, 1997
10.27 Continuing Guarantee and Subordination Agreement between Imperial Bank and Southhampton Enterprises
Corp., dated May 7, 1997
10.28 Continuing Guarantee and Subordination Agreement between Imperial Bank and Southhampton
Enterprises, Inc., dated May 7, 1997
10.29 Security Agreement between Imperial Bank and Southhampton Enterprises Corp., dated May 7, 1997
10.30 Security Agreement between Imperial Bank and Southhampton Enterprises, Inc., dated May 7, 1997
10.31 Security Agreement between Imperial Bank and The Antigua Group, Inc., dated May 7, 1997
10.32 Trademark Security Agreement between Imperial Bank and The Antigua Group, Inc., dated May 7, 1997
10.33 Pledge and Irrevocable Proxy Security Agreement between Imperial Bank and Southhampton Enterprises
Corp., dated May 7, 1997
10.34 Pledge and Irrevocable Proxy Security Agreement between Imperial Bank and Southhampton Enterprises,
Inc., dated May 7, 1997
10.35 Securities Purchase Agreement between The Cruttenden Roth Bridge Fund, L.L.C., The Antigua Group,
Inc., Southhampton Enterprises Corp. and Southhampton Enterprises, Inc., dated May 7, 1997
10.36 Senior Subordinated Secured Note payable to The Cruttenden Roth Bridge Fund, L.L.C. by The Antigua
Group, Inc. in the original principal amount of $1,020,000, dated May 7, 1997
10.37 Guaranty from Southhampton Enterprises Corp. in favor of Cruttenden Roth Bridge Fund, L.L.C., dated
May 7, 1997
10.38 Guaranty from Southhampton Enterprises, Inc. in favor of Cruttenden Roth Bridge Fund, L.L.C., dated
May 7, 1997
10.39 Security and Pledge Agreement between The Cruttenden Roth Bridge Fund, L.L.C. and Southhampton
Enterprises Corp., dated May 7, 1997
10.40 Security and Pledge Agreement between The Cruttenden Roth Bridge Fund, L.L.C. and Southhampton
Enterprises, Inc., dated May 7, 1997
10.41 Security Agreement between The Cruttenden Roth Bridge Fund, L.L.C. and The Antigua Group, Inc.,
dated May 7, 1997
10.42 Promissory Note (Three Year Note) payable to the Sellers by Southhampton Enterprises Corp. in the
original principal amount of $5,198,000, dated May 7, 1997
10.43 Promissory Note (Two Year Note) payable to the Sellers by Southhampton Enterprises Corp. in the
amount of $325,000, dated May 7, 1997
10.44 Promissory Note (Profit Note) payable to the Sellers by Southhampton Enterprises Corp. in the amount of
$855,000, dated May 7, 1997
10.45 Unconditional Guarantee of Payment between the Sellers and Southhampton Enterprises, Inc. and Antigua
Enterprises Inc., dated May 7, 1997
10.46 Security Agreement between Sellers and Southhampton Enterprises Corp., dated May 7, 1997
10.47 Security Agreement between Sellers and Southhampton Enterprises, Inc., dated May 7, 1997
10.48 Security Agreement between Sellers and The Antigua Group, Inc., dated May 7, 1997
10.49 Trademark Security Agreement between Sellers and The Antigua Group, Inc., dated May 7, 1997
10.50 Pledge and Security Agreement and Irrevocable Proxy between the Sellers and Southhampton Enterprises
Corp., dated May 7, 1997
</TABLE>
Ex - 3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.51 Pledge and Security Agreement and Irrevocable Proxy between the Sellers and Southhampton Enterprises,
Inc., dated May 7, 1997
10.52 Amendment to Second Amended and Restated Non-Negotiable Note payable to Gerald K. Whitley by The
Antigua Group, Inc. in the original principal amount of $250,964.25, dated June 16, 1997
10.53 Note Amendment Agreement dated July 1, 1995 and Second Amended and Restated Non-Negotiable Note
between Gerald K. Whitley and The Antigua Group, Inc., in the original principal amount of
$334,619.00, dated January 1, 1993
10.54 Amendment to Second Amended and Restated Non-Negotiable Note payable to Ronald A. McPherson by
The Antigua Group, Inc. in the original principal amount of $250,964.25, dated June 10, 1997
10.55 Note Amendment Agreement dated July 1, 1995 and Second Amended and Restated Non-Negotiable Note
between Ronald A. McPherson and The Antigua Group, Inc., in the original principal amount of
$334,619.00, dated January 1, 1993
11.1 Statement Regarding Computation of Earnings Per Share
16.1 Letter from BDO Dunwoody, Chartered Accountants, dated November 5, 1997
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of BDO Dunwoody, Chartered Accountants
*23.3 Consent of Stikeman, Elliott (contained in their opinion filed as Exhibit 5.1 to this Registration Statement)
24.1 Powers of Attorney (contained on Signatures Page)
*24.2 Certified resolution of the Board of Directors of the Registrant appointing the attorneys-in-fact
*24.3 Power of Attorney of Louis B. Lloyd
*24.4 Power of Attorney of L. Steven Haynes
*24.5 Power of Attorney of Gerald K. Whitley
*24.6 Power of Attorney of J. Christopher Woods
*24.7 Power of Attorney of James E. Miles
*24.8 Power of Attorney of Robert J. McCammon
*24.9 Power of Attorney of James W. Lewis
27 Financial Data Schedule (filed by EDGAR only)
</TABLE>
- ---------------------
* To be filed by amendment.
** Confidential treatment requested for portions of this exhibit.
Ex - 4
Exhibit 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into on April 21, 1997, by and between SOUTHHAMPTON ENTERPRISES CORP., a British
Columbia corporation ("SEC"), SOUTHHAMPTON ENTERPRISES, INC., a Texas
corporation ("SEI"), THOMAS E. DOOLEY, JR., the Chief Executive Officer of The
Antigua Group, Inc., a Nevada corporation ("Antigua") and GAIL DOOLEY, husband
and wife ("Dooley"), THOMAS E. DOOLEY AND GAIL DOOLEY REVOCABLE TRUST OF 1988,
the principal shareholder of Antigua (the "Dooley Trust"), E. LOUIS WERNER JR.
REVOCABLE INTERVIVOS TRUST OF 1982 (the "Werner Trust"), a shareholder of
Antigua, and THE IRREVOCABLE GIFT TRUSTS OF THE CHILDREN OF THOMAS AND GAIL
DOOLEY OF 1989 (the "Dooley Children Trusts"), a shareholder of Antigua.
ARTICLE I
RECITALS
--------
1.1. Present Structure of SEC and SEI. The Common Stock of SEC is
currently listed on the Vancouver Stock Exchange (the "VSE"). SEI's headquarters
are in Dallas, Texas. SEI is a wholly-owned subsidiary of SEC.
1.2 Present Structure of Antigua. Antigua's headquarters are in
Scottsdale, Arizona. Thomas E. Dooley, Jr. is the Chief Executive Officer and a
director of Antigua. Dooley, for the benefit of their minor children, owns a
total of 51,200 shares of Antigua Common Stock. Thomas E. Dooley is the trustee
of the Dooley Trust, which owns a total of 1,653,800 shares of Antigua Common
Stock. E. Louis Werner, Jr. is the trustee of the Werner Trust, which owns
88,600 shares of Antigua
<PAGE>
Common Stock. Bobbi D. Hunter is the trustee for the Dooley Children Trusts,
which collectively own a total of 181,000 shares of Antigua Common Stock.
Dooley, the Dooley Trust, the Dooley Children Trusts and the Werner Trust
(collectively, the "Shareholders") collectively own all of the issued and
outstanding capital stock of Antigua.
1.3 Present Structure of Acquisition. SEC, SEI, Antigua, and Dooley are
parties to a Merger Agreement dated as of July 18, 1996 and amended three times
by the parties in writing effective July 30, 1996 (the "First Amendment"),
September 15, 1996 (the "Second Amendment"), and October 30, 1996 (the "Third
Amendment"). The Merger Agreement, the First Amendment, the Second Amendment and
the Third Amendment are herein collectively referred to as the "Amended Merger
Agreement."
1.4 Revised Structure of Acquisition. The parties have determined that
it is in their respective best interests to structure the acquisition of Antigua
contemplated by the Amended Merger Agreement in the form of a purchase by SEI of
all of the issued and outstanding capital stock of Antigua from the
Shareholders.
NOW, THEREFORE, the parties agree as follows:
ARTICLE II
PURCHASE TERMS
--------------
2.1 Stock Purchase. At the Closing (as defined in Section 1.3 below),
the Shareholders shall sell, and SEI shall purchase, all of the issued and
outstanding capital stock of Antigua (the "Antigua Stock") for the consideration
set forth in Section 2.2 below.
2
<PAGE>
2.2 Purchase Price. The purchase price for the Antigua Stock (the
"Purchase Price") shall be as follows:
a. Cash or other immediately available funds in the
amount of $12,245,000, a total of $750,000 of which
has previously been paid as described in Section 6.7;
b. Promissory Notes in the aggregate principal amount of
$5,523,000, which Promissory Notes shall be in the
form attached collectively hereto as Exhibit 2.2(b);
and
c. A total of 250,000 shares of SEC Common Stock, a
warrant to purchase an additional 250,000 shares of
SEC Common Stock at an exercise price of $1 per
share, and an option to purchase an additional 50,000
shares of SEC Common Stock (subject to adjustment to
reflect the reverse split of SEC Common Stock to be
effected after the Closing Date) at an exercise price
of $1 per share; the form of such warrant and option
are attached hereto as Exhibit 2.2(c).
The purchase price shall be paid at the Closing. Additionally, in the event that
the Shareholders and SEI agree to make an election pursuant to Section 338 (h)
(10) of the Internal Revenue Code pursuant to Section 6.11 hereof, then SEI
shall, following the Closing, pay additional consideration to the Shareholders,
as described more completely in Section 6.11.
2.3 Closing. SEI's purchase of the Antigua Stock (the "Closing") shall
take place at 2:00 p.m. on May 7, 1997 (the "Closing Date") or at such other
time, date or place as shall be mutually agreed upon by the parties.
3
<PAGE>
2.4 Delivery of Certificates. At the Closing, the Shareholders shall
deliver to SEI certificates (duly endorsed for transfer to SEI) for the Antigua
Stock, free and clear of any liens, security interests or other encumbrances.
2.5 Structure as of the Closing. Effective as of the Closing: (a)
Antigua shall be a wholly-owned subsidiary of SEI; and (b) SEI shall be a
wholly-owned subsidiary of SEC.
2.6 Further Assurances. If, at any time after the date hereof, SEC or
SEI shall be advised that any further assignments or assurances or any other
acts or things are necessary or desirable to vest, perfect, confirm or record,
in or to SEC or SEI the title to the Antigua Stock, the Shareholders shall
execute and deliver all such assignments, deeds, endorsements and assurances,
and do such other reasonable things as may be requested by the Board of
Directors of SEC or SEI and are necessary or proper to vest, perfect or confirm
title to the Antigua Stock, and otherwise carry out the purposes of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SEC AND SEI
---------------------------------------------
SEC and SEI hereby jointly and severally represent and warrant to the
Shareholders, and each of them, as follows:
3.1 Organization and Qualification. Each of SEC and SEI is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has the requisite corporate power to
carry on its business as now conducted and presently proposed to be conducted.
4
<PAGE>
3.2 Authority Relative to This Agreement. Each of SEC and SEI has the
requisite corporate power and authority to enter into this Agreement to carry
out its obligations hereunder. The execution and delivery of this Agreement by
SEC and SEI and the consummation by SEC and SEI of the transactions contemplated
hereby have been duly authorized by the respective Boards of Directors of SEC
and SEI, and no other corporate proceedings on the part of SEC or SEI are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by SEC and SEI and constitutes a valid and
binding obligation of each, enforceable in accordance with its terms.
3.3 Consents and Approvals; No Violation. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, violate, conflict with or result in a default under any
provision of (a) SEC's or SEI's Articles of Incorporation or Bylaws, (b) any
agreement, arrangement or understanding, (c) any license, franchise or permit,
or (d) any law, regulation, order, judgment or decree, which would be violated
or breached, or in respect of which a right of termination or acceleration or
any encumbrance on any of SEC's or SEI's assets would be created, other than any
such breaches or violations that will not, individually or in the aggregate,
have a material adverse effect on the business, operations or financial
condition of SEC and its subsidiaries, taken as a whole. Other than in
connection with or in compliance with (a) the corporation laws of the Province
of British Columbia and the State of Texas, and (b) the rules and regulations of
the VSE, or (c) U.S., Canadian or British Columbian securities laws or blue sky
laws, no authorization, consent
5
<PAGE>
or approval of, or filing with, any public body, court or authority is necessary
on the part of SEC or SEI for the consummation by SEC and SEI of the
transactions contemplated by this Agreement, except for such authorizations,
consents, approvals and filings as to which the failure to obtain or make will
not, individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of SEC and its subsidiaries, taken
as a whole.
3.4 Capitalization of SEC and SEI. The authorized equity capitalization
of SEC consists of 100,000,000 shares of SEC Common Stock, no par value per
share, and 30,000,000 shares of SEC Preferred Stock, no par value per share. As
of the Closing Date: (a) 25,064,647 shares of SEC Common Stock will be issued
and outstanding (all of which shares will be fully paid and nonassessable), and
no shares of SEC Common Stock will have been repurchased by SEC; and (b)
5,250,000 shares of SEC Preferred Stock will be issued and outstanding (all of
which shares will be fully paid and nonassessable), and no shares of SEC
Preferred Stock will have been repurchased by SEC. Except as set forth on
Schedule 3.4 hereto, there are no options, warrants, conversion privileges or
other rights, agreements, arrangements or commitments obligating SEC to issue or
sell any shares of capital stock of SEC or securities or obligations of any kind
convertible or exchangeable for any shares of capital stock of SEC, nor are
there any stock appreciation, phantom or similar rights outstanding based upon
the book value or any other attribute of SEC.
3.5 VSE Filings. SEC has previously delivered to the Shareholders
copies of all reports filed by SEC with the VSE since January 1, 1994, which
constitute all reports required to be filed by SEC with the VSE since such date.
As of their respective dates, the documents and reports referred to above did
not contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of SEC included in such documents
6
<PAGE>
and reports were prepared in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects according to Canadian GAAP the financial
position of SEC as of the date thereof and the results of its operations and its
cash flows for the period then ended, in the case of the unaudited interim
financial statements subject to normal year-end audit adjustments and the
absence of complete footnote disclosures.
3.6 Absence of Undisclosed Liabilities. SEC and SEI do not have any
obligations or liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due and regardless of when asserted)
arising out of transactions heretofore entered into, or any action or inaction,
or any state of facts existing, including taxes with respect to or based upon
transactions or events heretofore occurring, except (a) obligations under
contracts or commitments (but not liabilities for breaches thereof), (b)
liabilities or reserves reflected on the consolidated balance sheet dated June
30, 1996 (the "June 30, 1996 Balance Sheet"), (c) liabilities which have arisen
after the date of the June 30, 1996 Balance Sheet in the ordinary course of
business (none of which is an uninsured liability for breach of contract, breach
of warranty, tort, infringement, claim or lawsuit), (d) liabilities otherwise
specifically disclosed in the documents and reports described in Section 3.5
hereof, and (e) liabilities incurred for financings related to this Agreement.
3.7 No Material Adverse Change. Since June 30, 1996, there has been no
material adverse change in the assets, financial condition, operating results,
customer, distributor, employee or supplier relations or business condition of
SEC or SEI.
7
<PAGE>
3.8 Compliance With Laws; Permits; Certain Operations. SEC, SEI and
their respective officers, directors, agents and employees have complied in all
material respects with all applicable laws and regulations which affect the
businesses or any owned or leased properties of SEC or SEI and to which SEC or
SEI may be subject, and no claims have been filed against SEC or SEI alleging a
violation of any such laws or regulations, except as described in the documents
and reports identified in Section 3.5 above. Neither SEC nor SEI has authorized,
given or agreed to give any money, gift or similar benefit (other than
incidental gifts of nominal value) to any actual or potential distributor,
customer, supplier, governmental employee or any other person in a position to
assist or hinder SEC or SEI in connection with any actual or proposed
transaction. SEC and SEI hold all of the material permits, licenses,
certificates and other authorizations of foreign, federal, state and local
governmental agencies required for the conduct of its business or the ownership
or leasing of their respective properties. In particular, but without limiting
the generality of the foregoing, SEC and SEI have not in any material respect
violated, or received a written notice or charge asserting any violation of, any
laws pertaining to occupational health or safety or the environment (including
rules and regulations thereunder).
3.9 Disclosure. Neither this Agreement nor any of the documents
delivered hereunder by SEC or SEI contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained herein
or therein, in light of the circumstances in which they were made, not
misleading, and there is no fact which has not been disclosed to the
Shareholders of which any officer or director of SEC or SEI is aware which
materially affects adversely or could reasonably be
8
<PAGE>
anticipated to materially affect the business, including operating results,
assets, customer, distributor, supplier or employee relations, or business
condition, of SEC or SEI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
--------------------------------------------------
The Shareholders jointly and severally represent and warrant to SEC and
SEI that:
4.1 Organization and Qualification. Antigua is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and has the requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted and presently
proposed to be conducted. The copies of Antigua's Articles of Incorporation and
Bylaws which have been furnished by Antigua to SEC prior to the date of this
Agreement reflect all amendments made thereto and are correct and complete.
Antigua is qualified to do business in every jurisdiction in which the nature of
its business or its ownership of property requires it to be qualified, other
than where the failure to so qualify will not, individually or in the aggregate,
have a material adverse effect on the business, operations or financial
condition of Antigua.
4.2 Authority Relative to This Agreement. Each Shareholder has the full
power and authority to execute and deliver this Agreement and to carry out its
respective obligations hereunder. The execution and delivery of this Agreement
by the Shareholders and the consummation of the transactions contemplated hereby
have been duly authorized by the Shareholders, and no other proceedings are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by the Shareholders and constitutes a valid and
binding obligation of the Shareholders, enforceable against the Shareholders in
accordance with its terms.
9
<PAGE>
4.3 Consents and Approvals; No Violation. Except as disclosed under the
caption "Consents and Approvals" in the disclosure from Antigua to SEC of even
date herewith (the "Disclosure Letter"), the execution, and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, violate, conflict with or result in a default under any provision of
(a) Antigua's Articles of Incorporation or Bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or permit, or (d) any
law, regulation, order, judgment or decree, which would be breached or violated,
or in respect of which a right of termination or acceleration or any encumbrance
on any of Antigua's assets would be created, other than any such breaches or
violations that will not, individually or in the aggregate, have a material
adverse effect on the business, operations or financial condition of Antigua.
Other than in connection with or in compliance with the corporation laws of the
State of Nevada, no authorization, consent or approval of, or filing with, any
public body, court or authority is necessary on the part of Antigua or the
Shareholders to allow the Shareholders to consummate the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make will not,
individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Antigua.
4.4 Capitalization. The authorized equity capitalization of Antigua
consists of 5,000,000 shares of Antigua Common Stock. As of the date hereof,
2,074,600 shares of Antigua Common Stock are issued and outstanding, all of
which shares are (a) validly issued, fully paid and nonassessable, and (b) owned
beneficially and of record as described on Schedule 4.4. Except as disclosed
under the caption "Capitalization" in the Disclosure Letter, there are no
options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating Antigua to issue or sell any shares of
capital stock of Antigua or securities or obligations of any kind convertible
into or exchangeable for any shares
10
<PAGE>
of capital stock of Antigua, nor are there any stock appreciation, phantom or
similar rights outstanding based upon the book value or any other attribute of
Antigua (collectively, "Antigua Options"). Other than as set forth in this
Agreement (including the Exhibits and Schedules hereto), the Shareholders are
not entitled to any preemptive, registration or other similar rights. At or
prior to the Closing, all Antigua Options will be repurchased, satisfied or
otherwise canceled or terminated without payment of any sum, or the incurrence
of any liability for future payment of any sum, by Antigua. As of the Closing,
SEI will own of record and beneficially the Antigua Stock, free and clear of all
liens, security interests or other encumbrances, shareholders' agreements or
voting trusts, and there will not be outstanding any subscriptions, warrants,
options or rights to which any person is or may be entitled to purchase or
otherwise acquire any capital stock of Antigua.
4.5 No Subsidiaries. Antigua does not directly or indirectly have any
material investment in any other corporation, partnership, joint venture or
other business association or entity, and is not subject to any obligation or
requirement to provide for or to make any investment (by loan, capital
contribution or otherwise) in any entity.
4.6 Financial Statements. The Shareholders have caused to be delivered
to SEC the following financial statements of Antigua: (a) audited balance sheets
at December 31, 1996, 1995 and 1994; and (b) audited statements of income,
retained earnings and cash flows for the years ended December 31, 1996, 1995 and
1994. The foregoing financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present in all material respects the financial position of Antigua as of
the dates thereof and the results of its operations and its cash flows for the
periods then ended. Antigua's audited balance sheet as of December 31, 1996 and
Antigua's audited statements of income,
11
<PAGE>
retained earnings and cash flows for the year ended December 31, 1996 are
hereinafter collectively referred to as the "December 31, 1996 Financial
Statements."
4.7 Absence of Undisclosed Liabilities. Antigua does not have any
obligations or liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due and regardless of when asserted)
arising out of transactions heretofore entered into, or any action or inaction,
or any state of facts existing, including taxes with respect to or based upon
transactions or events heretofore occurring, except (a) obligations under
contracts or commitments described in the Disclosure Letter under the caption
"Contracts", or under contracts or commitments which are not required to be
disclosed thereunder (but not liabilities for breaches thereof), (b) liabilities
or reserves reflected on the balance sheet included in the December 31, 1996
Financial Statements, (c) liabilities which have arisen after the date of the
balance sheet included in the December 31, 1996 Financial Statements in the
ordinary course of business (none of which is an uninsured liability for breach
of contract, breach of warranty, tort, infringement, claim or lawsuit), and (d)
liabilities otherwise specifically disclosed in this Agreement or in the
Disclosure Letter.
4.8 No Material Adverse Change. Since December 31, 1996, there has been
no material adverse change in the financial condition, properties, business,
operations, results of operations, or customer, distributor, sales
representative, employee or supplier relations, of Antigua.
4.9 Absence of Certain Developments. Except as set forth under the
caption "Developments" in the Disclosure Letter, since December 31, 1996,
Antigua has not:
a. Redeemed or purchased, directly or indirectly, any
shares of its capital stock, or declared or paid any
dividends or distributions with respect to any shares
of its capital stock.
12
<PAGE>
b. Other than upon the repurchase or other satisfaction
of Antigua Options pursuant to Section 4.4, issued or
sold any of its equity securities, securities
convertible into or exchangeable for its equity
securities, warrants, options or other rights to
acquire its equity securities, or any bonds or other
securities.
c. Borrowed any amount or incurred or become subject to
any material liability, except current liabilities
incurred in the ordinary course of business.
d. Discharged or satisfied any material lien or
encumbrance or paid any material liability, other
than current liabilities paid in the ordinary course
of business.
e. Mortgaged, pledged or subjected to any lien, charge
or other encumbrance, any of its assets with a fair
market value in excess of $10,000, except liens for
current property taxes not yet due and payable.
f. Sold, assigned or transferred (including without
limitation transfers to any employees, shareholders
or affiliates of Antigua) any tangible assets in
excess of $10,000, except in the ordinary course of
business, or canceled any debts or claims in excess
of $10,000.
g. Sold, assigned or transferred (including without
limitation transfers to any employees, shareholders
or affiliates of Antigua) any patents, trademarks,
trade names, copyrights, trade secrets or other
intangible assets, except in the ordinary course of
business, or disclosed any proprietary confidential
information to any person other than SEC or SEI or
employees or agents of Antigua.
h. Suffered any extraordinary loss or waived any rights
of material value, whether or not in the ordinary
course of business or consistent with past practice.
13
<PAGE>
i. Taken any other action or entered into any other
transaction other than in the ordinary course of
business and in accordance with past custom and
practice, or entered into any transaction with any
Insider (as defined in Section 4.21), in each case
involving in excess of $10,000.
j. Suffered any material theft, damage, destruction or
loss of or to any property or properties owned or
used by it, whether or not covered by insurance.
k. Other than in the ordinary course of business and
consistent with past practice, made or granted any
bonus or any wage, salary or compensation increase to
any director, officer, employee who earns more than
$25,000 per year, group of employees or consultant,
or made or granted any increase in any employee
benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement or
adopted any new employee benefit plan or arrangement.
l. Paid, accrued or agreed to pay in the future any sum
under Antigua's profit-sharing plan.
m. Made any capital expenditures or commitments therefor
that in the aggregate exceeded $50,000.
n. Made any loans or advances to, or guarantees for the
benefit of, any persons that in the aggregate
exceeded $10,000.
o. Made charitable contributions or pledges which in the
aggregate exceeded $10,000.
4.10 Title to Properties. Antigua owns good and marketable title to
each of the tangible properties and tangible assets reflected on the balance
sheet included in the December 31, 1996 Financial
14
<PAGE>
Statements or acquired since the date thereof, free and clear of all liens and
encumbrances, except for (A) liens for current taxes not yet due and payable,
(B) liens set forth under the caption "Real Estate" in the Disclosure Letter,
and (C) the properties subject to the leases set forth under the caption
"Leases" in the Disclosure Letter.
4.11 Accounts Receivable. Antigua's notes and accounts receivable
recorded on the balance sheet included in the December 31, 1996 Financial
Statements and those arising since the date thereof are valid receivables and
are collectible in accordance with their terms, net of the reserves recorded on
such balance sheet or thereafter, subject to no valid counterclaims or setoffs.
All reserves for notes and accounts receivable are established in accordance
with generally accepted accounting principles applied consistently with prior
periods.
4.12 Inventories. Except as set forth under the caption "Inventory" in
the Disclosure Letter, the inventories of Antigua recorded on the balance sheet
included in the December 31, 1996 Financial Statements, and the inventory
created or purchased since the date thereof, consists of a quantity and quality
usable and salable in the ordinary course of business, net of the reserves
recorded on the balance sheet or thereafter, is not slow-moving as determined in
accordance with past practices, obsolete or damaged, and is not defective. All
reserves for inventory were established in accordance with generally accepted
accounting principles applied consistently with prior periods.
4.13 Tax Matters. Except as set forth under the caption "Tax Matters"
in the Disclosure Letter, Antigua has filed all federal, foreign, state, county
and local income, excise, property, sales and other tax returns which are
required to be filed by it, and all such returns are true and correct in all
material respects; all taxes due and payable by Antigua have been paid; the
liability for taxes on the balance sheet included in the December 31, 1996
Financial Statements fully reflects Antigua's obligations for taxes as of such
15
<PAGE>
date, and Antigua's provisions for taxes in such balance sheet are sufficient
for all accrued and unpaid taxes as of the date of such balance sheet; Antigua
has paid all taxes due and payable or which it is obligated to withhold from
amounts owing to any employee, creditor, independent contractor, shareholder or
other third party; Antigua has not waived any statute of limitations in respect
of taxes or agreed to any extension of time with respect to a tax assessment or
deficiency; the assessment of any additional taxes for periods for which returns
have been filed is not expected; and there are no unresolved questions or claims
concerning the tax liability of Antigua. Antigua has not made an election under
ss. 341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
Antigua has a valid election in effect to be taxed as an S corporation under the
Code, and there have not been any acts or failures to act that would adversely
impact the validity of that election prior to the Closing Date. No claim has
ever been made by an authority in a jurisdiction where Antigua does not file tax
returns that it is or may be subject to taxation by that jurisdiction. There are
no security interests on any of the assets of Antigua that arose in connection
with any failure (or alleged failure) to pay any tax. Antigua has disclosed on
its federal income tax returns all positions taken therein that could give rise
to a substantial understatement of federal income tax within the meaning of Code
ss.6662.
4.14 Contracts and Commitments.
a. Except as set forth under the caption "Contracts" in
the Disclosure Letter, Antigua is not a party to any
(i) collective bargaining agreement or contract with
any labor union, (ii) bonus, pension, profit sharing,
retirement, or other form of deferred compensation
plan, (iii) hospitalization insurance or similar plan
or practice, whether formal or informal, (iv)
contract for the employment of any officer,
individual employee, or other person on a full-time
or consulting basis or
16
<PAGE>
relative to severance pay for any such person, (v)
agreement or indenture relating to the borrowing of
money in excess of $10,000 or to mortgaging, pledging
or otherwise placing a lien on any of the assets of
Antigua, (vi) guaranty of any obligation for borrowed
money or otherwise, other than endorsements made for
collection, (vii) lease or agreement under which it
is lessor of, or permits any third party to hold or
operate, any property, real or personal, with
aggregate remaining rental payments in excess of
$10,000, (viii) contract or group of related
contracts with the same party for the purchase of
products or services, under which the undelivered
balance of such products and services has a purchase
price in excess of $25,000, (ix) contract or group of
related contracts with the same party for the sale of
products or services under which the undelivered
balance of such products or services has a sales
price in excess of $25,000, (x) other contract or
group of related contracts with the same party
continuing over a period of more than six months from
the date or dates thereof, other than contracts
terminable by it on thirty days' or less notice
without penalty or involving less than $25,000, (xi)
contract which prohibits Antigua from freely engaging
in business anywhere in the world, (xii) sales
representative or distribution agreement, or any
other contract relating to the sale or distribution
of Antigua's products, (xiii) contract, agreement or
understanding with any Insider, (xiv) license
agreement or other agreement providing for the
payment or receipt of royalties or other compensation
by or to Antigua, or (xv) other agreement material to
Antigua's business or not entered into in the
ordinary course of business.
17
<PAGE>
b. Except as specifically disclosed under the caption
"Contracts" in the Disclosure Letter, (i) to the
knowledge of the Shareholders, no contract or
commitment required to be disclosed under such
caption has been breached or canceled by the other
party, (ii) since December 31, 1996, no customer or
supplier has notified Antigua that it will stop or
materially decrease the rate of business done with
Antigua, except for changes in the ordinary course of
Antigua's business, (iii) Antigua has performed in
all material respects all obligations required to be
performed by it in connection with the contracts or
commitments required to be disclosed under such
caption and is not in receipt of any written claim of
default under any contract or commitment required to
be disclosed under such caption, and (iv) Antigua has
no present expectation or intention of not fully
performing any obligation pursuant to any contract or
commitment set forth under such caption.
c. Prior to the date of this Agreement, SEC has been
supplied with a true and correct copy of each written
contract or commitment, and a written description of
each oral contract or commitment, referred to under
the caption "Contracts" in the Disclosure Letter,
together with all amendments, waivers or other
changes thereto.
4.15 Proprietary Rights.
a. Except as set forth under the caption "Proprietary
Rights" in the Disclosure Letter, there are no
patents, patent applications, trademarks, service
marks, trade names, corporate names, copyrights,
trade secrets or other proprietary rights
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owned by Antigua or necessary to the conduct of
Antigua's business as now conducted. Antigua owns and
possesses all rights, titles and interest, or a valid
license, in and to the proprietary rights set forth
under such caption.
b. The Disclosure Letter describes under such caption
all proprietary rights which have been licensed to
third parties and those proprietary rights which are
licensed from third parties. Antigua has taken all
necessary action to protect the proprietary rights
set forth under such caption. Antigua has not
received any written notice of, nor are the
Shareholders aware of any facts which indicate a
probable likelihood of, any infringement,
misappropriation, or conflict from any third party
with respect to Antigua's proprietary rights; Antigua
has not infringed, misappropriated or otherwise
conflicted with any proprietary rights of any third
parties, nor are the Shareholders aware of any
infringement, misappropriation or conflict which will
occur in the continued operation of Antigua; and no
written claim by any third party contesting the
validity of any proprietary rights listed under such
caption has been made, is currently outstanding, or,
to the knowledge of the Shareholders, is threatened.
4.16 Litigation. Except as set forth under the caption "Litigation" in
the Disclosure Letter, there are no actions, suits, proceedings, orders or
investigations pending or, to the knowledge of the Shareholders, threatened
against Antigua, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there is no material basis known to
the Shareholders for any of the foregoing.
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4.17 Brokerage. Except pursuant to an oral agreement with Phil Isbell
concerning certain business combinations, the total compensation payable under
which will not exceed $100,000 (payable by the Shareholders), there are no
claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Antigua or the Shareholders.
4.18 Employment Matters. Antigua has complied in all material respects
with all laws relating to the employment of labor, including provisions thereof
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes. Antigua has no material labor
relations problems pending, its labor relations are satisfactory and no key
executive employee of Antigua and no group of Antigua's employees has notified
Antigua of any plans to terminate his or its employment.
4.19 Employee Benefit Plans.
a. With respect to all employees and former employees of
Antigua, except as set forth under the caption
"Employee Benefits" in the Disclosure Letter, Antigua
does not presently maintain, contribute to or have
any liability (including current or potential
multi-employer plan withdrawal liability) under any
(i) non-qualified deferred compensation or retirement
plan or arrangement which is an "employee pension
benefit plan" as such term is defined in Section 3(2)
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) qualified defined
contribution retirement plan or arrangement which is
an employee pension benefit plan, (iii) qualified
defined benefit pension plan or arrangement which is
an employee pension benefit plan, (iv)
"multi-employer plan" as such term is defined in
Section 3(37) of ERISA, (v) unfunded or funded
medical, health or life
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insurance plan or arrangement for present or future
retirees or present or future terminated employees
which is an "employee welfare benefit plan" as such
term is defined in Section 3(1) of ERISA, (vi)
profit-sharing or other similar plan, or (vii) any
other employee welfare benefit plan.
b. With respect to each of the employee benefit plans
listed in the Disclosure Letter, the Shareholders
have furnished to SEC true and complete copies of (i)
the plan documents and summary plan description, (ii)
the most recent determination letter received from
the Internal Revenue Service, (iii) the latest
actuarial valuation, (iv) the latest financial
statement, (v) the last Form 5500 Annual Report, and
(vi) all related trust agreements, insurance
contracts or other funding agreements which implement
such employee benefit plan. Neither Antigua nor any
of its directors, officers, employees or any other
"fiduciary," as such term is defined in Section 3(21)
of ERISA, has any liability for failure to comply
with ERISA or the Code for any action or failure to
act in connection with the administration or
investment of such plans.
c. With respect to the insurance contracts or funding
agreements which implement any of the employee
benefit plans listed in the Disclosure Letter, such
insurance contracts or funding agreements are fully
insured or the reserves under such contracts are
sufficient to pay claims incurred.
4.20 Insurance. The Disclosure Letter, under the caption "Insurance,"
lists and briefly describes each insurance policy maintained by Antigua with
respect to its properties and assets and sets forth the date of expiration of
each such insurance policy. All of such insurance policies are in full force and
effect and
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Antigua is not in default in any material respect with respect to its
obligations under any of such insurance policies. The insurance coverage of
Antigua is customary for corporations of similar size engaged in similar lines
of businesses.
4.21 Affiliate Transactions. Except as set forth under the caption
"Affiliate Transactions" in the Disclosure Letter, no holder of 5% or more of
any class of stock of Antigua, officer or director of Antigua or, to any
Shareholder's knowledge, any member of the immediate family of any such
shareholder, officer or director, or, to any Shareholder's knowledge, any entity
in which any of such persons owns any beneficial interest (other than a
publicly-held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 5% of the stock of
which is beneficially owned by any of such persons) (collectively "Insiders"),
has any agreement with Antigua (other than at-will employment arrangements) or
any interest in any property, real, personal or mixed, tangible or intangible,
used in or pertaining to the business of Antigua. For purposes of the preceding
sentence, the members of the immediate family of a shareholder, officer or
director consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such shareholder, officer or director.
4.22 Customers and Suppliers. The Disclosure Letter, under the caption
"Customers and Suppliers," lists the 10 largest customers and 10 largest
suppliers of Antigua for 1996, and sets forth opposite the name of each such
customer and supplier the approximate percentage of net sales or purchases, as
the case may be, attributable to such customer or supplier. The Disclosure
Letter also sets forth the forecast of the 10 largest customers and suppliers
for 1997.
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4.23 Officers and Directors; Bank Accounts. The Disclosure Letter,
under the caption "Officers and Directors," lists all officers and directors of
Antigua, all of Antigua's bank accounts, and each authorized signer on such
accounts.
4.24 Compliance with Laws; Permits; Certain Operations. Antigua and its
officers, directors, agents and employees have complied in all material respects
with all applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof which affect the businesses or any owned or
leased properties of Antigua and to which Antigua may be subject, and no claims
have been filed against Antigua alleging a violation of any such laws or
regulations, except as set forth in the Disclosure Letter under the caption
"Compliance." Antigua has not authorized, given or agreed to give any money,
gift or similar benefit (other than incidental gifts of articles of nominal
value) to any actual or potential distributor, customer, supplier, governmental
employee or any other person in a position to assist or hinder Antigua in
connection with any actual or proposed transaction. Antigua holds all of the
material permits, licenses, certificates and other authorizations of foreign,
federal, state and local governmental agencies required for the conducts of its
business or the ownership or leasing of its property, including, without
limitation, permits, licenses, certificates and authorizations of the Federal
Communications Commission and Underwriters Laboratories. In particular, but
without limiting the generality of the foregoing, Antigua has not in any
material respect violated, or received a written notice or charge asserting any
violation of, any laws pertaining to occupational health or safety or the
environment (including rules and regulations thereunder).
4.25 Disclosure. Neither this Agreement, nor any other documents
delivered hereunder by the Shareholders nor the Disclosure Letter contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which
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they were made, not misleading, and there is no fact which has not been
disclosed to SEC of which the Shareholders are aware which materially affects
adversely or could reasonably be anticipated to materially affect adversely the
business, including operating results, assets, customer, distributor, supplier
or employee relations, and business operations, of Antigua.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
----------------------------------------
5.1 Conduct of Business Prior to the Closing. Prior to the Closing,
unless SEC and SEI have otherwise consented (such consent shall not be withheld
unreasonably), or as otherwise provided herein, the Shareholders shall cause
Antigua to take the following actions:
a. Antigua shall continue to conduct operations in the
ordinary and usual course of business, and maintain
its facilities in their current condition.
b. Antigua shall refrain from: (A) issuing, selling,
pledging, disposing of or encumbering (i) any
additional shares of, or any options, warrants,
conversion privileges or rights of any kind to
acquire any shares of, any of its capital stock, or
(ii) any of its assets, except in the ordinary course
of business; (B) amending or proposing to amend its
Articles of Incorporation or Bylaws; (C) splitting,
combining or reclassifying any outstanding shares of
Antigua's Common Stock, or declaring or paying any
dividend or other distribution payable in cash,
stock, property or otherwise with respect to shares
of Antigua's Common Stock; (D) redeeming, purchasing
or acquiring or offering to acquire any shares of
Antigua's Common Stock; (E) acquiring (by merger,
exchange, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership,
joint venture or
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other business organization or division or material
assets thereof; (F) incurring any indebtedness for
borrowed money or issuing any debt securities except
the borrowing of working capital in the ordinary
course of business and consistent with past practice;
(G) making any payment under Promissory Notes to any
employee of Antigua, or (H) entering into or
proposing to enter into or modifying or proposing to
modify in any material respect any material
agreement, arrangement or understanding with respect
to any of the matters set forth in this Section
5.1(b).
c. Except in the ordinary course and consistent with
past practice, Antigua shall refrain from entering
into or modifying any employment, severance or
similar agreements or arrangements with, or granting
any bonuses, salary increases, severance or
termination pay to, any officers, directors,
employees or consultants.
d. Except as required by law, Antigua shall refrain from
adopting or amending any bonus, profit sharing,
compensation, stock option, pension, retirement,
deferred compensation, employment or other employee
benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund
or arrangement for the benefit or welfare of any
director.
e. Antigua will use its best efforts to cause its
current insurance (or reinsurance) policies not to be
canceled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse,
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replacement policies providing coverage substantially
equal to the coverage under the canceled, terminated
or lapsed policies for substantially similar premiums
are in full force and effect.
f. Antigua shall use its reasonable efforts to preserve
intact its business organization and goodwill, keep
available the services of its officers and employees
as a group and maintain satisfactory relationships
with suppliers, distributors, customers and others
having business relationships with it; confer on a
regular and frequent basis with representatives of
SEC and report operational matters and the general
status of ongoing operations to SEC; refrain from
taking any action which would render, or which
reasonably may be expected to render, any
representation or warranty made by it in this
Agreement untrue at, or at any time prior to, the
Closing Date; after discovery by Antigua, notify SEC
of any emergency or other change in the normal course
of its business or in the operation of its properties
and of any governmental or third party complaints,
investigations or hearings known to Antigua (or
communications indicating that the same may be
contemplated) if such emergency, change, complaint,
investigation or hearing would be material,
individually or in the aggregate, to the business,
operations or financial condition of Antigua or the
Shareholders' ability to consummate the transactions
contemplated by this Agreement; and notify SEC if any
Shareholder discovers that any representation or
warranty made by any of them in this Agreement was
when made, or has subsequently become, untrue in any
material respect.
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ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
6.1 Mr. Dooley as Director. SEC and SEI shall cause Tom Dooley to
remain a director of Antigua for a period of at least two years following the
Closing. Upon the Closing, Mr. Dooley shall receive an option to purchase 50,000
shares of SEC Common Stock pursuant to SEC's non-employee director stock option
plan. SEC further agrees that during Mr. Dooley's term as a director of Antigua,
Mr. Dooley shall also participate in (a) SEC's stock option plan, and (b) SEC's
other benefit plans, if any, for non-employee directors to the same extent as
other non-employee directors of SEC.
6.2 Mr. Dooley as Consultant. Following the Closing, Mr. Dooley shall
serve as a consultant to Antigua pursuant to the terms of the Consulting
Agreement attached hereto as Exhibit 6.2.
6.3 Personal Items of Mr. Dooley. Effective as of the Closing, Mr.
Dooley shall be given all right, title and possession of the following items:
Desert Forest Country Club Membership; 1992 Ford Explorer; 1991 Acura NSX;
certain paintings and kachina dolls in Antigua's corporate offices; Phoenix
Coyotes 1996-97 Season Tickets; Phoenix Suns 1996-97 Season Tickets; cellular
phones currently used by Mr. Dooley and his immediate family; and all furniture
and art currently in Mr. Dooley's office. Following the Closing, SEC or Antigua
shall continue to pay the following expenses of Mr. Dooley: COBRA health
insurance policy premiums (for the longest period allowable by law) and
business-related cellular phone service charges for so long as Mr. Dooley
remains a director of Antigua.
6.4 Revised Lease for Facilities. Upon the later of (a) 30 days after
the Closing Date, or (b) Mr. Dooley gaining sole ownership of D&D Development
Company, an Arizona general partnership ("D&D"), SEC shall enter into a lease
for the premises currently leased by Antigua from D&D. The lease shall be for a
term which expires on October 31, 1999, with two one-year options for periods
which shall
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run consecutively from such expiration date. The rental rate payable under the
lease shall be $.45 per square foot until the later of "a" and "b" immediately
above, at which time the rental rate shall automatically convert to $.60 per
square foot. The other material terms of this lease shall be substantially the
same to those in the current lease between Antigua and D&D.
6.5 Vuono Option. At the Closing, SEC will issue to Frank Vuono an
option to purchase 10,000 shares of SEC's Common Stock at an exercise price of
$1 per share. A copy of the foregoing option is attached hereto as Exhibit 6.5.
6.6 Escrow Deposits. Prior to the date hereof, SEC and SEI deposited
the sum of $1,000,000 in an escrow account at Colonial Trust Company in Phoenix
to secure SEC's and SEI's obligations under the Amended Merger Agreement and
this Agreement. Such sum has previously been paid to the Shareholders. Of such
sum (a) $250,000 represents consideration paid to the Shareholders for extending
the Closing Date under the Amended Merger Agreement and this Agreement, and (b)
$750,000 will be applied to the Purchase Price payable at the Closing pursuant
to Section 2.2(a) hereof.
6.7 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using reasonable efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary filings.
6.8 Notification of Certain Matters. Each party will give prompt
written notice to the others of (a) the occurrence or failure to occur of any
event, which occurrence or failure has caused, will cause or is likely to cause
any representation or warranty on its part contained in this Agreement to be
untrue or inaccurate in any material respect at, or at any time prior to, the
Closing Date, and (b) any material failure
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of such party, or any officer, director, shareholder, employee or agent thereof,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder.
6.10 Director and Officer Indemnification; Liability Insurance. SEC
agrees that it will cause Antigua to maintain in effect, for a period of at
least two years following the Closing Date, the rights to indemnification
existing as of the Closing Date under Antigua's Bylaws in favor of its directors
and officers and, for a period of two years following the Closing Date,
liability insurance for Antigua's officers and directors substantially
equivalent to that maintained by SEC for its officers and directors. Any
determination required to be made with respect to whether an indemnified party's
conduct complies with the standards set forth under the Bylaws or applicable
liability insurance policies will be made by independent counsel selected by SEC
and reasonably satisfactory to such indemnified party.
6.11 Section 338 (h) (10) Election. The Shareholders, SEC and SEI agree
that promptly following the Closing the parties will jointly analyze the likely
impact upon the Shareholders and SEI of SEI and the Shareholders making a joint
election under Section 338 (h) (10) of the Code (and any corresponding elections
under state, local or foreign tax law) with respect to the transactions
contemplated by this Agreement. Upon completion of such analysis, if requested
to do so by SEI, the Shareholders agree to negotiate with SEI in good faith an
amount of additional consideration to be paid in cash which would compensate the
Shareholders for: (a) all professional accounting and legal fees incurred by the
Shareholders in making such election; (b) the increase in tax liability
resulting from the difference in tax rates for ordinary and capital gain income
due to an increase in the amount of gain characterized as ordinary income
instead of capital gain income as a result of the Section 338(h)(10) election;
(c) the increase in tax liability resulting from a future decrease in the
capital gains tax rate based on the additional amount of gain recognized at the
time of Closing due to such election; and (d) any interest and penalties
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payable to Federal and state taxing authorities if it is determined that the
gain recognized by the Shareholders from the Section 338(h)(10) election does
not qualify as an installment sale under applicable Federal and state tax law at
such time as such additional liabilities arise..
6.12 Promissory Note for Profits; Payment to Dooley and Cancellation of
Promissory Notes. At the Closing, SEI shall deliver to the Shareholders an
executed Promissory Note in the form attached hereto as Exhibit 6.12(a) in the
principal amount of $855,000. At the Closing, Antigua shall pay to Mr. Dooley
$2,112,000 in immediately available funds and Mr. Dooley shall deliver to
Antigua (for cancellation by Antigua) original Promissory Notes in the original
principal amounts of $1,200,000 and $1,150,000, respectively, copies of which
Promissory Notes are attached collectively hereto as Exhibit 6.12(b).
6.13 Forgiveness of Indebtedness Owed by Mr. Dooley. At the Closing,
Mr. Dooley's indebtedness to Antigua of $125,000 will automatically be canceled,
extinguished and forgiven by Antigua.
6.14 No Further Obligations. Upon the Closing, and the occurrence of
the events required to be performed thereat, neither Antigua nor Dooley shall
have any obligation to the other, contingent or otherwise, for monies owed with
the exception of Antigua's obligations to Dooley as set forth in the Consulting
Agreement attached hereto as Exhibit 6.2.
6.15 Veto Power of Mr. Dooley. Between the Closing Date and the date on
which all amounts required by the Promissory Notes set forth as Exhibits 2.2(b)
and 6.12(a) are paid in full or converted into shares of SEC Common Stock
pursuant to the terms of such Promissory Notes, Mr. Dooley shall have (a) veto
power over all capital expenditures by Antigua and all material changes to its
business that would affect Antigua's ability to repay such Promissory Notes, and
(b) total authority regarding all senior management staffing decisions at the
Company.
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6.16 Access to Information; Confidentiality. At all times from the date
hereof to the Closing Date: (a) SEC and SEI shall each afford the officers,
employees, accountants, counsel and other representatives of the Shareholders
access to all of the properties, books, contracts, commitments and records of
SEC and SEI; and (b) the Shareholders shall cause Antigua to afford the
officers, employees, accountants, counsel and other representatives of SEC and
SEI access to all of the properties, books, contracts, commitments and records
of Antigua. Further, at all times from the date hereof to the Closing Date, SEC
and SEI on the one hand, and the Shareholders and Antigua on the other hand,
shall promptly furnish to the other (i) a copy of each report, schedule,
registration statement or other document filed or received by it during such
period pursuant to the requirements of applicable securities laws, and (ii) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Unless otherwise required by law, the
parties will hold any such information which is nonpublic in confidence until
such time as such information otherwise becomes publicly available through no
wrongful act of either party and will not use such information other than to
evaluate the other party in conjunction with the transactions contemplated by
this Agreement. Additionally, in the event of termination of this Agreement for
any reason, each party (x) will promptly return all nonpublic documents obtained
from the other party, and (y) will refrain from the use or disclosure of any
such confidential information provided hereunder. Subject to the limitations
above, in the event of a termination of this Agreement for any reason, nothing
in this Section 6.16 will preclude a party from developing or offering products
or services competitive with those of the other parties.
6.17 Agreement With Wells Fargo and Bank One. Prior to the date hereof,
the parties have had discussions with Wells Fargo Bank, National Association
("Wells Fargo") and Bank One Arizona, NA ("Bank One") concerning the potential
modification of a Promissory Note dated July 17, 1995 in the
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principal amount of $1,200,000 from Mr. Dooley to Wells Fargo and Bank One (the
"Dooley Bank Note"). Those discussions resulted in a draft Note Modification
Agreement dated March 19, 1997 (the "Draft Note Modification Agreement"), a copy
of which is attached hereto as Exhibit 6.17. The Draft Note Modification
Agreement has not been executed. In the event that Mr. Dooley is successful in
reaching an agreement with Wells Fargo and Bank One pursuant to which (a) the
payment of at least $400,000 of the principal amount of the Dooley Bank Note is
deferred until at least June 27, 1997; and (b) no more than $800,000 is required
to be paid by Mr. Dooley concurrently with the execution of the foregoing
agreement with Bank One and Wells Fargo, then Southhampton shall reimburse Mr.
Dooley for the fees which Mr. Dooley would have had to pay pursuant to Section 2
of the Draft Note Modification Agreement had such Agreement been executed.
6.18 Legal Fees. Antigua has received a bill from the law firm Squire
Sanders & Dempsey relating to legal work performed by such law firm for Antigua.
Antigua has informed Squire Sanders that it does not intend to pay such bill. In
the event that SEC's independent public accountants advise SEC that it may write
off all or a portion of such legal fees, SEC will promptly pay to Mr. Dooley in
cash an amount equal to fifty percent (50%) of the amount written off.
ARTICLE VII
CLOSING
-------
7.1 Conditions of Each Party to Effect the Closing. The respective
obligations of each party to perform at the Closing shall be subject to the
fulfillment at or prior to the Closing of the following conditions:
a. The Shareholders, SEC and SEI shall have obtained all
consents and approvals necessary to the consummation
of this Agreement and the transactions
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contemplated hereby, including without limitation
approval of this Agreement and all financings
undertaken in connection herewith by LaSalle Business
Credit, Inc. ("LaSalle") and the VSE.
b. There shall be no action, proceeding or pending or
actual litigation to enjoin, restrain or prohibit the
consummation of the transactions contemplated by this
Agreement.
c. No party hereto will have terminated this Agreement
as permitted herein.
7.2 Additional Conditions to Obligations of the Shareholders. Each
Shareholder's respective obligation to perform at the Closing is also subject to
satisfaction of the following conditions:
a. The representations and warranties of SEC and SEI set
forth in Article III will be true and correct in all
material respects as of the Closing Date as if made
at and as of the Closing Date, and each of SEC and
SEI will in all material respects have performed each
obligation and agreement and complied with each
covenant to be performed and complied with by it
hereunder at or prior to the Closing.
b. SEC and SEI shall have complied with Section 7.4.
7.3 Additional Conditions to Obligations of SEC and SEI. SEC's and
SEI's obligations to perform at the Closing are also subject to satisfactions of
each of the following conditions:
a. Each of the representations and warranties of the
Shareholders contained in this Agreement will be true
and correct as of the Closing Date as if made at and
as of the Closing Date, and the Shareholders will in
all material respects have performed each obligation
and agreement and complied with each covenant to be
performed and complied with by them hereunder at or
prior to the Closing.
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b. There will have been no material adverse change in
the financial condition, liabilities, operating
results, business prospects, assets, or employee,
customer, licensor or supplier relations of Antigua,
and there will have been no damage, destruction or
loss, individually or in the aggregate, which
materially and adversely affects the properties,
assets or business of Antigua (whether or not covered
by insurance).
c. The Shareholders will have complied with Section 7.5.
7.4 Actions by SEC and SEI. At the Closing, SEC and SEI shall deliver
or cause to be delivered to the Shareholders in form and substance acceptable to
the Shareholders, each of the following instruments or materials, duly executed:
a. A copy of the text of the resolutions by which the
corporate actions on the part of SEC and SEI
necessary to approve this Agreement were taken.
b. An opinion from Tupper, Jonsson and Yeadon, based on
customary reliance and subject to customary
qualifications, including, without limitation, the
fact that the opinion is being rendered with respect
to Canadian and British Columbian law only, to the
effect that:
i. SEC is a corporation duly organized, validly
existing and in good standing under the laws
of the Province of British Columbia.
ii. SEC has the corporate power to execute and
deliver this Agreement and to consummate the
transactions on its part contemplated by
this Agreement. The execution and delivery
of this Agreement and the consummation of
the transactions on its part contemplated
hereby have
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been duly authorized by requisite corporate
action taken on the part of SEC.
iii. This Agreement has been executed and
delivered by SEC and is a valid and binding
agreement of SEC, enforceable against it in
accordance with its terms.
iv. The execution, delivery and performance of
this Agreement by SEC will not constitute a
violation of the Articles of Incorporation
or Bylaws of SEC.
v. SEC has taken all actions and received such
approvals as are required under (y) the laws
of Canada, the Province of British Columbia
or of any other province or Canadian
jurisdiction which are applicable to the
transactions contemplated by this Agreement,
and (z) the rules or regulations of the VSE,
in order for SEC and SEI to consummate the
transactions contemplated by this Agreement,
including without limitation SEI's
acquisition of the Antigua Stock.
c. An opinion from Bonn, Luscher, Padden & Wilkins,
based upon customary reliance and subject to
customary qualifications (including, without
limitation, that such opinion is being rendered in
reliance upon the opinion of Texas counsel to SEC,
which counsel and opinion shall be acceptable to the
Shareholders and their counsel) to the effect that:
i. SEI is a corporation validly existing and in
good standing under the laws of the State of
Texas;
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ii. SEI has the corporate power to execute and
deliver this Agreement and to consummate the
transactions on its part contemplated by
this Agreement. The execution and delivery
of this Agreement and the consummation of
the transactions on its part contemplated
hereby have been duly authorized by
requisite corporate action taken on the part
of SEI;
iii. This Agreement has been executed and
delivered by SEI and is a valid and binding
obligation of SEI, enforceable against it in
accordance with its terms; and
iv. The execution, delivery and performance of
this Agreement by SEI will not constitute a
violation of the Articles of Incorporation
or Bylaws of SEI.
d. Immediately available funds equal to $11,495,000 and
Promissory Notes in the form attached hereto as
Exhibits 2.2(b) and 6.12(a), and a capital
contribution of immediately available funds to
Antigua equal to $2,112,000.
e. A letter or certificate from the VSE approving this
Agreement and the transactions contemplated hereby.
f. All other documents, instruments and writings
required to be delivered by SEC at or prior to the
Closing pursuant to this Agreement or as may be
otherwise reasonably required by the Shareholders in
connection herewith.
36
<PAGE>
7.5 Actions by the Shareholders. At the Closing, the Shareholders shall
deliver or cause to be delivered to SEC and SEI in form and substance acceptable
to SEC and SEI, each of the following instruments or materials, duly executed:
a. Certificates representing the Antigua Stock,
accompanied by stock powers duly executed.
b. A copy of the text of the resolutions by which the
Shareholders and/or the Board of Directors of Antigua
approved this Agreement.
c. An opinion addressed to SEC and SEI from Quarles &
Brady, based on customary reliance and subject to
customary qualifications, including, without
limitation, the fact that the opinion is being
rendered with respect to the State of Arizona law and
the General Corporation Law of the State of Nevada
only, to the effect that:
i. Antigua is a corporation duly organized,
validly existing and in good standing under
the laws of the State of Nevada.
ii. The Shareholders have the power and
authority to execute and deliver this
Agreement and to consummate the transactions
contemplated by this Agreement. The
execution and delivery of this Agreement and
the consummation of the transactions
contemplated hereby have been duly
authorized by requisite action on the part
of the Shareholders.
iii. All of the Antigua Stock has been validly
issued and is fully paid and non-
assessable. To the knowledge of Quarles &
Brady, the Antigua Stock constitutes all of
the issued and outstanding capital stock of
Antigua, and
37
<PAGE>
the delivery of certificates representing
the Antigua Stock accompanied by stock
powers duly executed are in a form effective
to vest in SEI all of the right, title and
interest of the Shareholders in the Antigua
Stock, free and clear of all liens,
encumbrances, restrictions and claims
arising prior to the Closing (including
liens or encumbrances arising under any
shareholders' agreements, stock option,
stock purchase or other similar agreements,
or under Antigua's Articles or Bylaws).
iv. The Agreement has been executed and
delivered by the Shareholders and (assuming
the valid, authorization, execution and
delivery of the Agreement by SEC and SEI) is
a valid and binding agreement upon, and is
enforceable in accordance with its terms
against, the Shareholders.
v. To the knowledge of Quarles & Brady, the
execution, delivery and performance of this
Agreement by the Shareholders will not
constitute a violation of any contract or
agreement to which Antigua, Dooley, the
Dooley Trust or the Dooley Children Trusts
is a party.
d. Letters from each of the NBA, NHL, NFL and MLB
consenting to this Agreement or a change in control
of Antigua.
e. A letter from LaSalle consenting to this Agreement
and the transactions contemplated herein, including
all lending or similar transactions entered into by
SEC and SEI in connection herewith.
f. A letter from Thomas E. Dooley, Jr. dated as of the
Closing Date in which Mr. Dooley shall resign as an
officer and employee of Antigua.
38
<PAGE>
g. A Consulting Agreement between Antigua and Thomas E.
Dooley, Jr. in the form attached hereto as Exhibit
6.2.
h. Employment Agreements between Antigua and each of
Ronald McPherson, Gerald Whitley, Kevin O'Neill,
Brett Moore and Joe Blanchette.
i. All other documents, instruments, releases and
writings required to be delivered by the Shareholders
at or prior to the Closing pursuant to this Agreement
or as may be otherwise reasonably required by SEC or
SEI in connection herewith.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Publicity. All press releases and other public announcements
regarding this Agreement and the transactions contemplated hereby will be
approved by SEC and Dooley, unless otherwise required by law, in which event
each party will use best efforts to enable the other party to review, prior to
dissemination, the form and substance of such announcements.
8.2 Entire Agreement; Amendments; Further Assurances. This Agreement,
including the Disclosure Letter and any documents delivered hereunder or
ancillary hereto, constitutes the entire agreement of the parties pertaining to
the subject matter hereof and supersedes all prior agreements or understandings
of the parties, including without limitation the Amended Merger Agreement. This
Agreement may only be amended by a writing signed by all of the parties hereto,
but any party hereto can waive any right, condition or agreement of which it is
entitled to avail itself, but any such waiver will apply only to the
circumstances involved and only if it is in writing. Each party agrees to
execute and deliver any
39
<PAGE>
other documents and take any other actions necessary to carry out the terms of
this Agreement and to consummate the transactions contemplated herein.
8.3 Successors. Neither this Agreement nor any right, remedy,
obligation or liability hereunder may be assigned by any party without the prior
written consent of the other parties, except that the rights and obligations of
any party who is an individual may pass to his estate upon his death. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt if delivered personally or if
delivered by facsimile (in the latter case, with a copy delivered by first class
mail as described below), the next business day if by express mail (overnight
delivery) or three days after being sent by registered or certified mail, return
receipt requested, postage prepaid, if to SEC or SEI, at SEI's principal
executive offices at 9211 Diplomacy Row, Dallas, Texas 75247, Attention: L.
Steven Haynes, facsimile: 214-631-7297 (with a copy to Bonn, Luscher, Padden &
Wilkins, 805 N. 2nd Street, Phoenix, Arizona 85004, Attention: John M. Welch,
facsimile: 602-254-0656), if to Antigua, Dooley, the Dooley Children Trusts or
the Dooley Trust at 12401 East Saddle Horn Drive, Scottsdale, Arizona 85259,
Attention: Thomas E. Dooley, Jr. (with a copy to Quarles & Brady, One East
Camelback, Suite 400, Phoenix, Arizona 85012, Attention: P. Robert Moya,
facsimile: 602-230-5598), and if to The Werner Trust, to E. Louis Werner at 6900
East Camelback Road, Suite 700, Scottsdale, Arizona 85251 (or at such other
address for a party as shall be specified by notice hereunder).
8.5 Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the laws of the State of Arizona, without
regard to conflict of law principles; provided, however, that all matters
pertaining exclusively to the corporate governance of a party will be governed
40
<PAGE>
by the laws of the state or province of its incorporation. In the event that any
provision hereof is held to be invalid, void or illegal by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement, the remaining provisions shall be construed to preserve the
intent and purposes of this Agreement and the parties will negotiate in good
faith to modify the provision, covenant, term or restriction held to be invalid,
void or illegal to preserve each party's anticipated benefits under this
Agreement.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 Interpretation. This Agreement has been prepared and negotiations
in connection herewith have been carried on by the joint efforts of the parties
hereto and their respective counsel. This Agreement is to be construed fairly
and not strictly for or against any of the parties hereto. The articles and
section headings contained in this Agreement are for convenience of reference
only, and shall not effect the meaning or interpretation of any provision
hereof. As used in this Agreement, the masculine, feminine and neuter genders
will be deemed to include the others if the context requires.
8.8 Disclosure Generally. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be deemed
to constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant, or agreement contained herein. The inclusion
of any information in any written disclosure provided hereunder shall not be
deemed to be an admission or acknowledgment by a party, in and of itself, that
such information is material to or outside of the ordinary course of the
business of such party. The Disclosure Letter and any written information
provided by SEC hereunder shall be divided into paragraphs corresponding to the
sections of this
41
<PAGE>
Agreement. Disclosure in any paragraph of the Disclosure Letter or SEC's written
information shall constitute disclosure for purposes of all other paragraphs
thereof.
8.9 Survival of Representations and Warranties. The representations and
warranties of the parties shall survive the Closing for a period of 24 months
from the Closing Date.
8.10 Fees and Expenses. The parties shall bear their own fees and
expenses in connection with this Agreement and the Amended Merger Agreement;
provided, however, that at the Closing SEI shall reimburse the Shareholders for
fifty percent (50%) of Antigua's legal fees incurred in connection with the
Amended Merger Agreement and this Agreement.
/ / /
/ / /
/ / /
42
<PAGE>
DATED on April 21, 1997.
SOUTHHAMPTON ENTERPRISES CORP.
By: /s/ L. Steven Haynes
------------------------
L. Steven Haynes
Its Chief Executive Officer
SOUTHHAMPTON ENTERPRISES, INC.
By: /s/ L. Steven Haynes
------------------------
L. Steven Haynes
Its Chief Executive Officer
THOMAS E. DOOLEY AND GAIL DOOLEY
REVOCABLE TRUST OF 1988
By: /s/ Thomas E. Dooley, Jr.
-----------------------------
Thomas E. Dooley, Jr.
Its
------------------------
43
<PAGE>
E. LOUIS WERNER JR. REVOCABLE
INTERVIVOS TRUST OF 1982
By: /s/ E. Louis Werner, Jr.
----------------------------
E. Louis Werner, Jr.
Its Trustee
IRREVOCABLE GIFT TRUSTS OF THE
CHILDREN OF THOMAS AND GAIL DOOLEY
OF 1989
By: /s/ Bobbi D. Hunter
----------------------
Bobbi D. Hunter
Its Trustee
/s/ THOMAS E. DOOLEY
-------------------------
THOMAS E. DOOLEY, as
custodian for Kim L. Dooley
/s/ THOMAS E. DOOLEY
--------------------------
THOMAS E. DOOLEY, as
custodian for Shawn T. Dooley
SHAREHOLDERS
/s/ THOMAS E. DOOLEY, JR.
----------------------------------
THOMAS E. DOOLEY, JR., an individual
/s/ GAIL DOOLEY
----------------------------------
GAIL DOOLEY, an individual
44
Exhibit 2.2
June 2, 1997
Mr. L. Steven Haynes
Southhampton Enterprises Corp.
Southhampton Enterprises, Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Re: Amendment to Stock Purchase Agreement dated April 21, 1997
(the "Agreement")
Dear Steven:
As you know, in order to keep the transactions contemplated by the
Agreement in place, it is necessary to amend the Escrow Agreement dated as of
May 29, 1997 (the "Escrow Agreement") before the end of the day. Before we can
complete the amendment to the Escrow Agreement, it is necessary for us to reduce
certain new agreements to writing. While we understand that these agreements
will also require formal amendments to the Stock Purchase Agreement, and certain
other documents, nevertheless, we agree to the following additional terms and
conditions. Except as otherwise stated herein, terms beginning with initial
capital letters shall have the definitions ascribed to them in the Agreement.
1. Documentation. The agreements contained in this letter will be covered
by fully executed and binding amendments to existing documents or new documents,
as appropriate, as soon as practicable, but in any event by the close of
business in Phoenix, AZ, on Monday, June 9, 1997.
2. Earnest Money. SEI, SEC and you agree and acknowledge that the $1
million deposited in Colonial Trust Company, as described in Section 6.6 of the
Agreement, plus an additional $1 million, which will be deposited in the Escrow
created by the Escrow Agreement on or before June 4, 1997, shall belong to the
Shareholders regardless of whether the Closing occurs. If the Closing occurs on
or before June 16, 1997, $1,000,000 of such funds shall be treated as Required
Equity Funds, as described in the Escrow Agreement, $750,000 of such funds shall
be credited toward the purchase price, and the remaining $250,000 belongs to the
Shareholders as a non-refundable deposit. If the Closing fails to occur by June
16, 1997, that portion of such funds not already due to the Shareholders shall
be paid to the Shareholders in consideration of their agreement, as evidenced by
the Amended Escrow Agreement and this letter, to extend the Closing Date to June
16, 1997.
3. Additional Payments and Actions. Whether or not the Closing occurs, SEI
or SEC will on or before the dates indicated do all of the following:
<PAGE>
a. Promptly after the Closing, or by June 30, 1997 if no Closing occurs,
pay an additional $50,000 toward the legal and accounting fees incurred by the
Shareholders or Antigua in connection with the transactions contemplated by the
Agreement, including any of such fees that have been paid previously.
b. Beginning on the date of this letter, use its best and continuing
efforts to collect for and on behalf of Antigua the $73,175 owed by Golf Sport
International.
c. On or before June 6, 1997, pay to Mr. Dooley as agent for the
Shareholders, $3,000 for costs associated with the buyout of Sherrill Maxwell's
stock options.
d. If the Closing occurs, an additional amount shall be paid by SEC or SEI
to Mr. Dooley on behalf of the Shareholders equal to 10% interest on $13.670
million, from June 2, 1997, until all of such $13.670 million has been paid to
the Shareholders.
e. If the Closing occurs, an additional amount shall be paid by SEC or SEI
to Mr. Dooley on behalf of the Shareholders equal to the amount of interest that
would have accrued on the Promissory Notes (attached to the Agreement as Exhbit
2.2(b) in the aggregate amount of $5,523,000), had such notes been in effect
from June 2, 1997 to the Closing.
4. Accelerated Bonus. Upon closing, an amount equal to the available
portion of Antigua's existing credit line in excess of $1 million shall be paid
immediately, in cash, to Mr. Dooley, which amount shall be credited to the bonus
payable pursuant to his Consulting Agreement, as further described in the side
letter agreement from Joseph Kirk and Stephen Haynes on behalf of SEC and SEI
dated May 7, 1997.
5. Acknowledgment of Responsibility. SEI, SEC and you acknowledge that SEI
and SEC have the responsibility for obtaining VSE's consent for the transactions
contemplated by the Agreement and that none of the delays relating to the
Closing are the responsibility or fault of the Shareholders, or any of them, or
Antigua, and that, instead, the Shareholders and Antigua have fully performed,
as contemplated by the Agreement and the Escrow Agreement through the date of
this letter.
6. Guaranties. The Promissory Notes contemplated by Section 2.2 of the
Agreement, plus the obligations in Article VI of the Agreement shall be
guaranteed personally by you and by Mr. Louis Lloyd, using a form of guarantee
acceptable to the Shareholders. Additionally, at the Closing and quarterly
thereafter, until all guaranteed amounts have been paid in full, you and Mr.
Lloyd will deliver to M. Dooley on behalf of the Shareholders, your and his
financial statements in a form reasonably acceptable to Mr. Dooley.
<PAGE>
If this letter describes our new agreements accurately, please signify
your consent and agreement in the spaces indicated and return a fully executed
copy to me.
Very truly yours,
/s/ Thomas E. Dooley, Jr.
Thomas E. Dooley, Jr.
Accepted and Agreed to:
/s/ L. Steven Haynes
L. Steven Haynes, acting
as CEO of SEI and SEC, and
individually.
/s/ Louis Lloyd
Louis Lloyd, acting as Chairman
of SEC, and individually.
Exhibit 3.2
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA 318692
[SEAL]
Province of British Columbia
Ministry of Consumer and Corporate Affairs
Registrar of Companies
Company Act
Certificate of Incorporation
I HEREBY CERTIFY THAT
FAIR HARBOUR MINING CORPORATION
HAS THIS DAY BEEN INCORPORATED UNDER THE COMPANY ACT
GIVEN UNDER MY HAND AN SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 9TH DAY OF DECEMBER, 1986
/S/ M.A. JORRE DE ST. JORRE
[SEAL] M. A. JORRE DE ST. JORRE
REGISTRAR OF COMPANIES
<PAGE>
ARTICLES
OF
FAIR HARBOUR MINING CORPORATION
-------------------------------
TABLE OF CONTENTS
-----------------
PART ARTICLE SUBJECT
- ---- ------- -------
1 INTERPRETATION
1.1 Definition
Construction of Words
1.2 Definitions same as Company Act
1.3 Interpretation Act Rules of Construction Apply
2 SHARES
2.1 Member entitled to Certificate
2.2 Replacement of Lost or Defaced Certificate
2.3 Execution of Certificate
2.4 Recognition of Trusts
3 ISSUE OF SHARES
3.1 Directors Authorized
3.2 Conditions of Allotment
3.3 Commissions and Brokerage
3.4 Conditions of Issue
4 SHARE REGISTERS
4.1 Registers of Members, Transfers and Allotments
4.2 Branch Registers of Members
4.3 No Closing of Register of Members
5 TRANSFER AND TRANSMISSION OF SHARES
5.1 Transfer of Shares
5.2 Execution of Instrument of Transfer
5.3 Enquiry as to Title not Required
5.4 Submission of Instruments of Transfer
5.5 Transfer Fee
5.6 Personal Representative Recognized on Death
5.7 Death or Bankruptcy
5.8 Persons in Representative Capacity
<PAGE>
6 ALTERATION OF CAPITAL
6.1 Increase of Authorized Capital
6.2 Other Capital Alterations
6.3 Creation, Variation and Abrogation of Special
Rights and Restrictions
6.4 Consent of Class Required
6.5 Special Rights of Conversion
6.6 Class Meetings of Members
7 PURCHASE AND REDEMPTION OF SHARES
7.1 Company Authorized to Purchase or Redeem its
Shares
7.2 & 7.3 Redemption of Shares
8 BORROWING
8.1 Powers of Directors
8.2 Special Rights Attached to and Negotiability
of Debt Obligations
8.3 Register of Debentureholders
8.4 Execution of Debt Obligations
8.5 Register of Indebtedness
9 GENERAL MEETINGS
9.1 Annual General Meetings
9.2 Waiver of Annual General Meetings
9.3 Classification of General Meetings
9.4 Calling of Meetings
9.5 Advance Notice for Election of Directors
9.6 Notice for General Meetings
9.7 Waiver or Reduction of Notice
9.8 Notice of Special Business at General Meeting
10 PROCEEDINGS AT GENERAL MEETINGS
10.1 Special Business
10.2 Requirement of Quorum
10.3 Quorum
10.4 Lack of Quorum
10.5 Chairman
10.6 Alternate Chairman
10.7 Adjournments
10.8 Resolutions Need Not be Seconded
10.9 Decisions by Show of Hands or Poll
<PAGE>
10.10 Casting Vote
10.11 Manner of Taking Poll
10.12 Retention of Ballots Cast on a Poll
10.13 Casting of Votes
10.14 Ordinary Resolution Sufficient
11 VOTES OF MEMBERS
11.1 Number of Votes Per Share or Member
11.2 Votes of Persons in Representative Capacity
11.3 Representative of a Corporate Member
11.4 Votes by Joint Holders
11.5 Votes by Committee for a Member
11.6 Appointment of Proxyholders
11.7 Execution of Form of Proxy
11.8 Deposit of Proxy
11.9 Form of Proxy
11.10 Validity of Proxy Vote
11.11 Revocation of Proxy
12 DIRECTORS
12.1 Number of Directors
12.2 Remuneration of Expense of Directors
12.3 Qualification of Directors
13 ELECTION AND REMOVAL OF DIRECTORS
13.1 Election at Annual General Meetings
13.2 Eligibility of Retiring Directors
13.3 Continuance of Directors
13.4 Election of Less than Required Number of
Directors
13.5 Filling a Casual Vacancy
13.6 Additional Directors
13.7 Alternate Directors
13.8 Termination of Directorship
13.9 Removal of Directors
14 POWERS AND DUTIES OF DIRECTORS
14.1 Management of Affairs and Business
14.2 Appointment of Attorney
<PAGE>
15 DISCLOSURE OF INTEREST OF DIRECTORS
15.1 Disclosure of Conflicting Interest
15.2 Voting and Quorum re Proposed Contract
15.3 Director may hold Office or Place of Profit
with Company
15.4 Director Acting in Professional Capacity
15.5 Director Receiving Remuneration from other
Interests
16 PROCEEDINGS OF DIRECTORS
16.1 Chairman and Alternate
16.2 Meetings - Procedure
16.3 Meetings by Conference Telephone
16.4 Notice of Meeting
16.5 Waiver of Notice of Meetings
16.6 Quorum
16.7 Continuing Directors may Act During Vacancy
16.8 Validity of Acts of Directors
16.9 Resolution in Writing Effective
17 EXECUTIVE AND OTHER COMMITTEES
17.1 Appointment of Executive Committee
17.2 Appointment of Committees
17.3 Procedure at Meetings
18 OFFICERS
18.1 President and Secretary Required
18.2 Persons Holding More than One Office and
Remuneration
18.3 Disclosure of Conflicting Interest
19 INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
19.1 Indemnification of Directors
19.2 Indemnification of Officers, Employees, Agents
19.3 Indemnification not invalidated by non-
compliance
19.4 Company may purchase Insurance
<PAGE>
20 DIVIDENDS AND RESERVES
20.1 Declaration of Dividends
20.2 Declared Dividend Date
20.3 Proportionate to Number of Shares Held
20.4 Reserves
20.5 Receipts from Joint Holders
20.6 No Interest on Dividends
20.7 Payment of Dividends
20.8 Capitalization of Undistributed Surplus
21 DOCUMENTS, RECORDS AND REPORTS
21.1 Documents to be Kept
21.2 Accounts to be Kept
21.3 Inspection of Accounts
21.4 & 21.5 Financial Statements and Reports
22 NOTICES
22.1 Method of Giving Notice
22.2 Notice of Joint Holder
22.3 Notice to Personal Representative
22.4 Persons to Receive Notice
23 RECORD DATES
23.1 Record Date
23.2 No Closure of Register of Members
24 SEAL
24.1 Affixation of Seal to Documents
24.2 Mechanical Reproduction of Signatures
24.3 Official Seal for Other Jurisdictions
25 PROHIBITIONS
25.1(1) No Securities to be Offered to the Public
25.2(2) Restrictions on Transfers of Shares
<PAGE>
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
OF
FAIR HARBOUR MINING CORPORATION
-------------------------------
PART 1
INTERPRETATION
--------------
1.1 In these Articles, unless there is something in the subject or context
inconsistent therewith:
"Board" and "the Directors" or "the directors" mean the Directors or sole
Director of the Company for the time being.
"Company Act" means the Company Act of the Province of British Columbia as
from time to time enacted and all amendments thereto and includes the
regulations made pursuant thereto.
"seal" means the common seal of the Company.
"month" means calendar month.
"registered owner" or "registered holder" when used with respect to a share
in the authorized capital of the Company means the person registered in the
register of members in respect of such share.
Expressions referring to writing shall be construed as including references
to printing, lithography, typewriting, photography and other modes of
representing or reproducing words in a visible form.
Words importing the singular include the plural and vice versa; and words
importing male persons include female persons and words importing persons shall
include corporations.
1.2 The definitions in the Company Act on the date these articles become
effective shall, with the necessary changes and so far as applicable, apply to
these articles.
1.3 The Rules of Construction contained in the Interpretation Act shall
apply, mutatis mutandis, to the interpretation of these Articles.
<PAGE>
PART 2
SHARES AND SHARE CERTIFICATES
-----------------------------
2.1 Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him; provided that, in
respect of a share or shares held jointly by several persons, the Company shall
not be bound to issue more than one certificate, and delivery of a certificate
for a share to one of several joint registered holders or to his duly authorized
agent shall be sufficient delivery to all; and provided further that the Company
shall not be bound to issue certificates representing redeemable shares, if such
shares are to be redeemed within one month of the date on which they were
allotted. Any share certificate may be sent through the mail by registered
prepaid mail to the member entitled thereto, and neither the Company nor any
transfer agent shall be liable for any loss occasioned to the member owing to
any such share certificate so sent being lost in the mail or stolen.
2.2 If a share certificate
(i) is worn out or defaced, the Directors shall, upon production to them of
the said certificate and upon such other terms, if any, as they may think
fit, order the said certificate to be canceled and shall issue a new
certificate in lieu thereof;
(ii) is lost, stolen or destroyed, then, upon proof thereof to the
satisfaction of the Directors and upon such indemnity, if any, as the
Directors deem adequate being given, a new share certificate in lieu
thereof shall be issued to the person entitled to such lost, stolen or
destroyed certificate; or
(iii) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company issue
to his name two or more certificates, each representing a specified number
of shares and in the aggregate representing the same number of shares as
the certificate so surrendered, the Company shall cancel the certificate so
surrendered and issue in lieu thereof certificates in accordance with such
request.
Such sum, not exceeding one dollar, as the Directors may from time to time fix,
shall be paid to the Company for each certificate to be issued under this
Article.
2.3 Every share certificate shall be signed manually by at least one
officer or Director of the Company, or by or on behalf of a registrar, branch
registrar, transfer agent or branch transfer agent of the Company and any
additional signatures may be printed or otherwise mechanically reproduced and,
in such event, a certificate so signed is as valid as if signed manually,
notwithstanding that any person whose signature is so printed or
<PAGE>
mechanically reproduced shall have ceased to hold the office that he is stated
on such certificate to hold at the date of the issue of a share certificate.
2.4 Except as required by law, statute or these Articles no person shall be
recognized by the Company as holding any share upon any trust, and the Company
shall not be bound by or compelled in any way to recognize (even when having
notice thereof) any equitable contingent, future or partial interest in any
share or in any fractional part of a share or (except only as by law, statute or
these Articles provides or as ordered by a court of competent jurisdiction) any
other rights in respect of any share except an absolute right to the entirety
thereof in its registered holder.
PART 3
ISSUE OF SHARES
---------------
3.1 Subject to Article 3.2 and to any director to the contrary contained in
a resolution passed at a general meeting authorizing any increase or alteration
of capital, the shares shall be under the control of the Directors who may,
subject to the rights of the holders of the shares of the Company for the time
being issued, issue, allot, sell or otherwise dispose of, and/or grant options
on or otherwise deal in, shares authorized but not outstanding at such times, to
such persons (including Directors), in such manner, upon such terms and
conditions, and at such price or for such consideration, as they, in their
absolute discretion, may determine.
3.2 If the Company is, or becomes, a company which is not a reporting
company and the Directors are required by the Company Act before allotting any
shares to offer them pro rata to the members, the Directors shall, before
allotting any shares, comply with the applicable provisions of the Company Act.
3.3 Subject to the provisions of the Company Act, the Company, or the
Directors on behalf of the Company, may pay a commission or allow a discount to
any person in consideration of his subscribing or agreeing to subscribe, whether
absolutely or conditionally, for any shares in the Company, or procuring or
agreeing to procure subscriptions, whether absolutely or conditionally, for any
such shares, provided that, if the Company is not a specially limited company,
the rate of the commission and discount shall not in the aggregate exceed 25 per
centum of the amount of the subscription price per shares.
3.4 No share may be issued until it is fully paid and the Company shall
have received the full consideration therefor in cash, property or past services
actually performed for the Company. The value of property or services for the
purpose of this Article shall be the value determined by the Directors by
resolution to be, in all circumstances of the transaction, the fair market value
thereof.
<PAGE>
PART 4
SHARE REGISTERS
---------------
4.1 The Company shall keep or cause to be kept a register of members, a
register of transfers and a register of allotments within British Columbia, all
as required by the Company Act, and may combine one or more of such registers.
If the Company's capital shall consist of more than one class of shares, a
separate register of members, register of transfers and register of allotments
may be kept in respect of each class of shares. The Directors on behalf of the
Company may appoint a trust company to keep the register of members, register of
transfers and register of allotments or, if there is more than one class of
shares, the Directors may appoint a trust company, which need not be the same
trust company, to keep the register of members, the register of transfers and
the register of allotments for each class of share. The Directors on behalf of
the Company may also appoint one or more trust companies, including the trust
company which keeps the said registers of its shares or of a class thereof, as
transfer agent for its shares or such class thereof, as the case may be, and the
same or another trust company or companies as registrar for its shares of such
class thereof, as the case may be. The Directors may terminate the appointment
of any such trust company at any time and may appoint another trust company in
its place.
4.2 Unless prohibited by the Company Act, the Company may keep or cause to
be kept one or more branch registers of members at such place or places as the
Directors may from time to time determine.
4.3 The Company shall not at any time close its register of members.
PART 5
TRANSFER AND TRANSMISSION OF SHARES
-----------------------------------
5.1 Subject to the provisions of the Memorandum and of these Articles that
may be applicable, any member may transfer any of his shares by instrument in
writing executed by or on behalf of such member and delivered to the Company or
its transfer agent. The instrument of transfer of any share of the Company shall
be in the form, if any, on the back of the Company's share certificates or in
such other form as the Directors may from time to time approve. Except to the
extent that the Company Act may otherwise provide, the transferor shall be
deemed to remain the holder of the shares until the name of the transferee is
entered in the register of members or a branch register of members in respect
thereof.
5.2 The signature of the registered owner of any shares, or of his duly
authorized attorney, upon an authorized instrument of transfer, shall constitute
a complete and sufficient authority to
<PAGE>
the Company, its directors, officers and agents to register, in the name of the
transferee as named in the instrument of transfer, the number of shares
specified therein or, if no number is specified, all the shares of the
registered owner represented by share certificate deposited with the instrument
of transfer. If no transferee is named in the instrument of transfer, the
instrument of transfer shall constitute a complete and sufficient authority to
the Company, its directors, officers and agents to register, in the name of the
person in whose behalf any certificate for the shares to be transferred is
deposited with the Company for the purpose of having the transfer registered,
the number of shares specified in the instrument of transfer or, if no number is
specified, all the shares represented by all share certificates deposited with
the instrument of transfer.
5.3 Neither the Company nor any Director, officer or agent thereof shall be
bound to inquire into the title of the person named in the form of transfer as
transferee, or, if no person is named therein as transferee, of the person on
whose behalf the certificate is deposited with the Company for the purpose of
having the transfer registered or be liable to any claim by such registered
owner or by any intermediate owner or holder of the certificate or of any of the
shares represented thereby or any interest therein for registering the transfer,
and the transfer, when registered, shall confer upon the person in whose name
the shares have been registered a valid title to such shares.
5.4 Every instrument of transfer shall be executed by the transferor and
left at the registered office of the Company or at the office of its transfer
agent or registrar for registration together with the share certificate for the
shares to be transferred and such other evidence, if any, as the Directors or
the transfer agent or registrar may require to prove the title of the transferor
or his right to transfer the shares and the right of the transferee to have the
transfer registered. All instruments of transfer where the transfer is
registered shall be retained by the Company or its transfer agent or registrar
and any instrument of transfer, where the transfer is not registered, shall be
returned to the person depositing the same together with the share certificate
which accompanied the same when tendered for registration.
5.5 There shall be paid to the Company in respect of the registration of
any transfer such sum, if any, as the Directors may from time to time determine.
5.6 In the case of the death of a member, the survivor or survivors where
the deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall be the only
persons recognized by the Company as having any title to his interest in the
shares. Before recognizing any legal personal representative the Directors may
require him to obtain a grant of probate or letters of administration in British
Columbia.
<PAGE>
5.7 Upon the death or bankruptcy of a member, his personal representative
or trustee in bankruptcy, although not a member, shall have the same rights,
privileges and obligations that attach to the shares formerly held by the
deceased or bankrupt member if the documents required by the Company Act shall
have been deposited at the Company's registered office.
5.8 Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall, upon such documents and evidence being produced to
the Company as the Company Act requires or who becomes entitled to a share as a
result of an order of a Court of competent jurisdiction or a statute has the
right either to be registered as a member in his representative capacity in
respect of such share, or, if he is a personal representative, instead of being
registered himself, to make such transfer of the share as the deceased or
bankrupt person could have made; but the Directors shall, as regards a transfer
by a personal representative or trustee in bankruptcy, have the same right, if
any, to decline or suspend registration of a transferee as they would have in
the case of a transfer of a share by the deceased or bankrupt person before the
death or bankruptcy.
PART 6
ALTERATION OF CAPITAL
---------------------
6.1 The Company may by ordinary resolution filed with the Registrar amend
its Memorandum to increase the authorized capital of the Company by:
(i) creating shares with par value or shares without par value, or both;
(ii) increasing the number of shares with par value or shares without par
value, or both; or
(iii)increasing the par value of a class of shares with par value, if no
shares of that class are issued.
6.2 The Company may by special resolution alter its Memorandum to
subdivide, consolidate, change from shares with par value to shares without par
value, or from shares without par value to shares with par value, or change the
designation of, all or any of its shares but only to such extent, in such manner
and with such consents of members holding a class of shares which is the subject
of or affected by such alteration, as the Company Act provides.
6.3 The Company may alter its Memorandum or these Articles:
(i) by special resolution, to create, define and attach special rights ro
restrictions to any shares, and
(ii) by special resolution and by otherwise complying with any applicable
provision of its Memorandum or these Articles,
<PAGE>
to vary or abrogate any special rights and restrictions attached to
any shares
and in each case by filing a certified copy of such resolution with the
Registrar but no right or special right attached to any issued shares shall be
prejudiced or interfered with unless all members holding shares of each class
whose right or special right is so prejudiced or interfered with consent thereto
in writing, or unless a resolution consenting thereto is passed at a separate
class meeting of the holders of the shares of each such class by a majority of
three-fourths, or such greater majority as may be specified by the special
rights attached to the class of shares, of the votes cast at the separate class
meeting.
6.4 Notwithstanding such consent in writing or such resolution, no such
alteration shall be valid as to any part of the issued shares of any class
unless the holders of the rest of the issued shares of such class either all
consent thereto in writing or consent thereto by a resolution passed by the
votes of members holding three-fourths of the rest of such shares.
6.5 If the Company is or becomes a reporting company, no resolution to
create, vary or abrogate any special right of conversion attaching to any class
of shares shall be submitted to any meeting of members unless, if so required by
the Company Act, the British Columbia Securities Commission shall have consented
to the resolution.
6.6 Unless these Articles otherwise provide, the provisions of these
Articles relating to general meetings shall apply, with the necessary changes
and so far as they are applicable, to a class meeting of members holding a
particular class of shares but the quorum at a class meeting shall be one person
holding or representing by proxy one-third of the shares affected.
PART 7
PURCHASE AND REDEMPTION OF SHARES
---------------------------------
7.1 Subject to the special rights and restrictions attached to any class of
shares, the Company may, by a resolution of the Directors and in compliance with
the Company Act, purchase any of its shares at the price and upon the terms
specified in such resolution or redeem any class of its shares in accordance
with the special rights and restrictions attaching thereto. No such purchase or
redemption shall be made if the Company is insolvent at the time of the proposed
purchase or redemption or if the proposed purchase or redemption would render
the Company insolvent. Unless the shares are to be purchased through a stock
exchange or the Company is purchasing the shares from dissenting members
pursuant to the requirements of the Company Act, the Company shall make its
offer to purchase pro rata to every member who holds shares of the class or
kind, as the case may be, to be purchased.
<PAGE>
7.2 If the Company proposes at its option to redeem some but not all of the
shares of any class, the Directors may, subject to the special rights and
restrictions attached to such class of shares, decide the manner in which the
shares to be redeemed shall be selected.
7.3 Subject to the provisions of the Company Act, any shares purchased or
redeemed by the Company may be sold or issued by it, but, while such shares are
held by the Company, it shall not exercise any note in respect of these shares
and no dividend shall be paid thereon.
PART 8
BORROWING POWERS
----------------
8.1 The Directors may from time to time on behalf of the Company
(i) borrow money in such manner and amount, on such security, from such
sources and upon such terms and conditions as they think fit,
(ii) issue bonds, debentures, and other debt obligations either outright
or as security for any liability or obligation of the Company or any
other person, and
(iii) mortgage, charge, whether by way of specific or floating charge, or
give other security on the undertaking, or on the whole or any part
of the property and assets, of the Company (both present and future).
8.2 Any bonds, debentures or other debt obligations of the Company may be
issued at a discount, premium or otherwise, and with any special privileges as
to redemption, surrender, drawing, allotment of or conversion into or exchange
for shares or other securities, attending and voting at general meetings of the
Company, appointment of Directors or otherwise and may by their terms be
assignable free from any equities between the Company and the person to whom
they were issued or any subsequent holder thereof, all as the Directors may
determine.
8.3 The Company shall keep or cause to be kept within the Province of
British Columbia in accordance with the Company Act a register of its debentures
and a register of debentureholders, which registers may be combined, and subject
to the provisions of the Company Act, may keep or cause to be kept one or more
branch registers of its debentureholders at such place or places as the
Directors may from time to time determine and the Directors may by resolution,
regulation or otherwise make such provisions as they think fit respecting the
keeping of such branch registers.
<PAGE>
8.4 Every bond, debenture or other debt obligation of the Company shall be
signed manually by at least one Director or officer of the Company or by or on
behalf of a trustee, registrar, branch registrar, transfer agent or branch
transfer agent for the bond, debenture or other debt obligation appointed by the
Company or under any instrument under which the bond, debenture or other debt
obligation is issued and any additional signatures may be printed or otherwise
mechanically reproduced thereon and, in such event, a bond, debenture or other
debt obligation so signed is as valid as if signed manually notwithstanding that
any person whose signature is so printed or mechanically reproduced shall have
ceased to hold the office that he is stated on such bond, debenture or other
debt obligation to hold at the date of the issue thereof.
8.5 The Company shall keep or cause to be kept a register of its
indebtedness to every Director or officer of the Company or an associate of any
of them in accordance with the provisions of the Company Act.
PART 9
GENERAL MEETINGS
----------------
9.1 Subject to any extensions of time permitted pursuant to the Company
Act, the first annual general meeting of the Company shall be held within
fifteen months from the date of incorporation and thereafter an annual general
meeting shall be held once in every calendar year at such time (not being more
than thirteen months after the holding of the last preceding annual general
meeting) and place as may be determined by the Directors.
9.2 If the Company is, or becomes, a company which is not a reporting
company and all the members entitled to attend and vote at an annual general
meeting consent in writing to all the business which is required or desired to
be transacted at the meeting, the meeting need not be held.
9.3 All general meetings other than annual general meetings are herein
referred to as and may be called extraordinary general meetings.
9.4 The Directors may, whenever they think fit, convene an extraordinary
general meeting. An extraordinary general meeting, if requisitioned in
accordance with the Company Act, shall be convened by the Directors or, if not
convened by the Directors, may be convened by the requisitionists as provided in
the Company Act.
9.5 If the Company is or becomes a reporting company, advance notice of any
general meeting at which Directors are to be elected shall be published in the
manner required by the Company Act.
9.6 A notice convening a general meeting specifying the place, the day, and
the hour of the meeting, and, in case of special business, the general nature of
that business, shall be
<PAGE>
given as provided in the Company Act and in the manner hereinafter in these
Articles mentioned, or in such other manner (if any) as may be prescribed by
ordinary resolution, whether previous notice thereof has been given or not, to
such persons as are entitled by law or under these Articles to receive such
notice from the Company. Accidental omission to give notice of a meeting to, or
the non-receipt of notice of a meeting, by any member shall not invalidate the
proceedings at that meeting.
9.7 All the members of the Company entitled to attend and vote at a general
meeting may, by unanimous consent in writing given before, during or after the
meeting, or if they are present at the meeting by unanimous vote, waive or
reduce the period of notice of such meeting and an entry in the minute book of
such waiver or reduction shall be sufficient evidence of the due convening of
the meeting.
9.8 Except as otherwise provided by the Company Act, where any special
business at a general meeting includes considering, approving, ratifying,
adopting or authorizing any document or the execution thereof or the giving of
effect thereto, the notice convening the meeting shall, with respect to such
document, be sufficient if it states that a copy of the document or proposed
document is or will be available for inspection by members at the registered
office or records office of the Company or at some other place in British
Columbia designated in the notice during usual business hours up to the date of
such general meeting.
PART 10
PROCEEDINGS AT GENERAL MEETINGS
-------------------------------
10.1 All business shall be deemed special business which is transacted at
(i) an extraordinary general meeting other than the conduct of and voting
at, such meeting; and
(ii) an annual general meeting, with the exception of the conduct of, and
voting at, such meeting, the consideration of the financial statement
and of the respective reports of the Directors and Auditor, fixing or
changing the number of directors, approval of a motion to elect two or
more directors by a single resolution, the election of Directors, the
appointment of the Auditor, the fixing of the remuneration of the
Auditor and such other business as by these Articles or the Company
Act may be transacted at a general meeting without prior notice
thereof being given to the members or any business which is brought
under consideration by the report of the Directors.
10.2 No business, other than election of the chairman or the adjournment of
the meeting, shall be transacted at any general
<PAGE>
meeting unless a quorum of members, entitled to attend and vote, is present at
the commencement of the meeting, but the quorum need not be present throughout
the meeting.
10.3 Save as herein otherwise provided, a quorum shall be two members or
proxyholders representing two members, or one member and a proxyholder
representing another member. The Directors, the Secretary or, in his absence, an
Assistant Secretary, and the solicitor of the Company shall be entitled to
attend at any general meeting but no such person shall be counted in the quorum
or be entitled to vote at any general meeting unless he shall be a member or
proxyholder entitled to vote thereat.
10.4 If within half an hour from the time appointed for a general meeting a
quorum is not present, the meeting, if convened upon the requisition of members,
shall be dissolved. In any other case it shall stand adjourned to the same day
in the next week, at the same time and place, and, if at the adjourned meeting a
quorum is not present within half an hour from the time appointed for the
meeting, the person or persons present and being, or representing by proxy, a
member or members entitled to attend and vote at the meeting shall be a quorum.
10.5 The Chairman of the Board, if any, or in his absence the President of
the Company or in his absence a Vice-President of the Company, if any, shall be
entitled to preside as chairman at every general meeting of the Company.
10.6 If at any general meeting neither the Chairman of the Board nor
President nor a Vice-President is present within fifteen minutes after the time
appointed for holding the meeting or is willing to act as chairman, the
Directors present shall choose some one of their number to be chairman or if all
the Directors present decline to take the chair or shall fail to so choose or if
no Director be present, the members present shall choose one of their number to
be chairman.
10.7 The chairman may and shall, if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left unfinished at
the meeting from which the adjournment took place. When a meeting is adjourned
for thirty days or more, notice, but not "advance notice", of the adjourned
meeting shall be given as in the case of an original meeting. Save as aforesaid,
it shall not be necessary to give any notice of an adjourned meeting or of the
business to be transacted at an adjourned meeting.
10.8 No motion proposed at a general meeting need be seconded and the
chairman may propose or second a motion.
10.9 Subject to the provisions of the Company Act, at any general meeting a
resolution put to the vote of the meeting shall be decided on a show of hands,
unless (before or on the declaration
<PAGE>
of the result of the show of hands) a poll is directed by the chairman or
demanded by at least one member entitled to vote who is present in person or by
proxy. The chairman shall declare to the meeting the decision on every question
in accordance with the result of the show of hands or the poll, and such
decision shall be entered in the book of proceedings of the Company. A
declaration by the chairman that a resolution has been carried, or carried
unanimously, or by a particular majority, or lost or not carried by a particular
majority and an entry to that effect in the book of proceedings of the Company
shall be conclusive evidence of the fact without proof of the number or
proportion of the votes recorded in favour of, or against, that resolution.
10.10 In the case of an equality of votes, whether on a show of hands or on
a poll, the chairman of the meeting at which the show of hands takes place or at
which the poll is demanded shall not be entitled to a second or casting vote.
10.11 No poll may be demanded on the election of a chairman. A poll
demanded on a question of adjournment shall be taken forthwith. A poll demanded
on any other question shall be taken as soon as, in the opinion of the chairman,
is reasonably convenient, but in no event later than seven days after the
meeting and at such time and place and in such manner as the chairman of the
meeting directs. The result of the poll shall be deemed to be the resolution of
and passed at the meeting at which the poll was demanded. Any business other
than that upon which the poll has been demanded may be proceeded with pending
the taking of the poll. A demand for a poll may be withdrawn. In any dispute as
to the admission or rejection of a vote the decision of the chairman made in
good faith shall be final and conclusive.
10.12 Every ballot cast upon a poll and every proxy appointing a
proxyholder who casts a ballot upon a poll shall be retained by the Secretary
for such period and be subject to such inspection as the Company Act may
provide.
10.13 On a poll a person entitled to cast more than one vote need not, if
he votes, use all his votes or cast all the votes he uses in the same way.
10.14 Unless the Company Act, the Memorandum or these Articles otherwise
provide, any action to be taken by a resolution of the members may be taken by
an ordinary resolution.
PART 11
VOTES OF MEMBERS
----------------
11.1 Subject to any special voting rights or restrictions attached to any
class of shares and the restrictions on joint registered holders of shares, on a
show of hands every member who is present in person and entitled to vote thereat
shall have one vote and on a poll every member shall have one vote for each
share
<PAGE>
of which he is the registered holder and may exercise such vote either in person
or by proxyholder.
11.2 Any person who is not registered as a member but is entitled to vote
at any general meeting in respect of a share, may vote the share in the same
manner as if he were a member; but, unless the Directors have previously
admitted his right to vote at that meeting in respect of the share, he shall
satisfy the directors of his right to vote the share before the time for holding
the meeting, or adjourned meeting, as the case may be, at which he proposes to
vote.
11.3 Any corporation not being a subsidiary which is a member of the
Company may by resolution of its directors or other governing body authorize
such person as it thinks fit to act as its representative at any general meeting
or class meeting. The person so authorized shall be entitled to exercise in
respect of and at such meeting the same powers on behalf of the corporation
which he represents as that corporation could exercise if it were an individual
member of the Company personally present, including, without limitation, the
right, unless restricted by such resolution, to appoint a proxyholder to
represent such corporation, and shall be counted for the purpose of forming a
quorum if present at the meeting. Evidence of the appointment of any such
representative may be sent to the Company by written instrument, telegram, telex
or any method of transmitting legibly recorded messages. Notwithstanding the
foregoing, a corporation being a member may appoint a proxyholder.
11.4 In the case of joint registered holders of a share the vote of the
senior who exercises a vote, whether in person or by proxyholder, shall be
accepted to the exclusion of the votes of the other joint registered holders;
and for this purpose seniority shall be determined by the order in which the
names stand in the register of members. Several legal personal representatives
of a deceased member whose shares are registered in his sole name shall for the
purpose of this Article be deemed joint registered holders.
11.5 A member of unsound mind entitled to attend and vote, in respect of
whom an order has been made by any court having jurisdiction, may vote, whether
on a show of hands or on a poll, by his committee, curator bonis, or other
person in the nature of a committee or curator bonis appointed by that court,
and any such committee, curator bonis, or other person may appoint a
proxyholder.
11.6 A member holding more than one share in respect of which he is
entitled to vote shall be entitled to appoint one or more (but not more than
five) proxyholders to attend, act and vote for him on the same occasion. If such
a member should appoint more than one proxyholder for the same occasion he shall
specify the number of shares each proxyholder shall be entitled to vote. A
member may also appoint one or more alternate proxyholders to act in the place
and stead of an absent proxyholder.
<PAGE>
11.7 A form of proxy shall be in writing under the hand of the appointor or
of his attorney duly authorized in writing, or, if the appointor is a
corporation, either under the seal of the corporation or under the hand of a
duly authorized officer or attorney. A proxyholder need not be a member of the
Company if
(i) the Company is at the time a reporting company, or
(ii) the member appointing the proxyholder is a corporation, or
(iii) the Company shall have at the time only one member, or
(iv) the persons present in person or by proxy and entitled to vote at the
meeting by resolution permit the proxyholder to attend and vote; for
the purpose of such resolution the proxyholder shall be counted in
the quorum but shall not be entitled to vote,
and in all other cases a proxyholder must be a member.
11.8 A form of proxy and the power of attorney or other authority, if any,
under which it is signed or a notarially certified copy thereof shall be
deposited at the registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting, not less than 48
hours (excluding Saturdays, Sundays and holidays) before the time for holding
the meeting in respect of which the person named in the instrument is appointed.
In addition to any other method of depositing proxies provided for in these
Articles, the Directors may from time to time by resolution make regulations
relating to the depositing the proxies not exceeding 48 hours (excluding
Saturdays, Sundays and holidays) preceding the meeting or adjourned meeting
specified in the notice calling a meeting of members and providing for
particulars of such proxies to be sent to the Company or any agent of the
Company in writing or by letter, telegram, telex or any method of transmitting
legibly recorded messages so as to arrive before the commencement of the meeting
or adjourned meeting at the office of the Company or of any agent of the Company
appointed for the purpose of receiving such particulars and providing that
proxies so deposited may be acted upon as though the proxies themselves were
deposited as required by this Part and votes given in accordance with such
regulations shall be valid and shall be counted.
11.9 Unless the Company Act or any other statute or law which is applicable
to the Company or to any class of its shares requires any other form of proxy, a
proxy, whether for a specified meeting or otherwise, shall be in the form
following, but may also be in any other form that the Directors or the chairman
of the meeting shall approve:
<PAGE>
(Name of Company)
The undersigned, being a member of the above named Company,
hereby appoints or failing him as proxyholder for the
undersigned to attend, act and vote for and on behalf of the
undersigned at the general meeting of the Company to be held
on the ____ day of __________, 19__ and any adjournment thereof.
Signed this ____day of __________, 19__.
(Signature of Member)
11.10 A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving the proxy
or the revocation of the proxy or of the authority under which the form of proxy
was executed or the transfer of the share in respect of which the proxy is
given, provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered office of the
Company or by the Chairman of the meeting or adjourned meeting for which the
proxy was given before the vote is taken.
11.11 Every proxy may be revoked by an instrument in writing:
(i) executed by the member giving the same or by his attorney authorized
in writing or, where the member is a corporation, by a duly authorized
officer or attorney of the corporation; and
(ii) delivered either at the registered office of the Company at any time
up to and including the last business day preceding the day of the
meeting, or any adjournment thereof at which the proxy is to be used,
or to the chairman of the meeting on the day of the meeting or any
adjournment thereof before any vote in respect of which the proxy is
to be used shall have been taken
or in any other manner provided by law.
PART 12
DIRECTORS
---------
12.1 The subscribers to the Memorandum of the Company are the first
Directors. The Directors to succeed the first Directors may be appointed in
writing by a majority of the subscribers to the Memorandum or at a meeting of
the subscribers, or if not so appointed, they shall be elected by the members
entitled to vote on the election of the Directors and the number of Directors
shall be the same as the number of Directors so appointed or elected. The
<PAGE>
number of Directors, excluding additional Directors, may be fixed or changed
from time to time by directors resolution or by ordinary resolution, whether
previous notice thereof has been given or not, but notwithstanding anything
contained in these Articles the number of Directors shall never be less than one
or, if the Company is or becomes a reporting company, less than three.
12.2 The remuneration of the Directors as such may from time to time be
determined by the Directors or, if the Directors shall so decide, by the
members. Such remuneration may be in addition to any salary or other
remuneration paid to any officer or employee of the Company as such who is also
a Director. The Directors shall be repaid such reasonable travelling, hotel and
other expenses as they incur in and about the business of the Company and if any
Director shall perform any professional or other services for the Company that
in the opinion of the Directors are outside the ordinary duties of a Director or
shall otherwise be specially occupied in or about the Company's business, he may
be paid a remuneration to be fixed by the Board, or, at the option of such
Director, by the Company in general meeting, and such remuneration may be either
in addition to, or in substitution for any other remuneration that he may be
entitled to receive. The Directors on behalf of the Company, unless otherwise
determined by ordinary resolution, may pay a gratuity or pension or allowance on
retirement to any Director who has held any salaried office or place of profit
with the Company or to his spouse or dependents and may make contributions to
any fund and pay premiums for the purchase or provision of any such gratuity,
pension or allowance.
12.3 A director shall not be required to hold a share in the capital of the
Company as qualification for his office but shall be qualified as required by
the Company Act, to become or act as a Director.
PART 13
ELECTION AND REMOVAL
OR DIRECTORS
13.1 At each annual general meeting of the Company all Directors shall
retire and the members entitled to vote thereat shall elect a Board of Directors
consisting of the number of Directors for the time being fixed pursuant to these
Articles. If the Company is, or becomes, a company that is not a reporting
company and the business to be transacted at any annual general meeting is
consented to in writing by all the members who are entitled to attend and vote
thereat such annual general meeting shall be deemed for the purpose of this Part
to have been held on such written consent becoming effective.
13.2 A retiring Director shall be eligible for re-election.
<PAGE>
13.3 Where the Company fails to hold an annual general meeting in
accordance with the Company Act, the Directors then in office shall be deemed to
have been elected or appointed as Directors on the last day on which the annual
general meeting could have been held pursuant to these Articles and they may
hold office until other Directors are appointed or elected or until the day on
which the next annual general meeting is held.
13.4 If at any general meeting at which there should be an election of
Directors, the places of any of the retiring Directors are not filled by such
election, such of the retiring Directors who are not re-elected as may be
requested by the newly-elected Directors shall, if willing to do so, continue in
office to complete the number of Directors for the time being fixed pursuant to
these Articles until further new Directors are elected at a general meeting
convened for the purpose. If any such election or continuance of Directors does
not result in the election or continuance of the number of Directors for the
time being fixed pursuant to these Articles such number shall be fixed at the
number of Directors actually elected or continued in office.
13.5 Any casual vacancy occurring in the Board of Directors may be filled
by the remaining Directors or Director.
13.6 Between successive annual general meetings the Directors shall have
power to appoint one or more additional Directors but not more than one-third of
the number of Directors fixes pursuant to these Articles and in effect at the
last general meeting at which Directors were elected. Any Director so appointed
shall hold office only until the next following annual general meeting of the
Company, but shall be eligible for election at such meeting and so long as he is
an additional Director the number of Directors shall be increased accordingly.
13.7 Any Director may by instrument in writing delivered to the Company
appoint any person to be his alternate to act in his place at meetings of the
Directors at which he is not present unless the Directors shall have reasonably
disapproved the appointment of such person as an alternate Director and shall
have given notice to that effect to the Director appointing the alternate
Director within a reasonable time after delivery of such instrument to the
Company. Every such alternate shall be entitled to notice of meetings of the
Directors and to attend and vote as a Director at a meeting at which the person
appointing him is not personally present, and, if he is a Director, to have a
separate vote on behalf of the Director he is representing in addition to his
own vote. A Director may at any time by instrument, telegram, telex or any
method of transmitting legibly recorded messages delivered to the Company revoke
the appointment of an alternate appointed by him. The remuneration payable to
such an alternate shall be payable out of the remuneration of the Director
appointing him.
13.8 The office of Director shall be vacated if the Director:
<PAGE>
(i) resigns his office by notice in writing delivered to the registered
office of the Company; or
(ii) is convicted of an indictable offence and the other Directors shall
have resolved to remove him;
(iii) ceases to be qualified to act as a Director pursuant to the Company
Act.
13.9 The Company may by special resolution remove any Director before the
expiration of his period of office, and may by an ordinary resolution appoint
another person in his stead. In addition, the Company may, between Annual
General meetings, elect as many Directors as may be necessary to fill any
vacancy in the Board of Directors, including, without limitation, a vacancy
created by the passing of an ordinary resolution pursuant to these Articles to
increase the number of Directors.
PART 14
POWERS AND DUTIES OF DIRECTORS
------------------------------
14.1 The Directors shall manage, or supervise the management of, the
affairs and business of the Company and shall have the authority to exercise all
such powers of the Company as are not, by the Company Act or by the Memorandum
or these Articles, required to be exercised by the Company in general meeting.
14.2 The Directors may from time to time by power of attorney or other
instrument under the seal, appoint any person to be the attorney of the Company
for such purposes, and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Directors under these Articles
and excepting the powers of the Directors relating to the constitution of the
Board and of any of its committees and the appointment or removal of officers
and the power to declare dividends) and for such period, with such remuneration
and subject to such conditions as the Directors may think fit, and any such
appointment may be made in favour of any of the Directors or any of the members
of the Company or in favour of any corporation, or of any of the members,
directors, nominees or managers of any corporation, firm or joint venture and
any such power of attorney may contain such provisions for the protection or
convenience of persons dealing with such attorney as the Directors think fit.
Any such attorney may be authorized by the Directors to sub-delegate all or any
of the powers, authorities and discretions for the time being vested in him.
PART 15
DISCLOSURE OF INTEREST OF DIRECTORS
-----------------------------------
<PAGE>
15.1 A Director who is, in any way, directly or indirectly interested in an
existing or proposed contract or transaction with the Company or who holds any
office or possesses any property whereby, directly or indirectly, a duty or
interest might be created to conflict with his duty or interest as a Director
shall declare the nature and extent of his interest in such contract or
transaction or of the conflict or potential conflict with his duty and interest
as a Director, as the case may be, in accordance with the provisions of the
Company Act.
15.2 A Director shall not vote in respect of any such contract or
transaction with the Company in which he is interested and if he shall do so his
vote shall not be counted, but he shall be counted in the quorum present at the
meeting at which such vote is taken. Subject to the provisions of the Company
Act, the foregoing prohibitions shall not apply to
(i) any such contract or transaction relating to a loan to the Company,
which a Director or a specified corporation or a specified firm in
which he has an interest has guaranteed or joined in guaranteeing the
repayment of the loan or any part of the loan;
(ii) any contract or transaction made or to be made with, or for the
benefit of a holding corporation or subsidiary corporation of which a
Director is a director;
(iii) any contract by a Director to subscribe for or underwrite shares or
debentures to be issued by the Company or a subsidiary of the
Company, or any contract, arrangement or transaction in which a
Director is, directly or indirectly, interested if all the other
Directors are also, directly or indirectly interested in the
contract, arrangement or transaction;
(iv) determining the remuneration of the Directors;
(v) purchasing and maintaining insurance to cover Directors against
liability incurred by them as Directors; or
(vi) the indemnification of any Director by the Company.
These exceptions may from time to time be suspended or amended to any extent
approved by the Company in general meeting and permitted by the Company Act,
either generally or in respect of any particular contract or transaction or for
any particular period.
15.3 A Director may hold any office or place of profit with the Company
(other then the office of auditor of the Company) in conjunction with his office
of Director for such period and on such terms (as to remuneration or otherwise)
as the Directors may
<PAGE>
determine and no Director or intended Director shall be disqualified by his
office from contracting with the Company either with regard to his tenure of any
such other office or place of profit or as vendor, purchaser or otherwise, and,
subject to compliance with the provisions of the Company Act, no contract or
transaction entered into by or on behalf of the Company in which a Director is
in any way interested shall be liable to be voided by reason thereof.
15.4 Subject to compliance with the provisions of the Company Act, a
Directory or his firm may act in a professional capacity for the Company (except
as auditor of the Company) and he or his firm shall be entitled to remuneration
for professional services as if he were not a Director.
15.5 A Director may be or become a director or other officer or employee
of, or otherwise interested in, any corporation or firm in which the Company may
be interested as a shareholder or otherwise, and, subject to compliance with the
provisions of the Company Act, such Director shall not be accountable to the
Company for any remuneration or other benefits received by him as director,
officer or employee of, or from his interest in, such other corporation or firm,
unless the Company in general meeting otherwise directs.
PART 16
PROCEEDINGS OF DIRECTORS
------------------------
16.1 The Chairman of the Board, if any, or in his absence, the President
shall preside as chairman at every meeting of the Directors, or if there is no
Chairman of the Board or neither the Chairman of the Board nor the President is
present within fifteen minutes of the time appointed for holding the meeting or
is unwilling to act as chairman, or, if the Chairman of the Board, if any, and
the President have advised the Secretary that they will not be present at the
meeting, the Directors present shall choose one of their number to be chairman
of the meeting.
16.2 The Directors may meet together for the dispatch of business, adjourn
and otherwise regular their meetings, as they think fit. Questions arising at
any meeting shall be decided by a majority of votes. In case of an equality of
votes the chairman shall not have a second or casting vote. Meetings of the
Board held at regular intervals may be held at such place, at such time and upon
such notice (if any) as the Board may by resolution from time to time determine.
16.3 A Director may participate in a meeting of the Board or of any
committee of the Directors by means of conference telephones or other
communications facilities by means of which all Directors participating in the
meeting can hear each other and provided that all such Directors agree to such
participation. A Director participating in a meeting in accordance with this
Article
<PAGE>
shall be deemed to be present at the meeting and to have so agreed and shall be
counted in the quorum therefor and be entitled to speak and vote thereat.
16.4 A Director may, and the Secretary or an Assistant Secretary upon
request of a Director shall, call a meeting of the Board at any time. Reasonable
notice of such meeting specifying the place, day and hour of such meeting shall
be given by mail, postage prepaid, addressed to each of the Directors and
alternate Directors at his address as it appears on the books of the Company or
by leaving it at his usual business or residential address or by telephone,
telegram, telex, or any method of transmitting legibly recorded messages. It
shall not be necessary to give notice of a meeting of Directors to any Director
or alternate Director (i) who is at the time not in the Province of British
Columbia, or (ii) if such meeting is to be held immediately following a general
meeting at which such Director shall have been elected or is the meeting of
Directors at which such Director is appointed.
16.5 Any Director of the Company may file with the Secretary a document
executed by him waiving notice of any past, present, or future meeting or
meetings of the Directors being, or required to have been, sent to him and may
at any time withdraw such waiver with respect to meetings held thereafter. After
filing such waiver with respect to future meetings and until such waiver is
withdrawn no notice need be given to such Director and, unless the Director
otherwise requires in writing to the Secretary, to his alternate Director of any
meeting of Directors and all meetings of the Directors so held shall be deemed
not to be improperly called or constituted by reason of notice not having been
given to such Director or alternate Director.
16.6 The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and if not so fixed shall be two
directors or, if the number of Directors is fixed at one, shall be one Director.
16.7 The continuing Directors may act notwithstanding any vacancy in their
body, but, if and so long as their number is reduced below the number fixed
pursuant to these Articles as the necessary quorum of Directors, the continuing
Directors may act for the purpose of increasing the number of Directors to that
number, or of summoning a general meeting of the Company, but for no other
purpose.
16.8 Subject to the provisions of the Company Act, all acts done by any
meeting of the Directors or of a committee of Directors, or by any person acting
as a Director, shall, notwithstanding that it be afterwards discovered that
there was some defect in the qualification, election or appointment of any such
Directors or of the members of such committee or person acting as aforesaid, or
that they are or any of them were disqualified, be as valid as if every such
person had been duly elected or appointed and was qualified to be a Director.
<PAGE>
16.9 A resolution consented to in writing, whether by document, telegram,
telex or any method of transmitting legibly recorded messages or other means, by
all of the Directors shall be as valid and effectual as if it had been passed at
a meeting of the Directors duly called and held. Such resolution may be in two
or more counterparts which together shall be deemed to constitute one resolution
in writing. Such resolution shall be filed with the minutes of the proceedings
of the Directors and shall be effective on the date stated thereon or on the
latest date stated on any counterpart.
PART 17
EXECUTIVE AND OTHER COMMITTEES
------------------------------
17.1 The directors may by resolution appoint an Executive Committee to
consist of such member or members of their body as they think fit, which
committee shall have, and may exercise during the intervals between the meetings
of the Board, all the powers vested in the Board except the power to fill
vacancies in the Board, the power to change the membership of, or fill vacancies
in, said Committee or any other committee of the Board and such other powers, if
any, as may be specified in the resolution. The said Committee shall keep
regular minutes of its transactions and shall cause them to be recorded in books
kept for that purpose, and shall report the same to the Board of Directors at
such times as the Board of Directors may from time to time require. The Board
shall have the power at any time to revoke or override the authority given to or
acts done by the Executive Committee except as to acts done before such
revocation or overriding and to terminate the appointment or change the
membership of such Committee and to fill vacancies in it. The Executive
Committee may make rules for the conduct of its business and may appoint such
assistant as it may deem necessary. A majority of the members of said Committee
shall constitute a quorum thereof.
17.2 The Directors may by resolution appoint one or more committees
consisting of such member or members of their body as they think fit and may
delegate to any such committee between meetings of the Board such powers of the
Board (except the power to fill vacancies in the Board and the power to change
the membership of or fill vacancies in any committee of the Board and the power
to appoint or remove officers appointed by the Board) subject to such conditions
as may be prescribed in such resolution, and all committees so appointed shall
keep regular minutes of their transactions and shall cause them to be recorded
in books kept for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time to time require.
The Directors shall also have power at any time to revoke or override any
authority given to or acts to be done by any such committees except as to acts
done before such revocation or overriding and to terminate the appointment or
change the membership of a committee and to fill vacancies in it. Committees may
make rules for the conduct of their business and may appoint
<PAGE>
such assistant as they may deem necessary. A majority of the members of a
committee shall constitute a quorum thereof.
17.3 The Executive Committee and any other committee may meet and adjourn
as it thinks proper. Questions arising at any meeting shall be determined by a
majority of votes of the members of the committee present, and in case of an
equality of votes the chairman shall not have a second or casting vote. A
resolution approved in writing by all the members of the Executive Committee or
any other committee shall be as valid and effective as if it had been passed at
a meeting of such Committee duly called and constituted. Such resolution may be
in two or more counterparts which together shall be deemed to constitute one
resolution in writing. Such resolution shall be filed with the minutes of the
proceedings of the Committee and shall be effective on the date stated thereon
or on the latest date stated in any counterpart.
PART 18
OFFICERS
--------
18.1 The Directors shall, from time to time, appoint a President and a
Secretary and such other officers, if any, as the Directors shall determine and
the Directors may, at any time, terminate any such appointment. No officer shall
be appointed unless he is qualified in accordance with the provisions of the
Company Act.
18.2 One person may hold more than one of such offices except that the
offices of President and Secretary must be held by different persons unless the
Company has only one member. Any person appointed as Chairman of the Board, the
President or the Managing Director shall be a Director. The other officers need
not be Directors. The remuneration of the officers of the Company as such and
the terms and conditions of their tenure of office or employment shall from time
to time be determined by the Directors; such remuneration may be by way of
salary, fees, wages, commission or participation in profits or any other means
or all of these modes and an officer may in addition to such remuneration be
entitled to receive after he ceases to hold such office or leaves the employment
of the Company a pension or gratuity. The Directors may decide what functions
and duties each officer shall perform and may entrust to and confer upon him any
of the powers exercisable by them upon such terms and conditions and with such
restrictions as they think fit and may from time to time revoke, withdraw, alter
or vary all or any of such functions, duties and powers. The Secretary shall,
inter alia, perform the functions of the Secretary specified in the Company Act.
18.3 Every officer of the Company who holds any office or possesses any
property whereby, whether directly or indirectly, duties or interests might be
created in conflict with his duties or interests as an officer of the Company
shall, in writing, disclose
<PAGE>
to the President the fact and the nature, character and extent of the conflict.
PART 19
INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
---------------------------------
19.1 Subject to the provisions of the Company Act, the Directors shall
cause the Company to indemnify a Director or former Director of the Company and
the Directors may cause the Company to indemnify a director or former director
of a corporation of which the Company is or was a shareholder and the heirs and
personal representatives of any such person against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by him or them including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he is or they are made a party by reason of his
being or having been a Director of the Company or a director of such
corporation, including any action brought by the Company or any such
corporation. Each Director of the Company on being elected or appointed shall be
deemed to have contracted with the Company on the terms of the foregoing
indemnity.
19.2 Subject to the provisions of the Company Act, the Directors may cause
the Company to indemnify any officer, employee or agent of the Company or of a
corporation of which the Company is or was a shareholder (notwithstanding that
he is also a Director) and his heirs and personal representatives against all
costs, charges and expenses whatsoever incurred by him or them and resulting
from his acting as an officer, employee or agent of the Company or such
corporation. In addition the Company shall indemnify the Secretary or an
Assistant Secretary of the Company (if he shall not be a full time employee of
the Company and notwithstanding that he is also a Director) and his respective
heirs and legal representatives against all costs, charges and expenses
whatsoever incurred by him or them and arising out of the functions assigned to
the Secretary by the Company Act or these Articles and each such Secretary and
Assistant Secretary shall on being appointed be deemed to have contracted with
the Company on the terms of the foregoing indemnity.
19.3 The failure of a Director or officer of the Company to comply with the
provisions of the Company Act or of the Memorandum or these Articles shall not
invalidate any indemnity to which he is entitled under this Part.
19.4 The Directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was serving as a Director, officer,
employee or agent of the Company or as a director, officer, employee or agent of
any corporation of which the Company is or was a shareholder and his heirs or
personal
<PAGE>
representatives against any liability incurred by him as such director, officer,
employee or agent.
PART 20
DIVIDENDS AND RESERVE
---------------------
20.1 The Directors may from time to time declare and authorize payment of
such dividends, if any, as they may deem advisable and need not give notice of
such declaration to any member. No dividend shall be paid otherwise than out of
funds and/or assets properly available for the payment of dividends and a
declaration by the Directors as to the amount of such funds or assets available
for dividends shall be conclusive. The Company may pay any such dividend wholly
or in part by the distribution of specific assets and in particular by paid up
shares, bonds, debentures or other securities of the Company or any other
corporation or in any one or more such ways as may be authorized by the Company
or the Directors and where any difficulty arises with regard to such a
distribution the Directors may settle the same as they think expedient, and in
particular may fix the value for distribution of such specific assets or any
part thereof, and may determine that case payments in substitution for all or
any part of the specific assets to which any members are entitled shall be made
to any members on the basis of the value so fixed in order to adjust the rights
of all parties and may vest any such specific assets in trustees for the persons
entitled to the dividend as may seem expedient to the Directors.
20.2 Any dividend declared on shares of any class by the Directors may be
made payable on such date as is fixed by the Directors.
20.3 Subject to the rights of members (if any) holding shares with special
rights as to dividends, all dividends on shares of any class shall be declared
and paid according to the number of such shares held.
20.4 The Directors may, before declaring any dividend, set aside out of the
funds properly available for the payment of dividends such sums as they think
proper as a reserve or reserves which shall, at the discretion of the Directors,
be applicable for meeting contingencies, or for equalizing dividends, or for any
other purpose to which such funds of the Company may be properly applied, and
pending such application may, at the like discretion, either be employed in the
business of the Company or be invested in such investments as the Directors may
from time to time think fit. The Directors may also, without placing the same in
reserve, carry forward such funds, which they think prudent not to divide.
20.5 If several persons are registered as joint holders of any share, any
one of them may give an effective receipt for any dividend, bonuses or other
moneys payable in respect of the share.
<PAGE>
20.6 No dividend shall bear interest against the Company. Where the
dividend to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment thereof and such payment shall
be deemed to be payment in full.
20.7 Any dividend, bonuses or other moneys payable in cash in respect of
shares may be paid by cheque or warrant sent through the post directed to the
registered address of the holder, or in the case of joint holders, to the
registered address of that one of the joint holders who is first named on the
register, or to such person and to such address as the holder or joint holders
may direct in writing. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent. The mailing of such cheque or warrant
shall, to the extent of the sum represented thereby (plus the amount of any tax
required by law to be deducted) discharge all liability for the dividend, unless
such cheque or warrant shall not be paid on presentation or the amount of tax so
deducted shall not be paid to the appropriate taxing authority.
20.8 Notwithstanding anything contained in these Articles the Directors may
from time to time capitalize any undistributed surplus on hand of the Company
and may from time to time issue as fully paid and nonassessable any unissued
shares, or any bonds, debentures or debt obligations of the Company as a
dividend representing such undistributed surplus on hand or any part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
------------------------------
21.1 The Company shall keep at its records office or at such other place as
the Company Act may permit, the documents, copies, registers, minutes, and
records which the Company is required by the Company Act to keep at its records
office or such other place, as the case may be.
21.2 The Company shall cause to be kept proper books of account and
accounting records in respect of all financial and other transactions of the
Company in order properly to record the financial affairs and conditions of the
Company and to comply with the Company Act.
21.3 Unless the Directors determine otherwise, or unless otherwise
determined by any ordinary resolution, no member of the Company shall be
entitled to inspect any accounting records of the Company.
21.4 The Directors shall from time to time at the expense of the Company
cause to be prepared and laid before the Company in general meetings such
financial statements and reports as are required by the Company Act.
<PAGE>
21.5 Every member shall be entitled to be furnished once gratis on demand
with a copy of the latest annual financial statement of the Company and, if so
required by the Company Act, a copy of each such annual financial statement and
interim financial statement shall be mailed to each member.
PART 22
NOTICES
-------
22.1 A notice, statement or report may be given or delivered by the Company
to any member either by delivery to him personally or by sending it by mail to
him to his address as recorded in the register of members. Where a notice,
statement or report is sent by mail, service or delivery of the notice,
statement or report shall be deemed to be effected by properly addressing,
prepaying and mailing the notice, statement or report and to have been given the
day, Saturdays, Sundays and holidays excepted, following the date of mailing. A
certificate signed by the Secretary or other officer of the Company or of any
other corporation acting in that behalf for the Company that the letter,
envelope or wrapper containing the notice, statement or report was so addressed,
prepaid and mailed shall be conclusive evidence thereof.
22.2 A notice, statement or report may be given or delivered by the Company
to the joint holders of a share by giving the notice to the joint holder first
named in the register of members in respect of the share.
22.3 A notice, statement or report may be given or delivered by the Company
to the persons entitled to a share in consequences of death, bankruptcy or
incapacity of a member by sending it through the mail prepaid addressed to them
by name or by the title of representatives of the deceased or incapacitated
person or trustee of the bankrupt, or by any like description, at the address
(if any) supplied to the Company for the purpose by the persons claiming to be
so entitled, or (until such address has been so supplied) by giving the notice
in a manner in which the same might have been given if the death, bankruptcy or
incapacity had not occurred.
22.4 Notice of every general meeting or meeting of members holding a class
of shares shall be given in a manner hereinbefore authorized to every member
holding at the time of the issue of the notice or the date fixed for determining
the members entitled to such notice, whichever is the earlier, shares which
confer the right to notice of and to attend and vote at any such meeting. No
other person except the auditor of the Company and the Directors of the Company
shall be entitled to receive notices of any such meeting.
PART 23
<PAGE>
RECORD DATES
------------
23.1 The Directors may fix in advance a date, which shall not be more than
the maximum number of days permitted by the Company Act preceding the date of
any meeting of members or any class thereof for the payment of any dividend or
of the proposed taking of any other proper action requiring the determination of
members as the record date for the determination of the members entitled to
notice of, or to attend and vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend or for any other
proper purpose and, in such case, notwithstanding anything elsewhere contained
in these Articles, only members of record on the date so fixed shall be deemed
to be members for the purposes aforesaid.
23.2 Where no record date is so fixed for the determination of members as
provided in the preceding Article the date on which the notice is mailed or on
which the resolution declaring the dividend is adopted, as the case may be,
shall be the record for such determination.
PART 24
SEAL
----
24.1 The Directors may provide a seal for the Company and, if they do so,
shall provide for the safe custody of the seal which shall not be affixed to any
instrument except in the presence of the following person, namely:
(i) any two Directors, or
(ii) one of the Chairman of the Board, the President, the Managing
Director, a Director and a Vice-President together with one of the
Secretary, the Treasurer, the Secretary-Treasurer, an Assistant
Secretary, an Assistant Treasurer and an Assistant
Secretary-Treasurer, or
(iii) if the Company shall have only one member, the President or the
Secretary, or
(iv) such person or persons as the Directors may from time to time by
resolution appoint
and the said Directors, Officers, person or persons in whose presence the seal
is so affixed to an instrument shall sign such instrument. For the purpose of
certifying under seal true copies of any document or resolution the seal may be
affixed in the presence of any one of the foregoing persons.
24.2 To enable the seal of the Company to be affixed to any bonds,
debentures, share certificates, or other securities of the Company, whether in
definitive or interim form, on which
<PAGE>
facsimiles of any of the signatures of the Directors or officers of the Company
are, in accordance with the Company Act and/or these Articles, printed or
otherwise mechanically reproduced there may be delivered to the firm or company
employed to engrave, lithograph or print such definitive or interim bonds,
debentures, share certificates or other securities one or more unmounted dies
reproducing the Company's seal and the Chairman of the Board, the President, the
Managing Director or a Vice-President and the Secretary, Treasurer,
Secretary-Treasurer, an Assistant Secretary, an Assistant Treasurer or an
Assistant Secretary-Treasurer may by a document authorize such firm or company
to cause the Company's seal to be affixed to such definitive or interim bonds,
debentures, share certificates or other securities to which the Company's seal
has been so affixed shall for all purposes be deemed to be under and to bear the
Company's seal lawfully affixed thereto.
24.3 The Company may have for use in any other province, state, territory
or country an official seal which shall have on its face the name of the
province, state, territory or country where it is to be used and all of the
powers conferred by the Company Act with respect thereto may be exercised by the
Directors or by a duly authorized agent of the company.
PART 25
PROHIBITIONS
------------
25.1 If the Company is not a reporting company:
(1) no shares or debt obligations issued by the company shall be offered
for sale to the public;
(2) no shares shall be transferred without the previous consent of the
Directors expressed by a resolution of the Board and the Directors
shall not be required to give any reason for refusing to consent to
any proposed transfer.
DATED this 3rd day of December, 1986.
SIGNED BY THE SUBSCRIBER
/s/ Gary W. Dunn
GARY W. DUNN
#16, 1870 Yew Street
Vancouver, B.C. V6K 3G2
Barrister & Solicitor
<PAGE>
Stamped with the following:
"I hereby certify that these are
copies of documents filed with the
registrar of companies on
Dec 9 1986
/s/ Illegible
Registrar of Companies
For the Province of British Columbia"
PROVINCE OF BRITISH COLUMBIA
----------------------------
COMPANY ACT
-----------
MEMORANDUM
----------
OF
--
FAIR HARBOUR MINING CORPORATION
-------------------------------
I wish to be formed into a Company with limited liability under the Company
Act in pursuance of this Memorandum.
1. The name of the company is FAIR HARBOUR MINING CORPORATION
2. The authorized capital of the Company consists of Twenty Million
(20,000,000) Common Shares without par value.
3. I agree to take the number and kind and class of shares in the Company
set opposite my name.
Full Name, Resident Address and Number, Kind
Occupation of Subscriber and Class of
Shares taken by
Subscriber
/s/ Gary W. Dunn One (1) Common
GARY W. DUNN Share without par
value
#16 - 1870 Yew Street
VanCouver, B.C. V6K 3G2
Barrister & Solicitor
TOTAL SHARES TAKEN: One (1) Common
Share without par
value
Dated this 3rd day of December, 1986.
<PAGE>
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA 318692
[SEAL]
Province of British Columbia
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
FAIR HARBOUR MINING CORPORATION
HAS THIS DAY CHANGED ITS NAME TO THE NAME
FAIR RESOURCES GROUP INC.
GIVEN, UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA
THIS 17TH DAY OF DECEMBER, 1991
[seal of registrar] /s/ David W. Boyd
DAVID W. BOYD
Registrar of Companies
<PAGE>
duplicate
NUMBER: 318692
[seal]
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA Stamped with the following:
"Certified a true copy of a document
on file with the Registrar of
Companies.
Apr 29 1993
/s/ D. Biddlecombe
for Registrar of Companies
for the Province of British Columbia
I Hereby Certify that
FAIR RESOURCES GROUP INC.
has this day changed its name to
SOUTHHAMPTON ENTERPRISES CORP.
Issued under my hand at Victoria, British Columbia
on December 02, 1992
[seal of registrar]
JOHN S. POWELL
A/Registrar of Companies
Exhibit 4.2
Certificate No. W-#l
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A ONE YEAR HOLD
PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL 12:00 MIDNIGHT ON JUNE
16,1998, EXCEPT AS PERMITTED BY THE SECURITIES ACT, S.B.C. 1985, CHAPTER 83, AS
AMENDED (THE "ACT"), AND REGULATIONS AND RULES MADE UNDER THE ACT. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ALSO HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR THE LAWS OF ANY STATE
OF THE UNITED STATES OF AMERICA AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION OR AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR IN COMPLIANCE WITH THE REQUIREMENTS OF REGULATION
S UNDER SUCH ACT, AS EVIDENCED BY AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE ISSUER.
THE WARRANTS REPRESENTED HEREBY WILL BE VOID AND OF NO VALUE UNLESS EXERCISED
WITHIN THE TIME LIMIT HEREIN PROVIDED.
NON-TRANSFERABLE WARRANT
ANTIGUA ENTERPRISES INC.
(Incorporated under the laws of the Province of British Columbia, Canada)
WARRANT FOR PURCHASE OF
50,000 COMMON SHARES
WE, THE UNDERSIGNED, HEREBY CERTIFY THAT, for value received, THOMAS E. DOOLEY,
JR. of 12401 East Saddle Horn Drive, Scottsdale, Arizona, U. S. A. 85259
(hereinafter called the "Holder") is entitled to subscribe for and purchase
50,000 fully paid and non-assessable Common shares without par value in the
capital of SOUTHHAMPTON ENTERPRISES CORP. (hereinafter called the "Issuer") at
any time during the period from the date of his Warrant Certificate until 12:00
midnight, local time, in Vancouver, British Columbia, Canada, on May 29, 2002,
exercisable at an escalating price, as follows:
(a) during the 12-month period from 8:30 o'clock in the forenoon on the date of
issuance of this Warrant Certificate until 4:30 o'clock in the afternoon on the
day preceding the first anniversary of this Warrant Certificate, inclusive, at a
price of $7.20 per share;
(b) during the 12-month period from 8:30 o'clock in the forenoon on the first
anniversary of the date of issuance of this Warrant Certificate until 4:30
o'clock in the afternoon until 12:00 midnight on the day preceding second
anniversary of the issuance of this Warrant Certificate, inclusive, at a price
of $8.40 per share;
(c) during, the 12-month period from 8:3O o'clock in the forenoon on the second
anniversary of the date of issuance of this Warrant Certificate until 4:30
o'clock in the afternoon on the day preceding the third anniversary of the
issuance of this Warrant Certificate, inclusive, at a price of $9.70 per share;
(d) during the 12-month period from 8:30 o'clock in the forenoon on the third
anniversary of the issuance of this Warrant Certificate until 4:3O o'clock in
the afternoon on the day preceding the fourth anniversary of the issuance of
this Warrant Certificate, inclusive, at a price of $10.85 per share; and
(e) during the 12-month period from 8:30 o'clock in the forenoon on the fourth
anniversary of the date of issuance of this Warrant Certificate until 4:30
o'clock in the afternoon on the day preceding the fifth anniversary of the
issuance of this Warrant Certificate, inclusive, at a price of $12.10 per share,
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.
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The right to acquire Common Shares in the capital of the Issuer evidenced by
this Warrant Certificate may be exercised by the Holder in whole or in part (but
not as to a fraction of a Common Share), either:
(a) by:
(i) duly completing in the manner indicated and executing the subscription form
attached hereto;
(ii) delivering and surrendering this Warrant Certificate at the office of
Montreal Trust Company of Canada located at Suite 401, 510 Burrard Street,
Vancouver, British Columbia, Canada V6C 3B9; and
(iii) concurrently with the delivery of this Warrant Certificate as hereinbefore
stipulated, delivering to Montreal Trust Company of Canada at the address
hereinbeforementioned a banker's draft or certified cheque made payable to the
Issuer for or cash in the amount then due to the Issuer for the number of Common
Shares purchased upon the exercise of this Warrant Certificate; or
(b) if the average closing price of the Issuer's Common shares listed on the
Vancouver Stock Exchange during the ten (10) days on which the Vancouver Stock
Exchange shall be open for the trading of the Common shares in the capital of
the Issuer immediately preceding the delivery hereinaftermentioned (the "Ten Day
Average"), shall exceed the exercise price of the Warrant, by delivery to the
Issuer's Registrar and Transfer Agent at Suite 401, 510 Burrard Street,
Vancouver, British Columbia, Canada V6C 3B9 of:
(i) the subscription form attached hereto duly completed in the manner indicated
and executed by the Holder;
(ii) a supporting statutory declaration setting out the Ten Day Average and the
computation thereof made by; and
(iii) this Warrant Certificate, duly endorsed for exercise and surrender by the
Holder or, if the Holder is a body corporate or politic, a senior officer or
director of the Holder, to elect not to tender cash payment to the Issuer upon
the exercise of the Warrant (an "Election"), but instead to be deemed to have
tendered the difference between the Warrant exercise price and the Ten Day
Average, multiplied by the number of Common Shares which the Holder proposes to
purchase by exercise of the Warrant (not exceeding that number of Warrants
remaining unexercised prior to such Election) (the "Exercised Warrant") in
respect of which such Election shall have been made (the "Aggregate Cashless
Warrant Exercise Price"), in payment for the purchase of that certain number of
shares which is the quotient of the Aggregate Cashless Warrant Exercise Price
divided by the Ten Day Average (the "Elected Shares"), and, if the Holder makes
such an Election, the Holder shall be deemed to have exercised the Warrant
pursuant to paragraph (a) hereof to a sufficient extent to require the Issuer to
issue the Elected Shares and shall be deemed to have surrendered the Warrant to
the Issuer for cancellation, to the degree the Warrant shall have been so
exercised. As a condition of exercise of the Warrant pursuant to this paragraph
(b), the Issuer may require the Holder to execute any instrument which may, in
the reasonable opinion of the Issuer's legal counsel, be necessary or desirable
to evidence the extinguishment of any further right of the Holder to exercise
the Warrant, to the degree the Warrant shall have been so exercised.
If the Warrant represented hereby is exercised in whole or in part,
certificates representing the Common Shares so purchased shall be delivered to
the Holder by the Issuer within a reasonable time and, unless the Warrant has
expired, a new Warrant Certificate evidencing the Holder's right to acquire that
number of Common Shares, if any, with respect to which the Warrant shall not
then have been exercised shall also be issued to the Holder within such time.
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The Issuer covenants and agrees that all Common Shares which may be issued
upon the exercise of the right represented by this Warrant Certificate will,
upon issuance, be fully paid and non-assessable and free of all liens, charges
and encumbrances. The Issuer further covenants and agrees that, during the
period within which the right represented by this Warrant Certificate may be
exercised, the Issuer will at all times have authorized and reserved a
sufficient number of Common Shares to provide for the exercise of the right
represented by this Warrant Certificate in its entirety.
THE FOLLOWING ARE THE TERMS AND CONDITIONS GOVERNING THIS WARRANT CERTIFICATE:
1. If, following the occurrence of one or more events involving the capital
reorganization, reclassification, subdivision or consolidation of the
capital stock of the Issuer, or the payment of stock dividends by the
Issuer, or the merger, amalgamation or other corporate combination of the
Issuer with one or more other entities, or any other events in which new
securities of any nature are delivered in exchange for the issued Common
Shares of the Issuer and such issued Common Shares are cancelled (any of
which events is hereinafter called a "Fundamental Change"), the Holder
exercises the Warrant represented hereby in whole or in part, instead of
issuing those Common Shares which, but for such Fundamental Change and this
provision, would have been issued upon such exercise, the Issuer or its
successor shall issue an equivalent number of new securities.
2. The Issuer shall not effect any Fundamental Change a consequence of which
will be the creation of a successor to the Issuer unless prior to or
simultaneously with the consummation thereof the successor acknowledges in
writing that it will be bound by and comply with the preceding provision
hereof.
3. As used herein, the term, "Common Shares" shall mean and include the
presently authorized voting Common shares without par value in the capital
stock of the Issuer, the term, "Warrant Certificate" shall mean this
certificate representing the right to purchase such number of Common Shares
set forth above, and the term, "Warrant" shall mean the the right of the
Holder to purchase that certain number of Common Shares set forth above
which has been granted by the Issuer pursuant to the acceptance by the
Issuer of an offer by the Holder to purchase five times the number of
convertible limited retractable 12% Series "A" cumulative Preferred shares,
each having no par value, at a price of $1.35 per share (the "Purchased
Shares") provided that such a right was granted to the Holder by the Issuer
at the same time as the Purchased Shares were issued to the Holder by the
Issuer.
4. All references to currency herein shall be deemed to refer to lawful money
of Canada.
5. The Warrant shall not entitle the Holder to any rights as a shareholder of
the Issuer, including, without limitation, voting rights.
6. The Warrant and all rights represented hereby are neither transferable nor
assignable.
7. Upon its surrender by the Holder at the registered and records offices of
the Issuer, the Holder, at no cost, may exchange this certificate for a new
certificate or certificates of like tenor representing, in the aggregate,
the right to subscribe for and purchase that certain number of Common
Shares which the Holder may purchase hereunder, which number shall be
reduced by the number of Common Shares, if any, which shall already have
been issued upon the exercise of this certificate or any replacement
thereof (the "Residue"), which new certificates or certificates shall
collectively represent the right to purchase the Residue.
8. Time shall be of the essence hereof.
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IN WITNESS WHEREOF this Warrant Certificate has been duly executed by the
Issuer and its Registrar and Transfer Agent at the City of Vancouver in the
Province of British Columbia, Canada on the day and year hereinafter written.
Dated: June 16, 1997 Dated: June 16, 1997
ANTIGUA ENTERPRISES INC. MONTREAL TRUST COMPANY OF
CANADA
per: /s/ Illegible per: /s/ Illegible
President Authorized Signatory
per: /s/ Illegible
Secretary
Exhibit 4.3
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") NOR IS SUCH REGISTRATION CONTEMPLATED. SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME
WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, EXCEPT UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO IT AND TO ITS COUNSEL TO THE EFFECT THAT ANY
SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE ACT, OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
Warrant to Purchase
Shares of Common Stock
As Herein Described
WARRANT TO PURCHASE COMMON STOCK OF
SOUTHHAMPTON ENTERPRISES CORP.
This is to certify that, for value received, LaSalle Business Credit, Inc.,
or registered assigns (in each case, the "Holder"), is entitled to purchase,
subject to the provisions of this Warrant (the "Warrant"), from Southhampton
Enterprises Corp., a British Columbia, Canada corporation (the "Company"),
having its principal place of business at 9211 Diplomacy Row, Dallas, Texas, at
any time during the period from the date hereof (the "Commencement Date") to
5:00 P.M., Chicago, Illinois time, until June 1, 2002 (the "Expiration Date"),
at which time this Warrant shall expire and become void, ______________ shares
(which consists of three percent (3%) of that number of shares of Common Stock
which will be outstanding immediately after closing of the "Other Securities
Transactions," as represented on Schedule 1 attached hereto) ("Warrant Shares")
of the Company's Common Stock, no par value (the "Common Stock"). This Warrant
shall be exercisable at the Exercise Price, as hereinafter defined. The number
of shares of Common Stock to be received upon exercise of this Warrant shall be
adjusted from time to time as set forth below. The term "Exercise Price" means
initially the lower of (i) One Dollar ($1.00) per share and (ii) the lowest
price established by any of the following financing(s) that occurs within twelve
(12) months from the date hereof: (A) the price per share of common equity
established by the first round of common equity financing after the date hereof
or (B) the conversion price to Common Stock or exercise price for Common Stock
established by the first round of preferred stock,
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Convertible Securities or options or rights to purchase Common Stock after the
date hereof. In the absence of any such financing within the above time period,
the initial exercise price shall be One Dollar ($1.00) per share. The Exercise
Price per share shall be subject to adjustment as provided in this Warrant. The
term Convertible Securities means evidence of indebtedness, shares of stock or
other securities which are at any time directly or indirectly convertible into
or exchangeable for Common Stock. This Warrant also is subject to the following
terms and conditions:
1. Exercise Of Warrant And Payment Of Exercise Price.
(a) Exercise Of Warrant. This Warrant may be exercised in accordance
with the terms hereof at any time from and after the date hereof and before the
Expiration Date, but if such date is a day on which federal or state chartered
banking institutions located in the State of Illinois are authorized to close,
then on the next succeeding day which shall not be such a day. Exercise shall be
by presentation and surrender to the Company at its principal office, or at the
office of any transfer agent designated by the Company, of (i) this Warrant,
(ii) the attached exercise form properly executed, and either (iii) cash,
certified or cashiers check or wire transfer for the Exercise Price for the
number of Warrant Shares specified in the exercise form, or (iv) if the exercise
is to be a cashless exercise pursuant to Section 1.(b), written notice of the
number of shares of Common Stock with respect to which this Warrant is being
surrendered in payment of the aggregate exercise price for the Common Stock to
be delivered to Holder. If this Warrant is exercised in part only, the Company
or its transfer agent shall, upon surrender of the Warrant, execute and deliver
a new Warrant evidencing the rights of the Holder to purchase the remaining
number of Warrant Shares purchasable hereunder. Upon receipt by the Company of
this Warrant in proper form for exercise, accompanied by payment as aforesaid,
the Holder shall be deemed to be the holder of record of the Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such Warrant
Shares shall not then be actually delivered by the Holder.
(b) Payment Of Warrant Exercise Price.
Payment of the Exercise Price may be made by any of the
following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashiers check or wire transfer; or
(ii) surrender of this Warrant at the principal office of the
Company together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following formula:
X = Y(A-B)/A
<PAGE>
where: X = the number of shares of Common Stock to be issued to Holder (not
to exceed the number of shares set forth on the cover page of this
Warrant, as adjusted pursuant to the provisions of Section 4 of this
Warrant);
Y = the number of shares of Common Stock for which this Warrant is
being exercised;
A = the Fair Market Value of one share of Common Stock (for purposes
of this Section 1.(b), the "Fair Market Value" shall be defined in
accordance with Section 4.4 hereof;
B = the Exercise Price (as adjusted to the date of such calculation).
It is intended that the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction, if any, shall be deemed to have been acquired at
the time this Warrant was issued, for purposes of Rule 144(d)(3)(ii).
2. Reservation Of Shares And Expenses. The Company shall, at all times
until the expiration of this Warrant, reserve for issuance and delivery upon
exercise of this Warrant the number of Warrant Shares which shall be required
for issuance and delivery upon exercise of this Warrant. The Company covenants
that the shares of Common Stock issuable on exercise of the Warrant shall be
duly and validly issued and fully paid and non-assessable and free of liens,
charges and all taxes with respect to the issue thereof. The Company shall pay
all expenses, taxes (other than income or similar taxes imposed on Holder) and
other charges payable in connection with the preparation, issue and delivery of
stock certificates pursuant to this Warrant.
3. No Rights As Stockholders. This Warrant shall not entitle the Holder to
any rights as a stockholder of the Company, either at law or in equity. The
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
4. Adjustments.
4.1. Subdivision Or Combination Of Shares. If the Company is
recapitalized through the subdivision or combination of its outstanding shares
of Common Stock into a larger or smaller number of shares, the number of Warrant
Shares shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all of the Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
<PAGE>
4.2. Dividends In Common Stock Or Securities Convertible Into Common
Stock. If the Company declares a dividend or distribution on Common Stock
payable in Common Stock or securities convertible into Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock) of Common Stock
as a result of such dividend or distribution, and the Exercise Price shall be
adjusted so that the aggregate amount payable for the purchase of all the
Warrant Shares issuable hereunder immediately after the record date for such
dividend or distribution shall equal the aggregate amount so payable immediately
before such record date.
4.3. Distributions Of Other Securities Or Property. If the Company
distributes to holders of its Common Stock, other than as part of its
dissolution or liquidation or the winding up of its affairs, any of its
securities (other than Common Stock or securities convertible into Common
Stock), property or any evidence of indebtedness, then in each case, the number
of Warrant Shares thereafter purchasable upon exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
by a fraction, of which the numerator shall be the Fair Market Value price per
share of Common Stock (as determined pursuant to Section 4.4) on the record date
mentioned below in this Section 4.3, and of which the denominator shall be the
Fair Market Value price per share of Common Stock on such record date, less the
then fair value (as determined by the Board of Directors of the Company in good
faith) of the portion of the shares of the Company's capital stock, property or
evidence of indebtedness distributable with respect to each share of Common
Stock. Such adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the determination
of stockholders entitled to receive such distribution.
4.4. Fair Market Value. Fair market value of the Common Stock ("Fair
Market Value") shall be determined as follows:
(a) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange, or is
listed on the Nasdaq National Market or Small Cap Market, the current Fair
Market Value shall be the last reported sales price of the Common Stock on such
exchange or Nasdaq on the last business day prior to the date of exercise of
this Warrant or if no such sale is made on such day, the closing bid price for
such day on such exchange or Nasdaq; or
(b) if the Common Stock is not so listed or admitted to unlisted
trading privileges or quoted on Nasdaq, the current Fair Market Value shall be
the last bid price reported on the last business day prior to the date of the
exercise of this
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Warrant (i) by Nasdaq, or (ii) if reports are unavailable under clause (i)
above, by the National Quotation Bureau Incorporated; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid prices are not so reported, the current Fair Market
Value shall be determined in good faith as promptly as reasonably practicable by
the mutual agreement of the Board of Directors and the Holder. If such parties
are unable to reach agreement within 20 days after the need for such
determination arises, the Board of Directors shall appoint a nationally
recognized investment banking firm acceptable to the Holder (the "Appointed
Firm") to make such determination. The parties shall use their best efforts to
cause the Appointed Firm to resolve all disagreements as soon as practicable,
but in any event within 45 days after the submission of the disputes to such
Appointed Firm. The resolution of such disagreements and the determination of
Fair Market Value by the Appointed Firm shall be final and binding on the
Company and the Holder. The Appointed Firm will determine the allocation of its
fees and expenses in connection with its determination of Fair Market Value
based upon the percentage which the portion of the contested amount not awarded
to each party bears to the amount actually contested by such party. For example,
if the Board of Directors claims that the Fair Market Value is $1,000 less than
the amount claimed by the Holder, and if the Appointed Firm ultimately resolves
the dispute by awarding the Holder $300 of the $1,000 contested, then the fees
and expenses of the Appointed Firm will be allocated 70% (i.e.: 700/1000) to the
Holder and 30% (i.e.: 300/1000) to the Company.
4.5. Rights Offering. If the Company offers rights or warrants to
persons which entitle them to subscribe to or purchase Common Stock or
securities convertible into Common Stock then:
(a) If the price per share (together with the value of the
consideration, if any, paid for such rights or warrants) is lower on the record
date referred to below than the then Fair Market Value price per share of Common
Stock, the number of Warrant Shares thereafter purchasable upon the exercise of
the Warrant shall be determined by multiplying the number of Warrant Shares
immediately theretofore purchasable upon exercise of the Warrant by a fraction,
of which the numerator shall be the number of shares of Common Stock outstanding
on such record date plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the denominator shall be the number
of shares of Common Stock outstanding on such record date plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at the then Fair Market Value price per
share of Common Stock. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective retroactively as of the record
date for the determination of stockholders entitled to receive such rights or
warrants.
<PAGE>
(b) If, however, the price per share (together with the value of
the consideration, if any, paid for such rights or warrants) is not lower on
such record date than the then Fair Market Value price per share of Common
Stock, the Company shall give written notice of any such proposed offering to
the Holder at least fifteen days prior to the proposed record date in order to
permit the Holder to exercise this Warrant on or before such record date. There
shall be no adjustment in the number of shares of Common Stock for which this
Warrant may be exercised, or in the Exercise Price, by virtue of any such
distribution pursuant to this Section 4.5.(b).
4.6. Adjustment Of Exercise Price Upon Issuance Of Additional Shares
Of Common Stock. At the option of the Holder, the Exercise Price may be adjusted
to a price per share equal to the lesser of (a) the offering price, net of
underwriting discounts and expenses, of shares of Common Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares) issued
in connection with any public offering of the Company's Common Stock to the
general public, or (b) the price of shares of Common Stock (as adjusted for any
stock dividends, combinations or splits with respect to such shares) issued by
the Company in connection with a private placement in which the aggregate
proceeds of the placement exceed $1,000,000. The terms of this Section 4.6 shall
terminate upon the earlier of (i) the exercise of the Warrant, or (ii) the
closing of an underwritten offering of any of its securities to the general
public the aggregate proceeds of which (after deduction for underwriter's
discounts and expenses related to the issuance) exceed $10,000,000.
4.7. Merger, Sale Of Assets. If at any time while this Warrant, or any
portion thereof, is outstanding and unexpired there shall be: (a) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein); (b) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise; or (c) a sale or transfer of the Company's properties and assets as,
or substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
<PAGE>
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4. The foregoing provisions of this Section 4.7 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
4.8. Reclassification. If the Company, at any time while this Warrant,
or any portion thereof, remains outstanding and unexpired, shall change any of
the securities as to which purchase rights under this Warrant exist, by
reclassification of securities or otherwise, into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4.
4.9. Liquidation, Etc. If the Company shall, at any time before the
expiration of this Warrant, dissolve, liquidate or wind up its affairs, or
otherwise declare a dividend, or make a distribution to the holders of its
Common Stock generally, whether in cash, property or assets of any kind,
including any dividend payable in stock or securities of any other issuer owned
by the Company (excluding regularly payable cash dividends declared from time to
time by the Company's Board of Directors or any dividend or distribution
referred to in Section 4.2 or Section 4.3), the Exercise Price shall be reduced,
without any further action by the parties hereto, by the Per Share Value (as
hereinafter defined) of the dividend. For purposes of this Section 4.9, the "Per
Share Value" of a cash dividend or other distribution shall be the dollar amount
of the distribution on each share of Common Stock and the "Per Share Value" of
any dividend or distribution other than cash shall be equal to the fair market
value of such non-cash distribution on each share of Common Stock as determined
in good faith by the Board of Directors of the Company.
4.10. Adjustment of Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of the Warrant is adjusted, the Exercise
Price with respect to the Warrant Shares shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment,
<PAGE>
and of which the denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
4.11. Notice Of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Exercise Price of the
Warrant Shares is adjusted as provided herein, the Company shall mail to the
Holder a notice of such adjustment or adjustments, prepared and signed by the
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment, and the computation by which such adjustment
was made.
5. Notices To Holder. So long as this Warrant shall be outstanding: (a) if
the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash; or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any similar
rights; or (c) if there shall be any capital reorganization of the Company in
which the Company is not the surviving entity, recapitalization of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or other transfer of all or substantially all
of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company, then in such event, the
Company shall cause to be mailed to the Holder, at least twenty days prior to
the relevant date described below (or such shorter period as is reasonably
possible if twenty days is not reasonably possible), a notice containing a
description of the proposed action and stating the date or expected date on
which a record of the Company's stockholders is to be taken for the purpose of
any such dividend, distribution of rights, or such reclassification,
reorganization, consolidation, merger, conveyance, lease or transfer,
dissolution, liquidation or winding up is to take place, the effect of the
action, to the extent such effect may be known on the date of such notice, on
the Exercise Price and the kind and amount of shares of stock or other
securities or property deliverable on the exercise of the Warrant, and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event. All such notices shall
be deemed to have been received (i) in the case of personal delivery, on the
date of such delivery, and (ii) in the case of mailing, on the third business
day following the date of such mailing.
6. Transfer Or Loss of Warrant.
6.1. Transfer. This Warrant may be transferred, exercised, exchanged
or assigned ("transferred"), in whole or in part, subject to the provisions of
this Section 6.1. The Holder shall have the right to transfer all or a part of
this Warrant and
<PAGE>
all or part of the Warrant Shares. The Company shall register on its books any
transfer of the Warrant, upon surrender of same to the Company with a written
instrument of transfer duly executed by the registered Holder or by a duly
authorized attorney. Upon any such registration of a transfer, new Warrant(s)
shall be issued to the transferee(s) and the surrendered Warrant shall be
canceled by the Company. A Warrant may also be exchanged, at the option of the
Holder, for one or more new Warrants representing the aggregate number of
Warrant Shares evidenced by the Warrant surrendered. This Warrant and the
Warrant Shares or any other securities ("Other Securities") received upon
exercise of this Warrant or the conversion of the Warrant Shares shall be
subject to restrictions on transferability unless registered under the
Securities Act, or unless an exemption from registration is available. Until
this Warrant and the Warrant Shares are so registered, this Warrant and any
certificate for Warrant Shares issued or issuable upon exercise of this Warrant
shall contain a legend on the face thereof, in form and substance satisfactory
to counsel for the Company, stating that this warrant or the Warrant Shares may
not be sold, transferred or otherwise disposed of unless, in the opinion of
counsel satisfactory to the Company, which may be counsel to the Company, that
the Warrant or the Warrant Shares may be transferred without such registration.
This Warrant and the Warrant Shares may also be subject to restrictions on
transferability under applicable state securities or blue sky laws. Until the
Warrant and the Warrant Shares are registered under the Securities Act, the
Holder shall reimburse the Company for its expenses, including attorneys' fees,
incurred in connection with any transfer or assignment, in whole or in part, of
this Warrant or any Warrant Shares.
6.2. Compliance With Laws. Until this Warrant or the Warrant Shares
are registered under the Securities Act, the Company may require, as a condition
of transfer of this Warrant or the Warrant Shares that the transferee (who may
be the Holder in the case of an exchange) represent that the securities being
transferred are being acquired for investment purposes and for the transferee's
own account and not with a view to or for sale in connection with any
distribution of the security. The Company may also require that the transferee
provide written information adequate to establish that the transferee is an
"accredited investor" within the meaning of Regulation D issued under the
Securities Act, or otherwise meets all qualifications necessary to comply with
exemptions to the Securities Act, all as determined by counsel to the Company.
6.3. Loss Of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct its transfer
agent to execute and deliver, a new warrant of like tenor and date, any such
lost, stolen or destroyed Warrant thereupon shall become void.
<PAGE>
7. Registration Rights. The Company shall be obligated to the Holder of the
Warrants and the Warrant Shares as follows:
(a) Whenever, during the five-year period beginning on June 1, 1997
and ending on June 1, 2002, the Company proposes to file with the Securities and
Exchange Commission a Registration Statement (other than on Form S-8 or as to
securities issued pursuant to an employee benefit plan or a transaction subject
to Rule 145 promulgated under the Act), it shall, at least 30 days prior to each
such filing, give written notice of such proposed Filing (a "Filing Notice") to
the Holder and each holder of Warrant Shares at their respective addresses as
they appear on the records of the Company, pursuant to which the Company shall
offer to include in such Filing any or all of the Warrant Shares purchasable
under the Warrant and any Warrant Shares theretofore issued on exercise of any
portion of the Warrant. The Holder and holders of Warrant Shares shall have
until the 10th day after receipt of such notice to send to the Company a written
request or requests (a "Registration Request") that shall specify the number of
Warrant Shares which the Holder or holder of Warrant Shares desires to have
included in such filing (the aggregate amounts of which specified in all such
Registration Requests of the Holder and the holders of Warrant Shares shall be
referred to hereinafter as the "Registrable Securities") and the manner of
disposition for such Registrable Securities proposed by the Holder or holders of
Warrant Shares. The Company shall include in such filing, for registration under
the Securities Act of 1933 (the "1933 Act") and disposition in accordance with
the method of disposition set forth in such Registration Requests, the aggregate
number of Registrable Securities which the Holder or holders of Warrant Shares
requested be included in such filing. In the event that the managing underwriter
for said offering advises the Company and the holders of the Registrable
Securities in writing that the inclusion of such securities in the offering
would be detrimental to the offering of any shares or other securities to be
sold and issued by the Company pursuant to such Registration Statement, the
Company will include in such Registration Statement the number of Registrable
Securities which in the opinion of such managing underwriter can be included in
such Registration Statement, together with the shares of all other shareholders
who exercise similar registration rights to have their shares sold pursuant to
such Registration Statement, on a pro rata basis among all holders of such
Registrable Securities and other shares according to the ratio that the number
of Registrable Securities owned by the Holder hereof and any such other holder
bears to the total number of Registrable Securities and other shares owned by
all such holders.
(b) In addition to any Registration Statement pursuant to subsection
(a) above, (i) during the five-year period beginning on June 1, 1997 and ending
on June 1, 2002, and (ii) at any time after the earlier of (1) the date which is
120 days after the date on which the Company completes a firm-commitment
underwritten initial public offering of its common stock pursuant to a
Registration Statement, or (2) twenty-four months from the date
<PAGE>
hereof, the Company will, as promptly as practicable (but in any event within 60
days), after written request (the "Request") by Holder, or by a person or
persons holding (or having the right to acquire by virtue of holding the
Warrant) at least 50% of the shares of Common Stock which have been (or may be)
issued upon exercise of the Warrant, prepare and file at the Company's own
expense a Registration Statement with the Securities and Exchange Commission and
appropriate Blue Sky authorities sufficient to permit the public offering of the
Shares and will use its best efforts at its own expense through its officers,
directors, auditors and counsel, in all matters necessary or advisable, to cause
such Registration Statement to become effective as promptly as practicable and
to maintain such effectiveness so as to permit resale of the Shares covered by
the Request until the earlier of the time that all such Shares have been sold or
the expiration of ninety (90) days from the effective date of the Registration
Statement; provided, however, that the Company shall only be obligated to file
and have declared effective one such Registration Statement under this Section
7.2(b). Notwithstanding the foregoing, if a Registration Statement is filed
pursuant to this Section 7.2(b) but is not declared effective within 120 days of
the date of the filing thereof or, despite being declared effective within such
period of time, is not kept effective throughout the minimum period, then, it
shall not be deemed to be a Registration Statement meeting the requirements
hereunder and shall not satisfy or discharge the Company's obligations under
this Section 7.2(b).
(c) The Company shall not be required to file a Registration Statement
pursuant to Section 7.2(b) if, in the opinion of counsel for the Holder and
holders of Warrant Shares and counsel for the Company (or, should they not
agree, in the opinion of another counsel experienced in securities law matters
acceptable to counsel for such holders and the Company), the proposed public
offering or other disposition as to which such Registration Statement is
requested is exempt from registration and no longer subject to the volume and
manner of sales restrictions of Rule 144 under federal securities law, and also
exempt from qualification under applicable state securities laws and such
offering or other disposition would result in all purchasers or transferees of
such Shares proposed to be sold by any holders of the Warrants or Warrant Shares
obtaining Warrant Shares which are no longer "restricted securities" as defined
in Rule 144 under, and may be sold publicly pursuant to Section 4(1) of, the
Act.
(d) In consideration for the Company agreeing to its obligations under
this Section 7, the holder of Registrable Securities agrees in connection with
any registration of the Company's securities that, upon the request of the
Company or the underwriters managing any underwritten -offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of or otherwise dispose of any Registrable Securities (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days)
<PAGE>
from the effective date of such registration as the Company or the underwriters
may specify.
(e) If a registration pursuant to a Request under Section 7(b)
involves an underwritten offering, the managing or lead underwriter or
underwriters thereof shall be selected by the holders of at least a majority (by
number of shares) of the Common Stock which have been (or may be) issued upon
exercise of the Warrant as to which registration has been requested and shall be
acceptable to the Company, which shall not unreasonably withhold its acceptance
of any such underwriters.
(f) If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to a registration requested under
Section 7(b), the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be satisfactory in substance
and form to the Company, each such holder and the underwriters, and to contain
such representations and warranties by the Company and such other terms as are
generally prevailing in agreements of this type, including, without limitations,
indemnities to the effect and to the extent provided in Section 8 hereof.
8. Indemnification.
(a) The Company will, and does hereby undertake to, indemnify and hold
harmless each Holder, each of such Holder's officers, directors, partners and
agents, and each person controlling such Holder, with respect to any
registration, qualification, or compliance effected pursuant to Section 7, and
each underwriter, if any, and each person who controls any underwriter, of the
Registrable Securities held by or issuable to such Holder, against all claims,
losses, damages, and liabilities (or actions in respect thereto) to which they
may become subject under the 1933 Act, the Securities Exchange Act of 1934, as
amended, (the "1934 Act"), or other federal or state law arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any violation or alleged violation by the Company of any federal, state or
common law rule or regulation applicable to the Company in connection with any
such registration, qualification, or compliance, and will reimburse, as
incurred, each Holder, each underwriter, and each director, officer, partner,
agent and controlling person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action; provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense, arises out of or is based on any untrue statement or
<PAGE>
omission based upon written information furnished to the Company by an
instrument duly executed by any of the Holders or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in such registration, qualification, or compliance,
severally and not jointly, indemnify the Company, each of its directors, and
each officer who signs a Registration Statement in connection therewith, and
each person controlling the Company, each underwriter, if any, and, each person
who controls any underwriter, of the Company's securities covered by such a
Registration Statement, against all claims, losses, damages, and liabilities (or
actions in respect thereof arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, the Company, and each such underwriter or other person, for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made in such
Registration Statement, prospectus, offering circular, or other document, in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the liability of each such
Holder hereunder shall be limited to the net proceeds received by such Holder
from the sale of securities under such Registration Statement. In no event will
any Holder be required to enter into any agreement or undertaking in connection
with any registration under this Section 8 providing for any indemnification or
contribution obligations on the part of such Holder greater than such Holder's
obligations under this Section 8.
(c) Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide such
indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and the Indemnifying Party shall assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be subject to approval by the Indemnified Party (whose approval shall not
be unreasonably withheld) and the Indemnified Party may participate in such
defense with its separate counsel at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party
<PAGE>
of its obligations under this Section 8, except to the extent that such failure
to give notice shall materially adversely affect the Indemnifying Party in the
defense of any such claim or any such litigation. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff therein, to such Indemnified Party, of a release from all
liability in respect to such claim or litigation.
(d) If any Holder includes Registrable Securities in any registration,
such Holder shall furnish to the Company such information regarding such Holder,
and the distribution proposed by such or Holder, as the Company may reasonably
request in writing and as shall be required in connection with any registration,
qualification, or compliance referred to in Sections 7 and 8.
9. Contribution. In order to provide for just and equitable contribution
under the 1933 Act in any case in which: (a) the Holder or any holder of the
Warrant Shares or controlling person makes a claim for indemnification pursuant
to Section 8 hereof but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of Section 8 hereof provide for indemnification in such
case; or (b) contribution under the 1933 Act may be required on the part of the
Holder or any holder of the Warrant Shares or controlling person, then the
Company and the Holder or any such holder of the Warrant Shares or controlling
person shall contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Holder or holder of Warrant
Shares or controlling person on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and such holders of such securities and such
controlling persons agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
or by any other method which does not take account of the equitable
considerations referred to in this Section 9. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof referred to above in this Section 9 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in
<PAGE>
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
10. No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or otherwise, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times, in good faith, take
all such action as may be necessary or appropriate in order to protect the
rights of the Holder against impairment.
11. Restrictive Legend. Unless and until otherwise permitted by this
Section 11, each certificate for Warrants issued under this Agreement, each
certificate for any Warrants issued to any transferee of any such certificate,
each certificate for any Warrant Stock issued upon exercise of any Warrant and
each certificate for any Warrant Stock issued to any transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") NOR IS SUCH REGISTRATION CONTEMPLATED. SUCH
SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
AT ANY TIME WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, EXCEPT
UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE
SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
IT AND TO ITS COUNSEL TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN
VIOLATION OF THE ACT, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER."
12. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or three (3) business
days after mailing if mailed by registered or certified mail, postage prepaid,
addressed in the name and at the address of such Holder appearing on the records
of the Company. Notices or other communications to the Company shall be deemed
to have been sufficiently given if delivered by hand or three (3) business days
after mailing if mailed by registered or certified mail, postage prepaid, to the
Company at:
Southhampton Enterprises Corp.
9211 Diplomacy Row
Dallas, TX 75247
Attn.: President
<PAGE>
Either party may change the address to which notices shall be given by notice
pursuant to this Section 12.
13. Governing Law. This warrant shall be governed by and construed in
accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the Company has executed this Warrant as of May 7,
1997.
WITNESS/ATTEST: SOUTHHAMPTON ENTERPRISES CORP.,
A British Columbia,
Canada Corporation
/s/ illegible BY: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes,
Chief Executive Officer
<PAGE>
ANNEX A
-------
[FORM OF EXERCISE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____ shares of Common Stock
and herewith tenders payment for such shares of Common Stock in the amount of
$_______________ by bank check made payable to "Southhampton Enterprises Corp."
The undersigned requests that a certificate for such shares of Common Stock be
registered in the name of _______________________________________, whose address
is ____________________________________. If such number of shares of Common
Stock is less than all of the shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of the shares of Common Stock be registered in the name of
____________________ _______________________, whose address is
________________________________________________________________________________
______________________________________________________________.
Dated:
Signature: _____________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant Certificate.)
________________________________
Insert Social Security or Taxpayer
I.D. No. of Holder)
Exhibit 4.3.1
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
AMENDMENT NO. 1
TO
WARRANT
FOR VALUE RECEIVED, the adequacy and receipt of which is hereby
acknowledged, SOUTHHAMPTON ENTERPRISES CORP., a British Columbia (Canada)
corporation, hereby certifies to LASALLE BUSINESS CREDIT, INC. ("Holder"), and
its successors and assigns, that the Warrant dated May 7, 1997 originally issued
to Holder ("Warrant") shall be amended as set forth herein.
1. Definitions. Capitalized terms not otherwise defined shall have the
meanings set forth in the Warrant.
2. Number of Shares. The number of shares of Common Stock initially
issuable under the Warrant shall be 2,032,597, which amount shall be subject to
adjustment as provided in the Warrant.
3. Other Amendments. The Warrant shall be amended as follows:
a. The first paragraph of the Warrant, which paragraph commences with
the words "This is to certify that," is hereby amended by deleting the following
two sentences:
The term "Exercise Price" means initially the lower of (i)
One Dollar ($1.00) per share and (ii) the lowest price
established by any of the following financing(s) that occurs
within twelve (12) months of the date hereof: (A) the price
per share of common equity established by the first round of
common equity financing after the date hereof, or (B) the
conversion price to Common Stock or exercise price for
Common Stock established by the first round of preferred
stock, Convertible Securities or options or rights to
purchase Common Stock after the date hereof. In the absence
of any such financing within the above time period, the
initial exercise price shall be One Dollar ($1.00) per
share.
And substituting in lieu thereof the following:
<PAGE>
The term "Exercise Price" means initially One Dollar ($1.00)
per share.
b. The defined term "Warrant" as used in the Warrant shall mean the
Warrant as amended by any amendments to the Warrant, and any warrants issued in
exchange or replacement of the Warrant or upon the transfer of the Warrant
hereof.
c. Section 4.10 is hereby amended by deleting its present language in
its entirety and substituting in lieu thereof the following:
4.10 Adjustment of Exercise Price.
(a) Changes Based on Adjustments In Number Of
Warrant Shares. Whenever the number of Warrant
Shares purchasable upon the exercise of the
Warrant is adjusted, the Exercise Price with
respect to the Warrant Shares shall be adjusted by
multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant
Shares so purchasable immediately thereafter.
(b) The Cruttenden Warrant. Concurrent with
the issuance of this Warrant, the Company has also
issued a warrant to The Cruttenden Roth Bridge
Fund, LLC, to purchase 10.0% of the Company's
Common Stock on a fully diluted basis (the
"Cruttenden Warrant"). It is the intent of the
Company that the Exercise Price shall never be
greater than the per share exercise price
determined under the Cruttenden Warrant.
Accordingly, notwithstanding anything to the
contrary contained in this Warrant, the Exercise
Price of this Warrant shall be equal to the lesser
of i) the Exercise Price as determined under the
terms of this Warrant (not taking into account
this Section 4.(b); and ii) the per share exercise
price determined under the terms of the Cruttenden
Warrant in effect at the time the Holder desires
to exercise this Warrant.
4. Miscellaneous Provisions.
<PAGE>
a. Except as amended by this Amendment No. 1 to Warrant, the terms and
conditions of the Warrant shall remain in full force and effect.
b. The covenants and agreements of this Amendment No. 1 to Warrant
shall bind the heirs, assigns and successors of the Company.
c. This Amendment No. 1 to Warrant shall be deemed to have been made
in the State of Maryland and the validity of this Amendment No. 1 to Warrant,
the construction, interpretation, and enforcement thereof, and the rights of the
parties thereto shall be determined under, governed by, and construed in
accordance with the internal laws of the State of Maryland, without regard to
principles of conflicts of law.
d. The headings in this Amendment No. 1 to Warrant are inserted only
for convenience of reference and shall not be used in the construction of any of
its terms.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to Warrant
to be signed by its duly authorized officers effective as of May 7, 1997.
SOUTHHAMPTON ENTERPRISES
CORP., A British Columbia
(Canada) Corporation
By: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes, President
and Chief Executive Officer
AGREED AND ACCEPTED:
LASALLE BUSINESS CREDIT, INC.
By: /s/ Patrick E. Killpatrick (SEAL)
Name: Patrick E. Killpatrick
Title: Vice President
Exhibit 4.4
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
WARRANT
Company: SOUTHHAMPTON ENTERPRISES CORP.
a British Columbia (Canada) corporation
Number of Shares: _________ shares
Class of Stock: Common Stock, No Par Value
Initial Exercise Price: As described in Section 1
Issued as of: May 7, 1997
Expiration Date: As described in Section 1
FOR VALUE RECEIVED, the adequacy and receipt of which is hereby
acknowledged, SOUTHHAMPTON ENTERPRISES CORP., a Nevada corporation, hereby
certifies that IMPERIAL BANCORP, a California bank holding company, and its
successors and assigns, are entitled to purchase from the Company at any time
and from time to time on and after the date hereof until 12:00 midnight
California local time on the Expiration Date at an initial Exercise Price (as
described in Section 1), fully paid and nonassessable shares of Common Stock of
the Company; on the terms and conditions hereinafter set forth.
The number of such shares of Common Stock and the Exercise Price are
subject to adjustment as provided in the Warrant. Anything contained in this
Warrant to the contrary notwithstanding, the number of shares of Common Stock
which may be issued upon exercise of this Warrant by any Regulated Warrantholder
shall never exceed such amount as may be permitted under the Bank Holding
Company Act, or any successor statute, or under any other federal or state
banking or regulations to which such Regulated Warrantholder may be subject at
the time of such exercise.
1. Certain Definitions. As used in this Warrant, the following
terms have the following definitions:
"Additional Shares of Common Stock" means all shares of Common
Stock issued or issuable by the Company after the date of this Warrant.
<PAGE>
"Bank" means IMPERIAL BANK, a California banking corporation,
and its successors and assigns.
"Common Stock" means the Company's Common Stock, no par value,
and includes any common stock of the Company of any class or classes resulting
from any reclassification or reclassifications thereof which is not limited to a
fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company.
"Company" means Southhampton Enterprises Corp., a British
Columbia (Canada) corporation.
"Convertible Securities" means evidence of indebtedness,
shares of stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any
other security as of a relevant date means: (i) the Fair Value thereof as
determined in accordance with clause (ii) of the definition of Fair Value with
respect to Common Stock or any other security that is not listed on a national
securities exchange or traded on the over-the-counter market or quoted on
NASDAQ, and (ii) the average of the daily closing, prices for the ten (10)
trading days before such date (excluding any trades which are not bona fide
arm's length transactions) with respect to Common Stock or any other security
that is listed on a national securities exchange or traded on the
over-the-counter market or quoted on NASDAQ. The closing price for each day
shall be (i) the last sale price of shares of Common Stock or such other
security on such date or, if no such sale takes place on such date, the average
of the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which the
same are then listed or admitted to trading, or (ii) if no shares of Common
Stock or if no securities of the same class as such other security are then
listed or admitted to trading on any national securities exchange, the average
of the reported closing bid and asked prices thereof on such due in the
over-the-counter market as shown by the National Association of Securities
Dealers automated quotation system or, if no shares of Common Stock or if no
securities of the same class as such other security are then quoted in such
system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Warrantholders.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exercise Period" means the period commencing on the date
hereof and ending at 12:00 midnight California local time on the Expiration
Date.
<PAGE>
"Exercise Price" means initially the lower of (i) One Dollar
($1.00) per share and (ii) the lowest price established by any of the following
financing(s) that occurs within twelve (12) months from the date hereof: (A) the
price per share of common equity established by the first round of common equity
financing after the date hereof or (B) the conversion price to Common Stock or
exercise price for Common Stock established by the first round of preferred
stock, Convertible Securities or options or rights to purchase Common Stock
after the date hereof. In the absence of any such financing within the above
time period, the initial exercise price shall be the price per share established
by the round of Common Equity financing (including, if necessary, the initial
capitalization of the Company) most closely preceding the date hereof. The
exercise price per share shall be subject to adjustment as provided in this
Warrant.
"Expiration Date" means the date that is the later of: (i)
five (5) years after the date hereof (the "Fixed Date"); or (ii) thirty (30)
days after the date that the Fair Value Determination(s) is made (provided that
the procedure for determining Fair Value is initiated prior to the Fixed Date).
"Fair Value" means: (i) with respect to a share of Common
Stock or any other security, the Current Market Price thereof, and (ii) with
respect to any other property, assets, business or entity, an amount determined
in accordance with the following procedure: The Company and the holders of the
Warrants and Warrant Shares, as applicable, shall use their best efforts to
mutually agree to a determination of Fair Value within ten (10) days of the date
of the event requiring that such a determination be made. If the Company and
such holders are unable to reach agreement within said ten (10) day period, the
Company and the Warrantholders shall, within the immediately subsequent ten (10)
day period, select a mutually acceptable independent valuation professional who
shall issue a determination of Fair Value of the Warrant Shares within sixty
(60) days. In the event the Company and such Warrantholders are unable to reach
agreement with respect to a mutually acceptable independent valuation
professional within the aforementioned ten (10) day period, the Warrantholders
shall submit to the Company a list of three (3) independent valuation
professionals. Within the immediately subsequent ten (10) day period the Company
shall select one (1) independent valuation professional from such list. The
independent valuation professional so selected shall issue a determination of
Fair Value of the Warrant Shares within the immediately subsequent sixty (60)
day period. In all of the above cases, the independent valuation professional
shall be engaged by, and shall issue their determination for the benefit of, the
Warrantholders, and the determination so made shall be conclusive and binding on
the Company and the Warrantholders. The fees and expenses of any such
determination made by any and all such independent valuation professionals shall
be paid by the Company. If there is more than one holder of Warrants and/or
Warrant Shares entitled to a determination of Fair Value in any particular
instance, each action to be taken by the holders of such Warrants
<PAGE>
and/or Warrant Shares under this Section shall be taken by a majority in
interest of such holders and the action taken by such majority (including as to
any mutual agreement with the Company with respect to Fair Value and as to any
selection of independent valuation professionals) shall be binding upon all such
holders. In the case of a determination the Fair Value per share of Common
Stock, the Company and such holders shall not take into consideration, and shall
instruct all such independent valuation professionals not to take into
consideration, any premium for shares representing control of the Company, any
discount for any minority interest therein or any restrictions on transfer under
applicable federal and state securities laws or otherwise.
"Imperial" means IMPERIAL BANCORP, a California banking
holding company, and its successors and assigns.
"Indemnified Party" and "Indemnifying Party" have the meanings
set forth in Section 11(e)(iii).
"Loan Agreements" means that certain Credit Agreement of even
date herewith between the Company and the Bank.
"Registrable Stocks" means: (i) all Warrant Shares which are
issuable to the Warrantholders pursuant to the Warrants, whether or not the
Warrants have in fact been exercised and whether or not such Warrant Shares have
in fact been issues, (ii) all Warrant Shares acquired by the Warrantholders
pursuant to the Warrants, (iii) any shares of Common Stock, whether or not such
shares of Common Stock have in fact been issued, and stocks or other securities
of the Company issued upon conversion of, in a stock split or reclassification
of, or a stock dividend or other distribution on, or in substitution or exchange
for, or otherwise in connection with, such Warrant Shares or in a merger or
consolidation involving the Company or its assets. For purposes of Section 11, a
Warrantholder of record shall be treated as the record holder of the related
Warrant Shares and other securities issuable pursuant to the Warrants.
"Regulated Warrantholder" means any Warrantholder which is, or
the parent of which is, subject to the Bank Holding Company Act, or any
successor statute, or any other federal or state banking laws and regulations.
"Securities Act" means the Securities Act of 1933, as amended.
"Term Note" shall have the meaning given to it in the Loan
Agreements.
"Warrant(s)" means this Warrant and any warrants issued in
exchange or replacement of this Warrant or upon transfer hereof.
"Warrantholder(s)" means Imperial and its successors and
assigns.
<PAGE>
"Warrant Shares" means shares of Common Stock issuable to
Warrantholders pursuant to the Warrants.
2. Exercise of Warrant. This Warrant may be exercised, in whole
or in part, at any time and from time to time during the Exercise Period by
written notice to the Company and upon payment to the Company of the Exercise
Price (subject to adjustment as provided herein) for the shares of Common Stock
in respect of which the Warrant is exercised.
3. Form of Payout of Exercise Price. Anything contained herein to
the contrary notwithstanding, at the option of the Warrantholders, the Exercise
Price may be paid in any one or a combination of the following forms: (a) by
wire transfer to the Company, (b) by the Warrantholder's check to the Company,
(c) by the cancellation of any indebtedness owed by the Company and/or any
subsidiaries of the Company to the Warrantholder, and/or (d) by the surrender to
the Company of Warrants, Warrant Shares, Common Stock and/or other securities of
the Company and/or any subsidiaries of the Company having a Fair Value equal to
the Exercise Price.
4. Cashless Exercise/Conversion: Appreciation Right.
(a) Conversion. In lieu of exercising this Warrant as
specified in Sections 2 and 3 above, the Warrantholders may from time to time at
the Warrantholders' option convert this Warrant, in whole or in part, into a
number of shares of Common Stock of the Company determined by dividing (A) the
aggregate Fair Value of such shares or other securities otherwise issuable upon
exercise of this Warrant minus the aggregate Exercise Price of such shares by
(B) the Fair Value of one such share.
(b) Appreciation Right. In lieu of exercising this Warrant as
specified in Sections 2 and 3 above, the Warrantholders may, at any time, and
from time to time after the third anniversary date of this Agreement, require
the Company to purchase all or a portion of the Warrant Shares (but in no event
shall such portion represent less than one-third of the Warrant Shares), for
cash, at a price equal to the then Fair Value of the Common Stock issuable upon
exercise of this Warrant less the Exercise Price. Upon the Warrantholders'
exercise of this option, the Company shall promptly wire transfer to the
Warrantholders such amount as is required under this Section 4(b), but in no
event later than five (5) business days after the exercise of such option, in
immediately available funds. Notwithstanding anything in this Section 4(b) to
the contrary, the rights of the Warrantholders under the preceding sentences of
this Section 4(b) ("Appreciation Rights") shall terminate when (i) all of the
Warrant Shares have been registered under the Securities Act and (ii) the Term
Note has been paid in full or cash in the unpaid balance of the Term Note
remains pledged to the holder of the Term Note in accordance with Section 2.4(c)
of the Loan Agreements; provided, however, the Warrantholders shall not be able
to exercise the Appreciation Rights unless the Warrantholders have made a
request to the Company pursuant to
<PAGE>
Section 11(a) or (b) to register all the Registrable Stock under the Securities
Act and such Registrable Stock has not been registered within one hundred eight
(180) days after the making of the request for registration of all Registrable
Stock.
5. Certificates for Warrant Shares; New Warrant. The Company agrees
that the Warrant Shares shall be deemed to have been issued to the
Warrantholders as the record owner of such Warrant Shares as of the close of
business on the date on which payment for such Warrant Shares has been made (or
deemed to be made by conversion) in accordance with the terms of this Warrant.
Certificates for the Warrant Shares shall be delivered to Warrantholders within
a reasonable time, not exceeding five (5) days, after this Warrant has been
exercised or converted. A new Warrant representing the number of shares, if any,
with respect to which this Warrant remains exercisable also shall be issued to
the Warrantholders within such time so long as this Warrant has been surrendered
to the Company at the time of exercise.
6. Adjustment of Exercise Price, Number of Shares and Nature of
Securities Issuable Upon Exercise of Warrants.
(a) Exercise Price: Adjustment of Number of Shares. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Exercise Price, the Warrantholders shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, a number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Adjustment of Exercise Price Upon Issuance of Common
Stock. If and whenever after the date hereof the Company shall issue or sell
Additional Shares of Common Stock without consideration or for a consideration
per share less than the Current Market Price or the Exercise Price then in
effect immediately prior to the issuance or sale of such shares, then the
Exercise Price in effect immediately prior to such issuance or sale of such
shares shall be reduced to a number which shall be calculated by dividing (A) an
amount equal to the sum of (1) the number of shares of Common Stock outstanding,
immediately prior to such issue or sale multiplied by the then existing Exercise
Price plus (2) the aggregate consideration, if any, received by the Company upon
such issue or sale, by (B) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
No adjustment of the Exercise Price, however, shall be made in
an amount less than $.01 per share, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried forward,
shall amount to $.01 per share or more.
<PAGE>
The provisions of this Section 6(b) shall not apply to any
Additional Shares of Common Stock which are distributed to holders of Common
Stock pursuant to a stock split for which an adjustment is provided for under
Section 6(b).
(c) Further Provision for Adjustment of Exercise Price Upon
Issuance of Additional Shares of Common Stock and Convertible Securities. For
purposes of Section 6(b), the following provisions shall also be applicable:
(i) In case at any time on or after the date hereof,
the Company shall declare any dividend, or authorize any other
distribution, upon any stock of the Company of any class, payable in
Additional Shares of Common Stock or by the issuance of Convertible
Securities, such declaration or distribution shall be deemed to have
been issued or sold (as of the record date) without consideration and
shall thereby cause an adjustment in the Exercise Price as required by
Section 6(b).
(ii) (A) In case at any time on or after the date
hereof, the Company shall in any manner issue or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder
are immediately exercisable, there shall be determined the price per
share for which Additional Shares of Common Stock are issuable upon the
conversion or exchange thereof, such determination to be made by
dividing (a) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof by (b)
the maximum aggregate number of Additional Shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities
for such minimum aggregate amount of additional consideration; and such
issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such
maximum number of Additional Shares of Common Stock at the price per
share so determined, and shall thereby cause an adjustment in the
Exercise Price, if such an adjustment is required by Section 6(b)
hereof.
(B) If such Convertible Securities shall by their
terms provide for an increase or increases, with the passage of time,
in the amount of additional consideration, if any, payable to the
Company, or in the rate of exchange upon the conversion or exchange
thereof, the adjusted Exercise Price shall, upon any such increase
becoming effective, be increased to such Exercise Price as would have
been in effect had the adjustments made upon the issuance of such
Convertible Securities been made upon the basis of (and the total
consideration received therefor) (a) the issuance of the number of
shares of Common Stock theretofore actually delivered upon the exercise
of such Convertible Securities,
<PAGE>
(b) the issuance of all Common Stock, all Convertible Securities and
all rights and options to purchase Common Stock issued after the
issuance of such Convertible Securities, and (c) the original issuance
at the time of such change of any such Convertible Securities then
still outstanding; provided, however, that any such increase or
increases shall not exceed, in the aggregate, the amount of the
original reduction of the Exercise Price attributable to the
Convertible Securities.
(C) If any rights of conversion or exchange evidenced
by such Convertible Securities shall expire without having been
exercised, the adjusted Exercise Price shall forthwith be readjusted to
such Exercise Price as would have been in effect had an adjustment with
respect to such Convertible Securities been made on the basis that the
only Additional Shares of Common Stock issued or sold were those issued
upon the conversion or exchange of such Convertible Securities, and
that they were issued or sold for the consideration actually received
by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of such Convertible
Securities.
(iii) (A) In case at any time on or after the date
hereof, the Company shall in any manner grant or issue any rights or
options to subscribe for, purchase or otherwise acquire Additional
Shares of Common Stock, whether or not such rights or options are
immediately exercisable, there shall be determined the price per share
for which Additional Shares of Common Stock are issuable upon the
exercise of such rights or options, such determination to be made by
dividing (a) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options if
the maximum number of Additional Shares were issued pursuant to such
rights or options for such minimum aggregate amount of additional
consideration, by (b) the maximum number of Additional Shares of Common
Stock of the Company issuable upon the exercise of all such rights or
options for such minimum aggregate amount of additional consideration;
and the granting of such rights or options shall be deemed to be an
issue or sale for cash (as of the date of the granting of such rights
or options) of such maximum number of Additional Shares of Common Stock
at the price per share so determined, and shall thereby cause an
adjustment in the Exercise Price, if such an adjustment is required by
Section 6(b) hereof.
(B) If such rights or options shall by their terms
provide for an increase or increases, with passage of time, in the
amount of additional consideration payable to the Company upon the
exercise thereof, the adjusted Exercise Price shall, upon any such
increases becoming effective, be increased to such Exercise Price as
would have been in effect
<PAGE>
had the adjustments made upon the issuance of such rights or options
been made upon the basis for (and the total consideration received
therefor) (a) the issuance of the number of shares of Common Stock
theretofore actually delivered upon the exercise of such rights or
options, (b) the issuance of all Common Stock, all rights and options
and all Convertible Securities issued after the issuance of such rights
and options, and (c) the original issuance at the time of such change
of any such rights or options then still outstanding; provided,
however, that any such increase or increases in the Exercise Price
shall not exceed, in the aggregate, the amount of the original
reduction of the Exercise Price attributable to the grant of such
rights or options.
(C) If any such rights or options shall expire
without having been exercised, the adjusted Exercise Price shall
forthwith be readjusted to such Exercise Price as would have been in
effect had an adjustment with respect to such rights or options been
made on the basis that the only Additional Shares of Common Stock so
issued or sold were those issued or sold upon the exercise of such
rights or options and that they were issued or sold for the
consideration actually received by the Company upon such exercise, plus
the consideration, if any, actually received by the Company for the
granting of such rights or options.
(iv) (A) In case at any time on or after the date
hereof, the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Convertible Securities, there shall be
determined the price per share for which Additional Shares of Common
Stock are issuable upon the exchange or conversion of such Convertible
Securities if such rights or options were exercised, such determination
to be made by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the issuance of such
rights or options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options if the maximum number of Convertible Securities were
issued pursuant to such rights or options for such minimum aggregate
amount of additional consideration, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exchange or conversion of such Convertible Securities if the maximum
number of Additional Shares were issued pursuant to such Convertible
Securities for such minimum aggregate amount of additional
consideration, by (b) the maximum aggregate number of Additional Shares
of Common Stock issuable upon the exchange or conversion of the
Convertible Securities for such minimum aggregate amount of additional
consideration; and the issue or sale of such rights or options shall be
deemed to be an issue or sale for cash (as of the date of the granting
of such rights or options) of such maximum number of Additional Shares
of Common Stock at the price per share so determined,
<PAGE>
and thereby shall cause an adjustment in the Exercise Price, if such an
adjustment is required by Section 6(b).
(B) If such rights or options to subscribe for or
otherwise acquire Convertible Securities shall by their terms provide
for an increase or increases, with the passage of time, in the amount
of additional consideration payable to the Company upon the exercise,
exchange or conversion thereof, the adjusted Exercise Price shall,
forthwith upon any such increase becoming effective, be increased to
such Exercise Price as would have been in effect had the adjustments
made upon the issuances of such rights or options been made upon the
basis of (and the total consideration received therefor) (a) the
issuance of the number of shares of Common Stock theretofore actually
delivered upon the exchange or conversion of such Convertible
Securities, (b) the issuances of all Common Stock and all rights,
options and Convertible Securities issued after the issuance of such
rights and options, and (c) the original issuances at the time of such
change of any such rights, options and Convertible Securities issued
upon exercise of such rights or options which are then still
outstanding; provided, however, that any such increase or increases
shall not exceed, in the aggregate, the amount of the original
reduction of the Exercise Price attributable to the grant of such
rights or options.
(C) If any such rights, options or rights of
conversion or exchange of such Convertible Securities shall expire
without having been exercised, exchanged or converted, the adjusted
Exercise Price shall forthwith be readjusted to such Exercise Price as
would have been in effect had an adjustment been made with respect to
such rights, options or rights of conversion or exchange of such
Convertible Securities on the basis that the only Additional Shares of
Common Stock so issued or sold were those issued or sold upon the
exercise of such rights or options and exchange or conversion of such
Convertible Securities and that they were issued or sold for the
consideration actually received by the Company upon exercise of such
rights and options and exchange or conversion of such Convertible
Securities, plus the consideration, if any, actually received by the
Company for the granting of such rights, options or Convertible
Securities.
(v) In any case where an adjustment has been made in
the Exercise Price upon the issuance of Convertible Securities or any
rights or options to purchase Convertible Securities or Additional
Shares of Common Stock pursuant to this Section 6(c), no further
adjustment shall be made at the time of the conversion of any such
Convertible Securities or at the time of the exercise of any such
rights or options.
(vi) In case at any time on or after the issuance of
this Warrant any shares of Common Stock or Convertible
<PAGE>
Securities shall be issued or sold for a consideration other than cash,
the amount of the consideration other than cash payable to the Company
shall be deemed to be the Fair Value of such consideration. Whether or
not the consideration so received is cash, the amount thereof shall be
determined after deducting therefrom any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by
the Company in connection therewith.
(vii) In case at any time the Company shall fix a
record date of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution payable
in Common Stock, Convertible Securities or rights or options to
purchase either thereof, or (b) to subscribe for or purchase Common
Stock, Convertible Securities or rights or options to purchase either
thereof, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed, pursuant to this
Section 6(c), to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(viii) The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the deposition of any such
shares shall be considered an issue or sale of Common Stock for the
purposes of this Section 6(c).
(d) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive cash, stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the Warrantholders shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant upon exercise of this Warrant and in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such cash, shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of Common Stock equal to the number of shares
of such Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, and in any such case appropriate
provision shall be made with respect to the rights and interest of the
Warrantholders to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon
<PAGE>
the exercise of this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any
consolidation, merger or sale of all or substantially all of the assets of the
Company unless prior to or simultaneous with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation, merger or purchase of such assets shall assume, by written
instrument executed and mailed or delivered to the Warrantholders, the
obligation to deliver to such Warrantholders such cash (or cash equivalent),
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Warrantholders may be entitled to receive and containing the
express assumption of such successor corporation of the due and punctual
performance and observance of each provision of this Warrant to be performed and
observed by the Company and of all liabilities and obligations of the Company
hereunder; provided, however, in this case of any consolidation or merger of the
Company with another corporation or the sale of all or substantially all of its
assets to another corporation effected in such a manner that the holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, at the election of each
Warrantholder, in lieu of receiving such stock, securities or assets, such
Warrantholder shall receive cash equal to the Fair Value of the Common Stock
issuable upon exercise of the Warrant, less the Exercise Price payable upon
exercise thereof.
Upon any "change in control" of the Company, the appreciation
rights described in this section shall become immediately and contemporaneously
exercisable. In addition, should the Warrantholders not participate in the sale
of, nor receive a proportionate interest in, the proceeds of any sale of
twenty-five percent (25%) or more of the Common Stock of the Company, then such
appreciation right in their entirety shall become immediately and
contemporaneously exercisable.
In case any Additional Shares of Common Stock or Convertible
Securities or any rights or options to purchase any Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any merger of
another corporation into the Company, the amount of consideration therefor shall
be deemed to be the Fair Value of such portion of the assets of such merged
corporation as the Board of Directors of the Company shall in good faith
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities or rights or options, as the case may be, and the
Exercise Price shall be adjusted in accordance with this Section 6(d).
(e) Company to Prevent Dilution. In case at any time or from
time to time conditions arise by reason of action taken by the Company which are
not adequately covered by the provisions of this Section 6, and which might
materially and adversely affect the exercise rights of the Warrantholders under
any provision of this
<PAGE>
Warrant, unless the adjustment necessary shall be agreed upon by the Company and
the Warrantholders, the Board of Directors of the Company shall appoint a firm
of independent certified public accountants of recognized national standing (who
have not been employed by the Company within the last five years), acceptable to
the Warrantholders, who at the Company's expense shall give their opinion upon
the adjustment, if any, on a basis consistent with the standards established in
the other provisions of this Section 6, necessary with respect to the Exercise
Price and the number of shares purchasable upon exercise of the Warrants, so as
to preserve, without dilution, the exercise rights of the Warrantholders. Upon
receipt of such opinion, such Board of Directors shall forthwith make the
adjustments described therein.
(f) Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Warrant immediately prior to such subdivision
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock purchasable upon the exercise of this Warrant immediately prior to
such combination shall be proportionately reduced.
(g) Dissolution, Liquidation and Wind-Up. In case the Company
shall, at any time prior to the expiration of this Warrant, dissolve, liquidate
or wind up its affairs, the Warrantholders shall be entitled, upon the exercise
of this Warrant, to receive, in lieu of the shares of Common Stock of the
Company which such Warrantholders would have been entitled to receive, the same
kind and amount of assets as would have been issued, distributed or paid to such
Warrantholders upon any such dissolution, liquidation or winding up with respect
to such shares of Common Stock of the Company, had such Warrantholders been the
holders of record of the Warrant Shares receivable upon the exercise of this
Warrant on the record date for the determination of those persons entitled to
receive any such liquidating distribution. After any such dissolution,
liquidation or winding up which shall result in any cash distribution in excess
of the Exercise Price provided for by this Warrant, the Warrantholders may, at
each such Warrantholder's option, exercise the same without making payment of
the Exercise Price, and in such case the Company shall, upon the distribution to
said Warrantholders, consider that said Exercise Price has been paid in full to
it and in making settlement to said Warrantholders, shall deduct from the amount
payable to such Warrantholders an amount equal to such Exercise Price.
(h) Noncash Consideration. In case any Additional Shares of
Common Stock or Convertible Securities or any rights or options to purchase any
Additional Shares of Common Stock or
<PAGE>
Convertible Securities shall be issued for a consideration in a form other than
cash, the amount of such consideration shall be deemed to be the Fair Value
thereof.
(i) Accountants' Certificate. In each case of an adjustment in
the number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the Warrants, the Company at its expense shall
cause independent public accountants of recognized standing selected by the
Company and acceptable to the Warrantholders to compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of (a) the consideration received or to be
received by the Company for any Additional Shares of Common Stock, rights,
options or Convertible Securities issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock of each class outstanding or
deemed to be outstanding, (c) the adjusted Exercise Price and (d) the number of
shares issuable upon exercise of this Warrant. The Company will forthwith mail a
copy of each such certificate to each Warrantholder.
7. Special Agreements of the Company.
(a) Reservation of Shares. The Company covenants and agrees
that all Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant. The Company
hereby covenants and agrees to take all such action as may be necessary to
assure that the par value per share of the Common Stock is at all times equal to
or less than the Exercise Price.
(b) Avoidance of Certain Actions. The Company will not, by
amendment of its Articles or Certificates of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, issue or sale of
securities or otherwise, avoid or take any action which would have the effect of
avoiding the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in carrying out all of the provisions of this Warrant and in taking all of such
action as may be necessary or appropriate in order to protect the rights of the
Warrantholders against dilution or other impairment of their rights hereunder.
(c) Securing Governmental Approvals. If any shares of Common
Stock required to be reserved for the purposes of exercise of this Warrant
require registration with or approval of any governmental authority under any
federal law (other than the
<PAGE>
Securities Act) or under any state law before such shares may be issued upon
exercise of this Warrant, the Company will, at its expense, as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
(d) Listing on Securities Exchanges; Registration. If, and so
long as, any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act), the Company will, at its
expense, obtain and maintain the approval for listing upon official notice of
issuance of all Warrant Shares and maintain the listing of Warrant Shares after
their issuance; and the Company will so list on such national securities
exchange, will register under the Exchange Act (or any similar statute then in
effect), and will maintain such listing of, any other securities that at any
time are issuable upon exercise of this Warrant if and at the time any
securities of the same class shall be listed on such national securities
exchange by the Company.
(e) Information Rights. So long as the Warrantholders hold
this Warrant and/or any of the Warrant Shares, the Company shall deliver to the
Warrantholders (i) promptly after mailing, copies of all communications to the
shareholders of the Company, (ii) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by the independent public accountants of recognized standing,
and (iii) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
(f) Restrictions on Public Sale by the Company. The Company
will not effect any public or private sale or distribution of its convertible
debt or equity securities, including a sale pursuant to Regulation D under the
Securities Act, during the ten (10) day period prior to, and during the ninety
(90) day period beginning on, the closing date of each underwritten offering by
the Company made pursuant to a registration statement filed pursuant to Sections
11(a) or 11(b); and the Company shall cause each holder of its privately placed
convertible debt or equity securities issued by it at any time on or after the
date of this Warrant to agree not to effect any public sale or distribution of
any such securities during such period, including a sale pursuant to Rule 144 or
Rule 144A under the Securities Act.
(g) Preemptive Rights. In the event the Company offers to the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock issuable pursuant to the Warrants shall be deemed to
be issued and outstanding and held by the Warrantholders and the Warrantholders
shall be entitled to participate in such rights offering.
(h) Compliance with Law. The Company shall comply with all
applicable laws, rules and regulations of the United States and of all states,
municipalities and agencies of any other
<PAGE>
jurisdiction applicable to the Company and shall do all things necessary to
preserve, renew and keep in full force and effect and in good standing its
corporate existence and authority necessary to continue its business.
8. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, the Company
shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the Current Market Value of one share of Common Stock.
9. Notices of Stock Dividends, Subscriptions, Reclassifications,
Consolidations Mergers, etc. If at any time: (i) the Company shall declare a
cash dividend (or an increase in the then existing dividend rate), or declare a
dividend on Common Stock payable otherwise than in cash out of its net earnings
after taxes for the prior fiscal year; or (ii) the Company shall authorize the
granting to the holders of Common Stock of rights to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or (iii) there
shall be any capital reorganization, or reclassification, or redemption of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another corporation or firm;
or (iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then the Company shall give to the Warrantholders at
the addresses of such Warrantholders as shown on the books of the Company, at
least twenty (20) days prior to the applicable record date hereinafter
specified, a written notice summarizing such action or event and starting the
record date for any such dividend or rights (or, if a record date is not to be
selected, the date as of which the holders of Common Stock of record entitled to
such dividend or rights are to be determined), the date on which any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected the holders of Common Stock of record shall be
entitled to effect any exchange of their shares of Common Stock for cash (or
cash equivalent), securities or other property deliverable upon any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up.
10. Registered Holder; Transfer of Warrants or Warrant
Shares.
(a) Maintenance of Registration Books; Ownership of this
Warrant. The Company shall keep at its principal office a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result in
preventing or delaying the exercise or transfer of this Warrant.
<PAGE>
(b) Exchange and Replacement. This Warrant is exchangeable
upon surrender hereof by the registered holder to the Company at its principal
office for new Warrants of like tenor and date representing in the aggregate the
right to purchase the number of shares purchasable hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by said registered holder at the time of surrender. This Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the registered holder hereof in person or by duly authorized
attorney, and new Warrants shall be made and delivered by the Company, of the
same tenor and date as this Warrant but registered in the name of the
transferee(s), upon surrender of this Warrant, duly endorsed, to said office of
the Company. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant, without
requiring the posting of any bond or the giving of any other security. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this Section 10.
(c) Warrants and Warrant Shares Not Registered. The holder of
this Warrant, by accepting this Warrant, represents and acknowledges that this
Warrant and the Warrant Shares are not being registered under the Securities Act
on the grounds that the issuance of this Warrant and the offering and sale of
such Warrant Shares are exempt from registration under Section 4(2) of the
Securities Act as not involving any public offering.
11. Registration.
(a) Required Registration. Whenever the Company shall receive
a written request therefor from any holder or holders of at least 50% of the
Registrable Stock, the Company shall promptly prepare and file a registration
statement under the Securities Act covering the Registrable Stock which is the
subject of such request and shall use its best efforts to cause such
registration statement to become effective as expeditiously as possible. Upon
the receipt of such request, the Company shall promptly give written notice to
all holders of Registrable Stock that such registration is to be effected. The
Company shall include in such registration statement such Registrable Stock for
which it has received written requests to register such shares by the holders
thereof within thirty (30) days after the effectiveness of the Company's written
notice to such other holders. Except as hereinafter expressly provided, without
the written consent of the holders of a majority of the shares of Registrable
Stock for which registration has been requested pursuant to this Section,
neither the Company nor any other holder of securities of the Company may
include securities in such registration. Notwithstanding anything in this
Section 11(a)
<PAGE>
to the contrary, the Company shall not be required to effect more than two (2)
registrations of Registrable Stock pursuant to this Section 11(a) and it shall
not be required to effect more than one registration under this Section 11(a) on
Form S-3.
(b) Incidental Registration. Each time the Company shall
determine to file a registration statement under the Securities Act (other than
on Form S-8 or Form S-4) in connection with the proposed offer and sale for
money of any of its securities by it or by any of its security holders, the
Company will give written notice of its determination to all holders of
Registrable Stock. Upon the written request of a holder of any Registrable
Stock, the Company will cause all such Registrable Stock, the holders of which
have so requested registration thereof, to be included in such registration
statement, all to the extent requisite to permit the sale or other disposition
by the prospective seller or sellers of the Registrable Stock to be so
registered in accordance with the terms of the proposed offering. If the
registration statement is to cover an underwritten distribution, the Company
shall use its best efforts to cause the Registrable Stock requested for
inclusion pursuant to this Section 11(b) to be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter of such
public offering, the inclusion of all of the Registrable Stock requested to be
registered would materially and adversely affect the successful marketing of the
other shares proposed to be offered, then the amount of the Registrable Stock to
be included in the offering shall be reduced and the Registrable Stock and the
other shares to be offered shall participate in such offering as follows: the
shares to be sold by the Company, the Registrable Stock to be included in such
offering and the other shares of Common Stock to be included in such offering
shall each be reduced pro rata in proportion to the number of shares of Common
Stock proposed to be included in such offering by each holder of such shares and
by the Company.
(c) Registration Procedures. If and whenever the Company is
required by the provisions of Section 11(a) or 11(b) to effect the registration
of Registrable Stock under the Securities Act, the Company will, at its expense,
as expeditiously as possible:
(i) In accordance with the Securities Act and the
rules and regulations of the Commission, prepare and file with the
Commission a registration statement on the form of registration
statement appropriate with respect to such securities and use its best
efforts to cause such registration statement to become and remain
effective until the securities covered by such registration statement
to become and remain effective until the earlier ("Registration
Maintenance Event") of (a) the securities covered by such registration
statement having been sold or (b) the date one hundred eighty (180)
days after the effective date of such registration statement; and
<PAGE>
prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective and such registration statement and prospectus accurate and
complete until the occurrence of the Registration Maintenance Event;
(ii) If the offering is to be underwritten, in whole
or in part, enter into a written underwriting agreement with the
holders of the Registrable Stock participating in such offering and the
underwriter in form and substance reasonably satisfactory to the
managing underwriter of the public offering and the holders of the
Registrable Stock participating in such offering;
(iii) Furnish to the holders of securities
participating in such registration and to the underwriters of the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as such underwriters and holders may reasonably
request in order to facilitate the public offering of such securities;
(iv) Use its best efforts to register to qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders and underwriters may reasonably request;
(v) Notify the holders participating in such
registration, promptly after it shall receive notice thereof, of the
date and time when such registration statement and each post-effective
amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed;
(vi) Notify such holders promptly of any request by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the opinion of
counsel for such holders, is required under the Securities Act or the
rules and regulations thereunder in connection with the distribution of
the Registrable Stock by such holders;
(viii) Prepare and promptly file with the Commission,
and promptly notify such holders of the filing of, such amendments or
supplements to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such
<PAGE>
securities is required to be delivered under the Securities Act, any
event has occurred as the result of which any such prospectus or any
other prospectus as then in effect may include an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(ix) In case any of such holders or any underwriter
for any such holders is required to deliver a prospectus at a time when
the prospectus then in circulation is not in compliance with the
Securities Act or the rules and regulations of the Commission, prepare
promptly upon request such amendments or supplements to such
registration statement and such prospectus as may be necessary in order
for such prospectus to comply with the requirements of the Securities
Act and such rules and regulations;
(x) Advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
(xi) If requested by the managing underwriter or
underwriters or a holder of Registrable Stock being sold in connection
with an underwritten offering, immediately incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters and the holders of a majority of the Registrable Stock
being sold agree should be included therein relating to the plan of
distribution with respect to such Registrable Stock, including
information with respect to the Registrable Stock being sold to such
underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten
(or best efforts underwritten) offering of the Registrable Stock to be
sold in such offering; and make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or
post-effective amendment;
(xii) Cooperate with the selling holders of
Registrable Stock and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing
Registrable Stock to be sold and not bearing any restrictive legends;
and enable such Registrable Stock to be in such denominations and
registered in such names as the managing underwriters may request at
least two business days prior to any sale of Registrable Securities to
the underwriters;
<PAGE>
(xiii) Prepare a prospectus supplement or
post-effective amendment to the registration statement or the related
prospectus or any document incorporated therein by reference or file
any other required documents so that, as thereafter delivered to the
purchasers of the Registrable Stock, the prospectus will not contain an
untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xiv) Enter into such agreements (including an
underwriting agreement) and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(A) make such representations and warranties
to the holders of such Registrable Stock and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings;
(B) If an underwriting agreement is entered
into, the same shall set forth in full the indemnification provisions
and procedures of Section 11(e) hereof with respect to all parties to
be indemnified pursuant to said Section; and
(C) The Company shall deliver such documents
and certificates as may be requested by the holders of the majority of
the Registrable Stock being sold and the managing underwriters, if any,
to evidence compliance with the terms of this Section 11(c) and with
any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(xv) Make available for inspection by a
representative of the holders of a majority of the Registrable Stock,
any underwriter participating in any disposition pursuant to a
registration statement, and any attorney or accountant retained by the
sellers or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney
or accountant in connection with the preparation of the registration
statement; provided, that any records, information or documents that
are designated by the Company in writing as confidential shall be kept
confidential by such persons unless disclosure of such records,
information or documents is required by court or administrative order;
<PAGE>
(xvi) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to the Company's security holders, earning
statements satisfying the provisions of Section 11(a) of the Securities
Act, no later than forty-five (45) days after the end of any twelve
(12) month period (or ninety (90) days, if such a period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which
Registrable Stock is sold to underwriters in an underwritten offering,
or, if not sold to underwriters in such an offering, (ii) beginning
with the first month of the Company's first fiscal quarter commencing
after the effective date of a registration statement;
(xvii) Not file any amendment or supplement to such
registration statement or prospectus to which a majority in interest of
such holders has objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five (5) business days prior to the filing thereof; provided, however,
that the failure of such holders or their counsel to review or object
to any amendment or supplement to such registration statement or
prospectus shall not affect the rights of such holders or any
controlling person or persons thereof or any underwriter or
underwriters therefor under Section 11(e) hereof; and
(xviii) At the request of any such holder (i) furnish
to such holder on the effective date of the registration statement or,
if such registration includes an underwritten public offering, at the
closing provided for in the underwriting agreement, an opinion, dated
such date, of the counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and to the
holder or holders making such request, covering such matters with
respect to the registration statement, the prospectus and each
amendment or supplement thereto, proceedings under state and federal
securities laws, other matters relating to the Company, the securities
being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and such opinion of
counsel shall additionally cover such legal matters with respect to the
registration as such requesting holder or holders may reasonably
request, and (ii) use its best effort to furnish to such holder letters
dated each such effective date and such closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, stating that they are independent certified public accountants
within the meaning of the Securities Act and dealing with such matters
as the underwriters may request, or, if the offering is not
underwritten, that in the opinion of such accountants the financial
statements and other financial
<PAGE>
data of the Company included in the registration statement or the
prospectus or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the
Securities Act, and additionally covering such other financial matters,
including information as to the period ending immediately prior to the
date of such letter with respect to the registration statement and
prospectus, as such requesting holder or holders may reasonably
request.
(d) Expense of Registration. All expenses incident to the
Company's performance of or compliance with this Warrant, including, without
limitation, the following shall be borne by the Company, regardless of whether
the registration statement becomes effective:
(i) All registration and filing fees (including those
with respect to filings required to be made with the National
Association of Securities Dealers, Inc.);
(ii) Fees and expenses of compliance with all
securities or blue sky laws (including fees and disbursements of
counsel for the underwriters or selling holders in connection with blue
sky qualifications of the Registrable Stock an in determination of
their eligibility for investment under the laws of such jurisdictions
as the managing underwriters or holders of a majority of the
Registrable Stock being sold may designate);
(iii) Printing, messenger, telephone and delivery
expenses;
(iv) Fees and disbursements of counsel for the
Company, the underwriters and for the sellers of the Registrable Stock
as hereinafter provided;
(v) Fees and disbursements of all independent
certified public accountants of the Company (including the expenses of
any special audit and "comfort" letters required by or incident to such
performance);
(vi) Fees and disbursements of underwriters
(excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Stock or legal expenses
of any person other than the Company and the selling holders); and
(vii) Fees and expenses of other persons retained by
the Company.
The Company will, in any event, pay its internal expenses (including
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees an expenses incurred in
<PAGE>
connection with the listing of the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed, rating agency fees and the fees and expenses of any person, including
special experts, retained by the Company.
In connection with the registration statement required hereunder, the
Company will reimburse the holders of Registrable Stock being registered
pursuant to the registration statement for the reasonable fees and disbursements
of not more than one counsel (or more than one counsel if conflict exists among
such selling holders in the exercise of the reasonable judgment of counsel for
the selling holders and counsel for the Company) chosen by the holders of a
majority of such Registrable Stock.
(e) Indemnification.
(i) The Company hereby agrees to indemnify each of
the holders of Registrable Stock against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, preliminary or final
prospectus, or other document incident to any such registration,
qualification or compliance (or in any related registration statement,
notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration, qualification or compliance, and to reimburse the holders
of Registrable Stock (including officers and directors of the same and
controlling persons) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, provided, however, the Company will
not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by
Warrantholders in an instrument duly executed by Warrantholders and
stated to be specifically for use therein.
(ii) The Warrantholders severally and not jointly
agree to indemnify the Company and its officers and directors and each
person, if any, who controls any thereof within the meaning of Section
15 of the Securities Act and their respective successors against all
claims, losses, damages and liabilities (or actions in respect hereof)
arising out of or based on any untrue statement of a material fact
contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance relating to
securities purchased pursuant to the Warrants (or in any
<PAGE>
related registration statement, notification or the like) or any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading and will reimburse the Company and each other
person indemnified pursuant to this subsection (ii) for any legal and
any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action;
provided, however, that this subsection (ii) shall apply only if (and
only to the extent that) such statement or omission was made in
reliance upon information (including, without limitation, written
negative responses to inquiries) furnished to the Company by an
instrument duly executed by Warrantholders and stated to be
specifically for use in such prospectus, or other document (or related
registration statement, notification or the like) or any amendment or
supplement thereto.
(iii) Each party entitled to indemnification
hereunder (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party
(at such Indemnifying Party's expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be satisfactory to the Indemnified Party, and the
Indemnified Party may participate in such defense at such party's
expense, and provided further, the omission by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 11(e) except to the extent that
the omission results in a failure of actual notice to the Indemnifying
Party and such Indemnifying Party is materially damaged solely as a
result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or
litigation.
(iv) If the indemnification provided for in this
Section 11(e) is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any losses, claims, damages,
liabilities, expenses or actions in respect thereof referred to herein,
then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims,
damages, liabilities, expenses or actions in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on
the one hand, and the Indemnified Party on the other,
<PAGE>
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities, expenses or actions as well as
any other relevant equitable considerations, including the failure to
give the notice required hereunder. The relative fault of the
Indemnifying Party and the Indemnified Party shall be determined by
reference to, among other things whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Warrantholders
agree that it would not be just and equitable if contributions pursuant
to this Section 11(e) were determined by pro rata allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above. The amount paid or payable to an
Indemnified Party as a result of the losses, claims, damages,
liabilities or actions in respect thereof, referred to above, shall be
deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions
of this Section 11(e), in no event shall the amount contributed by any
seller of Registrable Stock exceed the aggregate net offering proceeds
received by such seller from the sale of Registrable Stock to which
such contribution or indemnification claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
(v) The indemnification required by this Section
11(e) shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses
incurred. Anything contained herein to the contrary notwithstanding,
the liability of any holder of Registrable Stock under this Section
11(e) shall not exceed the amount of the net proceeds actually received
by such holder from the sale of its Registrable Stock pursuant to the
registration, qualification, notification or compliance in respect of
which such liability arose.
(f) Reporting Requirements Under Exchange Act. The Company
shall maintain the registration of its Common Stock under Section 12 of the
Exchange Act and shall keep effective such registration and shall timely file
such information, documents and reports as the Commission may require or
prescribe under Section 13 of the Exchange Act, or otherwise. From and after the
effective date of the first registration statement filed by the Company under
the Securities Act, the Company shall (whether or not it shall then be required
to do so) timely file such information, documents and reports as the Commission
may require or prescribe under Section 13 or 15(d) (whichever is applicable) of
the Exchange Act.
<PAGE>
Immediately upon becoming subject to the reporting requirements of either
Section 13 or 15(d) of the Exchange Act, the Company shall forthwith upon
request furnish any holder of Registrable Stock (i) a written statement by the
Company that it has complied with such reporting requirements, (ii) a copy of
the most recent annual or quarterly report of the Company, and (iii) such other
reports and documents filed by the Company with the Commission as such holder
may reasonably request in availing itself of an exemption for the sale of
Registrable Stock without registration under the Securities Act. The Company
acknowledges and agrees that the purpose of the requirements contained in this
Section 11(f) is to enable any such holder to comply with the current public
information requirement contained in Rule 144 under the Securities Act should
such holder ever wish to dispose of any of the securities of the Company
acquired by it without registration under the Securities Act in reliance upon
Rule 144 (or any other similar exemptive provision). In addition, the Company
shall take such other measures and file such other information, documents and
reports as shall hereafter be required by the Commission as a condition to the
availability of Rule 144 and Rule 144A under the Securities Act (or any similar
exemptive provision hereafter in effect).
(g) Stockholder Information. The Company may require each
holder of Registrable Stock as to which any registration is to be effected
pursuant to this Section 11 to furnish the Company such information with respect
to such holder and the distribution of such Registrable Stock as shall be
required by law or by the Commission in connection therewith.
12. Representation and Warranties. The Company hereby represents
and warrants to and covenants with Imperial, the Bank, each Warrantholder, and
each holder of Warrant Shares that:
(a) Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Arizona. As of the date hereof, the authorized
capital of the Company consists of 100,000,000 shares of Common Stock and
30,000,000 shares of Preferred Stock, of which a number of shares of Common
Stock and Preferred Stock are issued and outstanding as is described on Schedule
1 (attached hereto). The Company has, and at all times during the Exercise
Period will have, reserved for issuance pursuant to the Warrants that number of
shares of Common Stock that are issuable pursuant to the Warrants. Except as
otherwise described on Schedule 1 (attached hereto), no unissued shares of
Common Stock are reserved for any purpose other than for issuance upon the
exercise of the Warrants. As of the date hereof and except as otherwise
described on Schedule 1 (attached hereto), the Company has not issued or agreed
to issue any stock purchase rights or convertible securities (other than this
Warrant), and there are no preemptive rights in effect with respect to the
issuance of any shares of Common Stock. All the outstanding shares of Common
Stock and Preferred Stock have been validly issued without violation of any
preemptive or similar rights, are fully paid and nonassessable
<PAGE>
and have been issued in compliance with all federal and applicable state
securities laws.
(b) Authority. The Company has full corporate power and
authority to execute and deliver this Warrant, to issue the shares of Common
Stock issuable upon exercise of this Warrant, and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action on its part. This Warrant
has been duly executed on behalf of the Company and constitutes the legal, valid
and binding obligation of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Neither the execution, delivery or
performance of this Warrant nor the issuance of the shares of Common Stock
issuable upon exercise of this Warrant will (a) conflict with or result in a
violation of the Certificate of Incorporation or By-Laws of the Company, (b)
conflict with or result in a violation of any law, statute, regulation, order or
decree applicable to the Company or any affiliate, (c) require any consent or
authorization or filing with, or other act by or in respect of any governmental
authority or (d) result in a breach of, constitute a default under or constitute
an event creating rights of acceleration, termination or cancellation under any
mortgage, lease, contract, franchise, instrument or other agreement to which the
Company is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, the shares of Common Stock so issued will have
been validly issued and will be fully paid and nonassessable. On the date
hereof, the par value of the Common Stock is less than the Exercise Price per
share of Common Stock.
13. Continuing Validity. Imperial, the Bank and each holder of
Warrant Shares shall continue to be entitled to all rights to which a
Warrantholder is entitled pursuant to the provisions of this Warrant except such
rights as by their terms apply solely to a Warrantholder, notwithstanding the
fact that this Warrant has been exercised or the period of exercisability has
expired. The Company will, at any time upon the request of Imperial, the Bank or
a holder of the Warrant Shares, acknowledge in writing, in form reasonably
satisfactory to Imperial, the Bank or such holder, the Company's continuing
obligation to afford to Imperial, the Bank or such holder all rights to which
Imperial, the Bank or such holder shall continue to be entitled in accordance
with the provisions of this Warrant; provided, however, that if Imperial, the
Bank or such holder shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to Imperial, the Bank
and such holder all such rights.
14. Miscellaneous Provisions.
(a) Notice of Expiration. The Company shall give written
notice to the Warrantholders specifically advising them of
<PAGE>
the Expiration Date and of their right to exercise the Warrants not more than
one hundred eighty (180) days and not less than ninety (90) days before the
Expiration Date. If such written notice is not so given, the Expiration Date
shall automatically be extended until ninety (90) days after the date that the
Company gives the Warrantholders such written notice.
(b) Governing Law, Venue and Waiver of Jury Trial. This
Warrant shall be deemed to have been made in the State of California and the
validity of this Warrant, the construction, interpretation, and enforcement
thereof, and the rights of the parties thereto shall be determined under,
governed by, and construed in accordance with the internal laws of the State of
California, without regard to principles of conflicts of law. The parties agree
the all actions or proceedings arising in connection with this Warrant shall be
tried and litigated only in the state or federal courts located in the County of
Los Angeles, State of California or, at the sole option of a Warrantholder, in
any other court in which a Warrantholder shall initiate legal or equitable
proceedings and which has subject matter jurisdiction over the matter in
controversy. The Warrantholders and the Company each waive the right to a trial
by jury and any right each may have to assert the doctrine of forum non
conveniens or to object to venue to the extent any proceeding is brought in
accordance with this Section 14(b). Service of process, sufficient for personal
jurisdiction in any action against the Company, may be made by registered or
certified mail, return receipt requested, to its address indicated in Section
14(b).
(c) Notices. Except for telephonic notices (if any) permitted
herein, any notices or other communications required or permitted to be given by
this Warrant to the Company or the Warrantholders or holders of the Warrant
Shares must be (i) given in writing and personally delivered or mailed by
prepaid certified or registered mail, or (ii) made by telefacsimile delivered or
transmitted (but confirmed on the date the telefacsimile is transmitted by one
of the other methods of giving of notice provided in this Section) to the party
to whom such notice or communication is directed, to the address of such person
as follows:
Company: Southhampton Enterprises Corp.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Warrantholders or the holders of the Warrant Shares:
Imperial Bank
9920 South La Cienega Boulevard, Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
<PAGE>
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed; provided that notice given to the Warrantholders or the holders
of the Warrant Shares shall be deemed given only if given to such person at both
addresses as aforesaid. The Company, the Warrantholders or the holders of the
Warrant Shares may change its address for purposes of this Warrant by giving
notice of such change to the other parties pursuant to this Section.
(d) Successors and Assigns. This Warrant shall be binding upon
and inure to the benefit of the Company, Imperial, the Bank, the Warrantholders
and the holders of Warrant Shares and the successors, assigns and transferees of
the Company, Imperial, the Bank, the Warrantholders and the holders of Warrant
Shares.
(e) Attorneys' Fees. The Company agrees to pay, on demand, all
attorneys' fees (including attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may be
incurred by Imperial, the Bank, the Warrantholders and the holders of Warrant
Shares in connection with any amendment to this Warrant and/or in connection the
enforcement of this Warrant or in any way arising out of, or consequential to
the protection, assertion, or enforcement of the Obligations under the Loan
Agreement (or any security therefor), whether or not suit is brought.
(f) Entire Agreement; Amendments and Waivers. This Warrant
sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby. The failure of any party to seek redress for
the violation or to insist upon the strict performance of any term of this
Warrant shall not constitute a waiver of such term and such party shall be
entitled to enforce such term without regard to such forbearance. This Warrant
may be amended, the Company may take any action herein prohibited or omit to
take action herein required to be performed by it, and any breach of or
compliance with any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written consent or written waiver
of the majority in interest of the Warrantholders, and then such consent or
waiver shall be
<PAGE>
effective only in the specific instance and for the specific purpose for which
given.
(g) Severability. If any terms of this Warrant as applied to
any person or to any circumstance is prohibited, void, invalid or unenforceable
in any jurisdiction, such term shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or invalidity without in any way affecting any
other term of this Warrant or affecting the validity or enforceability of this
Warrant or of such provision in any other jurisdiction.
(h) Headings. The headings in this Warrant are inserted only
for convenience of reference and shall not be used in the construction of any of
its terms.
(i) Transferability. This Agreement may be assigned,
transferred or sold by Warrantholder at any time without the consent of Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers effective as of the date first set forth above.
SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia (Canada) corporation
By: /s/ L. Steven Haynes
Type/Print Name: L. Steven Haynes
Title: President
<PAGE>
SCHEDULE 1
Capital Structure Total
Common Stock Shares Warrants Options Equity
Outstanding x 13,789,621 240,000
Scheduled for
Cancellation x (1,184,000)
Private Placement 1 x 811,000 811,000
Private Placement 2 x 1,050,000 1,050,000
Private Placement 3 x 1,180,556 590,278
Private Placement 4 x 850,000 850,000
Preferred Stock
Private Placement 6 x 3,900,000 3,900,000
Convertible Note
Private Placement 7 x 5,142,656 5,142,656
x 3,881,250 3,881,250
Fees
Finders Fees:
Geometry 800,000
Kaufman 80,000
Eron Capital 808,803
Sportswear LLC 658,792
Misc Finders Fee 1,000,000
Proposed Options
Employee 1,335,000
Directors 535,000
Total 31,079,875 17,913,987 2,110,000 51,103,862
LaSalle 1,580,532
Cruttenden 5,678,207
Imperial 5,678,207
Fully Diluted 64,040,808
5 for 1
reverse split 6,215,975 6,170,187 422,000 12,808,162
Fully Diluted 12,808,162
Exhibit 4.4.1
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
AMENDMENT NO. 1
TO
WARRANT
-------
Company: SOUTHHAMPTON ENTERPRISES CORP.
a British Columbia (Canada) corporation
Originally Issued as of: May 7, 1997
FOR VALUE RECEIVED, the adequacy and receipt of which is hereby
acknowledged, SOUTHHAMPTON ENTERPRISES CORP., a British Columbia (Canada)
corporation, hereby certifies to IMPERIAL BANCORP, a California bank holding
company, and its successors and assigns, that the Warrant originally issued as
of the date set forth above shall be amended as set forth herein.
1. Incorporation. All references to Southhampton Enterprises Corp. as a
Nevada corporation are hereby amended to reflect that Southhampton Enterprises
Corp. is a British Columbia (Canada) corporation.
2. Definitions. Capitalized terms not otherwise defined shall have the
meanings set forth in the Warrant.
3. Number of Shares. The number of shares of Common Stock initially
issuable under the Warrant shall be 6,753,247, which amount shall be subject to
adjustment as provided in the Warrant.
4. Other Amendments. The Warrant shall be amended follows:
(a) The phrases "first round of common equity financing after the date
hereof" and "first round of preferred stock, Convertible Securities or options
or rights to purchase Common Stock after the date hereof" as used in the
definition of "Exercise Price," shall be deemed to exclude the issuance of the
Common Stock, preferred stock, Convertible Securities, options and other rights
described in Schedule 1.
(b) The defined term "Warrant(s)" shall be deleted and replaced with the
following:
<PAGE>
"Warrant(s)" means this Warrant, any amendments to this Warrant, and
any warrants issued in exchange or replacement of this Warrant or upon the
transfer hereof.
(c) Section 6 is hereby amended by the inclusion of a new Section 6(j)
which provides as follows:
(j) The Cruttenden Warrant. Concurrent with the issuance of this
Warrant, the Company has also issued a warrant to The Cruttenden Roth
Bridge Fund, LLC, to purchase 10.0% of the Company's Common Stock on a
fully diluted basis (the "Cruttenden Warrant"). It is the intent of the
Company that the Exercise Price shall never be greater than the per share
exercise price determined under the Cruttenden Warrant. Accordingly,
notwithstanding anything to the contrary contained in this Warrant, the
Exercise Price of this Warrant shall be equal to the lesser of i) the
Exercise Price as determined under the terms of this Warrant (not taking
into account this Section 6(j)); and ii) the per share exercise price
determined under the terms of the Cruttenden Warrant in effect at the time
the Bank desires to exercise this Warrant.
5. Miscellaneous Provisions.
(a) Except as amended by this Amendment No. 1 to Warrant, the terms and
conditions of the Warrant shall remain in full force and effect.
(b) The covenants and agreements of this Amendment No. 1 to Warrant shall
bind the heirs, assigns and successors of the Company.
(c) This Amendment No. 1 to Warrant shall be deemed to have been made in
the State of California, and the validity of this Amendment No. 1 to Warrant,
the construction, interpretation, and enforcement thereof and the rights of the
parties thereto shall be determined under, governed by, and construed in
accordance with the internal laws of the State of California, without regard to
principles of conflicts of law.
(d) The headings in this Amendment No. 1 to Warrant are inserted only for
convenience of reference and shall not be used in the construction of any of its
terms.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to Warrant
to be signed by its duly authorized officers effective as of May 7, 1997.
SOUTHHAMPTON ENTERPRISES CORP.,
a British Columbia (Canada)corporation
<PAGE>
By: /S/ L. Steven Haynes
L. Steven Haynes, President
AGREED AND ACCEPTED:
IMPERIAL BANCORP,
a California bank holding company
By: illegible
Its: Vice President
EXHIBIT 4.5
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") NOR IS SUCH REGISTRATION CONTEMPLATED. SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME
WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, EXCEPT UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO IT AND TO ITS COUNSEL TO THE EFFECT THAT ANY
SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE ACT, OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
Warrant to Purchase
Shares of Common Stock
As Herein Described
WARRANT TO PURCHASE COMMON STOCK OF
SOUTHHAMPTON ENTERPRISES CORP.
This is to certify that, for value received, The Cruttenden Roth Bridge
Fund, LLC, or registered assigns (in each case, the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant (the "Warrant"), from
Southhampton Enterprises Corp., a British Columbia, Canada corporation (the
"Company"), having its principal place of business at 9211 Diplomacy Row,
Dallas, Texas, at any time during the period from the date hereof (the
"Commencement Date") to 5:00 p.m., California time, until May 7, 2002 (the
"Expiration Date"), at which time this Warrant shall expire and become void,
such number of shares of the Company's Common Stock, no par value (the "Common
Stock"), which consists of 10.0% of that number of shares of Common Stock which
will be outstanding on a fully diluted basis (the "Warrant Shares"). This
Warrant shall be exercisable at $1.00 per share, assuming 33,000,000 shares of
Common Stock outstanding, as adjusted from time to time pursuant to Section 4
hereof (the "Exercise Price"). The number of shares of Common Stock to be
received upon exercise of this Warrant shall be adjusted from time to time as
set forth below. This Warrant also is subject to the following terms and
conditions:
1. Exercise of Warrant and Payment of Exercise Price.
(a) Exercise of Warrant. This Warrant may be exercised in
accordance with the terms hereof at any time from and after the date hereof and
before the Expiration Date, but if such date is a day on which federal or state
chartered banking institutions located in the State of California are authorized
to close, then on
<PAGE>
the next succeeding day which shall not be such a day. Exercise shall be by
presentation and surrender to the Company at its principal office, or at the
office of any transfer agent designated by the Company, of (i) this Warrant,
(ii) the attached exercise form properly executed, and either (iii) cash,
certified or cashiers check or wire transfer for the Exercise Price for the
number of Warrant Shares specified in the exercise form or (iv) if the exercise
is to be a cashless exercise pursuant to Section 1(b), written notice of the
number of shares of Common Stock with respect to which this Warrant is being
surrendered in payment of the aggregate exercise price for the Common Stock to
be delivered to Holder. If this Warrant is exercised in part only, the Company
or its transfer agent shall, upon surrender of the Warrant, execute and deliver
a new Warrant evidencing the rights of the Holder to purchase the remaining
number of Warrant Shares purchasable hereunder. Upon receipt by the Company of
this Warrant in proper form for exercise, accompanied by payment as aforesaid,
the Holder shall be deemed to be the holder of record of the Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such Warrant
Shares shall not then be actually delivered by the Holder.
(b) Payment of Warrant Exercise Price.
Payment of the Exercise Price may be made by any of
the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashiers check or wire
transfer; or
(ii) surrender of this Warrant at the principal
office of the Company together with notice of election, in which event the
Company shall issue Holder a number of shares of Common Stock computed using the
following formula:
X = Y(A-B)/A
where: X = the number of shares of Common Stock to be issued
to Holder (not to exceed the number of shares set
forth on the cover page of this Warrant, as adjusted
pursuant to the provisions of Section 4 of this
Warrant);
Y = the number of shares of Common Stock for which
this Warrant is being exercised;
A = the Fair Market Value of one share of Common
Stock (for purposes of this Section 1(b), the "Fair
Market Value" shall be defined in accordance with
Section 4.4 hereof);
B = the Exercise Price (as adjusted to the date of
such calculation).
<PAGE>
It is intended that the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction, if any, shall be deemed to have been acquired at
the time this Warrant was issued, for purposes of Rule 144(d)(3)(ii).
Reservation of Shares and Expenses. The Company shall, at all
times until the expiration of this Warrant, reserve for issuance and delivery
upon exercise of this Warrant the number of Warrant Shares which shall be
required for issuance and delivery upon exercise of this Warrant. The Company
covenants that the shares of Common Stock issuable on exercise of the Warrant
shall be duly and validly issued and fully paid and non-assessable and free of
liens, charges and all taxes with respect to the issue thereof.
The Company shall pay all expenses, taxes (other than income or similar taxes
imposed on Holder) and other charges payable in connection with the preparation,
issue and delivery of stock certificates pursuant to this Warrant.
No Rights as Stockholders. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed in this Warrant
and are not enforceable against the Company except to the extent set forth
herein.
4. Adjustments.
4.1 Subdivision or Combination of Shares. If the Company is
recapitalized through the subdivision or combination of its outstanding shares
of Common Stock into a larger or smaller number of shares, the number of Warrant
Shares shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all of the Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
4.2 Dividends in Common Stock or Securities Convertible into
Common Stock. If the Company declares a dividend or distribution on Common Stock
payable in Common Stock or securities convertible into Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock) of Common Stock
as a result of such dividend or distribution, and the Exercise Price shall be
adjusted so that the aggregate amount payable for the purchase of all the
Warrant Shares issuable hereunder immediately after the record date for such
dividend or distribution shall equal the aggregate amount so payable immediately
before such record date.
<PAGE>
4.3 Distributions of Other Securities or Property. If the
Company distributes to holders of its Common Stock, other than as part of its
dissolution or liquidation or the winding up of its affairs, any of its
securities (other than Common Stock or securities convertible into Common
Stock), property or any evidence of indebtedness, then in each case, the number
of Warrant Shares thereafter purchasable upon exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
by a fraction, of which the numerator shall be the Fair Market Value price per
share of Common Stock (as determined pursuant to Section 4.4) on the record date
mentioned below in this Section 4.3, and of which the denominator shall be the
Fair Market Value price per share of Common Stock on such record date, less the
then fair value (as determined by the Board of Directors of the Company in good
faith) of the portion of the shares of the Company's capital stock, property or
evidence of indebtedness distributable with respect to each share of Common
Stock. Such adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the determination
of stockholders entitled to receive such distribution.
4.4 Fair Market Value. Fair market value of the Common Stock
("Fair Market Value") shall be determined as follows:
(a) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such an
exchange, or is listed on the Nasdaq National Market or Small Cap Market, the
current Fair Market Value shall be the closing bid price of the Common Stock on
such exchange or Nasdaq on the last business day prior to the date of exercise
of this Warrant; or
(b) If the Common Stock is not so listed or admitted
to unlisted trading privileges or quoted on Nasdaq, the current Fair Market
Value shall be the last bid price reported on the last business day prior to the
date of the exercise of this Warrant (i) by Nasdaq, or (ii) if reports are
unavailable under clause (i) above, by the National Quotation Bureau
Incorporated; or
(c) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid prices are not so reported, the current
Fair Market Value shall be determined in good faith as promptly as reasonably
practicable by the mutual agreement of the Board of Directors and the Holder. If
such parties are unable to reach agreement within 20 days after the need for
such determination arises, the Board of Directors shall appoint a nationally
recognized investment banking firm acceptable to the Holder (the "Appointed
Firm") to make such determination. The parties shall use their best efforts to
cause the Appointed Firm to resolve all disagreements as soon as practicable,
but in any event within 45 days after the submission of the disputes to such
Appointed Firm. The resolution of such disagreements and the determination of
Fair Market Value by the Appointed Firm shall be
<PAGE>
final and binding on the Company and the Holder. The Appointed Firm will
determine the allocation of its fees and expenses in connection with its
determination of Fair Market Value based upon the percentage which the portion
of the contested amount not awarded to each party bears to the amount actually
contested by such party. For example, if the Board of Directors claims that the
Fair Market Value is $1,000 less than the amount claimed by the Holder, and if
the Appointed Firm ultimately resolves the dispute by awarding the Holder $300
of the $1,000 contested, then the fees and expenses of the Appointed Firm will
be allocated 70% (i.e.: 700/1000) to the Holder and 30% (i.e.: 300/1000) to the
Company.
4.5 Rights of Offering. If the Company offers rights or
warrants to persons which entitle them to subscribe to or purchase Common Stock
or securities convertible into Common Stock then:
(a) If the price per share (together with the value
of the consideration, if any, paid for such rights or warrants) is lower on the
record date referred to below than the then Fair Market Value price per share of
Common Stock or the then current Exercise Price of this Warrant, the number of
Warrant Shares thereafter purchasable upon the exercise of the Warrant shall be
determined by multiplying the number of Warrant Shares immediately theretofore
purchasable upon exercise of the Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on each record date plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then Fair Market Value price per share of Common
Stock. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective retroactively as of the record date for the
determination of stockholders, entitled to receive such rights or warrants.
(b) If, however, the price per share (together with
the value of the consideration, if any, paid for such rights or warrants) is not
lower on such record date than the then Fair Market Value price per share of
Common Stock or the then current Exercise Price, the Company shall give written
notice of any such proposed offering to the Holder at least fifteen days prior
to the proposed record date in order to permit the Holder to exercise this
Warrant on or before such record date. There shall be no adjustment in the
number of shares of Common Stock for which this Warrant may be exercised, or in
the Exercise Price, by virtue of any such distribution pursuant to this Section
4.5(b).
4.6 Adjustment of Exercise Price Upon Issuance of Additional
Shares of Common Stock. At the option of the Holder, the Exercise Price may be
adjusted to a price per share equal to the lesser of (i) the offering price, net
of underwriting discounts and expenses, of shares of Common Stock (as adjusted
for any stock dividends, combinations or splits with respect to such shares)
<PAGE>
issued in connection with any public offering of the Company's Common Stock to
the general public or (ii) the price of shares of Common Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares) issued
by the Company in connection with a private placement in which the aggregate
proceeds of the placement exceed $1,000,000. The terms of this Section 4.6 shall
terminate upon the earlier of (i) the exercise of the Warrant, or (ii) the
closing of an underwritten offering of any of its securities to the general
public the aggregate proceeds of which (after deduction for underwriter's
discounts and expenses related to the issuance) exceed $10,000,000.
4.7 Merger, Sale of Assets. If at any time while this Warrant,
or any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4. The foregoing provisions of this Section 4.7 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
4.8 Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, shall change
any of the securities as to which purchase rights under this Warrant exist, by
reclassification of securities
<PAGE>
or otherwise, into the same or a different number of securities of any other
class or classes, this Warrant shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as the result of
such change with respect to the securities that were subject to the purchase
rights under this Warrant immediately prior to such reclassification or other
change and the Exercise Price therefor shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 4.
4.9 Liquidation, etc. If the Company shall, at any time before
the expiration of this Warrant, dissolve, liquidate or wind up its affairs, or
otherwise declare a dividend, or make a distribution to the holders of its
Common Stock generally, whether in cash, property or assets of any kind,
including any dividend payable in stock or securities of any other issuer owned
by the Company (excluding regularly payable cash dividends declared from time to
time by the Company's Board of Directors or any dividend or distribution
referred to in Section 4.2 or Section 4.3), the Exercise Price shall be reduced,
without any further action by the parties hereto, by the Per Share Value (as
hereinafter defined) of the dividend. For purposes of this Section 4.9, the "Per
Share Value" of a cash dividend or other distribution shall be the dollar amount
of the distribution on each share of Common Stock and the "Per Share Value" of
any dividend or distribution other than cash shall be equal to the fair market
value of such non-cash distribution on each share of Common Stock as determined
in good faith by the Board of Directors of the Company.
4.10 Adjustment of Exercise Price.
(a) Whenever the number of Warrant Shares purchasable
upon the exercise of the Warrant is adjusted, the Exercise Price with respect to
the Warrant Shares shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Warrant Shares so purchasable immediately thereafter.
(b) Upon the exercise of any warrants or options of
the Company outstanding as of the date hereof, including this Warrant (the
"Options"), as a result of which there are more than 33,000,000 shares of Common
Stock outstanding, then the Exercise Price shall be recomputed to an amount
equal to the product of $1.00 and the ratio of 33,000,000 shares to the number
of shares of Common Stock outstanding on a fully diluted basis. In addition,
upon the expiration of any of the Company's Options outstanding as of the date
hereof which shall not have been exercised, the Exercise Price, and any
subsequent adjustments thereof, shall, upon such expiration, be adjusted by
multiplying such Exercise Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on a fully diluted basis, and
the denominator of which shall be the number of shares of Common Stock
<PAGE>
outstanding on a fully diluted basis, minus the number of shares issuable upon
the exercise of such expired Options.
(c) From time to time after the date hereof, upon the
exercise of any of the Options, the Exercise Price shall be adjusted upward by
adding to the Exercise Price a fraction, the numerator of which shall be the
amount of cash paid to the Company upon exercise of such Options (the
"Additional Capital"), and the denominator of which shall be the Additional
Capital plus the market capitalization of the Company immediately prior to such
event. The market capitalization of the Company shall be deemed to be
$33,000,000 as of the date hereof and, for purposes of the foregoing
calculation, shall be deemed to increase cumulatively by any Additional Capital.
(d) Notwithstanding anything herein to the contrary,
in no event shall the Exercise Price be adjusted to an amount greater than
$1.00.
4.11 Number of Warrant Shares. The number of Warrant Shares
issuable upon exercise of this Warrant shall be 10.0% of that number of shares
of Common Stock outstanding on a fully diluted basis immediately after the
consummation of the transactions contemplated by the Other Securities Documents
(as such term is defined in that certain Securities Purchase Agreement of even
date herewith among the Company, The Cruttenden Roth Bridge Fund, LLC,
Southhampton Enterprises, Inc. and The Antigua Group, Inc.), including this
Warrant, subject to the adjustments described above. Upon the expiration of any
of the Options outstanding as of the date hereof which shall not have been
exercised, the number of Warrant Shares, as adjusted herewith, shall be reduced
by an amount equal to the product of 10.0% and the number of shares of Common
Stock issuable upon exercise of such expired Options.
4.12 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of the Warrant or the Exercise Price of the
Warrant Shares is adjusted as provided herein, the Company shall mail to the
Holder a notice of such adjustment or adjustments, prepared and signed by the
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment, and the computation by which such adjustment
was made.
5. Notices to Holder. So long as this Warrant shall be outstanding (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any similar
rights or (c) if there shall be any capital reorganization of the Company in
which the Company is not the surviving entity, recapitalization of the capital
stock of the Company, consolidation
<PAGE>
or merger of the Company with or into another corporation, sale, lease or other
transfer of all or substantially all of the property and assets of the Company,
or voluntary or involuntary dissolution, liquidation or winding up of the
Company, then in such event, the Company shall cause to be mailed to the Holder,
at least twenty days prior to the relevant date described below (or such shorter
period as is reasonably possible if twenty days is not reasonably possible), a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders is to be taken for
the purpose of any such dividend, distribution of rights, or such
reclassification, reorganization, consolidation, merger, conveyance, lease or
transfer, dissolution, liquidation or winding up is to take place, the effect of
the action, to the extent such effect may be known on the date of such notice,
on the Exercise Price and the kind and amount of shares of stock or other
securities or property deliverable on the exercise of the Warrant, and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event. All such notices shall
be deemed to have been received (i) in the case of personal delivery, on the
date of such delivery, and (ii) in the case of mailing, on the third business
day following the date of such mailing.
6. Transfer or Loss of Warrant.
6.1 Transfer. This Warrant may be transferred, exercised,
exchanged or assigned ("transferred"), in whole or in part, subject to the
provisions of this Section 6.1. The Holder shall have the right to transfer all
or a part of this Warrant and all or part of the Warrant Shares. The Company
shall register on its books any transfer of the Warrant, upon surrender of same
to the Company with a written instrument of transfer duly executed by the
registered Holder or by a duly authorized attorney. Upon any such registration
of a transfer, new Warrant(s) shall be issued to the transferee(s) and the
surrendered Warrant shall be canceled by the Company. A Warrant may also be
exchanged, at the option of the Holder, for one or more new Warrants
representing the aggregate number of Warrant Shares evidenced by the Warrant
surrendered. This Warrant and the Warrant Shares or any other securities ("Other
Securities") received upon exercise of this Warrant or the conversion of the
Warrant Shares shall be subject to restrictions on transferability unless
registered under the Securities Act, or unless an exemption from registration is
available. Until this Warrant and the Warrant Shares are so registered, this
Warrant and any certificate for Warrant Shares issued or issuable upon exercise
of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, stating that this Warrant or
the Warrant Shares may not be sold, transferred or otherwise disposed of unless,
in the opinion of counsel satisfactory to the Company, which may be counsel to
the Company, that the Warrant or the Warrant Shares may be transferred without
such registration. This Warrant and the Warrant Shares may also be
<PAGE>
subject to restrictions on transferability under applicable state securities or
blue sky laws. Until the Warrant and the Warrant Shares are registered under the
Securities Act, the Holder shall reimburse the Company for its expenses,
including attorneys' fees, incurred in connection with any transfer or
assignment, in whole or in part, of this Warrant or any Warrant Shares.
6.2 Compliance with Laws. Until this Warrant or the Warrant
Shares are registered under the Securities Act, the Company may require, as a
condition of transfer of this Warrant or the Warrant Shares that the transferee
(who may be the Holder in the case of an exchange) represent that the securities
being transferred are being acquired for investment purposes and for the
transferee's own account and not with a view to or for sale in connection with
any distribution of the security. The Company may also require that the
transferee provide written information adequate to establish that the transferee
is an "accredited investor" within the meaning of Regulation D issued under the
Securities Act, or otherwise meets all qualifications necessary to comply with
exemptions to the Securities Act, all as determined by counsel to the Company.
6.3 Loss of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct its transfer
agent to execute and deliver, a new Warrant of like tenor and date, any such
lost, stolen or destroyed Warrant thereupon shall become void.
7. Registration Rights. The Company shall be obligated to the Holder of
the Warrants and the Warrant Shares as follows:
(a) Whenever, during the five-year period beginning on May __,
1997 and ending on May __, 2002, the Company proposes to file with the
Securities and Exchange Commission a Registration Statement (other than on Form
S-4 or as to securities issued pursuant to an employee benefit plan or a
transaction subject to Rule 145 promulgated under the Act), it shall, at least
30 days prior to each such filing, give written notice of such proposed filing
(a "Filing Notice") to the Holder and each holder of Warrant Shares at their
respective addresses as they appear on the records of the Company, pursuant to
which the Company shall offer to include in such filing any or all of the
Warrant Shares purchasable under the Warrant and any Warrant Shares theretofore
issued on exercise of any portion of the Warrant. The Holder and holders of
Warrant Shares shall have until the 10th day after receipt of such notice to
send to the Company a written request or requests (a "Registration Request")
that shall specify the number of Warrant Shares which the Holder or holder of
Warrant Shares desires to have included in such filing (the aggregate amounts of
which specified in all such Registration Requests of the Holder and the holders
of Warrant Shares shall be referred to hereinafter as the "Registrable
<PAGE>
Securities") and the manner of disposition for such Registrable Securities
proposed by the Holder or holders of Warrant Shares. The Company shall include
in such filing, for registration under the Securities Act of 1933 (the "1933
Act") and disposition in accordance with the method of disposition set forth in
such Registration Requests, the aggregate number of Registrable Securities which
the Holder or holders of Warrant Shares requested be included in such filing. In
the event that the managing underwriter for said offering advises the Company
and the holders of the Registrable Shares in writing that the inclusion of such
securities in the offering would be detrimental to the offering of any shares or
other securities to be sold and issued by the Company pursuant to such
Registration Statement, the Company will include in such Registration Statement
the number of Registrable Shares which in the opinion of such managing
underwriter can be included in such Registration Statement, together with the
shares of all other shareholders who exercise similar registration rights to
have their shares sold pursuant to such Registration Statement, on a pro-rata
basis among all holders of such Registrable Shares and other shares according to
the ratio that the number of Registrable Shares owned by the Holder hereof and
any such other holder bears to the total number of Registrable Shares and other
shares owned by all such holders.
(b) In addition to any Registration Statement pursuant to
subsection (a) above, during (i) the five-year period beginning on May __, 1997
and ending on May __, 2002, and (ii) at any time after the earlier of (i) the
date which is 120 days after the date on which the Company completes a
firm-commitment underwritten initial public offering of its common stock
pursuant to a Registration Statement, or (ii) twenty-four months from the date
hereof, the Company will, as promptly as practicable (but in any event within 60
days), after written request (the "Request") by Holder, or by a person or
persons holding (or having the right to acquire by virtue of holding the
Warrant) at least 50% of the shares of Common Stock which have been (or may be)
issued upon exercise of the Warrant, prepare and file at the Company's own
expense a Registration Statement with the Securities and Exchange Commission and
appropriate Blue Sky authorities sufficient to permit the public offering of the
Shares and will use its best efforts at its own expense through its officers,
directors, auditors and counsel, in all matters necessary or advisable, to cause
such Registration Statement to become effective as promptly as practicable and
to maintain such effectiveness so as to permit resale of the Shares covered by
the Request until the earlier of the time that all such Shares have been sold or
the expiration of ninety (90) days from the effective date of the Registration
Statement; provided, however, that the Company shall only be obligated to file
and have declared effective one such Registration Statement under this Section
7.2(b). Notwithstanding the foregoing, if a Registration Statement is filed
pursuant to this Section 7.2(b) but is not declared effective within 120 days of
the date of the filing thereof or, despite being declared effective within such
period of time, is not kept effective throughout the
<PAGE>
minimum period, then, it shall not be deemed to be a Registration Statement
meeting the requirements hereunder and shall not satisfy or discharge the
Company's obligations under this Section 7.2(b).
(c) The Company shall not be required to file a Registration
Statement pursuant to Section 7.2(b) if, in the opinion of counsel for the
Holder and holders of Warrant Shares and counsel for the Company (or, should
they not agree, in the opinion of another counsel experienced in securities law
matters acceptable to counsel for such holders and the Company), the proposed
public offering or other disposition as to which such Registration Statement is
requested is exempt from registration and no longer subject to the volume and
manner of sales restrictions of Rule 144 under federal securities law, and also
exempt from qualification under applicable state securities laws and such
offering or other disposition would result in all purchasers or transferees of
such Shares proposed to be sold by any holders of the Warrants or Warrant Shares
obtaining Warrant Shares which are no longer "restricted securities" as defined
in Rule 144 under, and may be sold publicly pursuant to Section 4(1) of, the
Act.
(d) In consideration for the Company agreeing to its
obligations under this Section 7, the holder of Registrable Shares agrees in
connection with any registration of the Company's securities that, upon the
request of the Company or the underwriters managing any underwritten offering of
the Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of or otherwise dispose of any Registrable Shares (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as the
Company or the underwriters may specify.
(e) If a registration pursuant to a Request under Section 7(b)
involves an underwritten offering, the managing or lead underwriter or
underwriters thereof shall be selected by the holders of at least a majority (by
number of shares) of the Common Stock which have been (or may be) issued upon
exercise of the Warrant as to which registration has been requested and shall be
acceptable to the Company, which shall not unreasonably withhold its acceptance
of any such underwriters.
(f) If requested by the underwriters for any underwritten
offering by holders of Registrable Securities pursuant to a registration
requested under Section 7(b), the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
satisfactory in substance and form to the Company, each such holder and the
underwriters, and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitations, indemnities to the effect and to the extent
provided in Section 8 hereof.
<PAGE>
8. Indemnification.
(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Holder, each of such Holder's officers, directors,
partners and agents, and each person controlling such Holder, with respect to
any registration, qualification, or compliance effected pursuant to Section 7,
and each underwriter, if any, and each person who controls any underwriter, of
the Registrable Shares held by or issuable to such Holder, against all claims,
losses, damages, and liabilities (or actions in respect thereto) to which they
may become subject under the 1933 Act, the Securities Exchange Act of 1934, as
amended, (the "1934 Act"), or other federal or state law arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any violation or alleged violation by the Company of any federal, state or
common law rule or regulation applicable to the Company in connection with any
such registration, qualification, or compliance, and will reimburse, as
incurred, each Holder, each underwriter, and each director, officer, partner,
agent and controlling person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action; provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense, arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by any of the Holders or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Shares held by or
issuable to such Holder are included in such registration, qualification, or
compliance, severally and not jointly, indemnify the Company, each of its
directors, and each officer who signs a Registration Statement in connection
therewith, and each person controlling the Company, each underwriter, if any,
and, each person who controls any underwriter, of the Company's securities
covered by such a Registration Statement, against all claims, losses, damages,
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such Registration Statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, the Company, and each such
underwriter or other person, for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that
<PAGE>
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) was made in such Registration Statement, prospectus, offering
circular, or other document, in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein; provided, however, that
the liability of each such Holder hereunder shall be limited to the net proceeds
received by such Holder from the sale of securities under such Registration
Statement. In no event will any Holder be required to enter into any agreement
or undertaking in connection with any registration under this Section 8
providing for any indemnification or contribution obligations on the part of
such Holder greater than such Holder's obligations under this Section 8.
(c) Each party entitled to indemnification under this Section
8 (the "Indemnified Party") shall give notice to the party required to provide
such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and the Indemnifying Party shall assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be subject to approval by the Indemnified Party (whose approval shall not
be unreasonably withheld) and the Indemnified Party may participate in such
defense with its separate counsel at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 8, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
(d) If any Holder includes Registrable Securities in any
registration, such Holder shall furnish to the Company such information
regarding such Holder, and the distribution proposed by such or Holder, as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification, or compliance referred to in Sections 7
and 8.
9. Contribution. In order to provide for just and equitable
contribution under the 1933 Act in any case in which (i) the Holder or any
holder of the Warrant Shares or controlling person makes a claim for
indemnification pursuant to Section 8 hereof but it is judicially determined (by
the entry of a final judgment or decree
<PAGE>
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 8 hereof provide for indemnification in such case or (ii) contribution
under the 1933 Act may be required on the part of the Holder or any holder of
the Warrant Shares or controlling person, then the Company and the Holder or any
such holder of the Warrant Shares or controlling person shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), in either
such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Holder or holder of Warrant Shares or controlling person on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and such holders
of such securities and such controlling persons agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation or by any other method which does not take account of the
equitable considerations referred to in this Section 9. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section 9
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
10. No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or otherwise, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times, in
good faith, take all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
11. Restrictive Legend. Unless and until otherwise permitted by this
Section 11, each certificate for Warrants issued under this Agreement, each
certificate for any Warrants issued to any transferee of any such certificate,
each certificate for any Warrant Stock issued upon exercise of any Warrant and
each certificate for any Warrant Stock issued to any transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
<PAGE>
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") NOR IS SUCH REGISTRATION CONTEMPLATED. SUCH
SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT
ANY TIME WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE
COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO IT AND TO ITS COUNSEL
TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE ACT, OR
APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED
THEREUNDER."
Notices. Notices and other communications to be given to the
Holder shall be deemed sufficiently given if delivered by hand, or three (3)
business days after mailing if mailed by registered or certified mail, postage
prepaid, addressed in the name and at the address of such Holder appearing on
the records of the Company. Notices or other communications to the Company shall
be deemed to have been sufficiently given if delivered by hand or three (3)
business days after mailing if mailed by registered or certified mail, postage
prepaid, to the Company at:
Southhampton Enterprises Corp.
9211 Diplomacy Row
Dallas, TX 75247
Attn: President
Either party may change the address to which notices shall be given by notice
pursuant to this Section 12.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the Company has executed this Warrant as of May 7,
1997.
SOUTHHAMPTON ENTERPRISES CORP.
a British Columbia, Canada corporation
By: /s/ Thomas E. Dooley, Jr.
Its:President
<PAGE>
Annex A
[FORM OF EXERCISE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase______ shares of Common
Stock and herewith tenders payment for such shares of Common Stock in the amount
of $__________ by bank check made payable to "Southhampton Enterprises Corp."
The undersigned requests that a certificate for such shares of Common Stock be
registered in the name of _____________________, whose address is
____________________________. If such number of shares of Common Stock is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
the shares of Common Stock be registered in the name of , whose
address is _______________________, and that such Warrant Certificate be
delivered to _____________________, whose address is
.
Dated:
Signature:
(Signature must conform in all
respects to name of Holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or
Taxpayer Identification
Number of Holder.)
Exhibit 10.1
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), which shall be
effective as of May 7, 1997, is by and between Southhampton Enterprises Corp., a
British Columbia corporation (the "Company"), and Thomas E. Dooley, Jr., as
agent (the "Shareholder");
RECITALS:
A. The Company and the Shareholder are parties to a Stock Purchase
Agreement, dated April 21, 1997, (the "Stock Purchase Agreement").
B. Pursuant to the Stock Purchase Agreement, the Shareholder is
acquiring shares of the Company's common stock, no par value.
C. Pursuant to the Stock Purchase Agreement, the Shareholder is also
acquiring warrants to purchase shares of the Company's common stock, and
promissory notes which may be converted into the Company's common stock.
D. The shares of the Company's common stock which will or may be issued
pursuant to the Stock Purchase Agreement, as described in Recital Sections B and
C, are referred to in this Agreement as the "Common Stock."
E. The Common Stock will not be registered under the Securities Act of
1933, as amended, or under the securities laws of any state, in reliance upon
exemptions from registration thereunder.
In consideration of the mutual covenants and obligations hereinafter
set forth, the Company and the Shareholder, hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the terms listed in
this Section shall have the meanings set forth below:
(a) "Affiliate" of any Person means any other Person who
either directly or indirectly is in control of, is controlled by or is under
common control with such Person; provided that for purposes of this definition
an investment entity shall be deemed to be controlled by its investment manager,
investment advisor or general partner.
(b) "Business Day" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a day on which banking institutions in the City
of Phoenix are authorized by law, regulation or executive order to close.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are effect from time to time.
<PAGE>
(d) "Holder" shall mean the Shareholder and his successors,
assigns and transferees (subject to Section 10 hereof). For purposes of this
Agreement, the Company may deem the registered holder of a Registrable Security
as the Holder thereof (subject to Section 10 hereof).
(e) "Person" shall mean an individual, partnership,
corporation, limited liability company, joint venture, trust or unincorporated
organization, a government or agency or political subdivision thereof or any
other entity.
(f) "Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by a prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference in such prospectus.
(g) "Registrable Securities" shall mean (i) all shares of
Common Stock issued or issuable to the Shareholder pursuant to the Stock
Purchase Agreement as further described in Recital Sections B and C; and (ii)
any other securities issued as a result of or in connection with any stock
dividend, stock split or reverse stock split, combination, recapitalization,
reclassification, merger or consolidation, exchange or distribution in respect
of the shares of Common Stock referred in to (i) above.
(h) "Registration Expenses" shall have the meaning set forth
in Section 6 hereof.
(i) "Registration Statement" shall mean any registration
statement which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus included therein, all
amendments and supplements to such Registration Statement including post
effective amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
(j) "Registration Termination Date" shall mean the earlier to
occur of (i) the date that is five years following the date hereof or (ii) the
first date upon which the Registrable Securities may be sold without limitation
under Rule 144 under the Securities Act (as such Rule may be amended from time
to time), other than the limitations set forth in paragraphs (c), (f) and (h) of
such Rule, as determined by the opinion of counsel to the Company (which shall
be reasonably satisfactory to counsel to the Holders).
(k) "SEC" shall mean the U.S. Securities and Exchange
Commission, or any other U.S. federal agency at the time administering the
Securities Act.
<PAGE>
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
(m) "Underwritten Offering" shall mean an offering that is
registered under the Securities Act in which securities of the Company are sold
pursuant to a firm commitment underwriting, to an underwriter at a fixed price
for reoffering to the public or pursuant to agency or best efforts arrangements
with an underwriter.
SECTION 2. Securities Subject to this Agreement. The
Registrable Securities are entitled to the benefits of this
Agreement.
SECTION 3. Demand Registration.
(a) Demand Registration (i) Upon the written request of
Holders owning not less than 50% of the Registrable Securities (excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act), and provided that
there is then no effective Registration Statement in effect with respect to such
Registrable Securities, the Company will effect, in accordance with the terms of
this Agreement, the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register by such Holders,
subject to Section 3(c) hereof; provided that the number of securities requested
to be so registered shall be not less than 50% of the Registrable Securities
held by such requesting Holders. No such request may be made earlier than the
date on which the Company has published financial results covering at least 30
days of "post-merger" combined results of operations (with respect to the
transaction contemplated by the Stock Purchase Agreement (the "Demand
Commencement Date"), in accordance with the SEC interpretations of APB Opinion
No. 16, as determined by the Company. The Company shall promptly notify the
Holders of the Demand Commencement Date. In addition, no such request shall be
made during the 90-day period following the completion of any Underwritten
Offering of the Company's shares of Common Stock and no such request shall be
made to include any Registrable Securities in the initial public offering of
securities of the Company. The Company shall not be obligated to effect more
than two demand registrations pursuant to this Section 3, provided that the
Company shall not be required to effect more than one registration on a form
other than S-3 (or any successor to such form).
(ii) Expenses. The Company shall pay all Registration
Expenses with respect to any demand registration pursuant to this Section 3.
(b) Effectiveness of Registration Statement. The Company
agrees to use its best efforts to (i) cause the
<PAGE>
Registration Statement relating to any demand registration pursuant to this
Section 3 to become effective under the Securities Act as promptly as
practicable (ii) thereafter keep such Registration Statement effective
continuously for the period specified in the next succeeding paragraph; and
(iii) prevent the happening of any event of the kinds described in clauses (4)
or (5) of Section 5(a)(ii) hereof.
A demand registration requested pursuant to this Section 3
will not be deemed to have been effected unless the Registration Statement
relating thereto has become effective under the Securities Act and remain
continuously effective (except as otherwise permitted under this Agreement) for
a period ending on the earlier of:
(A) in the case of a Registration Statement on Form S-3
(subject to Section 5(c) below), the Registration Termination
Date; or
(B) in the case of a Registration Statement on a Form other
than Form S-3, the date which is 90 days after the effective
date of such Registration Statement; or
(C) the date on which all Registrable Securities covered by
such Registration Statement have been sold and the
distribution contemplated thereby has been completed.
(c) Inclusion of Other Securities. The Company, and any other
holder of the Company's securities that has registration rights, may include its
securities in any demand registration effected pursuant to this Section 3;
provided, however, that if the managing underwriter or underwriters of any
Underwritten Offering contemplated thereby advise the Holders in writing that
the total amount or kind of securities which such Holder, the Company or any
such other holder intends to include in such proposed public offering is
sufficiently large to affect the success of the proposed public offering
requested by the Holder or Holders materially and adversely, then the amount or
kind of securities to be offered for the account of the Company or any such
other holder shall be reduced to the extent necessary to reduce the total amount
or kind of securities to be included in such proposed public offering to the
amount or kind recommended by such managing underwriter or underwriters.
(d) Form. Registrations under this Section 3 will be on a form
permitted by the rules and regulations of the SEC selected by the Company;
provided, however, the Company may use Form S-3 if at the time of filing such
Registration Statement the Company is eligible to use such Form.
(e) Manner of Sale. The Company may (but shall have no
obligation to) cause any Registrable Securities that are the subject of a demand
registration pursuant to this Section 3 to be sold in an Underwritten Offering
in which event the Company shall
<PAGE>
have the right to designate the managing underwriter or underwriters thereof
(which shall be reasonably satisfactory to the Holders whose Registrable
Securities are the subject of such demand registration).
SECTION 4. Piggyback Registration.
(a) Piggyback Registration. If the Company at any time
proposes to file a registration statement with respect to any class of equity
securities, whether for its own account (other than a registration statement on
Form S-4 or S-8, or any successor or substantially similar form or a
registration statement covering (i) an employee stock option, stock purchase or
compensation plan or securities issued or issuable pursuant to any such plan or
(ii) a dividend reinvestment plan) or for the account of a holder of securities
of the Company pursuant to registration rights granted by the Company (a
"Requesting Securityholder"), then the Company shall in each case give written
notice of such proposed filing to all Holders of Registrable Securities at least
20 Business Days before the anticipated filing date of any such registration
statement by the Company, and such notice shall offer to all Holders the
opportunity to have any or all of the Registrable Securities held by such
Holders included in such registration statement. Each Holder of Registrable
Securities desiring to have his Registrable Securities registered under this
Section 4 shall so advise the Company in writing within 10 Business Days after
the date of receipt of such notice (which request shall set forth the amount of
Registrable Securities for which registration is requested), and the Company
shall include in such Registration Statement all such Registrable Securities so
requested to be included therein; provided, however, that if such Registration
Statement is for an Underwritten Offering, the Holders of Registrable Securities
included therein shall join in the underwriting on the same terms and conditions
as the Company or the Requesting Securityholders except that the Holders of
Registrable Securities shall not be required to give any representations and
warranties relating to the Company, and shall execute any underwriting
agreement, "lock-up" letters or other customary agreements or documents executed
by the Company or the Requesting Securityholders in connection therewith.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
any such proposed public offering advise the Holders in writing that the total
amount or kind of securities which the Holders of Registrable Securities, the
Company, the Requesting Securityholders and any other Persons intended to be
included in such proposed public offering is sufficiently large to affect the
success of such proposed public offering materially and adversely, then the
amount or kind of securities to be offered for the accounts of the Holders of
Registrable Securities shall be reduced pro rata, together with the amount or
kind of securities to be offered for the accounts of any other Persons
requesting registration of securities pursuant to rights similar to the rights
of the Holders under this Section 4, to the extent necessary to reduce the total
amount or kind of securities to be included in such proposed public offering to
the
<PAGE>
amount or kind recommended by such managing underwriter or underwriters before
the securities offered by the Company or any Requesting Securityholder are so
reduced. Notwithstanding the foregoing, however, the Holders shall have no right
to include any Registrable Securities in the Company's initial public offering
of securities.
(b) No Obligation. Neither the giving of notice by the Company
nor any request by the Holders to register Registrable Securities pursuant to
Section 4(a) shall in any way obligate the Company to file any such Registration
Statement. The Company may, at any time prior to the effective date thereof,
determine not to offer the securities to which Registration Statement relates
and/or withdraw the Registration Statement from the SEC, without liability of
the Company to the Holders.
SECTION 5. Registration Procedures and Other Agreements.
(a) General. In connection with the Company's registration
obligations pursuant to Section 3 and, to the extent applicable thereto, Section
4 hereof, the Company will:
(i) prepare and file with the SEC a new Registration
Statement or such amendments and post-effective amendments to an existing
Offering Registration Statement as may be necessary to keep such Registration
Statement effective as set forth in Section 3(b); provided, however, that no
Registration Statement shall be required to remain in effect after all
Registrable Securities covered by such Registration Statement have been sold and
distributed as contemplated by such Registration Statement;
(ii) notify each selling Holder promptly (1) when a
new Registration Statement, amendment thereto, Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any
new Registration Statement or posteffective amendment, when it has become
effective, (2) of any request by the SEC for amendments or supplements to any
Registration Statement or Prospectus or for additional information, (3) of the
issuance by the SEC of any comments with respect to any filing, (4) of any stop
order suspending the effectiveness of any Registration Statement or the
initiation or threatening of any proceedings for such purpose, (5) of any
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (6) of the happening of any event which makes any statement of a
material fact made in any Registration Statement, Prospectus or any document
incorporated therein by reference untrue or which requires the making of any
changes in any Registration Statement, Prospectus or any document incorporated
therein by reference in order to make the statements therein (in the case of any
Prospectus, in the light of the circumstances under which they were made) not
misleading; and make every reasonable effort to obtain as promptly as
practicable the withdrawal of any order or
<PAGE>
other action suspending the effectiveness of any Registration Statement or
suspending the qualification or registration (or exemption therefrom) of the
Registrable Securities for sale in any jurisdiction;
(iii) furnish to each selling Holder, without charge,
at least one manually signed or "edgarized" copy and as many conformed copies as
may reasonable be requested, of the then effective Registration Statement and
any post-effective amendment thereto, and one copy of all financial statements
and schedules, all documents incorporated therein by reference and all exhibits
thereto (including those incorporated by reference);
(iv) deliver to each selling Holder, without charge,
as many copies of the then effective Prospectus (including each prospectus
subject to completion) and any amendments or supplements thereto as such Holder
may reasonably request;
(v) use its best efforts to register or qualify under
the securities or blue sky laws of such jurisdictions as the selling Holders
reasonably request in writing and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the then effective Registration Statement;
provided, however, that the Company will not be required to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify, or (y) subject itself to general taxation in any such jurisdiction, or
(z) register or qualify such Registrable Securities under the securities or blue
sky laws of any jurisdiction in which the Company does not then maintain a
currently effective registration or qualification of any of its securities;
(vi) upon the occurrence of any event contemplated by
clause (6) of Section 5(a)(ii) hereof, as promptly as practicable (in light of
the circumstances causing the occurrence of such event) prepare a supplement or
post-effective amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made, not misleading;
(vii) use reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on each securities
exchange (or quotation system operated by a national securities association) on
which identical securities issued by the Company are then listed, and enter into
customary agreements including, if necessary, a listing application and
indemnification agreement in customary form;
<PAGE>
(viii) if the registration is in connection with an
Underwritten Offering, enter into an underwriting agreement with respect to the
Registrable Securities, which agreement shall contain provisions that are
customary in connection with underwritten secondary offerings, including
representations and warranties, opinions of counsel, letters of accountants and
indemnification provisions with underwriters that acquire Registrable
Securities;
(ix) otherwise use its best efforts to comply in all
material respects with all applicable rules and regulations of the SEC relating
to such registration and the distribution of the securities being offered and
make generally available to its securities holders earnings statements
satisfying the provisions of Section 11 (a) of the Securities Act and complying
with Rule 158 of the SEC thereunder;
(x) cooperate and assist in any filings required to
be made with the National Association of Securities Dealers, Inc.; and
(xi) make available for inspection by a
representative of selling Holders and any attorney or accountant retained by
such selling Holders, all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors and employees to supply all information reasonably requested by, and
to cooperate fully with, any such representative, underwriter, attorney or
accountant in connection with such registration, and otherwise to cooperate
fully in connection with any due diligence investigation; provided that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company, prior to the release or disclosure to them of any such information,
records or documents.
(b) Each selling Holder shall furnish to the Company, upon
request, in writing such information and documents as, in the opinion of counsel
to the Company may be reasonably required to prepare properly and file such
Registration Statement in accordance with the applicable provisions of the
Securities Act.
SECTION 6. Registration Expenses. All expenses incident to the Company
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of one
counsel in connection with blue sky qualifications or registrations (or the
obtaining of exemptions therefrom) of the Registrable Securities), the
reasonable fees and disbursements of counsel retained by the Holders (which
counsel shall be reasonably satisfactory to the Company), printing expenses
(including expenses of printing Prospectuses), messenger and delivery expenses,
internal expenses (including all salaries and expenses of its officers and
employees performing legal or accounting duties), fees and disbursements of
<PAGE>
its counsel and its independent certified public accountants (including the
expenses of any special audit or "comfort" letters required by or incident to
such performance or compliance), securities acts liability insurance (if the
Company elects to obtain such insurance), fees and expenses of any special
experts retained by the Company in connection with any registration hereunder
and the fees and expenses of any other Person retained by the Company (all such
fees and expenses being referred to as "Registration Expenses"), shall be borne
by the Company, whether or not any Registration Statement becomes effective.
SECTION 7. Suspension of Sales under Certain Circumstances.
(a) Upon receipt of any notice from the Company that
dispositions under the then current Prospectus must be discontinued and
suspended, whether as a result of an event described in Section 5(a)(ii)(4),(5)
or (6) hereof or otherwise, each Holder will forthwith discontinue and suspend
disposition of Registrable Securities pursuant to such Prospectus until (i) the
Holders are advised in writing by the Company that a new Registration Statement
covering the offer of Registrable Securities has become effective under the
Securities Act, or (ii) the Holders receive copies of a supplemented or amended
Prospectus contemplated by Section 5(a) hereof, or (iii) the Holders are advised
in writing by the Company that the use of the Prospectus may be resumed.
(b) If at any time following the date hereof any of the
Company's shares of Common Stock are to be sold pursuant to an Underwritten
Offering, then for the period commencing 45 days prior to, and expiring 180 days
after, the effective date of such Underwritten Offering, none of the Holders
will effect any public sale or distribution of any Registrable Securities or any
other shares of Common Stock of the Company then owned by such Holders, other
than pursuant to such Underwritten Offering (if any Registrable Securities are
included in such Underwritten Offering).
SECTION 8. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, but without
duplication, each Holder of Registrable Securities, any their respective
officers and directors, if any, and each Person who controls such Holder within
the meaning of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement of a
material fact in, or any omission of a material fact required to be stated in,
any Registration Statement or in any preliminary or final Prospectus, or any
amendment or supplement thereto, or necessary to make the statements therein (in
the case of a Prospectus in light of the circumstances under which they were
made) not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by any Holder or any
underwriter expressly for use therein; provided
<PAGE>
that the Company will not be liable pursuant to this Section 8(a) if such
losses, claims, damages, liabilities or expenses have been caused by the failure
of any selling Holder to deliver a copy of the Registration Statement or
Prospectus, or any amendments or supplements thereto, after the Company has
furnished such copies to such Holder.
(b) Indemnification by the Holders of Registrable Securities.
In connection with any Registration Statement covering Registrable Securities of
any Holder, such Holder will furnish to the Company in writing such information
as the Company reasonably requests for use in connection with any such
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, but without duplication, the Company, its
officers, directors, shareholders, employees, advisors and agents, and each
Person who controls the Company (within the meaning of the Securities Act),
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact in, or any omission of a material fact
required to be stated in, the Registration Statement or in any preliminary or
final Prospectus, or any amendment or supplement thereto, or necessary to make
the statements therein (in the case of a Prospectus in light of the
circumstances under which they were made) not misleading, but only to the extent
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
therein. If the offering to which the Registration Statement relates is an
Underwritten Offering, each Holder agrees to enter into an underwriting
agreement in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each Person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such Holder of the
Company.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided, however,
that any Person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in, but not control, the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such indemnified Person, unless (A) the indemnifying party shall have failed to
assume the defense of such claim and employ counsel reasonably, satisfactory to
the indemnified party in a timely manner, or (B) in the reasonable judgment of
any such Person, based upon written advice of its counsel, a conflict of
interest may exist between such Person and the indemnifying party with respect
to such claims (in which case, if the Person notifies the indemnifying party in
writing, that such Person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right
<PAGE>
to assume the defense of any such claim as to which such conflict of interest
may exist). The indemnifying party will not be subject to any liability for any
settlement made without its consent. No indemnified party will be required to
consent to the entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation. An indemnifying party who is not entitled to, or elects not
to, assume the defense of the claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, as well as one local counsel in
each relevant jurisdiction.
(d) Contribution. If for any reason the indemnification
provided for in Section 8(a) or 8(b) hereof is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by Sections 8(a) and
8(b) hereof, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentations.
SECTION 9. Current Public Information. The Company agrees that it will
file all reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
it ceases to be required to file such reports, it will, upon the request of
Holders owning not less than 51% of the Registrable Securities [excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act], make publicly
available other information), and it will take such further action as may
reasonably be required, in each case to the extent required from time to time to
enable the Holders to sell Registrable Securities without registration under the
Securities Act within the limitations of the applicable exemptions provided by
(x) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (y) any similar regulation hereinafter adopted by the SEC.
SECTION 10. No Inconsistent Agreements. The Company has not previously
entered into and shall not in the future enter into any agreement, arrangement
or understanding with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
SECTION 11. Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers
<PAGE>
or consents to departures from the provisions hereof may not be given, without
the written consent of (a) the Company and (b) the Holders owning not less than
51% of the Registrable Securities (excluding any Registrable Securities that
have previously been sold pursuant to a Registration Statement hereunder or Rule
144 under the Securities Act).
SECTION 12. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, facsimile, or air-courier guaranteeing overnight delivery:
(a) If to a Holder of Registrable Securities, at the most
current address for such Holder, as it appears on the books of the Company; and
(b) If to the Company: The Antigua Group, Inc., 9319 North
94th Way, Scottsdale, AZ 85258, Attention: Chief Executive Officer; facsimile
no. 860-9609, or at such other address as may be designated from time to time by
notice given in accordance with the provisions of this Section 11.
All such notices and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery or
facsimile, on the date of such delivery, (ii) in the case of air courier, on the
Business Day after the date when sent, and (iii) in the case of mailing, on the
fifth Business Day following such mailing.
SECTION 13. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, transferees and assigns of the
parties hereto; provided, however, that (a) no transferee in any transfer made
in reliance on Rule 144 under the Securities Act shall have any rights as a
Holder under this Agreement; and (b) no Person to whom the Registrable
Securities are transferred shall have any rights under this Agreement as a
Holder unless such Person agrees to be bound by the terms and conditions of this
Agreement.
SECTION 14. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
SECTION 15. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Arizona without reference to principles of conflict of
laws. The parties to this Agreement hereby consent to the jurisdiction in
personam of the Superior Court of the State of Arizona, in and for the County of
Maricopa or of the United States District Court for the District of Arizona, in
any legal proceeding to enforce any obligations under this Agreement, and agree
that venue in Maricopa County is not inconvenient.
<PAGE>
SECTION 16. Construction. The Section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. All terms used in one number or
gender shall be construed to include any other number or gender as the context
may require. Whenever the words "include," "includes," or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 17. Entire Agreement. This Agreement, together with any other
documents and certificates delivered hereunder and the Stock Purchase Agreement,
state the entire agreement of the Company and the Shareholder with respect to
the subject matter hereof, merge all prior negotiations, agreements and
understandings, if any, and state in full all representations, warranties and
agreements which have induced this Agreement.
IN WITNESS WHEREOF, the Company and the Shareholder have duly executed
and delivered this agreement as of the date written above.
/s/ L. Steven Haynes
By: L. Steven Haynes as Secretary
IN WITNESS WHEREOF, the Company and the Shareholder have duly executed
and delivered this Agreement as of the date first written above.
/s/ Thomas E. Dooley
By: Thomas E. Dooley as Agent
Exhibit 10.2
INTERCREDITOR AGREEMENT
-----------------------
THIS INTERCREDITOR AGREEMENT ("AGREEMENT") is dated as of May 7, 1997, by
and between LASALLE BUSINESS CREDIT, INC. ("LASALLE"), THOMAS E. DOOLEY, JR., as
agent for the entities listed on Schedule 1 attached hereto ("SELLER"), THE
CRUTTENDEN ROTH BRIDGE FUND, LLC ("CRUTTENDEN"), IMPERIAL BANK ("IMPERIAL"), THE
ANTIGUA GROUP, INC. ("ANTIGUA"), SOUTHHAMPTON ENTERPRISES, CORP. ("PARENT") and
SOUTHHAMPTON ENTERPRISES, INC. ("SEI")
RECITALS
--------
A. ANTIGUA has obtained from LASALLE: (a) a revolving line of credit in the
maximum principal amount of Twelve Million Dollars ($12,000,000.00) (as the same
may be hereafter amended, modified, renewed or replaced, including any such
amendment, modification, renewal or replacement which increases the maximum
principal amount thereof, "REVOLVER") ; (b) a term loan in the principal amount
of Seven Hundred Seventy-Five Thousand Dollars ($775,000.00) ("TERM LOAN A");
and (c) a term loan in the principal amount of Three Million Five Hundred
Thousand Dollars ($3,500,000.00) ("TERM LOAN B"). As used herein, the term
"LASALLE LOANS" shall mean collectively the REVOLVER, the TERM LOAN A and the
TERM LOAN B, and any amendments thereto. The LASALLE LOANS are secured by
security interests in all of ANTIGUA'S now owned or hereafter acquired assets.
SEI and the PARENT have guaranteed the LASALLE LOANS and have granted to LASALLE
security interests in all of their respective assets as security for the
obligations under such guarantees.
B. ANTIGUA has obtained from IMPERIAL a loan in the principal amount of Two
Million Five Hundred Thousand Dollars ($2,500,000.00) ("IMPERIAL LOAN") which is
secured by security interests in all of the assets of ANTIGUA. The PARENT and
SEI have guaranteed the IMPERIAL LOAN and have granted to IMPERIAL security
interests in all of their respective assets as security for the obligations
under such guaranties.
C. The PARENT is indebted to the SELLER as evidenced by three (3)
promissory notes of even date herewith in the aggregate principal amount of Six
Million Three Hundred Seventy-Eight Thousand Dollars ($6,378,000.00)
(collectively "SELLER DEBT"). The PARENT'S obligations under the SELLER DEBT are
secured by security interests in all of the assets of the PARENT, ANTIGUA and
SEI. ANTIGUA and SEI have guaranteed the SELLER DEBT.
D. ANTIGUA has obtained from CRUTTENDEN a loan in the principal amount of
One Million Twenty Thousand Dollars ($1,020,000.00) ("CRUTTENDEN LOAN") which is
secured by security interests in all of the assets of ANTIGUA. The PARENT and
SEI have guaranteed the CRUTTENDEN LOAN and have granted to CRUTTENDEN
<PAGE>
security interests in all of their respective assets as security for the
obligations under such guaranties.
E. The parties wish to agree upon the relative rights and priorities of the
various security interests in the assets of ANTIGUA, the PARENT and SEI.
NOW THEREFORE, in consideration of these premises, the terms and conditions
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Definitions. When used in this AGREEMENT, the following terms
shall have the meanings set forth as definitions in this Section, unless a
specific context clearly requires a different meaning. Terms defined in this
Section or elsewhere in this AGREEMENT shall be in all capital letters
throughout. The singular use of any defined term shall include the plural and
the plural use shall include the singular.
Section 1.1. Antigua Collateral. The term "ANTIGUA COLLATERAL" means
all of the tangible and intangible property of ANTIGUA or in which ANTIGUA has
an interest, whether now owned or hereafter acquired, in which a LENDER has a
security interest, including, but not limited to, all inventory, accounts,
equipment, general intangibles, investment property, chattel paper, instruments,
documents, fixtures, trademarks, patents, and goods and, all proceeds and
products thereof.
Section 1.2. Antigua Stock. The term "ANTIGUA STOCK" means all of the
shares of stock in ANTIGUA in which a LENDER now or hereafter has a security
interest.
Section 1.3. Collateral. The term "COLLATERAL" means any assets or
property which are ANTIGUA COLLATERAL, PARENT COLLATERAL, SEI COLLATERAL,
ANTIGUA STOCK or SEI STOCK.
Section 1.4. Debtors. The term "DEBTORS" means ANTIGUA, the PARENT and
SEI collectively; and the term "DEBTOR" means any one of the DEBTORS
individually.
Section 1.5. Lenders. The term "LENDERS" means collectively LASALLE,
IMPERIAL, CRUTTENDEN, and the SELLERS; and the term "LENDER" means one of the
LENDERS individually.
Section 1.6. Parent Collateral. The term "PARENT COLLATERAL" means all
of the tangible and intangible property of the PARENT or in which the PARENT has
an interest, whether now owned or hereafter acquired, in which a LENDER has a
security interest, including, but not limited to, all inventory, accounts,
equipment, general intangibles, investment property, chattel paper, instruments,
documents, fixtures, trademarks, patents, and goods and all proceeds and
products thereof, but specifically excluding the SEI STOCK.
<PAGE>
Section 1.7. Prior Security Interest. The term "PRIOR SECURITY
INTEREST" means a SECURITY INTEREST which, pursuant to the terms of this
AGREEMENT, is prior to another SECURITY INTEREST in the same COLLATERAL.
Section 1.8. SEI Collateral. The term "SEI COLLATERAL" means all of
the tangible and intangible property of SEI or in which SEI has an interest,
whether now owned or hereafter acquired, in which a LENDER has a security
interest, including, but not limited to, all inventory, accounts, equipment,
general intangibles, investment property, chattel paper, instruments, documents,
fixtures, trademarks, patents, and goods, and all proceeds and products thereof,
but specifically excluding the ANTIGUA STOCK.
Section 1.9. SEI Stock. The term "SEI STOCK" means all of the shares
of stock in SEI in which a LENDER now or hereafter has a security interest.
Section 1.10. Security Interest. The term "SECURITY INTEREST" means a
security interest or lien in any or all of the COLLATERAL.
Section 1.11. Senior Lien. The term "SENIOR LIEN" means, as to any
particular COLLATERAL, the SECURITY INTEREST of a LENDER which pursuant to the
terms of this AGREEMENT is senior and prior to the SECURITY INTERESTS of all
other LENDERS in such COLLATERAL.
Section 2. Priority Of Security Interest. The parties hereto hereby agree
as follows:
Section 2.1. Priority Of Security Interests In Antigua Collateral,
Parent Collateral and SEI Collateral. The SECURITY INTEREST of LASALLE in the
ANTIGUA COLLATERAL, the PARENT COLLATERAL and the SEI COLLATERAL shall
constitute a senior and superior security interest in the ANTIGUA COLLATERAL,
the PARENT COLLATERAL and the SEI COLLATERAL, prior in right and entitlement to
any SECURITY INTEREST of IMPERIAL, CRUTTENDEN or the SELLER in the ANTIGUA
COLLATERAL, the PARENT COLLATERAL or the SEI COLLATERAL. The SECURITY INTEREST
of IMPERIAL in the ANTIGUA COLLATERAL, the PARENT COLLATERAL and the SEI
COLLATERAL shall be subject to the PRIOR SECURITY INTERESTS of LASALLE but prior
in right and entitlement to any SECURITY INTEREST of CRUTTENDEN or the SELLER in
the ANTIGUA COLLATERAL, the PARENT COLLATERAL or the SEI COLLATERAL. The
SECURITY INTEREST of CRUTTENDEN in the ANTIGUA COLLATERAL, the PARENT COLLATERAL
and the SEI COLLATERAL shall be subject to the PRIOR SECURITY INTERESTS of
LASALLE and IMPERIAL but prior in right and entitlement to any SECURITY INTEREST
of the SELLER in the ANTIGUA COLLATERAL, the PARENT COLLATERAL or the SEI
COLLATERAL. The SECURITY INTEREST of the SELLER in the ANTIGUA COLLATERAL, the
PARENT COLLATERAL and the SEI COLLATERAL shall be subject to the PRIOR SECURITY
INTERESTS of LASALLE, IMPERIAL and CRUTTENDEN.
<PAGE>
Section 2.2. Priority Of Security Interests In Antigua Stock And SEI
Stock. The SECURITY INTEREST of IMPERIAL in the ANTIGUA STOCK and the SEI STOCK
shall constitute a senior and superior security interest in the ANTIGUA STOCK
and the SEI STOCK, prior in right and entitlement to any security interest of
CRUTTENDEN, the SELLER or LASALLE in the ANTIGUA STOCK or the SEI STOCK. The
SECURITY INTEREST of CRUTTENDEN in the ANTIGUA STOCK and the SEI STOCK shall be
subject to the PRIOR SECURITY INTERESTS of IMPERIAL, but prior in right and
entitlement to any SECURITY INTEREST of the SELLER or LASALLE in the ANTIGUA
STOCK or the SEI STOCK. The SECURITY INTEREST of the SELLER in the ANTIGUA STOCK
and the SEI STOCK shall be subject to the PRIOR SECURITY INTERESTS of IMPERIAL
and CRUTTENDEN, but prior in right and entitlement to any SECURITY INTEREST
LASALLE in the ANTIGUA STOCK or the SEI STOCK. As of the date of this AGREEMENT,
LASALLE does not have a SECURITY INTEREST in the SEI STOCK or the ANTIGUA STOCK.
Any SECURITY INTEREST LASALLE hereafter obtains in the ANTIGUA STOCK or the SEI
STOCK shall be subject to the PRIOR SECURITY INTERESTS of IMPERIAL, CRUTTENDEN
and the SELLER.
Section 2.3. Priorities Are Absolute And Unconditional. The priorities
of SECURITY INTERESTS agreed upon by the parties hereto shall apply: (a) at all
times and in all events and circumstances, including before, during and after
any bankruptcy case or other reorganization or insolvency proceeding; and (b)
notwithstanding the priorities which would ordinarily result from the time or
order of attachment or perfection of the respective SECURITY INTERESTS, or the
time of recordation of financing statements or other documents or the time of
giving or failure to give notice of the acquisition or expected acquisition of
purchase money or other SECURITY INTERESTS. Each party, nevertheless, agrees to
make such filings and recordings in the public records to evidence the
priorities set forth herein as any other party may reasonably request. The
subordinations and priorities specified in this AGREEMENT are not dependent or
conditioned upon the perfection, validity, or enforceability of any SECURITY
INTEREST.
Section 3. Limitation On Security Interests. The SECURITY INTERESTS having
the benefit of the priorities as set forth herein shall be limited in the amount
which may be secured by such SECURITY INTERESTS to the following principal
amounts for the following LENDERS, together with all accrued and unpaid interest
thereon: (a) LASALLE -- A principal amount of Seventeen Million Nine Hundred
Forty-Seven Thousand Five Hundred Dollars ($17,947,500.00), together with all
other sums due under or in connection with the LASALLE LOANS or any documents
executed in connection therewith, including, but not limited to, all fees,
enforcement costs and reimbursement and indemnification obligations; (b)
IMPERIAL -- A principal amount equal to the principal balance of the IMPERIAL
LOAN, together with all other sums due under or in connection with the IMPERIAL
LOAN or any documents executed in connection therewith, including, but not
limited to, all fees, enforcement costs and reimbursement and
<PAGE>
indemnification obligations; (c) CRUTTENDEN -- A principal amount equal to the
principal balance of the CRUTTENDEN LOAN, together with all other sums due under
or in connection with the CRUTTENDEN LOAN or any documents executed in
connection therewith, including, but not limited to, all fees, enforcement costs
and reimbursement and indemnification obligations; and (d) SELLER -- A principal
amount equal to the principal balance of the SELLER DEBT, together with all
other sums due under or in connection with the SELLER DEBT or any documents
executed in connection therewith, including, but not limited to, all fees,
enforcement costs and reimbursement and indemnification obligations.
Section 4. Disposition Of Antigua Stock Or SEI Stock. Prior to the sale or
other disposition of the ANTIGUA STOCK or the SEI STOCK by a LENDER ("SELLING
LENDER") enforcing its SECURITY INTERESTS in such stock, the SELLING LENDER
shall give not less than thirty (30) calendar days written notice of such
proposed sale or other disposition to the other LENDERS ("SALE NOTICE"). During
the thirty (30) calendar day period after receipt of the SALE NOTICE, any LENDER
holding a SECURITY INTEREST in the stock which is to be sold ("SUBJECT STOCK")
may notify the SELLING LENDER of its intention to purchase from the SELLING
LENDER all of the obligations owed to the SELLING LENDER which are secured by
the SECURITY INTERESTS in the SUBJECT STOCK ("PURCHASE NOTICE"). In providing a
PURCHASE NOTICE to the SELLING LENDER, the LENDER providing the PURCHASE NOTICE
irrevocably commits to purchase from the SELLING LENDER within thirty (30)
calendar days from the date of receipt of the SALE NOTICE all of the obligations
owed to the SELLING LENDER which are secured by the SECURITY INTERESTS in the
SUBJECT STOCK for a purchase price equal to one hundred percent (100%) of the
amount of such obligations, including, but not limited to, principal and
interest, as of the date of payment ("PURCHASE PRICE"). The SELLING LENDER
hereby agrees to sell to the LENDER which timely provides a PURCHASE NOTICE (or
in the event more than one LENDER timely delivers a PURCHASE NOTICE, then to
such LENDER which has the most senior in priority SECURITY INTEREST in the
SUBJECT STOCK) the obligations secured by the SECURITY INTEREST of the SELLING
LENDER in the SUBJECT STOCK, together with all SECURITY INTERESTS securing such
obligations and all documents evidencing such obligations for a purchase price
equal to the PURCHASE PRICE, provided any such sale shall occur within thirty
(30) calendar days after the date of the purchasing LENDER'S receipt of the SALE
NOTICE and shall be made without any warranty or representation by the SELLING
LENDER and without any recourse to the SELLING LENDER.
Section 5. Release Of Liens. Each LENDER holding a SECURITY INTEREST in a
particular item of COLLATERAL (excluding the ANTIGUA STOCK and the SEI STOCK)
which is not the SENIOR LIEN (as to any such item of COLLATERAL each such LENDER
is referred to as a "JUNIOR POSITION LENDER") agrees that in the event of any
sale or other disposition of such COLLATERAL, whether by ANTIGUA, PARENT, SEI,
or by the LENDER holding the SENIOR LIEN in such COLLATERAL, if the LENDER
holding the SENIOR LIEN in such COLLATERAL agrees to
<PAGE>
such sale or other disposition and the proceeds of such sale or other
disposition are applied to reduce the obligations secured by the SENIOR LIEN,
the JUNIOR POSITION LENDER shall: (i) have no right to object to the sale or
other disposition of such COLLATERAL or withhold or delay its consent, if such
consent is required for the sale or other disposition of such COLLATERAL; and
(ii) upon the request of the LENDER holding the SENIOR LIEN in such COLLATERAL,
provide all necessary releases of SECURITY INTERESTS held by the JUNIOR POSITION
LENDER necessary in order to accomplish such sale or other disposition free and
clear of all SECURITY INTERESTS of the JUNIOR POSITION LENDER, all without any
consideration or payment to the JUNIOR POSITION LENDER, unless the proceeds from
such sale repay all debt secured by the SENIOR LIEN in such COLLATERAL in full,
in which event any proceeds in excess of the amount used to repay all debt
secured by the SENIOR LIEN in such COLLATERAL in full shall be paid to the
LENDER having the SECURITY INTEREST which is prior to all other SECURITY
INTERESTS outstanding, provided such proceeds are not required by applicable law
to be paid to any other party. The provisions of this Section are solely for the
benefit of the LENDERS holding SENIOR LIENS and the DEBTORS shall have no rights
hereunder.
Section 6. No Third Party Beneficiaries. This AGREEMENT and the terms and
provisions hereof are solely for the benefit of the LENDERS and shall not
benefit in any way any person not specifically a party to this AGREEMENT.
Nothing in this AGREEMENT is intended to affect, limit, or in any way diminish
the SECURITY INTERESTS which any party hereto claims in the assets of any DEBTOR
insofar as the rights of the DEBTORS and third parties are concerned. The
parties hereto specifically reserve any and all of their respective rights,
SECURITY INTERESTS and right to assert SECURITY INTERESTS against any DEBTOR and
any third parties, including guarantors.
Section 7. Termination, Recission, Or Modification. The subordinations,
agreements, and priorities set forth in this AGREEMENT shall remain in full
force and effect regardless of whether any party hereto in the future seeks to
rescind, amend, terminate or reform, by liquidation or otherwise, its respective
agreements with the DEBTORS.
Section 8. Delivery Of Collateral. If any party to this AGREEMENT shall be
in possession of any COLLATERAL subject to its SECURITY INTEREST (including, but
not limited to, certificates evidencing any ANTIGUA STOCK or SEI STOCK, and
blank stock powers relating thereto) after having had its loan paid in full, it
shall deliver (unless otherwise restricted by law and subject in all events to
the receipt of any indemnification of all liabilities arising from such
delivery) or surrender possession of the same to such other party as may be
entitled thereto in accordance with the priorities established pursuant to this
AGREEMENT, without recourse or warranty. SEI and SEC irrevocably direct IMPERIAL
and CRUTTENDEN to deliver the certificates evidencing any ANTIGUA STOCK or SEI
STOCK, together with all stock transfer powers relating
<PAGE>
thereto, to the party hereto having a SECURITY INTEREST in the ANTIGUA STOCK and
SEI STOCK subject only to the security interest of such LENDER, at such time as
all obligations owed to IMPERIAL or CRUTTENDEN, as the case may be, which secure
its SECURITY INTEREST in the ANTIGUA STOCK and SEI STOCK are repaid in full.
Section 9. Receipt Of Monies. The parties each agree that should any of
them receive any money from the sale, liquidation, casualty or other disposition
of, or as a result of their SECURITY INTERESTS in, any COLLATERAL as to which it
does not hold the SENIOR LIEN at anytime prior to the payment in full of all of
the obligations owed by the DEBTORS to the parties holding PRIOR SECURITY
INTERESTS, they will (unless otherwise restricted by law) hold the same in trust
for the party holding the SENIOR LIEN in such COLLATERAL and promptly pay over
the same to the party holding the SENIOR LIEN for application to the obligations
of the DEBTORS owed to the party holding the SENIOR LIEN.
Section 10. Bailees. Each of the LENDERS hereby appoints the others as
agent for the purposes of perfecting their respective SECURITY INTERESTS in and
on any of the COLLATERAL; provided that none of them shall have any duty or
liability to protect or preserve any rights pertaining to any of the COLLATERAL
and each of them hereby waives and releases the others from all claims and
liabilities arising pursuant to the others' respective roles as bailee with
respect to the COLLATERAL.
Section 11. Waiver Of Marshalling. Each party to this AGREEMENT hereby
waives any right to require any other party to marshall any security or
COLLATERAL or otherwise to compel any other party to seek recourse against or
satisfaction of the indebtedness owed to it from one source before seeking
recourse or satisfaction from another source.
Section 12. Provisions Concerning Insurance. Subject to the priorities,
subordinations, and respective rights of the parties contained in this
AGREEMENT, each party to this AGREEMENT shall be entitled to be designated
secured party and to obtain loss payee endorsements and additional insured
status with respect to any and all policies of insurance now or hereafter
obtained by any DEBTOR insuring against casualty or other loss to any property
of such DEBTOR in which any party may have a security interest, and, in
connection therewith, may file claims, settle disputes, make adjustments and
take any and all other action otherwise then permitted to each party hereto and
regard thereto which it may deem advisable with respect to any assets of the
DEBTORS. The provisions of this AGREEMENT shall govern the parties' respective
rights to insurance proceeds despite any inconsistent provisions or any
inconsistent designation of rights or priorities among secured credits in any
insurance policy.
Section 13. Relation Of Parties. This AGREEMENT is entered into solely for
the purposes set forth in the Recitals above, and, except as is expressly
provided otherwise herein, no party to this
<PAGE>
AGREEMENT assumes any responsibility to the other parties to advise such other
parties of information known to such party regarding the financial condition of
any DEBTOR or regarding any collateral of any DEBTOR or of any other
circumstances bearing upon the risk of non-payment of the obligations of any
DEBTOR to the parties hereto. Each party shall be responsible for managing its
relation with the DEBTORS and no party shall be deemed the agent of any other
party for any purpose. Each of the parties hereto may alter, amend, supplement,
release, discharge or otherwise modify any terms of the documents evidencing and
embodying their respective loans without notice to or consent of the others.
Section 14. Notices. Any notice required or permitted by or in connection
with this AGREEMENT shall be in writing and shall be made by facsimile
(confirmed on the date the facsimile is sent by one of the other methods of
giving notice provided for in this Section) or by hand delivery, by Federal
Express, or other similar overnight delivery service, or by certified mail,
unrestricted delivery, return receipt requested, postage prepaid, addressed to
the respective parties at the appropriate address set forth below or to such
other address as may be hereafter specified by written notice by the respective
parties. Notice shall be considered given as of the date of the facsimile or the
hand delivery, one (1) calendar day after delivery to Federal Express or similar
overnight delivery service, or three (3) calendar days after the date of
mailing, independent of the date of actual delivery or whether delivery is ever
in fact made, as the case may be, provided the giver of notice can establish the
fact that notice was given as provided herein. If notice is tendered pursuant to
the provisions of this Section and is refused by the intended recipient thereof,
the notice, nevertheless, shall be considered to have been given and shall be
effective as of the date herein provided.
If to LASALLE:
LASALLE BUSINESS CREDIT, INC.
120 East Baltimore Street
Suite 1802
Baltimore, Maryland 21202
Attn.: Patrick E. Killpatrick,
Vice President
Fax No.: (410) 837-0644
If to IMPERIAL:
IMPERIAL BANK
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Fax No.: (310) 417-5695
With a Copy to:
<PAGE>
IMPERIAL BANK
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Fax No.: (310) 417-5695
With A Copy To:
IMPERIAL BANK
4343 East Camelback Road
Suite 444
Phoenix, Arizona 85018
Attn.: Edmund Ozorio, Vice President
Fax No.: (602) 952-8643
If to the SELLER:
THOMAS E. DOOLEY, JR., As Agent
12401 East Saddle Horn Drive
Scottsdale, Arizona 85259
Fax No.: ______________________
If to CRUTTENDEN:
THE CRUTTENDEN ROTH BRIDGE FUND, LLC:
18301 Von Karman, 7th Floor
Irvine, California 92715
Fax No.: (714) 852-9603
If to ANTIGUA:
THE ANTIGUA GROUP, INC.
9319 N. 94th Way
Scottsdale, Arizona 85258
Attn.: L. Steven Haynes
Fax No.: (602) 860-9609
If to PARENT:
SOUTHHAMPTON ENTERPRISES, CORP.
9211 Diplomacy Row
Dallas, Texas 75247
Attn.: L. Steven Haynes
Fax No.: (214) 631-7297
If to SEI:
SOUTHHAMPTON ENTERPRISES, INC.
9211 Diplomacy Row
Dallas, Texas 75247
Attn.: L. Steven Haynes
Fax No.: (214) 631-7297
<PAGE>
Section 15. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this AGREEMENT and the rights and obligations of the
parties hereto, including the validity, construction, interpretation, and
enforceability of this AGREEMENT and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this AGREEMENT or which occurred or were to occur as a direct or indirect
result of this AGREEMENT having been executed.
Section 16. Consent To Jurisdiction; Agreement As To Venue. Each party
hereto irrevocably consents to the non-exclusive jurisdiction of the courts of
the State of Maryland and of the United States District Court For The District
Of Maryland, if a basis for federal jurisdiction exists. Each party hereto
agrees that venue shall be proper in any circuit court of the State of Maryland
or in the United States District Court For The District Of Maryland if a basis
for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
Section 17. Waiver Of Trial By Jury. Each party to this AGREEMENT agrees
that any suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by either party hereto or any successor or assign of any party on or
with respect to this AGREEMENT or which in any way relates, directly or
indirectly, to the dealings of the parties with respect thereto, shall be tried
only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
Section 18. Delivery By Telecopier. This AGREEMENT may be delivered by
telecopier and a telefacsimile of any party's signature shall constitute an
original signature for all purposes.
Section 19. Counterparts. This AGREEMENT may be executed in counterparts
each of which shall be binding upon the signatory but all of which shall
constitute one and the same agreement.
Section 20. Loan Documents. The provisions of this AGREEMENT are intended
by the parties to control any conflicting provisions which are contained in any
loan documents executed by any of the DEBTORS.
Section 21. Binding Nature. This AGREEMENT shall be binding upon, and inure
to the benefit of, the parties and their respective successors and assigns.
Section 22. Effective Date. This AGREEMENT shall be effective as of the
date on which it is designated as being executed, independent of the actual date
each party hereto executes this AGREEMENT, and is intended to constitute an
instrument under
<PAGE>
seal.
Section 23. Term Of Agreement. This AGREEMENT shall continue in full force
and effect and shall be irrevocable by any party hereto until the earlier to
occur of the following:
(a) The parties mutually agree in writing to terminate this AGREEMENT;
or
(b) All of the obligations owed by the BORROWER to the parties hereto
are fully paid and satisfied and the respective SECURITY INTERESTS have been
terminated and released of record.
Section 24. Section Titles. The section titles contained in this AGREEMENT
are for convenience only and are without substantive meaning or content of any
kind and shall not be considered part of this AGREEMENT.
IN WITNESS WHEREOF, the parties have duly executed this AGREEMENT under
seal as of the date first above written.
WITNESS/ATTEST: LASALLE BUSINESS CREDIT, INC.
/s/ illegible By /s/ Patrick E. Killpatrick (SEAL)
Patrick E. Killpatrick
Vice President
Date: May 7, 1997
WITNESS/ATTEST: IMPERIAL BANK
/s/ illegible By: /s/ Edmund Ozorio (SEAL)
Name: Edmund Ozorio
Title: Vice President
Date: May 7, 1997
THE ANTIGUA GROUP, INC.
/s/ illegible By: /s/ Gerald K. Whitley (SEAL)
Gerald K. Whitley
Vice President - Finance
Date: May 7, 1997
<PAGE>
/s/ illegible /s/ Thomas E. Dooley, Jr.
THOMAS E. DOOLEY, JR., As Agent for
Entities Listed On Schedule 1
Attached Hereto
Date: May 7, 1997
THE CRUTTENDEN ROTH BRIDGE FUND, LLC
/s/ illegible By: /s/ Shelly Singhal (SEAL)
Name: Shelly Singhal
Title: Manager
Date: May 7, 1997
SOUTHHAMPTON ENTERPRISES, CORP.
/s/ illegible By: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes,
Chief Executive officer
Date: May 7, 1997
WITNESS/ATTEST: SOUTHHAMPTON ENTERPRISES, INC.
/s/ illegible By: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes,
Secretary
Date: May 7, 1997
<PAGE>
SCHEDULE 1
Sellers
- -------
Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim
L. Dooley.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley.
E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable Intervivos
Trust dated December 31, 1982.
Peter J. Dooley, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989.
EMPLOYMENT AGREEMENT Exhibit 10.3
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of May 7,
1997, by and between THE ANTIGUA GROUP, INC., a Nevada corporation with its
principal place of business in Scottsdale, Arizona (the "Company"), and RONALD
A. MCPHERSON, a resident of the State of Arizona ("Employee").
RECITALS
A. Employee is currently Vice-President of Sales and Marketing of the
Company.
B. Employee is currently an at-will employee of the Company.
C. The Company manufactures and sells various types of apparel on a
national and international basis.
D. The Company and Employee desire to continue Employee's relationship with
the Company and to memorialize the terms of Employee's employment with the
Company.
AGREEMENT
1. Employment. The Company hereby continues to employ Employee as Vice
President of Sales and Marketing of the Company and Employee hereby accepts such
continued employment upon the terms and conditions set forth herein. Employee
shall continue to be employed by the Company in Scottsdale, Arizona. Employee
shall not be required either by the Company or in the performance of his duties
to relocate from the Metropolitan Phoenix area.
2. Duties of Employment. Employee shall continue to serve as Vice President
of Sales and Marketing of the Company. In such capacity, Employee shall continue
to perform such duties and services consistent with Employee's title and
position as Vice President of Sales and Marketing of the Company as the
Company's Board of Directors may assign or delegate to him from time to time. As
of the date hereof, such duties shall include primary responsibility for the
following functions: budgets for the Company's areas of distribution, sales
manager training and evaluation; interaction with and oversight of the Company's
sales force, implementation of the Company's telemarketing initiative;
coordinate key account management and development, coordinate and direct
regional and national sales meetings, direct commission reviews; assist in
structuring the Company's strategic goals and objectives; set budgets for the
Company's marketing efforts; direct development of catalogs, brochures, flyers,
etc.; direct development of Company advertising and public relations efforts;
and direct Company participation in trade shows and conventions. Employee shall
report directly to the Company's Chief Executive Officer.
<PAGE>
3. Term. This Agreement shall be effective upon the closing of the Stock
Purchase Agreement dated April 21, 1997 (the "Effective Date") and shall
continue until terminated in accordance with Paragraph 5 hereof.
4. Compensation Benefits. Employee will receive the following compensation
for his services during his term of employment hereunder:
(a) Salary. During the first year of this Agreement, Employee shall
receive a base salary of $114,421 per year, payable in accordance with the
standard payroll policies of the Company. Such salary shall be prorated for any
partial year of employment by Employee hereunder. The base salary will be
reviewed at least annually by the Company's Board of Directors, but in no event
shall the base salary be less than that specified in this Section 4(a) during
the term of this Agreement.
(b) Bonuses. Employee shall participate in the Company's Executive
Incentive Compensation Program at a bonus level equal to 15% of Employee's base
salary. Such bonus shall be paid within sixty (60) days of the end of the
Company's fiscal year and shall be prorated for any partial year of employment
by Employee hereunder.
(c) Stock Options. Concurrently with the execution of this Agreement,
Employee has been granted an option to purchase up to 300,000 shares of the
Common Stock of the Company's parent, Southhampton Enterprises Corp. ("Parent"),
pursuant to Parent's Executive and Employee Stock Option Plan (the "Plan"),
exercisable at any time during the two (2) year period after the date of grant,
at an exercise price per share equal to the market price of Parent's Common
Stock on the date hereof. The number and exercise price of such options is
subject to adjustment to reflect the reverse split of Parent's Common Stock to
be effected after the date hereof. Such options are vested in full as of the
date hereof. Employee shall also participate in the Plan on a going-forward
basis.
(d) Medical Insurance. The Company will provide coverage for Employee
and his dependents during the term of his employment under the Company's health
insurance policy.
(e) Payments Due Under Promissory Note and Stock Repurchase Agreement.
Employee is the Payee under a Second Amended and Restated Promissory Note from
the Company (the "Promissory Note"). Employee is also entitled to certain
payments from the Company pursuant to the terms of a Stock Repurchase Agreement
dated July 1, 1993 (the "Stock Repurchase Agreement"). Upon the Effective Date:
(i) the Company will pay Employee a total of $83,654.75 due under the Promissory
Note; (ii) Parent will issue to Employee a total of 150,600 shares of Common
Stock of Parent and Warrants to purchase up to 75,300 additional shares of
Common Stock of Parent at an exercise price of $1.00 per share, and (iii) the
<PAGE>
Company will execute an Amendment to the Second Amended and Restated Promissory
Note in the form attached hereto as Exhibit "I" which embodies the parties'
agreement concerning the foregoing and the remaining payments due to Employee
under the Note and the Stock Repurchase Agreement.
(f) Other Management Incentive Programs and Benefits. Employee shall
be eligible to participate in all other incentives and benefit programs of the
Company and Parent as are from time to time in effect and offered to other
senior executive employees of the Company and Parent.
5. Termination. This Agreement will continue in full force and effect until
termination by the parties. This Agreement may be terminated by the parties only
in the following ways: (i) it may be renegotiated and replaced by a written
agreement signed by both parties; (ii) the Company may terminate this Agreement
with or without "Cause," as defined below; or (iii) Employee may terminate this
Agreement with or without "Good Reason," as defined below;
6. Termination by the Company.
(a) Termination For Cause. The Company may terminate this Agreement
and Employee's employment for Cause at any time upon written notice.
For purposes of this Agreement, "Cause" shall be limited to discharge
resulting from a good faith and reasonable determination by the Board of
Directors of the Company that Employee: (i) has been convicted of a felony
involving dishonesty, fraud, theft or embezzlement; (ii) on more than one
occasion, has willfully failed or refused in a material respect, after prior
written notice from the Company, to follow the reasonable and lawful policies or
directives established by the Company for its employees of comparable seniority,
or (iii) on more than one occasion, has willfully or refused, after prior
written notice from the Company, to attend to the material duties or
obligations, consistent with Employee's position hereunder, reasonably imposed
upon him under this Agreement.
If this Agreement and Employee's employment hereunder is terminated
for Cause, Employee shall receive no Severance Benefits as otherwise may have
been provided pursuant to Section 9.
(b) Termination Without Cause. The Company also may terminate this
Agreement, and Employee's employment hereunder, without Cause at any time by
giving thirty (30) days prior written notice to Employee. In the event this
Agreement and Employee's employment hereunder are terminated by the Company
without Cause, Employee shall receive Severance Benefits pursuant to Section 9.
7. Termination by Employee. Employee may terminate this Agreement and his
employment hereunder with or without "Good Reason" in accordance with the
provisions of this Section 7.
<PAGE>
(a) Termination For Good Reason. Employee may terminate this Agreement
and his employment hereunder for "Good Reason" by giving written notice to the
Company within ninety (90) days, or such longer period as may be agreed to in
writing by the Company, of Employer's receipt of notice of the Occurrence of any
event constituting "Good Reason," as described below.
Employee shall have "Good Reason" to terminate this Agreement and his
employment hereunder upon the occurrence of any of the following events: (i)
Employee is in any way demoted (whether such demotion is by reduction in title
or a reduction in authority, responsibilities or duties) to a position of less
stature or importance within the Company than the position described in Sections
1 and 2; (ii) Employee is required to relocate to an employment location other
than the Metropolitan Phoenix area, or (iii) Employee's annual base salary as
determined pursuant to Section 4 hereof is reduced to a level that is more than
ten percent (10%) less than the annual salary paid to Employee during any prior
contract year, unless, (y) Employee has agreed in writing to that reduction, or
(z) the salaries of the entire senior management staff are reduced on a pro rata
basis according to a policy established by the Company's Board of Directors.
If Employee terminates this Agreement and his employment for Good
Reason, Employee shall receive Severance Benefits pursuant to Section 9.
(b) Termination Without Good Reason. Employee also may terminate this
Agreement and his employment without Good Reason at any time by giving ninety
(90) days prior written notice to the Company. If Employee terminates this
Agreement and his employment hereunder without Good Reason, Employee shall not
be entitled to receive Severance Benefits pursuant to Section 9. In this event,
if so requested by the Company, Employee agrees to cooperate with the Company in
the location of Employee's successor and to participate in the training of such
successor.
8. Death or Disability. This Agreement will terminate automatically on
Employee's death. Any salary or other amounts due to Employee for services
rendered or expenses incurred prior to his death shall be paid to Employee's
surviving spouse, or if Employee does not leave a surviving spouse, to
Employee's estate, within thirty (30) days of the death of Employee. No other
benefits shall be payable to Employee's heirs pursuant to this Agreement, but
amounts may be payable pursuant to any life insurance or other benefit plans
maintained by the Company for the benefit of Employee or his designee.
The Company agrees to purchase and maintain during the term hereof a
disability policy for Employee with coverage levels and other terms to be
determined by the Company's Compensation Committee.
9. Severance Benefits. If this Agreement and Employee's
<PAGE>
employment hereunder are terminated without Cause by the Company pursuant to
Section 6(b) hereof, or if Employee elects to terminate this Agreement for good
reason pursuant to Section 7(a) hereof, Employee shall receive the "Severance
Benefits" provided by this Section 9. The Severance Benefits shall begin
immediately following termination of employment and shall continue to be payable
for a period of six (6) months thereafter.
The Employee's "Severance Benefits" shall consist of the continuation
of: (i) the Employee's salary then in effect as determined pursuant to Section
4; (ii) the continuation of any health, life, disability, or other insurance
benefits that Employee was receiving as of his last day of active employment;
and (iii) the immediate vesting of any and all unvested stock options existing
on the date of termination. If a particular insurance benefit may not be
continued for any contractual reason, the Company shall pay the cash equivalent
to the Employee on a monthly basis or in a single lump sum. The amount of the
cash equivalent of the benefit and whether the cash equivalent will be paid in
monthly installments or in a lump sum will be determined by the Company in the
exercise of its good faith and reasonable discretion.
If Employee voluntarily terminates this Agreement and his employment
without Good Reason; or if the Company terminates the Agreement and Employee's
employment hereunder for Cause, Employee shall receive any unpaid salary to the
effective date of termination but shall not receive any other Severance
Benefits. No Severance Benefits or unearned salary are payable in the event of
Employee's death.
10. Other Benefits. Employee will be entitled to participate in any benefit
plans, including, but not limited to, 401(K), retirement plans, stock option
plans, phantom stock plans, life insurance plans and health and dental plans
generally available to other Company or Parent employees of comparable
seniority, subject to any restrictions (excluding waiting periods and
preexisting condition exclusions relative to health, life and dental plans)
specified in those plans.
Employee is entitled to paid vacation during each year of the contract
according to the vacation policy for other employees of comparable seniority to
be established by the Company's Compensation Committee.
Employee shall be timely reimbursed for all reasonable out-of-pocket
expenses incurred by Employee for the benefit or account of the Company.
11. Confidentiality. Employee acknowledges that Employee has received and
contributed to the production of, Confidential Information, and that Employee
may continue to receive and contribute to the production of Confidential
Information in the future. For purposes of this Agreement, Employee agrees that
<PAGE>
"Confidential Information" shall mean information or material proprietary to the
Company or designated as Confidential Information by the Company and not
generally known by non-Company personnel, which Employee develops or to which
Employee may obtain knowledge or access through or as a result of Employee's
relationship with the Company (including information conceived, originated,
discovered or developed in whole or in part by Employee). Confidential
Information includes, but is not limited to, the following types of information
and other information of a similar nature (whether or not reduced to writing):
discoveries, inventions, ideas, concepts, research, development, processes,
procedures, "knowhow", formulae, marketing techniques and materials, marketing
and development plans, business plans, customer names and other information
related to customers, price lists, pricing policies, financial information,
employee compensation and computer programs and systems. Confidential
Information also includes any information described above which the Company
obtains from another party and which the Company or such third party treats as
proprietary or designates as Confidential Information, whether or not owned by
or developed by the Company, and as to which the Company is required to sign a
confidentiality agreement or agrees in another fashion to treat such information
as confidential, provided, however, that Employee is provided with a copy of
such third-party confidentiality agreement or is otherwise fully informed of
such other form of confidentiality agreement at the time such agreement is
entered into by the Company. Employee acknowledges that the Confidential
Information derives independent economic value, actual or potential from not
being keener known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use.
Information publicly known without breach of this Agreement that is generally
employed by the trade at or after the time Employee first learns of such
information, or generic information or knowledge which Employee would have
teamed in the course of similar employment or work elsewhere in the trade, shall
not be deemed part of the Confidential Information. Employee further agrees:
11.1 To furnish the Company on demand, at any time during or after
employment a complete list of the names and addresses known to employee of all
present, former and potential customers and other contacts gained while an
employee of the Company, whether or not in the possession or within the
knowledge of the Company.
11.2 That all notes, memoranda, documentation and records in any way
incorporating or reflecting any Confidential Information shall belong
exclusively to the Company and Employee agrees to turn over all copies of such
materials in Employee's control to the Company upon request or upon termination
of Employee's employment with the Company.
11.3 That while employed by the Company and thereafter Employee will
hold in confidence and not directly or indirectly reveal, report, publish,
disclose or transfer any of the Confidential Information to any person or
entity, or utilize any of
<PAGE>
the Confidential Information for any purpose, except in the course of Employee's
work for the Company.
11.4 That any ideas in whole or in part conceived or made by Employee
during the term of this employment or relationship with the Company which are
made through the use of any of the Confidential Information of the Company or
any of the Company's equipment, facilities, trade secrets or time, or which
result from any work performed by Employee for the Company, shall belong
exclusively to the Company and shall be deemed a part of the Confidential
Information for purposes of this Agreement. Employee hereby assigns and agrees
to assign to the Company all rights in and to such Confidential Information
whether for purposes of obtaining patent or copyright protection or otherwise.
Employee shall acknowledge and deliver to the Company, without charge to the
Company (but at its expense) such written instruments and do such other acts,
including giving testimony in support of Employee's authorship or inventorship,
as the case may be, necessary in the opinion of the Company to obtain patents or
copyrights or to otherwise protect or vest in the Company the entire right and
title in and to the Confidential Information.
12. Non-Competition During Employment. Employee agrees that during the term
of Employee's employment with the Company, Employee will devote all of
Employee's business time and effort to and give undivided loyalty to the
Company, and will not engage in any way whatsoever, directly or indirectly, in
any business that is competitive with the Company or solicit, or in any other
manner work for or assist any business which is competitive with the Company.
During the term of Employee's employment by the Company, Employee will undertake
no planning for or organization of any business activity competitive with the
Company, and Employee will not combine or conspire with any other employee of
the Company or any other person for the purpose of organizing any such
competitive business activity.
13. Non-Competition After Employment. The Company and Employee acknowledge
that Employee will acquire much knowledge and information concerning the
business of the Company as the result of Employee's employment. Competition by
Employee in that business after this Agreement is terminated would severely
injure the Company. Accordingly, provided that the Company is not in material
breach under this Agreement, until six months from the earlier of (y) the
expiration of the term of this Agreement, or (z) the date Employee's employment
with the Company is terminated for any reason whatsoever, Employee will not:
13.1 Within any jurisdiction or marketing area in which the Company is
doing business or is qualified to do business, directly or indirectly own,
manage, operate, control, be employed by or participate in the ownership,
management, operation or control of, or be connected in any manner with, any
business of the type and character engaged and competitive with that conducted
by the Company. For purposes of interpreting the preceding sentence,
<PAGE>
the parties acknowledge that while the Company currently competes in the apparel
industry, this provision should not prohibit Employee from participating in the
entire apparel industry, but only those segments of the apparel industry which
compete with the Company's products and services. For these purposes, ownership
of securities of not in excess of 5% of the stock of a company that is publicly
traded on a national securities exchange or is quoted on an automated quotation
system of a national securities association and is part of a national market
system shall not be considered to be competition with the Company or any of its
affiliates.
13.2 Persuade or attempt to persuade any potential customer or client
to which the Company or any of its affiliates has made a proposal or sale, or
with which the Company or any of its affiliates has been having discussions, not
to transact business with the Company or such affiliate, or instead to transact
business with another person or organization.
13.3 Solicit the business of any company which is a customer or client
of the Company or any of its affiliates at any time during Employee's employment
by the Company, or was its customer or client within two years prior to the date
of this Agreement; provided, however, if Employee becomes employed by or
represents a business that exclusively sells products that are wholly dissimilar
from products then marketed or intended to be marketed by the Company, such
contact shall be permissible.
13.4 Solicit, endeavor to entice away from the Company or any of its
affiliates, or otherwise interfere with the relationship of the Company or any
of its affiliates with, any person who is employed by or otherwise engaged to
perform services for the Company or any of its affiliates, whether for
Employee's account or for the account of any other person or organization.
14. Injunctive Relief. Employee agrees that it would be difficult to
measure the damage to the Company from any breach by Employee of the covenants
set forth herein, that Injury to the Company from any such breach would be
impossible to calculate, and that money damages would therefore be an inadequate
remedy for any such breach. Accordingly, Employee agrees that if Employee should
breach Sections 11, 12 or 13 of this Agreement, the Company shall be entitled,
in addition to and without limitation of all other remedies it may have, to
injunctions or other appropriate orders to restrain any such breach without
showing or proving any actual damage to the Company. This Section shall survive
termination of Employee's employment.
15. Governing Law. This Agreement shall be interpreted and construed under
the laws of the State of Arizona, which laws shall prevail in the event of any
conflict of law. This Agreement and the obligations hereunder are made and
performable in Maricopa County, Arizona, which shall be the exclusive venue for
any litigation hereunder.
<PAGE>
16. Modification of Contract. No waiver or modification of this Agreement
shall be valid unless it is in writing and duly executed by both parties.
17. Judicial Modification of Agreement. If the period of time or the area
specified in Section 11, 12 or 13 herein should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such number of months or
the area shall be reduced by the elimination of such portion thereof or both so
that such restrictions may be enforced in such area and for such time as is
adjudged to be reasonable. If Employee violates any of the restrictions
contained in Sections 11, 12 or 13 of this Agreement, then the restrictive
period contained in Section 13 shall not run in favor of Employee from the time
of the commencement of any such violation until such time as such violation
shall be cured by Employee to the satisfaction of the Company.
18. Notices. Any notice to be given hereunder by either party to the other
shall be in writing and may be transmitted by personal delivery or by mail,
registered or certified, postage prepaid with return receipt requested. Notices
shall be addressed to the parties at the following addresses and shall be
effective upon receipt:
If to the Company: The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
Attention: Chief Executive Officer
If to Employee: Mr. Ronald A. McPherson
c/o The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
19. Entire Agreement. This Agreement contains the complete agreement
concerning the employment arrangement between the Company and Employee. This
Agreement supersedes any previous agreements or understandings between the
parties, including but not limited to the Confidentiality and Non-Competition
Agreement between the Company and Employee.
20. Attorneys' Fees. In the event of a dispute or litigation arising
hereunder, the successful party in such dispute or litigation shall be entitled
to recover its costs and reasonable attorneys' fees from the other parties to
such dispute or litigation.
21. Dispute Resolution.
(a) Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement, or the statutory rights or obligations of either
party hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section
<PAGE>
21(b). Any demand for mediation shall be made in writing and served upon the
other party to the dispute, by certified mail, return receipt requested, at the
executive business address of the President of the Company, and at the last
known residence address of Employee, respectively. The demand shall set forth
with reasonable specificity the basis of the dispute and the relief sought. The
mediation hearing will occur at a time and place convenient to the parties in
Phoenix, Arizona within thirty (30) days of the date of selection or appointment
of the mediator.
(b) Selection of Mediator. The parties shall select the mediator from
a panel list made available by the Phoenix, Arizona office of the American
Arbitration Association (the "AAA"). If the parties are unable to agree to a
mediator within ten (10) days of receipt of a demand for mediation, the mediator
will be chosen by alternatively striking from a list of five (5) mediators
obtained from the AAA. The Company shall have the first strike.
22. Effective Date. This Agreement shall be effective as of the Effective
Date.
DATED on May 7, 1997.
THE ANTIGUA GROUP
By /s/ L. Steven Haynes /s/ Ronald A. McPherson
L. Steven Haynes Ronald A. McPherson
Its Chief Executive Officer
COMPANY EMPLOYEE
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of May 7,
1997, by and between THE ANTIGUA GROUP, INC., a Nevada corporation with its
principal place of business in Scottsdale, Arizona (the "Company"), and GERALD
K. WHITLEY, a resident of the State of Arizona ("Employee").
RECITALS
A. Employee is currently Vice-President of Finance of the Company.
B. Employee is currently an at-will employee of the Company.
C. The Company manufactures and sells various types of apparel on a
national and international basis.
D. The Company and Employee desire to continue Employee's relationship with
the Company and to memorialize the terms of Employee's employment with the
Company.
AGREEMENT
1. Employment. The Company hereby continues to employ Employee as Vice
President of Finance of the Company and Employee hereby accepts such continued
employment upon the terms and conditions set forth herein. Employee shall
continue to be employed by the Company in Scottsdale, Arizona. Employee shall
not be required either by the Company or in the performance of his duties to
relocate from the Metropolitan Phoenix area.
2. Duties of Employment. Employee shall continue to serve as Vice President
of Finance of the Company. In such capacity, Employee shall continue to perform
such duties and services consistent with Employee's title and position as Vice
President of Finance of the Company as the Company's Board of Directors may
assign or delegate to him from time to time. As of the date hereof, such duties
shall include primary responsibility for the following functions: accounting;
budgeting; financial statements and financial reporting, including periodic
reporting required by the Vancouver Stock Exchange and/or a U.S. national
securities exchange; cash management; inventory control/management; accounts
receivable and payable; credit and collections; fixed assets and depreciation;
payroll; bank reports and loan compliance reports; income tax returns; sales tax
payment and reporting; 401(k) reports and audits, and insurance (including
workmen's compensation). Employee shall report directly to the Company's Chief
Executive Officer.
3. Term. This Agreement shall be effective upon the closing of the Stock
Purchase Agreement dated April 21, 1997 (the
<PAGE>
"Effective Date") and shall continue until terminated in accordance with
Paragraph 5 hereof.
4. Compensation and Benefits. Employee will receive the following
compensation for his services during his term of employment hereunder:
(a) Salary. During the first year of this Agreement, Employee shall
receive a base salary of $89,440 per year, payable in accordance with the
standard payroll policies of the Company. Such salary shall be prorated for any
partial year of employment by Employee hereunder. The base salary will be
reviewed at least annually by the Company's Board of Directors, but in no event
shall the base salary be less than that specified in this Section 4(a) during
the term of this Agreement.
(b) Bonuses. Employee shall participate in the Company's Executive
Incentive Compensation Program at a bonus level equal to 15% of Employee's base
salary. Such bonus shall be paid within sixty (60) days of the end of the
Company's fiscal year and shall be prorated for any partial year of employment
by Employee hereunder.
(c) Stock Options. Concurrently with the execution of this Agreement,
Employee has been granted an option to purchase up to 300,000 shares of the
Common Stock of the Company's parent, Southhampton Enterprises Corp. ("Parent"),
pursuant to Parent's Executive and Employee Stock Option Plan (the "Plan"),
exercisable at any time during the two (2) year period after the date of grant,
at an exercise price per share equal to the market price of Parent's Common
Stock on the date hereof. The number and exercise price of such options is
subject to adjustment to reflect the reverse split of Parent's Common Stock to
be effected after the date hereof. Such options are vested in full as of the
date hereof Employee shall also participate in the Plan on a going-forward
basis.
(d) Medical Insurance. The Company will provide coverage for Employee
and his dependents during the term of Employee's employment under the Company's
health insurance policy.
(e) Due Under Promissory Note and Stock Repurchase Agreement. Employee
is the Payee under a Second Amended and Restated Promissory Note from the
Company (the "Promissory Note"). Employee is also entitled to certain payments
from the Company pursuant to the term of a Stock Repurchase Agreement dated July
1, 1993 (the "Stock Repurchase Agreement"). Upon the Effective Date: (i) the
Company will pay Employee a total of $83,654.75 due under the Promissory Note;
(ii) Parent will issue to Employee a total of 150,600 shares of Common Stock of
Parent and Warrants to purchase up to 75,300 additional shares of Common Stock
of Parent at an exercise price of $1.00 per share, and (iii) the Company will
execute an Amendment to the Second Amended and Restated Promissory Note in the
form attached hereto as Exhibit "I" which embodies the
<PAGE>
parties' agreement concerning the foregoing and the remaining payments due to
Employee under the Note and the Stock Repurchase Agreement.
(f) Other Management Incentive Programs and Benefits. Employee shall
be eligible to participate in all other incentives and benefit programs of the
Company and Parent as are from time to time in effect and offered to other
senior executive employees of the Company and Parent.
5. Termination. This Agreement will continue in full force and effect until
termination by the parties. This Agreement may be terminated by the parties only
in the following ways (i) it may be renegotiated and replaced by a written
agreement signed by both parties, (ii) the Company may terminate this Agreement
with or without "Cause," as defined below; or (iii) Employee may terminate this
Agreement with or without "Good Reason," as defined below;
6. Termination by the Company.
(a) Termination For Cause. The Company may terminate this Agreement
and Employee's employment for Cause at any time upon written notice.
For purposes of this Agreement, "Cause" shall be limited to discharge
resulting from a good faith and reasonable determination by the Board of
Directors of the Company that Employee: (i) has been convicted of a felony
involving dishonesty, fraud, theft or embezzlement; (ii) on more than one
occasion, has willfully failed or refused in a material respect, after prior
written notice from the Company, to follow the reasonable and lawful policies or
directives established by the Company for its employees of comparable seniority,
or (iii) on more than one occasion has willfully failed or refused, after prior
written notice from the Company, to attend to the material duties or
obligations, consistent with Employee's position hereunder, reasonably imposed
upon him under this Agreement.
If this Agreement and Employee's employment hereunder is terminated
for Cause, Employee shall receive no Severance Benefits as otherwise may have
been provided pursuant to Section 9.
(b) Termination Without Case. The Company also may terminate this
Agreement and Employee's employment hereunder, without Cause at any time by
giving ninety (90) days prior written notice to Employee. In the event this
Agreement and Employee's employment hereunder are terminated by the Company
without Cause, Employee shall receive Severance Benefits pursuant to Section 9.
7. Termination by Employment. Employee may terminate this Agreement and his
employment hereunder with or without "Good Reason" in accordance with the
provisions of this Section 7.
(a) Termination For Good Reason. Employee may terminate
<PAGE>
this Agreement and his employment hereunder for "Good Reason" by giving written
notice to the Company within thirty (30) days, or such longer period as may be
agreed to in writing by the Company, of Employer's receipt of notice of the
occurrence of any event constituting "Good Reason," as described below.
Employee shall have "Good Reason" to terminate this Agreement and his
employment hereunder upon the occurrence of any of the following events: (i)
Employee is in any way demoted (whether such demotion is by reduction in title
or a reduction 'in authority, responsibilities or duties) to a position of less
stature or importance within the Company than the position described in Sections
1 and 2; (ii) Employee is required to relocate to an employment location other
than the Metropolitan Phoenix area; or (iii) Employee's annual base salary as
determined pursuant to Section 4 hereof is reduced to a level that is more than
ten percent (10%) less than the annual salary paid to Employee during any prior
contract year, unless, (y) Employee has agreed in writing to that reduction or
(z) the salaries of the entire senior management staff are reduced on a pro rata
basis according to a policy established by the Company's Board of Directors.
If Employee terminates this Agreement and his employment for Good
Reason Employee shall receive Severance Benefits pursuant to Section 9.
(b) Termination Without Good Reason. Employee also may terminate this
Agreement and his employment without Good Reason at any time by giving ninety
(90) days prior written notice to the Company. If Employee terminates this
Agreement and his employment hereunder without Good Reason, Employee shall not
be entitled to receive Severance Benefits pursuant to Section 9. In this event,
if so requested by the Company, Employee agrees to cooperate with the Company in
the location of Employee's successor and to participate in the training of such
successor.
8. Death or Disability. This Agreement will terminate automatically on
Employee's death. Any salary or other amounts due to Employee for services
rendered or expenses incurred prior to his death shall be paid to Employee's
surviving spouse, or if Employee does not leave a surviving spouse, to
Employee's estate, within thirty (30) days of the death of Employee. No other
benefits shall be payable to Employee's heirs pursuant to this Agreement, but
amounts may be payable pursuant to any life insurance or other benefit plans
maintained by the Company for the benefit of Employee or his designee.
The Company agrees to purchase and maintain during the term hereof, a
disability policy for Employee with coverage levels and other terms to be
determined by the Company's Compensation Committee
9. Severance Benefits. If this Agreement and Employee's employment
hereunder are terminated without Cause by the Company
<PAGE>
pursuant to Section 6(b) hereof or if Employee elects to terminate this
Agreement for Good reason pursuant to Section 7(a) hereof, Employee shall
receive the "Severance Benefits" provided by this Section 9. The Severance
Benefits shall begin immediately following termination of employment and will
continue to be payable for a period of six (6) months thereafter.
The Employee's "Severance Benefits" shall consist of the continuation
of (i) the Employee's salary then in effect as determined pursuant to Section 4;
(ii) the continuation of any health, life, disability, or other insurance
benefits that Employee was receiving as of his last day of active employment;
and (iii) the immediate vesting of any and all unvested stock options existing
on the date of termination. If a particular insurance benefit may not be
continued for any contractual reason, the Company shall pay the cash equivalent
to the Employee on a monthly basis or in a single lump sum. The amount of the
cash equivalent of the benefit and whether the cash equivalent will be paid in
monthly installments or in a lump sum will be determined by the Company in the
exercise of its good faith and reasonable discretion.
If Employee voluntarily terminates this Agreement and his employment
without Good Reason; or if the Company terminates the Agreement and Employee's
employment hereunder for Cause, Employee shall receive any unpaid salary to the
effective date of termination but shall not receive any other Severance
Benefits. No Severance Benefits or unearned salary are payable in the event of
Employee's death.
10. Other Benefits. Employee will be entitled to participate in any benefit
plans, including, but not limited to, 401(K), retirement plans, stock option
plans, phantom stock plans, life insurance plans and health and dental plans
generally available to other Company or Parent employees of comparable
seniority, subject to any restrictions (excluding waiting periods and
preexisting condition exclusions relative to health, life and dental plans)
specified in those plans.
Employee is entitled to paid vacation during each year of the contract
according to the vacation policy for other employees of comparable seniority to
be established by the Company's Compensation Committee.
Employee shall be timely reimbursed for all reasonable out-of-pocket
expenses incurred by Employee for the benefit or account of the Company
11. Confidentiality. Employee acknowledges that Employee has received and
contributed to the production of Confidential Information, and that Employee may
continue to receive and contribute to the production of Confidential Information
in the future. For purposes of this Agreement, Employee agrees that
"Confidential Information" shall mean information or material
<PAGE>
proprietary to the Company or designated as Confidential Information by the
Company and not generally known by non-Company personnel, which Employee
develops or to which Employee may obtain knowledge or access through or as a
result of Employee's relationship with the Company (including information
conceived, originated, discovered or developed in whole or in part by Employee).
Confidential Information includes, but is not limited to, the following types of
information and other information of a similar nature (whether or not reduced to
writing): discoveries, inventions, ideas, concepts, research, development,
processes, procedures, "know-how", formulae, marketing techniques and materials,
marketing and development plans, business plans, customer names and other
information related to customers, price lists, pricing policies, financial
information employee compensation and computer programs and systems.
Confidential Information also includes any information described above which the
Company obtains from another party and which the Company or such third party
treats as proprietary or designates as Confidential Information, whether or not
owned by or developed by the Company, and as to which the Company is required to
sign a confidentiality agreement or agrees in another fashion to treat such
information as confidential; provided, however, that Employee is provided with a
copy of such third-party confidentiality agreement or is otherwise fully
informed of such other form of confidentiality agreement at the time such
agreement is entered into by the Company. Employee acknowledges that the
Confidential Information derives independent economic value, actual or potential
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use. Information publicly known without breach of this Agreement that is
generally employed by the trade at or after the time Employee first learns of
such information, or generic information or knowledge which Employee would have
learned in the course of similar employment or work elsewhere in the trade,
shall not be deemed part of the Confidential Information. Employee further
agrees:
11.1 To furnish the Company on demand, at any time during or after
employment, a complete fist of the names and addresses known to employee of all
present, former and potential customers and other contacts gained while an
employee of the Company, whether or not in the possession or within the
knowledge of the Company.
11.2 That all notes, memoranda, documentation and records in any way
incorporating or reflecting any Confidential Information shall belong
exclusively to the Company and Employee agrees to turn over all copies of such
materials in Employee's control to the Company upon request or upon termination
of Employee's employment with the Company.
11.3 That while employed by the Company and thereafter Employee will
hold in confidence and not directly or indirectly reveal report, publish,
disclose or transfer any of the Confidential Information to any person or
entity, or utilize any of the Confidential Information for any purpose, except
in the course
<PAGE>
of Employee's work for the Company.
11.4 That any ideas in whole or in part conceived or made by Employee
during the term of this employment or relationship with the Company which are
made through the use of any of the Confidential Information of the Company or
any of the Company's equipment, facilities, trade secrets or time, or which
result from any work performed by Employee for the Company, shall belong
exclusively to the Company and shall be deemed a part of the Confidential
Information for purposes of this Agreement. Employee hereby assigns and agrees
to assign to the Company all rights in and to such Confidential Information
whether for purposes of obtaining patent or copyright protection or otherwise.
Employee shall acknowledge and deliver to the Company, without charge to the
Company (but at its expense) such written instruments and do such other acts,
including giving testimony in support of Employee's authorship or inventorship,
as the case may be, necessary in the opinion of the Company to obtain patents or
copyrights or to otherwise protect or vest in the Company the entire right and
title in and to the Confidential Information.
12. Non-Competition During Employment. Employee agrees that during the term
of Employee's employment with the Company, Employee will devote all of
Employee's business time and effort to and give undivided loyalty to the
Company, and will not engage in any way whatsoever, directly or indirectly, in
any business that is competitive with the Company or solicit, or in any other
manner work for or assist any business which is competitive with the Company.
During the term of Employee's employment by the Company, Employee will undertake
no planning for or organization of any business activity competitive with the
Company, and Employee will not combine or conspire with any other employee of
the Company or any other person for the purpose of organizing any such
competitive business activity.
13. Non-Competition After Employment. The Company and Employee acknowledge
that Employee will acquire much knowledge and information concerning the
business of the Company as the result of Employee's employment. Competition by
Employee in that business after this Agreement is terminated would severely
injure the Company. Accordingly, provided that the Company is not in material
breach under this Agreement, until six months from the earlier of (y) the
expiration of the term of this Agreement, or (z) the date Employee's employment
with the Company is terminated for any reason whatsoever, Employee will not:
13.1 Within any jurisdiction or marketing area in which the Company is
doing business or is qualified to do business, directly or indirectly own,
manage, operate, control, be employed by or participate in the ownership,
management, operation or control of or be connected in any manner with, any
business of the type and character engaged and competitive with that conducted
by the Company. For purposes of interpreting the preceding sentence, the parties
acknowledge that while the Company currently competes
<PAGE>
in the apparel industry, this provision should not prohibit Employee from
participating in the entire apparel industry, but only those segments of the
apparel industry which compete with the Company's products and services. For
these purposes, ownership of securities of not in excess of 5% of the stock of a
company that is publicly traded on a national securities exchange or is quoted
on an automated quotation system of a national securities association and is
part of a national market system shall not be considered to be competition with
the Company or any of its affiliates.
13.2 Persuade or attempt to persuade any potential customer or client
to which the Company or any of its affiliates has made a proposal or sale, or
with which the Company or any of its affiliates has been having discussions, not
to transact business with the Company or such affiliate, or instead to transact
business with another person or organization.
13.3 Solicit the business of any company which is a customer or client
of the Company or any of its affiliates at any time during Employee's employment
by the Company, or with its customer or client within two years prior to the
date of this Agreement; provided, however, if Employee becomes employed by or
represents a business that exclusively sells products that are wholly dissimilar
from products then marketed or intended to be marketed by the Company, such
contact shall be permissible;
13.4 Solicit, endeavor to entice away from the Company or any of its
affiliates, or otherwise interfere with the relationship of the Company or any
of its affiliates with, any person who is employed by or otherwise engaged to
perform services for the Company or any of its affiliates, whether for
Employee's account or for the account of any other person or organization.
14. Injunctive Employee agrees that it would be difficult to measure the
damage to the Company from any breach by Employee of the covenants set forth
herein, that injury to the Company from any such breach would be impossible to
calculate, and that money damages would therefore be an inadequate remedy for
any such breach. Accordingly, Employee agrees that if Employee should breach
Sections 11, 12 or 13 of this Agreement, the Company shall be entitled, in
addition to and without limitation of all other remedies it may have, to
injunctions or other appropriate orders to restrain any such breach without
showing or proving any actual damage to the Company. This Section shall survive
termination of Employee's employment.
15. Governing Law. This Agreement shall be interpreted and construed under
the laws of the State of Arizona, which laws shall prevail in the event of any
conflict of law. This Agreement and the obligations hereunder are made and
performable in Maricopa County, Arizona, which shall be the exclusive venue for
any litigation hereunder.
16. Modification of Contract. No waiver or modification of
<PAGE>
this Agreement shall be valid unless it is in writing and duly executed by both
parties.
17. Judicial Modification of Agreement. If the period of time or the area
specified in Section 11, 12 or 13 herein should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such number of months or
the area shall be reduced by the elimination of such portion thereof or both so
that such restrictions may be enforced in such area and for such time as is
adjudged to be reasonable. If Employee violates any of the restrictions
contained in Sections 11, 12 or 13 of this Agreement, then the restrictive
period contained in Section 13 shall not in favor of Employee from the time of
the commencement of any such violation until such time as such violation shall
be cured by Employee to the satisfaction of the Company.
18. Notices. Any notice to be given hereunder by either party to the other
shall be in writing and may be transmitted by personal delivery or by mail,
registered or certified, postage prepaid with return receipt requested. Notices
shall be addressed to the parties at the following addresses and shall be
effective upon receipt:
If to the Company: The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
Attention: Chief Executive Officer
If to Employee: Mr. Gerald K. Whitley
10305 E. Jenan Drive
Scottsdale, Arizona 85260
19. Entire Agreement. Agreement contains the complete agreement concerning
the employment arrangement between the Company and Employee. This Agreement
supersedes any previous agreements or understandings between the parties,
including but not limited to the Confidentiality and Non-Competition Agreement
between the Company and Employee.
20. Attorneys' Fees. In the event of a dispute or litigation arising
hereunder, the successful party in such dispute or litigation shall be entitled
to recover its costs and reasonable attorneys' fees from the other parties to
such dispute or litigation.
21. Dispute Resolution.
(a) Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement, or the statutory rights or obligations of either
party hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section 21(b). Any demand for mediation shall be made in writing and served upon
the other party to the dispute, by certified mail,
<PAGE>
return receipt requested, at the executive business address of the President of
the Company, and at the last known residence address of Employee, respectively.
The demand shall set forth reasonable specificity the basis of the dispute and
the relief sought. The mediation hearing will occur at a time and place
convenient to the parties in Phoenix, Arizona within thirty (30) days of the
date of selection or appointment of the mediator.
(b) Selection of Mediator. The parties shall select the mediator from a
panel list made available by the Phoenix, Arizona office of the American
Arbitration Association (the "AAA"). If the parties are unable to agree to a
mediator within ten (10) days of receipt of a demand for mediation, the mediator
shall be chosen by alternatively striking from a list of five (5) mediators
obtained from the AAA. The Company shall have the first strike.
22. Effective Date. This Agreement shall be effective as of the Effective
Date
DATED on May 7, 1997.
THE ANTIGUA GROUP, INC.
By /s/ L. Steven Haynes /s/ Gerald K. Whitley
L. Steven Haynes Gerald K. Whitley
Its Chief Executive Officer
COMPANY EMPLOYEE
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 16th
day of June, 1997, by and between THE ANTIGUA GROUP, INC., a Nevada corporation
with its principal place of business in Scottsdale, Arizona (the "Company"), and
L. STEVEN HAYNES, a resident of the State of Texas ("Employee").
RECITALS
A. Immediately prior to the execution of this Agreement, Southhampton
Enterprises, Inc. ("SEI") has acquired all of the issued and outstanding capital
stock of the Company.
B. Employee is the Chief Executive Officer of SEI.
C. The Company manufactures and sells various types of apparel on a
national and international basis.
D. The Company will be operated as a wholly-owned subsidiary of SEI.
E. The Company and Employee desire to memorialize the terms under which
Employee shall serve as the Chief Executive Officer of the Company.
AGREEMENT
1. Employment. The Company hereby employs Employee as its President and
Chief Executive Officer. Employee shall be employed by the Company in
Scottsdale, Arizona. Employee shall commute from his current residence in
Dallas, Texas until such time as Employee has relocated to the Metropolitan
Phoenix area. When Employee has so relocated, Employee shall not be required
either by the Company or in the performance of his duties to relocate from the
Metropolitan Phoenix area.
2. Duties of Employment. Employee shall serve as the Company's President
and Chief Executive Officer and shall perform such duties for the Company as the
Board of Directors may from time to time determine. Employee shall also serve as
an officer and director of the Company's affiliates. Employee shall devote his
full time and attention to the performance of his duties under this Agreement.
Employee agrees to faithfully and diligently perform all duties commensurate
with such positions. In addition, the Company will promptly use its best efforts
to cause Employee to be elected to the Company's Board of Directors to fill a
vacancy on the Board. The Company shall also use its best efforts to cause SEI
to re-elect Employee as a member of the Company's Board of Directors for so long
as Employee remains President and Chief Executive Officer under this Agreement.
<PAGE>
3. Term. The original term of this Agreement shall be from the closing of
the Stock Purchase Agreement dated April 21, 1997 (the "Commencement Date")
through the date which is three years from the Commencement Date, unless
terminated prior to such date in accordance with Paragraph 5 hereof.
Additionally, the Company shall have an option, exercisable at least ninety (90)
days prior to the end of the original term, to extend this Agreement on the
terms contained herein for an additional two-year term.
4. Compensation and Benefits. Employee will receive the following
compensation for his services during his term of employment hereunder:
(a) Salary. During the first year of this Agreement, Employee shall
receive a base salary of $175,000 per year, payable in accordance with the
standard payroll policies of the Company. Such salary shall be prorated for any
partial year of employment by Employee hereunder. The base salary will be
reviewed at least annually by the Company's Board of Directors, but in no event
shall the base salary be less than that specified in this Section 4(a) during
the term of this Agreement.
(b) Bonuses. Employee shall participate in the Company's Executive
Incentive Compensation Program at a bonus level equal to 15% of Employee's base
salary. Such bonus shall be paid within sixty (60) days of the end of the
Company's fiscal year and shall be prorated for any partial year of employment
by Employee hereunder.
(c) Stock Options. Concurrently with the execution of this Agreement,
Employee has been granted an option to purchase up to 275,000 shares of the
Common Stock of the Company's parent, Southhampton Enterprises Corp. ("Parent"),
pursuant to Parent's Executive and Employee Stock Option Plan (the "Plan"),
exercisable (subject to the vesting condition described immediately below) at
any time during the two (2) year period after the Commencement Date, at an
exercise price of $1.35 (Canadian) during the first year and $1.55 (Canadian)
during the second year. The number of such options and the exercise price
thereof are subject to adjustment upon the occurrence of a reverse stock split
or other similar event. Fifty percent (50%) of such options shall vest
immediately upon the Commencement Date; the remaining fifty percent (50%) of
such options shall vest one (1) year from the Commencement Date. Employee shall
also participate in the Plan on a going-forward basis.
(d) Medical Insurance. The Company will provide coverage for Employee
and his dependents during the term of his employment under the Company's health
insurance policy.
(e) Other Management Incentive Programs and Benefits. Employee shall
be eligible to participate in all other incentives and benefit programs of the
Company and Parent as are from time to time in effect and offered to other
senior executive employees of
<PAGE>
the Company and Parent.
(f) Relocation expenses. The Company shall reimburse Employee for (a)
all reasonable expenses incurred by Employee in commuting between Dallas and the
Metropolitan Phoenix area prior to Employee's relocation to the Metropolitan
Phoenix area and (b) all reasonable expenses incurred by Employee in relocating
Employee and his family to the Metropolitan Phoenix area.
5. Termination. This Agreement may be terminated by the Company or Employee
for any or no reason upon ninety (90) days' notice to the other party. In the
event the Company terminates Employee's employment for any reason, the Company
shall continue to provide Employee with the following benefits for a period of
six (6) months from the effective date of such termination: (a) the Company
shall continue to pay Employee's base salary as then in effect in accordance
with the standard payroll policies of the Company; (b) the Company shall
continue to provide Employee with any health, life, disability or other
insurance benefits that Employee was receiving as of his last day of active
employment; and (c) all stock options which are unvested as of Employee's last
day of active employment shall immediately vest in full. In the event Employee
terminates his employment with the Company, all stock options which are unvested
as of the date of such termination shall automatically be canceled and shall be
of no other force or effect.
6. Death or Disability. This Agreement will terminate automatically upon
the death of Employee.
Promptly after the Commencement Date, the Company shall purchase a $500,000 term
life insurance policy on Employee with Employee's designee as beneficiary. The
Company shall pay the premiums for such policy during the term of this Agreement
up to a maximum premium payment of $500 per year; Employee shall pay the portion
of such premium, if any, which exceeds $500 per year. The Company agrees to
purchase and maintain during the term hereof, a disability policy for Employee
with coverage levels and other terms to be determined by the Company's
Compensation Committee.
7. Other Benefits. Employee will be entitled to participate in any benefit
plans, including, but not limited to, 401(K), retirement plans, stock option
plans, phantom stock plans, life insurance plans and health and dental plans
generally available to other Company or Parent employees of comparable
seniority, subject to any restrictions (excluding waiting periods and
pre-existing condition exclusions relative to health, life and dental plans)
specified in those plans.
Employee is entitled to paid vacation during each year of the contract
according to the vacation policy for other employees of comparable seniority to
be established by the Company's Compensation Committee.
Employee shall be timely reimbursed for all reasonable,
<PAGE>
documented out-of-pocket expenses incurred by Employee for the benefit or
account of the Company.
8. Confidentiality. Employee acknowledges that Employee has received and
contributed to the production of, Confidential Information, and that Employee
may continue to receive and contribute to the production of Confidential
Information in the future. For purposes of this Agreement, Employee agrees that
"Confidential Information" shall mean information or material proprietary to the
Company or designated as Confidential Information by the Company and not
generally known by non-Company personnel, which Employee develops or to which
Employee may obtain knowledge or access through or as a result of Employee's
relationship with the Company (including information conceived, originated,
discovered or developed in whole or in part by Employee). Confidential
Information includes, but is not limited to, the following types of information
and other information of a similar nature (whether or not reduced to writing):
discoveries, inventions, ideas, concepts, research, development, processes,
procedures, "know-how", formulae, marketing techniques and materials, marketing
and development plans, business plans, customer names and other information
related to customers, price lists, pricing policies, financial information,
employee compensation, and computer programs and systems. Confidential
Information also includes any information described above which the Company
obtains from another party and which the Company or such third party treats as
proprietary or designates as Confidential Information, whether or not owned by
or developed by the Company, and as to which the Company is required to sign a
confidentiality agreement or agrees in another fashion to treat such information
as confidential; provided, however, that Employee is provided with a copy of
such third-party confidentiality agreement or is otherwise fully informed of
such other form of confidentiality agreement at the time such agreement is
entered into by the Company. Employee acknowledges that the Confidential
Information derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from its disclosure or use.
Information publicly known without breach of this Agreement that is generally
employed by the trade at or after the time Employee first learns of such
information, or generic information or knowledge which Employee would have
learned in the course of similar employment or work elsewhere in the trade,
shall not be deemed part of the Confidential Information. Employee further
agrees:
8.1 To furnish the Company on demand, at any time during or after
employment, a complete list of the names and addresses known to employee of all
present, former and potential customers and other contacts gained while an
employee of the Company, whether or not in the possession or within the
knowledge of the Company.
8.2 That all notes, memoranda, documentation and records in any way
incorporating, based on or reflecting any Confidential Information shall belong
exclusively to the Company and Employee
<PAGE>
agrees to turn over all copies of such materials in Employee's control to the
Company upon request or upon termination of Employee's employment with the
Company.
8.3 That while employed by the Company and thereafter Employee will
hold in confidence and not directly or indirectly reveal, report, publish,
disclose or transfer any of the Confidential Information to any person or
entity, or utilize any of the Confidential Information for any purpose, except
in the course of Employee's work for the Company.
8.4 That any ideas in whole or in part conceived or made by Employee
during the term of this employment or relationship with the Company which are
made through the use of any of the Confidential Information of the Company or
any of the Company's equipment, facilities, trade secrets or time, or which
result from any work performed by Employee for the Company, shall belong
exclusively to the Company and shall be deemed a part of the Confidential
Information for purposes of this Agreement. Employee hereby assigns and agrees
to assign to the Company all rights in and to such Confidential Information
whether for purposes of obtaining patent or copyright protection or otherwise.
Employee shall acknowledge and deliver to the Company, without charge to the
Company (but at its expense) such written instruments and do such other acts,
including giving testimony in support of Employee's authorship or inventorship,
as the case may be, necessary in the opinion of the Company to obtain patents or
copyrights or to otherwise protect or vest in the Company the entire right and
title in and to the Confidential Information.
9. Non-Competition During Employment. Employee agrees that during the term
of Employee's employment with the Company, Employee will devote all of
Employee's business time and effort to and give undivided loyalty to the
Company, and will not engage in any way whatsoever, directly or indirectly, in
any business that is competitive with the Company or solicit, or in any other
manner work for or assist any business which is competitive with the Company.
During the term of Employee's employment by the Company, Employee will undertake
no planning for or organization of any business activity competitive with the
Company, and Employee will not combine or conspire with any other employee of
the Company or any other person for the purpose of organizing any such
competitive business activity.
10. Non-Competition After Employment. The Company and Employee acknowledge
that Employee will acquire much knowledge and information concerning the
business of the Company as the result of Employee's employment. Competition by
Employee in that business after this Agreement is terminated would severely
injure the Company. Accordingly, provided that the Company is not in material
breach under this Agreement, until a date which is two (2) years from the date
Employee's employment agreement is terminated for any reason, Employee will not:
<PAGE>
10.1 Within any jurisdiction or marketing area in which the Company is
doing business, plans to do business or is qualified to do business, directly or
indirectly own, manage, operate, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with, any business of the type and character engaged and competitive with that
conducted by the Company. For purposes of interpreting the preceding sentence,
the parties acknowledge that while the Company currently competes in the apparel
industry, this provision should not prohibit Employee from participating in the
entire apparel industry, but only those segments of the apparel industry which
compete directly or indirectly with the Company's products and services. For
these purposes, ownership of securities of not in excess of 5% of the stock of a
company that is publicly traded on a national securities exchange or is quoted
on an automated quotation system of a national securities association and is
part of a national market system shall not be considered to be competition with
the Company or any of its affiliates.
10.2 Persuade or attempt to persuade any existing or potential
customer or client to which the Company or any of its affiliates has made a
proposal or sale, or with which the Company or any of its affiliates has been
having discussions, not to transact business with the Company or such affiliate,
or instead to transact business with another person or organization.
10.3 Solicit the business of any company which is a customer or client
of the Company or any of its affiliates at any time during Employee's employment
by the Company, or was its customer or client within two years prior to the date
of this Agreement; provided, however, if Employee becomes employed by or
represents a business that exclusively sells products that are wholly dissimilar
from, and not competitive directly or indirectly with, products then marketed or
intended to be marketed by the Company, such contact shall be permissible;
10.4 Solicit, endeavor to entice away from the Company or any of its
affiliates, or otherwise interfere with the relationship of the Company or any
of its affiliates with, any person who is employed by or otherwise engaged to
perform services for the Company or any of its affiliates, whether for
Employee's account or for the account of any other person or organization.
11. Injunctive Relief. Employee agrees that it would be difficult to
measure the damage to the Company from any breach by Employee of the covenants
set forth herein, that injury to the Company from any such breach would be
impossible to calculate, and that money damages would therefore be an inadequate
remedy for any such breach. Accordingly, Employee agrees that if Employee should
breach Sections 8, 9 or 10 of this Agreement, the Company shall be entitled, in
addition to and without limitation of all other remedies it may have, to
injunctions or other appropriate orders to restrain any such breach without
showing or proving any actual damage to the Company. Sections 8, 9, 10 and 11
shall survive
<PAGE>
termination of Employee's employment or this Agreement.
12. Governing Law. This Agreement shall be interpreted and construed under
the laws of the State of Arizona, which laws shall prevail in the event of any
conflict of law. This Agreement and the obligations hereunder are made and
performable in Maricopa County, Arizona, which shall be the exclusive venue for
any litigation hereunder.
13. Modification of Contract. No waiver or modification of this Agreement
shall be valid unless it is in writing and duly executed by both parties.
14. Judicial Modification of Agreement. If the period of time or the area
specified in Section 8, 9 or 10 herein should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such number of months or
the area shall be reduced by the elimination of such portion thereof or both so
that such restrictions may be enforced in such area and for such time as is
adjudged to be reasonable. If Employee violates any of the restrictions
contained in Sections 8, 9 or 10 of this Agreement, then the restrictive period
contained in Section 10 shall not run in favor of Employee from the time of the
commencement of any such violation until such time as such violation shall be
cured by Employee to the satisfaction of the Company.
15. Notices. Any notice to be given hereunder by either party to the other
shall be in writing and may be transmitted by personal delivery, via delivery by
a nationally recognized overnight delivery service or by certified mail, postage
prepaid with return receipt requested. Notices shall be addressed to the parties
at the following addresses and shall be effective upon receipt, if personally
delivered or delivered by a nationally recognized overnight delivery service, or
five days after deposit in the U.S. mail (certified mail with return receipt
requested):
If to the Company: The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
Attention: Chief Executive Officer
If to Employee: Mr. L. Steven Haynes
c/o The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
16. Entire Agreement. This Agreement contains the complete agreement
concerning the employment arrangement between the Company and Employee. This
Agreement supersedes any previous agreements or understandings between the
parties, including but not limited to the Confidentiality and Non-Competition
Agreement between the Company and Employee.
17. Attorneys' Fees. In the event of a dispute or litigation
<PAGE>
arising hereunder, the successful party in such dispute or litigation shall be
entitled to recover its costs and reasonable attorneys' fees from the other
parties to such dispute or litigation.
18. Dispute Resolution.
(a) Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement, or the statutory rights or obligations of either
party hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section 18(b). Any demand for mediation shall be made in writing and served upon
the other party to the dispute, by certified mail, return receipt requested, at
the executive business address of the President of the Company, and at the last
known residence address of Employee, respectively. The demand shall set forth
with reasonable specificity the basis of the dispute and the relief sought. The
mediation hearing will occur at a time and place convenient to the parties in
Phoenix, Arizona within thirty (30) days of the date of selection or appointment
of the mediator.
(b) Selection of Mediator. The parties shall select the mediator from
a panel list made available by the Phoenix, Arizona office of the American
Arbitration Association (the "AAA"). If the parties are unable to agree to a
mediator within ten (10) days of receipt of a demand for mediation, the mediator
will be chosen by alternatively striking from a list of five (5) mediators
obtained from the AAA. The Company shall have the first strike.
19. Effective Date. This Agreement shall be effective as of the
Commencement Date.
DATED on June 16, 1997.
THE ANTIGUA GROUP, INC.
By /s/ T. Dooley ______________________
Thomas E. Dooley, Jr.
COMPANY EMPLOYEE
AGREED TO AND ACCEPTED on May 7, 1997:
SOUTHHAMPTON ENTERPRISES CORP.
By /s/ Louis B. Lloyd
Louis B. Lloyd
Its Chairman of the Board
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of May 29,
1997, by and between THE ANTIGUA GROUP, INC., a Nevada corporation with its
principal place of business in Scottsdale, Arizona (the "Company"), and BRETT
MOORE, a resident of the State of Arizona ("Employee").
RECITALS
A. Employee is currently Vice-President-Product Development and Sourcing of
the Company.
B. Employee is currently an at-will employee of the Company.
C. The Company manufactures and sells various types of apparel on a
national and international basis.
D. The Company and Employee desire to continue Employee's relationship with
the Company and to memorialize the terms of Employee's employment with the
Company.
AGREEMENT
1. Employment. The Company hereby continues to employ Employee and Employee
hereby accepts such employment upon the terms and conditions set forth herein.
Employee shall continue to be employed by the Company in Scottsdale, Arizona.
2. Duties of Employment. Employee shall continue to serve as Vice
President-Product Development and Sourcing of the Company. In such capacity,
Employee shall continue to perform such duties and services as the Company's
Board of Directors may assign or delegate to her from time to time. As of the
date hereof, such duties shall include primary responsibility for the following
functions: overall product direction (including new product introduction,
evaluation of existing products and implementation of new designs); global
sourcing strategy (including locating new qualified manufacturers, cultivating
relationshps with existing manufacturers, and locating new qualified
manufacturers, cultivating relationships with existing manufacturers, and
implementing and enforcing systems which aadhere to all U.S. customs and
overseas manufacturing regulations); overseeing product purchasing; development
and implementation of quality control systems; coordinate with marketing
department to ensure consistent print message to trade and consumers; oversee
retail sales and operations (including investigation and development or retail/
partnership opportunities, and creation of in-shop merchandising programs).
Employee shall report directly to the Company's Chief Executive Officer.
3. Term. This Agreement shall be effective as of the
<PAGE>
Closing under the Stock Purchase Agreement dated April 21, 1997 and shall
continue in effect until terminated as provided in Paragraph 5 hereof.
4. Compensation and Benefits. Employee will receive the following
compensation for her services during her term of employment hereunder:
(a) Salary. Employee shall receive a base salary of $105,000 per year,
payable in accordance with the standard payroll policies of the Company. Such
salary shall be prorated for any partial year of employment by Employee
hereunder.
(b) Bonuses. Employee shall be eligible to participate in the
Company's Executive Incentive Compensation Program at a bonus level not less
than 15% of Employee's base salary. Such bonus shall be paid within sixty (60)
days of the end of the Company's fiscal year and shall be prorated for any
partial year of employment by Employee hereunder.
(c) Stock Options. Concurrently with the execution of this Agreement,
Employee has been granted a two-year option to purchase up to 200,000 shares of
the Common Stock of the Company's parent, Southhampton Enterprises Corp.
("Parent"), pursuant to Parent's Executive and Employee Stock Option Plan (the
"Plan") at an exercise price per share equal to the market price of Parent's
Common Stock on the date hereof. The number and exercise price of such options
is subject to adjustment to reflect the one-for-five reverse stock split of
Parent Common Stock to be effected after the date hereof. All of such options
are vested in full as of the date hereof. Employee shall also participate in the
Plan on a going-forward basis.
(d) Medical Insurance. The Company will provide coverage for Employee
and her dependents (if any) during the term of her employment under the
Company's health insurance policy.
(e) Miscellaneous Benefits. Employee shall be entitled to vacation,
sick pay and reimbursement of business expenses incurred on behalf of the
Company on the same basis as other senior management of the Company. Employee
shall also be entitled to participate in the Company's 401(k) Plan to the same
extent as other senior management of the Company.
(f) Annual Review. Employee shall be entitled to an employment review
in accordance with the Company's senior management review policy.
5. Termination. This Agreement may be terminated as follows:
(a) For any or no reason by either Employee or the Company upon sixty
(60) days' notice by the terminating party to the other party;
<PAGE>
(b) By the Company immediately upon the death of Employee; or
(c) By the Company in the event Employee is unable to perform her
duties under this Agreement for a period of more than ninety (90) consecutive
days due to total or partial disability.
Subject to Section 6, and any notice period provided for above, any termination
of Employee's employment will be effective upon the non-terminating party's
receipt of written notice of such termination, and such termination shall be
without prejudice to any other remedy to which the Company may be entitled
either at law, in equity or under this Agreement.
6. Severance. In the event the Company terminates this Agreement for any
reason or Employee terminates this agreement for "Good Reason" (as hereinafter
defined), then (a) Employee shall receive six months' salary paid bi-monthly
with the first payment due and payable two weeks after Employee's last day of
employment, and (b) the Company shall vest any and all unvested stock options on
the date of such termination, and (c) Employee shall have a period of ninety
(90) days within which to exercise any vested options. In the event Employee
terminates this Agreement for other than "Good Reason", then (i) Employee shall
be entitled to no compensation past the last day of Employee's employment with
the Company; and (ii) all stock options of Employee which are not vested as of
the date of such termination shall automatically be null and void and of no
further force or effect.
"Good Reason" shall mean the occurrence of any of the following: (i) the
Company's failure to re-appoint Employee to offices, titles or positions
carrying comparable authority, responsibilities, dignity and importance to that
of Employee's offices and positions as of the date hereof, or (ii) any material
change by the Company in Employee's functions, duties, or responsibilities which
would cause Employee's positions with the Company to be of less dignity,
responsibility or importance than as in effect on the date hereof, or (iii)
Employee being requested by the Company to relocate to a location other than the
Metropolitan Phoenix area.
7. Confidentiality. Employee acknowledges that Employee has received and
contributed to the production of, Confidential Information, and that Employee
may continue to receive and contribute to the production of Confidential
Information in the future. For purposes of this Agreement, Employee agrees that
"Confidential Information" shall mean information or material proprietary to the
Company or designated as Confidential Information by the Company and not
generally known by non-Company personnel, which Employee develops or to which
Employee may obtain knowledge or access through or as a result of Employee's
relationship with the Company (including information conceived, originated,
discovered or developed in whole or in part by Employee). Confidential
Information includes, but is not limited
<PAGE>
to, the following types of information and other information of a similar nature
(whether or not reduced to writing): discoveries, inventions, ideas, concepts,
research, development, processes, procedures, "know-how", formulae, marketing
techniques and materials, marketing and development plans, business plans,
customer names and other information related to customers, price lists, pricing
policies, financial information, employee compensation, and computer programs
and systems. Confidential Information also includes any information described
above which obtains from another party and which treats as proprietary or
designates as Confidential Information, whether or not owned by or developed by
the Company. Employee acknowledges that the Confidential Information derives
independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use. Information publicly known
without breach of this Agreement that is generally employed by the trade at or
after the time Employee first learns of such information, or generic information
or knowledge which Employee would have learned in the course of similar
employment or work elsewhere in the trade, shall not be deemed part of the
Confidential Information. Employee further agrees:
7.1 To furnish the Company on demand, at any time during or after
employment, a complete list of the names and addresses known to employee of all
present, former and potential customers and other contacts gained while an
employee of the Company, whether or not in the possession or within the
knowledge of the Company.
7.2 That all notes, memoranda, documentation and records in any way
incorporating or reflecting any Confidential Information shall belong
exclusively to the Company and Employee agrees to turn over all copies of such
materials in Employee's control to the Company upon request or upon termination
of Employee's employment with the Company.
7.3 That while employed by the Company and thereafter Employee will
hold in confidence and not directly or indirectly reveal, report, publish,
disclose or offer any of the Confidential Information to any person or entity,
or utilize any of the Confidential Information for any purpose, except in the
course of Employee's work for the Company.
7.4 That any ideas in whole or in part conceived or made by Employee
during the term of this employment or relationship with the Company which are
made through the use of any of the Confidential Information of the Company or
any of the Company's equipment facilities, trade secrets or time, or which
result from any work performed by Employee for the Company, shall belong
exclusively to the Company and shall be deemed a part of the Confidential
Information for purposes of this Agreement. Employee hereby assigns and agrees
to assign to the Company all rights in and to such Confidential Information
whether for purposes of obtaining patent or copyright protection or otherwise.
Employee
<PAGE>
shall acknowledge and deliver to the Company, without charge to the Company (but
at its expense) such written instruments and do such other acts, including
giving testimony in support of Employee's authorship or inventorship, as the
case may be, necessary in the opinion of the Company to obtain patents or
copyrights or to otherwise protect or vest in the Company the entire right and
title in and to the Confidential Information.
8. Non-Competition During Employment. Employee agrees that during the term
of Employee's employment with the Company, Employee will devote all of
Employee's business time and effort to and give undivided loyalty to the
Company, and will not engage in any way whatsoever, directly or indirectly, in
any business that is competitive with the Company or solicit or in any other
manner work for or assist any business which is competitive with the Company.
During the term of Employee's employment by the Company, Employee will undertake
no planning for or organization of any business activity competitive with the
Company, and Employee will not combine or conspire with any other employee of
the Company or any other person for the purpose of organizing any such
competitive business activity. Notwithstanding the foregoing, however, Employee
may serve as a consultant on projects in the apparel and/or golf businesses with
the prior approval of the Company's Chief Executive Officer, which shall not be
unreasonably withheld.
9. Non-Competition After Employment. The Company and Employee acknowledge
that Employee will acquire much knowledge and information concerning the
business of the Company as the result of Employee's employment. Competition by
Employee in that business after this Agreement is terminated would severely
injure the Company. Accordingly, until six (6) months after this Agreement is
terminated or Employee leaves the employment with the Company for any reason
whatsoever, Employee will not:
9.1 Within any jurisdiction or marketing area in which the Company is
doing business or is qualified to do business, directly or indirectly own,
manage, operate, control, be employed by or participate in the ownership,
management, operation or control of, or be connected in any manner with, any
business of the type and character engaged and competitive with that conducted
by the Company. For purposes of interpreting the preceding sentence, the parties
acknowledge that while the Company currently competes in the apparel industry,
this provision should not prohibit Employee from participating in the entire
apparel industry, but only those segments of the apparel industry which compete
with the Company's products and services. For these purposes, ownership of
securities of not in excess of 5% of the stock of a company that is publicly
traded on a national securities exchange or is quoted on an automated quotation
system of a national securities association and is part of a national market
system shall not be considered to be competition with the Company or any of its
affiliates.
9.2 Persuade or attempt to persuade any potential customer or client
to which the Company or any of its affiliates
<PAGE>
has made a proposal or sale, or with which the Company or any of its affiliates
has been having discussions, not to transact business with the Company or such
affiliate, or instead to transact business with another person or organization.
9.3 Solicit the business of any company which is a customer or client
of the Company or any of its affiliates at any time during Employee's employment
by the Company, or was its customer or client within two years prior to the date
of this Agreement; provided, however, if Employee becomes employed by or
represents a business that exclusively sells products that are wholly dissimilar
from products then marketed or intended to be marketed by the Company, such
contact shall be permissible;
9.4 Solicit, endeavor to entice away from the Company or any of its
affiliates, or otherwise interfere with the relationship of the Company or any
of its affiliates with, any person who is employed by or otherwise engaged to
perform services for the Company or any of its affiliates, whether for
Employee's account or for the account of any other person or organization.
10. Injunctive Relief. Employee agrees that it would be difficult to
measure the damage to the Company from any breach by Employee of the covenants
set forth herein, that injury to the Company from any such breach would be
impossible to calculate, and that money damages would therefore be an inadequate
remedy for any such breach. Accordingly, Employee agrees that if Employee should
breach Paragraphs 7, 8 or 9 of this Agreement the Company shall be entitled, in
addition to and without limitation of all other remedies it may have, to
injunctions or other appropriate orders to restrain any such breach without
showing or proving any actual damage to the Company. This Paragraph shall
survive termination of Employee's employment.
11. Governing Law. This Agreement shall be interpreted and construed under
the laws of the State of Arizona, which laws shall prevail in the event of any
conflict of law. This Agreement and the obligations hereunder are made and
performable in Maricopa County, Arizona, which shall be the exclusive venue for
any litigation hereunder.
12. Modification of Contract. No waiver or modification of this Agreement
shall be valid unless it is in writing and duly executed by both parties.
13. Judicial Modification of Agreement. If the period of time or the area
specified in Paragraphs 7, 8 or 9 herein should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such number of months or
the area shall be reduced by the elimination of such portion thereof or both so
that such restrictions may be enforced in such area and for such time and is
adjudged to be reasonable. If Employee violates any of the restrictions
contained in Paragraphs 7, 8 or 9 of this Agreement, then the restrictive period
contained in Paragraph 9 shall not run
<PAGE>
in favor of Employee from the time of the commencement of any such violation
until such time as such violation shall be cured by Employee to the satisfaction
of the Company.
14. Notices. Any notice to be given hereunder by either party to the other
shall be in writing and may be transmitted by personal delivery or by mail,
registered or certified, postage prepaid with return receipt requested. Notices
shall be addressed to the parties at the following addresses and shall be
effective upon receipt:
If to the Company: The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
Attention: Chief Executive Officer
If to Employee: Ms. Brett Moore
c/o The Antigua Group, Inc.
9319 N. 94th Way
Scottsdale, Arizona 85258
15. Entire Agreement. This Agreement contains the complete agreement
concerning the employment arrangement between the Company and Employee. This
Agreement supersedes any previous agreements or understandings between the
parties.
16. Attorneys' Fees. In the event of a dispute or litigation arising
hereunder, the successful party in such dispute or litigation shall be entitled
to recover its costs and reasonable attorneys' fees from the other parties to
such dispute or litigation.
DATED on May 29, 1997.
THE ANTIGUA GROUP, INC.
By /s/ L. Steven Haynes /s/ Brett Moore
L. Steven Haynes Brett Moore
Its Chief Executive Officer
COMPANY EMPLOYEE
Exhibit 10.9
LEASE AGREEMENT
THIS LEASE AGREEMENT, effective as of the 1st day of December, 1994 by and
between D&D DEVELOPMENT CO., an Arizona general partnership, hereinafter
referred to as "Landlord", and THE ANTIGUA GROUP, INC., a Nevada corporation,
hereinafter referred to as "Tenant";
WITNESSETH:
1. PREMISES. In consideration of the mutual obligations of Landlord and
Tenant set forth herein, Landlord leases to Tenant, and Tenant hereby takes from
Landlord the property consisting of a one-story building containing 42,532
square feet of space together with various landscaped and parking areas all of
which is situated within the County of Maricopa, State of Arizona, legally
described as Lots 26, 27 and 28, McCormick Ranch Industrial Center Unit II,
according to Book 277 of Maps, Page 36, records of Maricopa County, Arizona, and
more commonly known as 9319 North 94th Way, Scottsdale, Arizona (the
"Premises"), together with all rights, privileges, easements, appurtenances, and
amenities belonging to or in any way pertaining to the Premises, to have and to
hold, subject to the terms, covenants and conditions in this Lease.
A. TERM. Subject to Tenant's right to extend the term set
forth herein the term of this Lease shall commence on the commencement date
hereinafter set forth and shall end on the last day of the month that is
twenty-four (24) months after the commencement date.
B. COMMENCEMENT DATE. The commencement date shall be December
1, 1994.
C. OPTIONS. Upon the expiration of this Lease, Tenant shall
have the option to extend the term for an additional twelve (12) months (the
"First Extension"). Upon the expiration of the First Extension, Tenant shall
have the option to extend the term for an additional twelve (12) months (the
"Second Extension"). Upon the expiration of the Second Extension, Tenant shall
have the option to extend the term an additional twelve (12) months (the "Final
Extension"). The First Extension, Second Extension and Final Extension will be
referred to herein collectively as the "Extensions". Tenant may exercise the
Extensions by giving notice to the Landlord before the end of the terms set
forth herein. If exercised, the Extensions will not effect the base rent or
obligations of Tenant under the Lease and the rent for the Premises shall remain
unchanged.
D. EXISTING BUILDING. Tenant acknowledges that (i) it has
inspected and accepts the Premises, (ii) the buildings and improvements
comprising the same are presently suitable for the purpose for which the
Premises are leased, (iii) the Premises are
<PAGE>
presently in good and satisfactory condition, and (iv) no representations as to
the repair of the Premises, nor promises to alter, remodel or improve the
Premises have been made by Landlord (unless otherwise expressly set forth in
this Lease).
2. BASE RENT. Tenant agrees to pay to Landlord rent for the Premises,
in advance, at the rate of Nineteen Thousand One Hundred Thirty-Nine and 40/100
Dollars ($19,139.40) per month [forty-five cents (45(cent)) per square foot per
month] during the term hereof.
3. TAXES. Tenant agrees to pay all taxes, assessments and governmental
charges of any kind and nature (collectively referred to herein as "Taxes") that
accrue against the Premises. Tenant shall be liable for all taxes levied or
assessed against any personal property or fixtures placed in the Premises by
Tenant.
4. TENANT IMPROVEMENTS. Landlord agrees to pay for the completion of
improvements to the Premises as may be required by Tenant at any time and/or
from time to time, in an amount not to exceed $10,000 in the aggregate.
Contemporaneously herewith Tenant has completed improvements to the Premises at
a cost in excess of $10,000 and has provided to Landlord invoices in support of
such expenditures. Consequently, upon the execution hereof, Landlord shall pay
to Tenant the sum of $10,000 in satisfaction of Landlord's obligations
hereunder.
5. TENANT'S REPAIRS. Tenant, at its own cost and expense, shall (i)
maintain all parts of the Premises, landscape and grounds surrounding the
Premises in good condition, (ii) promptly make all necessary repairs and
replacements, and (iii) keep the parking areas, driveways and alleys surrounding
the Premises in a reasonably clean and sanitary condition.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior approval of Landlord, which
approval shall not be unreasonably withheld or delayed by Landlord. Tenant, at
its own cost and expense, may erect upon the Premises such shelves, bins,
machinery and trade fixtures as it desires for Tenant's business. All
alterations, additions, improvements and partitions erected by Tenant shall be
and remain the property of Tenant during the term of this Lease.
7. SIGNS. Any signage Tenant desires for the Premises shall be subject
to Landlord's approval, which approval shall not be unreasonably withheld or
delayed by Landlord. Tenant shall, to Landlord's reasonable satisfaction,
repair, paint, and/or replace the building facia surface to which its signs are
attached upon vacation of the Premises, or the removal or alteration of its
signage.
8. PARKING. Tenant shall be entitled to park in those areas
2
<PAGE>
designated for parking.
9. UTILITIES. Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer, sprinkler charges, refuse and trash collection, and other
utilities and services used on or at the Premises, together with any taxes,
penalties, surcharges or the like pertaining to the Tenant's use of the
Premises, and any maintenance charges for utilities.
10. INSURANCE.
A. Tenant shall maintain insurance covering the buildings
situated on the Premises for the full "replacement cost" thereof, except for a
commercially reasonable deductible, insuring against the perils of fire,
lightning, extended coverage, vandalism and malicious mischief.
B. Tenant, at its own expense, shall maintain during the term
of this Lease a policy or policies of worker's compensation and comprehensive
general liability insurance, including personal injury and property damage, with
contractual liability endorsement, in the amount of Five Hundred Thousand
Dollars ($500,000.00) for property damage and One Million Dollars
($1,000,000.00) per occurrence for personal injuries or deaths of persons
occurring in or about the Premises. Tenant, at its own expense, also shall
maintain during the term of this Lease, fire and extended coverage insurance
covering the replacement cost of (i) all alterations, additions, partitions and
improvements installed or placed on the Premises by Tenant or by Landlord on
behalf of Tenant and (ii) all of Tenant's personal property contained within the
Premises. Said policies shall (i) name Landlord as an additional insured and
insure Landlord's contingent liability under this Lease (except for the worker's
compensation policy, which instead shall include waiver of subrogation
endorsement in favor of Landlord), and (ii) be issued by an insurance company
which is approved by Landlord, which approval shall not be unreasonably withheld
or delayed.
11. FIRE AND CASUALTY DAMAGE.
A. If the Premises should be damaged or destroyed by fire or
other peril, Tenant immediately shall give written notice to Landlord. If the
Premises should be totally destroyed by any peril covered by insurance or if
they should be so damaged thereby that rebuilding or repairs cannot be completed
within sixty (60) days after the date of such damage, Tenant shall have the
right to terminate this Lease and the rent shall be abated during the unexpired
portion of this Lease, effective upon the date of the occurrence of such damage.
B. If the Premises should be damaged by any peril covered by
insurance and rebuilding or repairs can be within sixty
3
<PAGE>
(60) days after the date of such damage, this Lease shall not terminate, and
Landlord shall restore the Premises to its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in, or about the Premises or for the benefit
of, or by or for Tenant. If such repairs and rebuilding have not been completed
within sixty (60) days after the date of such damage Tenant may (in addition to
any other remedies that may be available to Tenant), upon payment of any past
due rent, fees and/or charges payable by Tenant, terminate this Lease by
delivering written notice of termination to Landlord.
C. Anything in this Lease to the contrary notwithstanding,
Landlord and Tenant hereby waive and release each other of and from any and all
rights of recovery, claim, action or cause of action, against each other, their
agents, officers and employees, for any loss or damage that may occur to the
Premises, improvements to the Premises, or personal property (building contents)
within the building and/or Premises, for any reason regardless of cause or
origin if such loss and/or damage is covered by a policy of insurance for the
benefit of the party suffering any such loss and/or damage. Each party to this
Lease agrees immediately after execution of this Lease to give every insurance
company, which has issued to it policies of fire and extended coverage
insurance, written notice of the terms of the mutual waivers contained in this
subparagraph, and if necessary, to have the insurance policies properly
endorsed.
12. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of
recovery and causes of action against Landlord which Tenant has expressly
released, Landlord shall hold Tenant harmless and defend Tenant against any and
all claims or liability for any injury or damage to any person in, on or about
the Premises, when such injury or damage shall be caused by the act, neglect,
negligence, fault of, or omission of any duty with respect to the same by
Landlord, its agents, servants, employees or invitees. Except for any claims,
rights of recovery and causes of action against Tenant which Landlord has
expressly released, Tenant shall hold Landlord harmless from and defend Landlord
against any and all claims or liability for any injury or damage to any person
in, on or about the Premises, when such injury or damage shall be caused by the
act, neglect, negligence, fault of, or omission of any duty with respect to the
same by Tenant, its agents, servants, employees, or invitees. The provisions of
this Paragraph shall survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to such expiration or
termination.
13. USE. The Premises shall be used only for the purpose of
manufacturing, receiving, storing, shipping and selling products, materials and
merchandise made and/or distributed by Tenant and for
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such other lawful purposes as may be directly incidental thereto. Tenant shall
comply with all governmental laws, ordinances and regulations applicable to the
use of the Premises, and promptly shall comply with all governmental orders and
directives for the correction, prevention and abatement of nuisances in or upon,
or connected with the Premises.
14. INSPECTION. Landlord and Landlord's agents and representatives
shall have the right to enter the Premises at any reasonable time during
business hours to inspect the Premises. During the period that is three (3)
months prior to the end of the Lease term, upon telephonic notice to Tenant,
Landlord and Landlord's representatives may enter the Premises during business
hours for the purpose of showing the Premises. In addition, Landlord shall have
the right to erect a suitable sign on the Premises stating the Premises are
available.
15. ASSIGNMENT AND SUBLETTING. Tenant shall have the right to assign,
sublet, transfer or encumber this Lease, or any interest therein, without the
prior written consent of Landlord. Any assignee, sublessee or transferee of
Tenant's interest in this Lease (all such assignees, sublessees and transferees
being hereinafter referred to as "Transferees"), shall be obligated to perform
all obligations of Tenant under this Lease to the extent of such assignment or
sublease. If such Transferee causes the occurrence of an event of default then
Landlord shall look solely to such Transferee with respect to such default.
16. CONDEMNATION. If more than eighty percent (80%) of the Premises are
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and, the taking prevents or materially interferes with the use of the
Premises for the purpose for which they were leased to Tenant, then upon notice
from Tenant to Landlord, this Lease shall terminate and the rent shall be abated
during the unexpired portion of this Lease, effective on the date of such
taking. If less than eighty percent (80%) of the Premises are taken for any
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain, or by private purchase in lieu thereof, this
Lease shall not terminate, but the rent payable hereunder during the unexpired
portion of this Lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances. All compensation awarded in
connection with or as a result of any of the foregoing proceedings shall be the
property of Landlord and Tenant hereby assigns any interest in any such award to
Landlord; provided, however, Landlord shall have no interest in any award made
to Tenant for loss of business or goodwill or for the taking of Tenant's
fixtures and improvements, if a separate award for such items is made to Tenant.
17. HOLDING OVER. At the termination of this Lease by its
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expiration or otherwise, Tenant immediately shall deliver possession to Landlord
with all cleaning, repairs and maintenance required herein to be performed by
Tenant completed. If, for any reason, Tenant retains possession of the Premises
after the expiration or termination of the Lease, unless the parties hereto
otherwise agree in writing, such possession shall be subject to termination by
either Landlord or Tenant at any time upon not less than ten (10) days advance
written notice, and all of the other terms and provisions of this Lease shall be
applicable during such period.
18. QUIET ENJOYMENT. Landlord covenants that it holds good title to the
Premises. Landlord has the authority to enter into this Lease and so long as
Tenant pays all amounts due hereunder and performs all other covenants and
agreements herein set forth, Tenant shall peaceably and quietly have, hold and
enjoy the Premises for the term hereof without hindrance or molestation from
Landlord, subject to the terms and provisions of this Lease.
19. EVENTS OF DEFAULT. The following events (herein individually
referred to as "event of default") each shall be deemed to be events of
nonperformance by Tenant under this Lease:
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of thirty (30)
days after Tenant receives written notice of such default.
B. Tenant shall fail to discharge any lien placed upon the
Premises hereof by Tenant within forty-five (45) days after any such lien or
encumbrance is filed against the Premises.
C. Tenant shall fail to comply with any term, provision or
covenant of this Lease and shall not cure such failure within sixty (60) days
after written notice thereof to Tenant.
20. REMEDIES
A. Upon each occurrence of an event of default, Landlord shall
have the option to pursue any one or more of the following remedies without any
notice or demand: (1) terminate this Lease; and/or (2) enter upon and take
possession of the Premises without terminating this Lease; and/or (3) alter all
locks and other security devices at the Premises with or without terminating
this Lease, and pursue, at Landlord's option, one or more remedies pursuant to
this Lease and in any such event Tenant immediately shall surrender the Premises
to Landlord, and if Tenant fails so to do, Landlord, without waiving any other
remedy it may have, may enter upon and take possession of the Premises and expel
or remove Tenant and any other person who may be occupying such Premises or any
part thereof.
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B. If Landlord terminates this Lease, and/or repossesses the
Premises with or without termination of this Lease, Tenant shall only be liable
for and shall pay to Landlord, the sum of all rental and other payments owed to
Landlord hereunder accrued to the date of such termination.
C. Exercise by Landlord of any one or more remedies hereunder
granted or otherwise available shall not preclude Landlord from the exercise of
any one or more other remedies and shall not be deemed to be an acceptance of
surrender of the Premises by Landlord, whether by agreement or by operation of
law, it being understood that such surrender can be effected only by the written
agreement of Landlord and Tenant. Tenant and Landlord further agree that
forbearance by Landlord to enforce its rights pursuant to the Lease at law or in
equity, shall not be a waiver of Landlord's right to enforce one or more of its
rights in connection with any subsequent default.
D. In the event of termination and/or repossession of the
Premises for an event of default, Landlord shall use reasonable efforts to relet
the Premises and to collect rental after reletting.
21. LANDLORD DEFAULT; TENANT RIGHT TO CANCEL. If Landlord fails to
perform any of its obligations hereunder within ten (10) days after written
notice from Tenant specifying such failure, and/or if Tenant has a demonstrable
financial reversal (hereinbelow defined), Tenant shall have the right to
terminate this Lease upon written notice to Landlord. In addition, in the event
of any default hereunder by Landlord, Tenant shall have the right to bring an
action for damages and/or other suitable relief. As used herein the term
"demonstrable financial reversal" means any financial or business reversal which
Tenant encounters, for which Tenant can provide written documentation and which
reversal, as Tenant shall determine, prevents and/or substantially interferes
with Tenant's ability to fulfill its obligations under this Lease.
22. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now constituting a lien or charge upon the
Premises or the improvements situated thereon, provided, however, that if the
mortgagee, trustee, or holder of any such mortgage or deed of trust elects to
have Tenant's interest in this Lease superior to any such instrument, then by
notice to Tenant from such mortgage, trustee or holder, this Lease shall be
deemed superior to such lien, whether this Lease was executed before or after
said mortgage or deed of trust.
23. MECHANIC'S LIENS. Tenant has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Landlord or Tenant in the Premises or
to charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant,
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including those who may furnish materials or perform labor for any construction
or repairs. Tenant covenants and agrees that it will pay or cause to be paid all
sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the Premises at the
request of Tenant. Tenant agrees to give Landlord immediate written notice of
the placing of any lien or encumbrance against the Premises.
24. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires. The captions
inserted in this Lease are for convenience only and in no way define, limit or
otherwise describe the scope or intent of this Lease, or any provision hereof,
or in any way affect the interpretation of this Lease.
B. The terms, provisions and covenants and conditions
contained in this Lease shall run with the land and shall apply to, inure to the
benefit of, and be binding upon, the parties's hereto and upon their respective
heirs, executors, personal representatives, legal representatives, successors
and assigns, except as otherwise herein expressly provided. Landlord shall have
the right to transfer and assign, in whole or in part, its rights and
obligations in the Premises.
C. Landlord shall not be held responsible for delays in the
performance of its obligations hereunder when caused by strikes, lockouts, labor
disputes, acts of God, inability to obtain labor or materials or reasonable
substitutes therefor, governmental restrictions, governmental regulations,
governmental controls, enemy or hostile governmental action, civil commotion,
fire or other casualty, and other causes beyond the reasonable control of the
Landlord.
D. This Lease constitutes the entire understanding and
agreement of the Landlord and Tenant with respect to the subject matter of this
Lease, and contains all of the covenants and agreements of Landlord and Tenant
with respect thereto. Landlord and Tenant each acknowledge that no
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
which are not contained herein, and any prior agreements, promises,
negotiations, or representations not expressly set forth in this Lease are of no
force or effect. This Lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
E. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the
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intention of the parties hereto that the remainder of this Lease shall not be
affected thereby, and it is also the intention of the parties to this Lease that
in lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision as
similar in terms to such illegal, invalid or unenforceable clause or provision
as may be possible and be legal, valid and enforceable.
F. Landlord shall, upon demand by Tenant execute and deliver
to Tenant for recording, a written notice as to the existence and terms of this
Lease, in form and content acceptable to Tenant.
G. Time is of the essence of this Lease and each provision
thereof.
25. NOTICES. Each provision of this Lease or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivering of
any notice or the making any payment by Tenant to Landlord shall be deemed to be
complied with when and if the following steps are taken:
A. All rent and other repayments required to be made by Tenant
to Landlord hereunder shall be payable to Landlord at the address for Landlord
set forth below or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith.
B. All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address set forth below, or at such
other address as Tenant may specify from time to time by written notice
delivered in accordance herewith.
C. Any written notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually received or
not when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses set
out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith.
26. ATTORNMENT. In the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed of trust covering the Premises, or in the event of any
deed-in-lieu transaction with respect to the Premises, the Tenant shall attorn
to the Purchaser upon any such foreclosure or sale and recognize such Purchaser
as the Landlord under this Lease.
27. GOVERNING LAW, VENUE. This Lease shall be governed and
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construed in accordance with the laws of the State of Arizona. In the event of
any action brought to enforce this Lease, the parties hereto agree that the
jurisdiction and venue for such action shall be the federal and state courts, as
applicable, located in Phoenix, Maricopa County, Arizona.
EXECUTED BY LANDLORD, this 1st day of December, 1994.
LANDLORD:
D&D DEVELOPMENT CO., an Arizona
general partnership
By: /s/ T. Dooley
Thomas E. Dooley, Jr.
Its: General Partner
LANDLORD'S ADDRESS:
9319 North 94th Way
Scottsdale, Arizona 85285
EXECUTED BY TENANT, this 1st day of December, 1994.
TENANT:
THE ANTIGUA GROUP, INC., a Nevada
corporation
By: /s/ T. Dooley
Thomas E. Dooley, Jr.
Its: Chairman of the Board
TENANT'S ADDRESS:
9319 North 94th Way
Scottsdale, Arizona 85285
10
Exhibit 10.9.1
ANTIGUA
Thomas E. Dooley, Jr.
Chairman of the Board
Chief Executive Officer
September 20, 1996
CERTIFIED MAIL
--------------
RETURN RECEIPT REQUESTED
------------------------
D & D Development Co.
9319 North 94th Way
Scottsdale, Arizona 85285
Re: Lease Agreement dated as December 1, 1994
9319 North 94th Way, Scottsdale, Arizona
Ladies & Gentlemen:
Pursuant to the optional "First Extension" described in paragraph 1(c) of the
lease above-referenced, we hereby notify you of our exercise of that option to
extend the term of the lease for an additional 12-month period.
Please contact the undersigned with any questions you may have.
Sincerely,
THE ANTIGUA GROUP, INC.
/s/ Thomas E. Dooley, Jr.
Thomas E. Dooley, Jr.
Chairman of the Board/CEO
TED/vs
cc: C.J. Larkin
Peter Dooley
Stephen Manes, Esq.
The Antigua Group, Inc. 9319 N. 94th Way, Scottsdale, AZ 85258 / P.O. Box 4400,
Scottsdale, AZ 85261 602-860-1444 Administration: 800-562-9777 Customer Service:
800-528-3133 Fax: 602-860-0822
Exhibit 10.10
McCormick Ranch
Industrial Center III
Commercial Lease Agreement
Petroleum, Inc.
as Landlord
And
Antigua Group, Inc.,
as Tenant
<PAGE>
Petroleum, Inc.
McCormick Ranch Industrial Center III
Multi-Tenant Gross Lease
LEASE AGREEMENT
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. Date of Lease: August 22, 1996.
Section 1.02. Landlord: Petroleum, Inc.
Address of Landlord: 301 N. Main, Suite 1300, Wichita, Kansas
67202-4813.
Section 1.03. Tenant (include legal entity): Antigua Group, Inc., an
Arizona corporation.
Address of Tenant: 9319 N. 94th Way, Scottsdale, Arizona 95258
Section 1.04. Property: The Property is part of Landlord's multi-tenant
real property development known as McCormick Ranch Industrial Center III, 9318
and 9332 North 95th Way, Scottsdale, Arizona 85258 and described or depicted in
Exhibit "A" (the "Project"). The Project includes the land, the buildings and
all other improvements located on the land, and the common areas described in
Paragraph 4.05(a). The Property shall be various suites within the buildings
known as 9318 and 9332 North 95th Way, Scottsdale, Arizona 85258 as set forth in
Exhibit "B". Landlord has agreed to lease to Tenant and Tenant has agreed to
lease from Landlord the Property in accordance with the schedule set forth on
Exhibit "B".
Section 1.05. Lease Term: The Lease Term for each suite shall commence
November 1, 1996 in accordance with the schedule set forth in Exhibit "B" and
shall expire October 31, 1999.
Section 1.06. Permitted Uses: (See Article Five) Manufacture, sale and
storage of sportswear and gold accessories and related office use.
Section 1.07. Tenant's Guarantor: (If none, so state) None
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Section 1.08. Brokers: (See Article Fourteen) (If none, so state).
Landlord's Broker: George W. Reeve Enterprises
Tenant's Broker: None.
Section 1.09. Commission Payable to Landlord's Broker: (See Article
Fourteen) By Separate Agreement
Section 1.10. Initial Security Deposit. None.
Section 1.11. Vehicle Parking Spaces Allocated to Tenant: (See Section
4.05) N/A
Section 1.12. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: The monthly rent shall be calculated in accordance with
Exhibit "B". Tenant shall pay the applicable rental tax to Landlord each month
in addition to the monthly Base Rent. The monthly base rental rate shall be as
follows:
Months 01 through 12 $.60 per S.F.
13 through 24 $.63 per S.F.
25 through 36 $.66 per S.F.
(b) OTHER PERIODIC PAYMENTS: (i) Tenant's pro rata share of Real
Property Taxes above the "Base Real Property Taxes" (See Section 4.02); (ii)
Utilities (See Section 4.03); (iii) Tenant's Pro Rata Share of Increased
Insurance Premiums above "Base Premiums" (See Section 4.04); (iv) Tenant's Pro
Rate Share of Common Area Expenses above the "Base Common Area Charges" (see
Section 4.05); (v) Impounds for Tenant's Share of Insurance Premiums and
Property Taxes (See Section 4.08); (vi) Maintenance, Repairs and Alterations
(see Article Six). For purposes of this Lease, "Tenant's Pro Rata Share" shall
be that percentage from time to time calculated by dividing the aggregate square
foot area of that portion of the Property occupied by Tenant as set forth in
Exhibit "B", by the aggregate square foot area of the Project, which is 74,908
square feet.
Section 1.13. Costs and Charges Payable by Landlord: (a) Base Real
Property Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section
4.04(c); (c) Base Common Area Charges (See Section 4.05); (d) Maintenance and
Repair (See Article Six).
Section 1.14. Landlord's Share of Profit of Assignment of Sublease:
(See Section 9.05) Fifty percent (50%) of the Profit (the "Landlord's Share").
Section 1.15. Riders: The following Riders are attached to and made a
part of this Lease: (if none, so state)
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Exhibit "A" First and Second Floor Plans for
Buildings A and B
Exhibit "B" Suite Covered by Lease
Exhibit "C" None
Exhibit "D" Rules and Regulations
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property for Lease Term: Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a
"month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a "month-to-month" tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term, plus the applicable rental
tax levied on the rent collected by Landlord under the terms of this Lease. On
the first day of the second month of the Lease Term and each month thereafter,
Tenant shall pay landlord the Base Rent, plus the applicable rental tax levied
on the rent collected by Landlord under the terms of this Lease, in advance,
without offset, deduction or prior demand. The Base Rent and applicable rent tax
shall be payable at Landlord's address or at such other place as Landlord may
designate in writing.
Section 3.02. Termination; Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenant's successor) any advance rent or other
advance payments made by Tenant to Landlord, and any
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amounts paid for real property taxes and other reserves which apply to any time
periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called "Additional Rent". Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. Property Taxes.
(a) Real Property Taxes. Landlord shall pay the "Base Real Property
Taxes" on the Project during the Lease Term. Base Real Property Taxes are real
property taxes applicable to the Project for the 1996 tax year. From and after
January 1, 1997, Tenant shall pay Landlord Tenant's pro rate share of the
amount, if any, by which the real property taxes during the Lease Term exceed
the Base Real Property Taxes. Subject to Paragraph 4.02(c), Tenant shall make
such payments within fifteen (15) days after receipt of Landlord's statement
showing the amount and computation of such increase. Landlord shall reimburse
Tenant within thirty (30) days after written demand for any real property taxes
paid by Tenant covering any period of time prior to January 1, 1997 or after the
Lease Term.
(b) Definition of "Real Property Tax." "Real property tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalk,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment of the Project due to a change of ownership as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Project; and (v) any charge or fee replacing any tax previously included within
the definition of real property tax. "Real property tax" does not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes. Nothing contained in this Article Four shall be construed as limiting
Tenant's obligation to pay the applicable rental tax which is currently
scheduled to be assessed at 3.15% on the rent collected by Landlord, and Tenant
shall be required to pay such rental tax (including any increases in the
applicable rental tax) in addition to the Base Rent throughout the Lease Term.
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(c) Joint Assessment. (This provision is not applicable, as the Project
is separately assessed and not jointly assessed with any adjacent property.)
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxes separately from the Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
thirty (30) days after Tenant receives a written statement from Landlord for
such personal property taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within thirty (30) days after receipt of Landlord's
written statement.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisors and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and noncontributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained
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by Landlord shall not be contributory and shall not provide primary insurance.
(b) Property and Rental Income Insurance. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Project in the full amount of its replacement value. Such policy shall contain
an Inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which Landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake insurance if required by any lender
holding a security interest in the Project. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. At any time during the Lease Term and any extensions of the
Lease Term, Landlord may, in Landlord's discretion, also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall not be liable for the payment of any deductible amount under
Landlord's insurance policies maintained pursuant to this Section 4.04 unless
the loss is caused by Tenant's negligence or willful misconduct. Tenant shall
not do or permit anything to be done which invalidates any such insurance
policies.
(c) Payment of Premiums.
(i) Landlord shall pay the "Base Premiums" for the insurance
policies maintained by Landlord under Paragraph 4.04(b). For purposes of this
Lease, the "Base Premiums" shall be the premiums paid by Landlord for coverage
during 1996 for the insurance policies maintained by Landlord under Paragraph
4.04(b).
(ii) From and after January 1, 1997, Tenant shall pay Landlord
Tenant's pro rata share of the amount, if any, by which the insurance premiums
for all policies maintained by Landlord under Paragraph 4.04(b) have increased
over the Base Premiums, whether such increases result from the nature of
Tenant's occupancy, any act or omission of Tenant, the reasonable requirement of
any lender referred to in Article Eleven (Protection of Lenders), the increased
value of the Project or general rate increases. When acquiring insurance
coverage, Landlord will use its good faith efforts to obtain the most reasonably
priced insurance policies for the coverage sought. However, if Landlord
substantially increases the amount of insurance carried or the percentage of
insured value after the period during which the Base Premiums were calculated,
Tenant shall only pay Landlord the amount of increased premiums which would have
been charged by the insurance carrier if the amount of insurance or percentage
of insured value had not been substantially increased by Landlord. This
adjustment in the amount due from Tenant shall be made only
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once during the Lease Term. Thereafter, Tenant shall be obligated to pay the
full amount of any additional increases in the insurance premiums, including
increases resulting from any further increases in the amount of insurance or
percentage of insured value. Subject to Section 4.05, Tenant shall pay Landlord
the increases over the Base Premiums within thirty (30) days after receipt by
Tenant of a statement of the amount due. If the insurance policies maintained by
Landlord cover improvements or real property other than the Project, Landlord
shall also deliver to Tenant a statement of the amount of the premiums
applicable to the Project showing, in reasonable detail, how such amount was
computed. If the Lease Term expires before the expiration of the insurance
period, Tenant's liability shall be prorated on an annual basis.
(d) General Insurance Provisions.
(i) Any insurance which Tenant is required to maintain under
this Lease shall include a provision which requires the insurance carrier to
give Landlord not less than thirty (30) days written notice prior to any
cancellation or modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or
renewal to Landlord required under this Lease within the prescribed time period
or if any such policy is canceled or modified during the Lease Term without
Landlord's consent, Landlord may obtain such insurance, in which case Tenant
shall reimburse Landlord for the cost of such insurance within thirty (30) days
after receipt of a statement that indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this
Lease with companies holding a "General Policy Rating" or A-12 or better, as set
forth in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers,
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employees, agents or representatives of the other, for loss of or damage to its
property or the property of others under its control, if such loss or damage is
covered by any insurance policy in force (whether or not described in this
Lease) at the time of such loss or damage. Upon obtaining the required policies
of insurance, Landlord and Tenant shall give notice to the insurance carriers of
this mutual waiver of subrogation.
Section 4.05. Common Areas; Use, Maintenance and Costs.
(a) Common Areas. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants of
the Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert Common Areas into leasable areas,
construct additional parking facilities (including parking structures) in the
Common Areas, and increase or decrease Common Areas land and/or facilities.
Tenant acknowledges that such activities may result in inconvenience to Tenant.
Such activities and changes are permitted if they do not materially affect
Tenant's use of the Property.
(b) Use of Common Areas. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its
reasonable efforts to cause others who use the Common Areas with Tenant's
express or implied permission to abide by Landlord's rules and regulations. At
any time, Landlord may close any Common Areas to perform any acts in the Common
Areas, as in Landlord's judgement, are desirable to improve the Project. Tenant
shall not interfere with the rights of Landlord, other tenants or any other
person entitled to use the Common Areas.
(c) Specific Provision Regarding Vehicle Parking. Tenant shall be
entitled to use and enjoy in common with the other tenants of the buildings
located at 9318 and 9332 North 95th Way all the vehicle parking spaces without
paying any additional rent. Tenant's parking shall not be reserved and shall be
limited to vehicles no larger than standard size automobiles or pickup utility
vehicles and show vans not exceeding 30 feet in length. Tenant shall not cause
large trucks or other large vehicles to be parked within the Project or on the
adjacent public streets. Temporary parking of large delivery vehicles in the
Project will be permitted as reasonably necessary in the ordinary course of
Tenant's business. Vehicles shall be parked only in striped parking spaces and
not in driveways, loading areas or other locations not
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specifically designated for parking. Handicapped spaces shall only be used by
those legally permitted to use them. If Tenant parks more vehicles in the
parking area than the number set forth in Section 1.11 of this Lease, such
conduct shall be a material breach of this Lease. In addition to Landlord's
other remedies under the Lease, Tenant shall pay a daily charge determined by
Landlord for each such additional vehicle.
(d) Maintenance of Common Areas. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's reasonable discretion, as a first-class industrial/commercial real
property development. Landlord shall pay the "Base Common Area Charges" which
shall be the aggregate amount expended by Landlord pursuant to this Section
4.05(d) during 1996. From and after January 1, 1997, Tenant shall pay Landlord
Tenant's pro rata share of the amount, if any, by which the Common Area costs
exceed the Base Common Area Charges. Common Areas costs include, but not limited
to, costs and expenses for the following: gardening and landscaping; utilities,
water and sewage charges; maintenance of signs (other than tenants' signs);
premiums for liability, property damage, fire and other types of casualty
insurance on the Common Areas and worker's compensation insurance; all property
taxes and assessments levied on or attributable to the Common Areas and all
Common Area improvements; all personal property taxes levied on or attributable
to personal property used in connection with the Common Areas', straight-line
depreciation on personal property owned by Landlord which is consumed in the
operation or maintenance of the Common Areas; fees for required licenses and
permits; repairing, resurfacing, repaving, maintaining, painting, lighting,
cleaning, refuse removal, security and similar items; reserves for roof
replacement and exterior painting and other appropriate reserves and a
reasonable allowance to Landlord for Landlord's supervision of the Common Areas
(actual not to exceed five percent (5%) of the gross rents of the Project for
the calendar year). Landlord may cause any or all of such services to be
provided by third parties and the cost of such services shall be included in
Common Area costs. Common Area costs shall not include depreciation of real
property which forms part of the Common Areas.
(e) Tenant's Share and Payment. From and after January 1, 1997, Tenant
shall pay Tenant's pro rata share of all increases in Common Area costs above
the Base Common Area Charges (pro rated for any fractional month) upon thirty
(30) days written notice from Landlord that such costs are due and payable, and
in any event prior to delinquency. Tenant's pro rata share shall be calculated
by dividing the square foot area of the Property, as set forth in Section 1.04
of the Lease, by the aggregate square foot area of the Project which is leased
or held for lease by tenants, as of the date on which the computation is made.
Any changes in the Common Area costs and/or the aggregate area of the Project
leased or held for lease during the Lease Term shall be effective on the first
day
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of the month after such change occurs. Landlord may, at Landlord's election,
estimate in advance and charge to Tenant as Common Areas costs, all real
property taxes for which Tenant is liable under Section 4.02 of the Lease, all
insurance premiums for which Tenant is liable under Section 4.04 of the Lease,
all maintenance and repair costs for which Tenant is liable under Section 6.04
of the Lease, and all other Common Area costs payable by Tenant hereunder. At
Landlord's election, such statements of estimated Common Area costs shall be
delivered monthly, quarterly or at any other periodic intervals to be designated
by Landlord. Landlord may adjust such estimates at any time based upon
Landlord's experience and reasonable anticipation of costs. Such adjustments
shall be effective as of the next rent payment date after notice to Tenant.
Within sixty (60) days after the end of each calendar year of the Lease Term,
Landlord shall deliver to Tenant a statement prepared in accordance with
generally accepted accounting principles setting forth, in reasonable detail,
the Common Area costs paid or incurred by Landlord during the preceding calendar
year and Tenant's pro rata share. Upon receipt of such statement, there shall be
an adjustment between Landlord and Tenant, with payment to or credit given by
Landlord (as the case may be) so that Landlord shall receive the entire amount
of Tenant's share of such costs and expenses for such period.
Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
five percent (5%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.07. Interest on Past Due Obligations. Any amount owed by
Tenant to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
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Anything in this Lease to the contrary notwithstanding, upon ten (10) days prior
notice to Landlord, Tenant shall have the right to, either partially or fully,
cease business operations at the Property and thereupon either partially or
fully vacate the Property; provided, however, all other obligations of Tenant
under this Lease with respect to the Property shall not be affected thereby
including, without limitation, Tenant's obligation to pay Base Rent, additional
rent and all other costs and charges which Tenant has agreed to pay under this
Lease.
Section 5.02. Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of tenants of the Project, or which constitutes a nuisance or waste.
Section 5.03. Hazardous Materials. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials"
or "toxic substances" now or subsequently regulated under any applicable
federal, state or local laws or regulations, including without limitations
petroleum based products, paints, solvents, lead, cyanide, DDT, printing inks,
acids, pesticides, ammonia compounds and other chemical products, asbestos, PCBs
and similar compounds, and including any different products and materials which
are subsequently found to have adverse effects on the environment or the health
and safety of persons. Tenant shall not cause or permit any Hazardous Material
to be generated, produced, brought upon, used, stored, treated or disposed of in
or about the Property by Tenant, its agents, employees, contractors, sublessees
or invitees without the prior written consent of Landlord. Landlord shall be
entitled to take into account such other factors or facts as Landlord may
reasonably determine to be relevant in determining whether to grant or without
consent to Tenant's proposed activity with respect to Hazardous Material. In no
event, however, shall Landlord be required to consent to the installation or use
of any storage tanks on the Property.
Section 5.04. Signs and Auctions. Tenant shall not place any signs on
the Property without Landlord's prior written consent. Tenant shall not conduct
or permit any auctions or sheriff's sales at the Property. Landlord agrees that
within sixty (60) days after a tenant of 9318 and 9332 North 95th Way vacates
the building, Landlord shall at its expense remove such Tenant's identification
signs from the face of the building.
Section 5.05. Indemnity. Tenant shall indemnify Landlord against and
hold Landlord harmless from any and all costs, claims or liability arising from:
(a) Tenant's use of the Property; (b) the conduct of Tenant's business or
anything else done or permitted
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by Tenant to be done in or about the Property, including any contamination of
the Property or any other property resulting from the presence or use of
Hazardous Material caused or permitted by Tenant; (c) any breach or default in
the performance of Tenant's obligations under this Lease; (d) any
misrepresentation or breach of warranty by Tenant under this Lease; or (e) other
acts or omissions of Tenant. Tenant shall defend Landlord against any such cost,
claim or liability at Tenant's expense with counsel reasonably acceptable to
Landlord or, at Landlord's election, Tenant shall reimburse Landlord for any
legal fees or costs incurred by Landlord in connection with any such claim. As a
material part of the consideration to Landlord, Tenant assumes all risk of
damage to property or injury to persons in or about the Property arising from
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord, except for any claim arising out of Landlord's negligence or willful
misconduct. As used in this Section, the term "Tenant" shall include Tenant's
employees, agents, contractors and invitees, if applicable.
Section 5.06. Landlord's Access. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall have
given Tenant prior notice of such entry, except in the case of an emergency.
Landlord may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession. If Tenant pays the rent and complies
with all other terms of this Lease, Tenant may occupy and enjoy the Property for
the full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY: MAINTENANCE, REPAIRS AND ALTERNATIONS
Section 6.01. Existing Conditions. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations, and orders. Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use. Tenant represents and warrants that
Tenant has made its own inspection of and inquiry regarding the condition of the
Property and except as expressly set forth herein is not relying on any
representations of Landlord or any Broker with respect thereto. If Landlord or
Landlord's Broker has provided a Property Information Sheet or other Disclosure
Statement regarding the Property, a copy is attached as an exhibit to the Lease.
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Section 6.02, Exemption of Landlord from Liability. Landlord shall not
be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
Property, whether such damage or injury is caused by or results from: (a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures or any other cause; (c) conditions arising in
or about the Property or upon other portions of the Project, or from other
sources or places; or (d) any act or omission of any other tenant of the
Project. Landlord shall not be liable for any such damage or injury even though
the cause of or the means of repairing such damage or injury are not accessible
to Tenant. The provisions of this Section 6.02 shall not, however, exempt
Landlord from liability for Landlord's negligence or willful misconduct.
Section 6.03. Landlord's Obligations. Subject to the provisions of
Article Seven (Damage or Destruction) and Article Eight (Condemnation), and
except for damage caused by any act or omissions of Tenant, or Tenant's
employees, agents, contractors or invitees, Landlord shall keep the foundation,
roof and structural portions of the improvements on the Property in good order,
condition and repair. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the surfaces of walls. Landlord shall
begin the repair process for any repairs under this Section 6.03 within thirty
(30) days after receipt of a written notice from Tenant of the need for such
repairs and shall thereafter pursue completion of such repairs in a reasonable
and diligent manner. Tenant waives the benefit of any present or future law
which might give Tenant the right to repair the Property at Landlord's expense
or to terminate the Lease because of the condition of the Property.
Section 6.04. Tenant's Obligations.
(a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including nonstructural, interior, systems and equipment) in good
order, condition and repair (including Interior repainting and refinishing, as
needed). If any portion of the Property or any system or equipment in the
Property which Tenant is obligated to repair cannot be fully repaired or
restored, Tenant shall promptly replace such portion of the Property or system
or equipment in the Property, regardless of whether the benefit of such
replacement extends beyond the Lease Term; but if the benefit of such
replacement shall be prorated over the remaining portion of the Lease Term (as
extended), and Tenant shall be liable only for that portion of the cost which is
applicable to the Lease Term (as extended). Tenant shall adopt a preventive
maintenance program providing for regular semi-annual
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inspections and maintenance of the heating and air conditioning systems by a
licensed heating and air conditioning contractor. Landlord shall have the right,
upon thirty (30) days written notice to Tenant, to undertake the responsibility
for preventive maintenance of the heating and air conditioning system at
Tenant's expense. In addition, Tenant shall, at Tenant's expense, repair any
damage to the roof, foundation or structural portions of walls caused by
Tenant's acts or omissions. It is the intention of Landlord and Tenant that, at
all times during the Lease Term, Tenant shall maintain the Property in an
attractive, first-class and fully operative condition.
(b) Tenant Shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or replace
the Property as required by this Section 6.04, Landlord may, upon ten (10) days'
notice to Tenant (except that no notice shall be required in the case of an
emergency), enter the Property and perform such maintenance or repair (including
replacement, as needed) on behalf of Tenant. In such case, Tenant shall
reimburse Landlord for all costs incurred in performing such maintenance or
repair immediately upon demand.
Section 6.05. Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions, or improvements
to the Property without Landlord's prior written consent, except for
non-structural alterations which do not exceed Ten Thousand Dollars ($10,000) in
cost cumulatively over the Lease Term and which are not visible from the outside
of any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good and worklike manner, in conformity with all applicable
laws and regulations, and by a contractor approved by Landlord. Upon completion
of any such work, Tenant shall provide Landlord with "as built" plans, copies of
all construction contracts, and proof of payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.
Section 6.06. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated
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to remedy under any provision of this Lease. However, Tenant shall not be
obligated to repair any damage which Landlord is required to repair under
Article Seven (Damage or Destruction). In addition, unless Tenant has obtained
Landlord's consent to leave any alterations, additions and improvements at the
termination of the Lease at such time as Tenant requests Landlord's consent to
make any such alteration, addition or improvements (whether or not made with
Landlord's consent) prior to the expiration of the Lease and to restore the
Property to its prior condition, all at Tenant's expense. All alterations,
additions and improvements which Landlord has not required Tenant to remove
shall become Landlord's property and shall be surrendered to Landlord upon the
expiration or earlier termination of the Lease, except that Tenant may remove
any of Tenant's machinery or equipment which can be removed without material
damage to the Property. Tenant shall repair, at Tenant's expense, any damage to
the Property caused by the removal of any such machinery or equipment. In no
event, however, shall Tenant remove any of the following materials or equipment
(which shall be deemed Landlord's property) without Landlord's prior written
consent: any power wiring or power panels; lighting or lighting fixtures; wall
coverings; drapes, blinds or other window coverings; carpets or other floor
coverings; heaters, air conditioners or any other heating or air conditioning
equipment; fencing or security gates; or other similar building operating
equipment and decorations. In the event Tenant and Landlord mutually agree to
the removal of any fixtures, Tenant agrees to restore the property to its prior
condition, all at Tenant's expense.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than fifty percent (50%) of the Property is untenantable as
a result of such damage or less than fifty percent (50%) of Tenant's operations
are materially impaired) and if the proceeds received by Landlord from the
insurance policies described in Paragraph 4.04(b) are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord shall repair
the damage as soon as reasonably possible. Landlord may elect (but is not
required) to repair any damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not covered
by the insurance policies which Landlord maintains under Paragraph 4.04(b),
Landlord may elect either to (i) repair the damage as soon as reasonably
possible, in which case this Lease shall remain in full force and effect, or
(ii) terminate this Lease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of
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the occurrence of the damage whether Landlord elects to repair the damage or
terminate the Lease. If Landlord elects to repair the damage and the damage was
due to any act or omission of Tenant, or Tenant's employees, agents, contractors
or invitees, Tenant shall pay Landlord the "deductible amount" (if any) under
Landlord's insurance policies and the differences between the actual cost of
repair and any insurance proceeds received by Landlord. If Landlord elects to
terminate the Lease, Tenant may elect to continue this Lease in full force and
effect, in which case Tenant shall repair any damage to the Property and any
building in which the Property is located. Tenant shall pay the cost of such
repairs, except that upon satisfactory completion of such repairs, Landlord
shall deliver to Tenant any insurance proceeds received by Landlord for the
damage repaired by Tenant. Tenant shall give Landlord written notice of such
election within ten (10) days after receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six (6) months
of the Lease Term and such damage will require more than thirty (30) days to
repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. Substantial or Total Destruction. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence, if the Property can be rebuilt within six (6) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord's own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed
or damaged and Landlord or Tenant repairs or restores the Property pursuant to
the provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible
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reduction in Base Rent, insurance premiums and real property taxes, Tenant shall
not be entitled to any compensation, reduction, or reimbursement from Landlord
as a result of any damage, destruction, repair, or restoration of or to the
Property. Anything to the contrary contained herein notwithstanding, in the
event that Tenant is prevented from occupying the Property for more than twelve
(12) consecutive months as a result of any such casualty, then Tenant may by
written notice to Landlord cancel this Lease.
Section 7.04. Waiver. Tenant waives the protection of any statute, code
or judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord or Tenant terminates this Lease,
this Lease shall remain in effect as to the portion of the Property not taken,
except that the Base Rent and Additional Rent shall be reduced in proportion to
the reduction in the floor area of the Property. Any Condemnation award or
payment shall be distributed in the following order: (a) first, to any ground
lessor, mortgagee or beneficiary under a deed of trust encumbering the Property,
the amount of its interest in the Property; (b) second, to Tenant, only the
amount of any award specifically designated for loss of or damage to Tenant's
trade fixtures or removable personal Property; provided, however, anything
herein to the contrary notwithstanding Tenant shall have the right to submit a
separate claim for any loss or damage which Tenant may have incurred by reason
of such condemnation and any award pursuant thereto may be retained by Tenant
free of any claim by Landlord or any other party so long as the same does not
reduce Landlord's award, it being specifically understood that Tenant shall not
be entitled to any award for loss of its leasehold estate or any portion of the
condemnation award which is attributable to the taking of any part of the
Project; and (c) third, to Landlord, the remainder of such award, whether as
compensation for reduction in the value of the leasehold, the
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taking of the fee, or otherwise. If this Lease is not terminated, Landlord shall
repair any damage to the Property caused by the condemnation, except that
Landlord shall not be obligated to repair any damage for which Tenant has been
reimbursed by the condemning authority. If the severance damages received by
Landlord are not sufficient to pay for such repair, Landlord shall have the
right to terminate this Lease or make such repair at Landlord's expense
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No portion of the Property
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent. If Tenant
is a corporation, any change in the ownership of fifty-one percent (51%) of the
issued and outstanding voting stock of the corporation shall require Landlord's
consent.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or
sublease the Property, without Landlord's consent, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this
Article Nine, whether with or without Landlord's consent, shall release Tenant
or change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Article Nine. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's transferee
defaults under this Lease, Landlord may proceed directly against Tenant without
pursuing remedies against the transferee. Landlord may consent to subsequent
assignments or modifications of this Lease by Tenant's transferee, without
notifying Tenant or obtaining its consent. Such action shall not relieve
Tenant's liability under this Lease.
Section 9.04. (Intentionally omitted)
Section 9.05. Landlord's Consent.
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(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord reasonably deems relevant. Landlord shall have the
right to withhold consent, if reasonable, or to grant consent, based on the
following factors: (i) the business of the proposed assignee or subtenant and
the proposed use of the Property; (ii) the net worth and financial reputation of
the proposed assignee or subtenant: (iii) Tenant's compliance with all of its
obligations under the Lease; and (iv) such other factors as Landlord may
reasonably deem relevant. If Landlord objects to a proposed assignment solely
because of the net worth and/or financial reputation of the proposed assignee,
Tenant may nonetheless sublease (but not assign), all or a portion of the
Property to the proposed transferee, but only on the other terms of the proposed
transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the
Lease the Landlord's share (stated in Section 1.14) of the Profit (defined
below) on such transaction as and when received by Tenant, unless Landlord gives
written notice to Tenant and the assignee or subtenant that Landlord's share
shall be paid by the assignee or subtenant to Landlord directly. The "Profit"
means (A) all amounts paid to Tenant for such assignment or sublease, including
"key" money, monthly rent in excess of the monthly rent payable under the Lease,
and all fees and other consideration paid for the assignment or sublease,
including fees under any collateral agreements, less (B) costs and expenses
directly incurred by Tenant in connection with the execution and performance of
such assignment or sublease for real estate Broker's commissions and cost of
renovation or construction of tenant improvements required under such assignment
or sublease. Tenant is entitled to recover such costs and expenses before Tenant
is obligated to pay the Landlord's share to Landlord. The Profit in the case of
a sublease of less than all the Property is the rent allocable to the subleased
space as a percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written statement
certifying all amounts to be paid from any assignment or sublease of the
Property within thirty (30) days after the transaction documentation is signed,
and Landlord may inspect Tenant's books and records during regular business
hours to verify the accuracy of such statement. On written request, Tenant shall
promptly furnish to Landlord copies of all the transaction documentation, all of
which shall be certified by Tenant to be complete, true and correct. Landlord's
receipt of Landlord's share shall not be a
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consent to any further assignment or subletting. The breach of tenant's
obligation under this Paragraph 9.05(b) shall be a material default of the
Lease.
Section 9.06. No Merger. No merger shall result from Tenant's sublease
of the Property under this Article Nine, Tenant's Surrender of this Lease or the
termination of this Lease in any other manner. In such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each
of Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;
(b) If within seven (7) days of the date the same is due, Tenant fails
to pay rent or any other charge;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30)-day period and thereafter diligently pursues
its completion. The notice required by this Paragraph is intended to satisfy any
and all notice requirements imposed by law on Landlord and is not in addition to
any such requirements.
(d) (i) If Tenant makes a general assignment or general arrangement for
the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or
for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within sixty (60) days; (iii) if a trustee or receiver is appointed to
take possession of substantially all of Tenant's assets located at the Property
or of Tenant's interest in this Lease and possession is not restored to Tenant
within sixty (60) days; or (iv) if, substantially all of Tenant's assets located
at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
sixty (60) days. If a court of competent jurisdiction determines that any of the
acts described in this subparagraph (d) is not in
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default under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession) and such trustee or Tenant transfers
Tenant's interest hereunder, then Landlord shall receive, as Additional Rent,
the excess, if any, of the rent (or any other consideration) paid in connection
with such assignment or sublease over the rent payable by Tenant under this
Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.
Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which
Landlord had earned at the time of the termination; (ii) the worth at the time
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Landlord would have earned after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves Landlord
could have reasonably avoided; (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent, Additional Rent and other charges which
Tenant would have paid for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves Landlord could have
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under the Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, any costs or expenses
Landlord incurs in maintaining or preserving the Property after such default,
the cost of recovering possession of the Property, expenses of retailing,
including necessary renovation or alteration of the Property, Landlord's
reasonable attorneys' fees incurred in connection therewith, and any real estate
commission paid or payable. As used in subparts (i) and (ii) above, the "worth
at the time of the award" is computed by allowing interest on unpaid amounts at
the rate of fifteen percent (15%) per annum, or such lesser amount as may then
be the maximum lawful rate. As used in subpart (iii) above, the "worth at the
time of the award" is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of
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the award, plus one percent (1%). If Tenant has abandoned the property, Landlord
shall have the option of (i) retaking possession of the Property and recovering
from Tenant the amount specified in this Paragraph 10.03(a), or (ii) proceeding
under Paragraph 10.03(b).
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state in which the Property is located.
Section 10.04. Repayment of "Free" Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if during the term of the Lease (a) Tenant has
not abandoned the Property, (b) Landlord has not retaken possession of the
Property due to Tenant's default, and (c) Landlord has not had to institute an
action against Tenant to collect rent. If any of the conditions set forth in the
preceding sentence are not satisfied, then Abated Rent shall immediately become
due and payable in full and this Lease shall be enforced as if there were no
such rent abatement or other rent concession. In such case Abated Rent shall be
calculated based on the full initial rent payable under this Lease.
Section 10.05. Termination. Notwithstanding any other term or
provisions hereof to the contrary, the Lease shall terminate on the occurrence
of any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of all unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
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Section 10.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS AND PURCHASERS
Section 11.01. Subordination. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidation, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any material way (the performance of ministerial acts shall not be deemed
material), and Tenant shall not be deprived of its rights under this Lease.
Tenant's right to quiet possession of the Property during the Lease Term shall
not be disturbed if Tenant pays the rent and performs all of Tenant's
obligations under this Lease and is not otherwise in default. Tenant shall not
be obligated to enter into any subordination of the Lease, as aforesaid, unless
and until with respect to any such ground lease, deed of trust or mortgage, the
Landlord under such ground lease, the beneficiary under such deed of trust or
the mortgagee under such mortgage executes and delivers to Tenant a
subordination, non-disturbance and attornment agreement. Furthermore, such
subordination, non-disturbance and attornment agreement shall provide, among
other matters, that upon any termination of such ground lease or foreclosure of
any such deed of trust or mortgage, as the case may be, the successor to
Landlord through such termination and/or foreclosure will assume, observe and
perform all of Landlord's obligations under the Lease which are to be performed
during the period of time that such successor owns the Property. If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
ground lease, deed of trust or mortgage or the date of recording thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any purchaser, assignee, transferee, ground lessor, beneficiary
under a deed of trust, mortgagee, or parties at a foreclosure sale, Tenant shall
attorn to the transferee of or successor Landlord's interest in the Property and
recognize such transferee or successor as Landlord under this Lease. Tenant
waives the protection of any statute or rule of law which gives or purports to
give Tenant any right to terminate this Lease or surrender possession of the
Property upon the transfer of Landlord's interest.
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Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so, provided such documents are in form and
content reasonably acceptable to Tenant.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
canceled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchaser or encumbrancer may conclusively
upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such
ten (10) day period, Landlord, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the terms
and provisions of this Lease have not been changed except as otherwise
represented by Landlord; (ii) that this Lease has not been canceled or
terminated except as otherwise represented by Landlord; (iii) that not more than
one month's Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.
Section 11.05. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord its annual
financial statement, together with the report of its independent public
accountants and such monthly unaudited financial statements for the period after
the date of the annual financial statement as Tenant may have prepared in the
normal course of its operation. In addition, Tenant shall deliver such financial
information to any lender designated by Landlord to facilitate the financing or
refinancing of the Property. Tenant represents and warrants to Landlord that
each such financial statement is a true and accurate statement as of the date of
such statement. All financial statements shall be confidential and shall be used
only for the purposes set forth in this Lease.
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Landlord agrees to use reasonable discretion in the request and use of Tenant's
financial information.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease only if suit is commenced and a
party prevails. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award to
the party in whose favor a judgment is entered, a reasonable sum as attorneys'
fees and costs. The losing party in such action shall pay such attorneys' fees
and costs. Tenant shall also indemnify Landlord against and hold Landlord
harmless from all costs, expenses, demands and liability Landlord may incur if
Landlord becomes or is made a party to any claim or action (a) instituted by
Tenant against any third party, or by any third party against Tenant, or by or
against any person holding any interest under or using the Property by license
of or agreement with Tenant; (b) for foreclosure of any lien for labor or
material furnished to or for Tenant or such other person; (c) otherwise arising
out of or resulting from any act or transaction of Tenant or such other person;
or (d) necessary to protect Landlord's interest under this Lease in a bankruptcy
proceeding, or other proceeding under Title 11 of the United States Code, as
amended. Tenant shall defend Landlord against any such claim or action at
Tenant's expense with counsel reasonably acceptable to Landlord or, at
Landlord's election, Tenant shall reimburse Landlord for any legal fees or costs
Landlord incurs in any such claim or action.
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenant's request for
Landlord's consent under Article Nine (Assignment and Subletting) in an amount
not to exceed $1,000, or in connection with any other act which Tenant proposes
to do and which requires Landlord's consent. Wherever in this Lease Tenant is
required to obtain Landlord's consent, Landlord agrees that it will not
unreasonably withhold such consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color, sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
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Section 13.02. Landlord's Liability: Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title, but
Landlord shall nonetheless remain liable for any material breaches occurring
during its term as Landlord. Any Landlord who transfers its title or interest is
relieved of all liability with respect to the obligations of Landlord under this
Lease to be performed on or after the date of transfer. However, each Landlord
shall deliver to its transferee all funds that Tenant previously paid if such
funds have not yet been applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord. Landlord shall not
be in default under this Lease unless Landlord (or such ground lessor, mortgagee
or beneficiary) fails to cure such nonperformance within thirty (30) days after
receipt of Tenant's notice. However, if such nonperformance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect,
Section 13.04. Interpretation. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a part
of the terms or provisions of this Lease. Whenever required by the context of
this Lease, the singular shall include the plural and the plural shall include
the Singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.05. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the
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parties pertaining to the lease of the Property and no other agreements are
effective. All amendments to this Lease shall be in writing and signed by all
parties. Any other attempted amendment shall be void.
Section 13.06. Notices. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.03 above, except that upon
Tenant's taking possession of the Property, the Property shall be tenant's
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in Section 1.02 above. All notices shall be effective upon
delivery. Either party may change its notice address upon written notice to the
other party.
Section 13.07. Waivers. All waivers must be in writing and signed by
the waiving party, Landlord's failure to enforce any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. No Recordation. Tenant shall not record this Lease or
any memorandum or other document describing or referring to this Lease without
prior written consent from Landlord. However, Landlord may require that a "Short
Form" memorandum of this Lease executed by both parties be recorded. The party
requesting any recording shall pay all transfer taxes and recording fees.
Section 13.09. Binding Effect; Choice of Law. This Lease binds any
party who legally acquires any rights or interest in his lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. Corporate Authority; Partnership Authority. Upon
execution of this Lease, Tenant shall deliver to Landlord a certified copy of a
resolution of Tenant's Board of Directors authorizing the execution of this
Lease or other evidence of such authority reasonably acceptable to Landlord. If
Tenant is a partnership, each person or entity signing this Lease for Tenant
represents and warrants that he or it is a general partner of the partnership,
that he or it has full authority to sign for the partnership and that this Lease
binds the partnership and all general partners of the partnership. Tenant shall
give written
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notice to Landlord of any general partner's withdrawal or addition. Within
thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a
copy of Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.1 1. Joint and Several Liability. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.12. (intentionally omitted).
Section 13.13. Execution of Lease. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. Survival. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
Section 13.15. Time of Essence. Time is of the essence in the
performance of the obligations created by this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.01. Broker's Fee. When this Lease is signed by and delivered
to both Landlord and Tenant, Landlord shall pay a real estate commission to
Landlord's Broker named in Section 1.08 above, If any, as provided In the
written agreement between Landlord and Landlord's Broker.
Section 14.02. (Intentionally omitted).
Section 14.03. Agency Disclosure; No Other Brokers. Landlord and Tenant
each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction. Brokerage or finders fees payable to any
person or entity in any way relating to this Lease shall be the sole
responsibility of the party contracting to pay the same, and each party agrees
to indemnify and hold harmless the other against any loss, cost or expense
(including attorney's fees) which the other may incur by reason of any claim for
such commissions or fees based on an agreement with the indemnifying party.
ARTICLE FIFTEEN: ADDITIONAL PROVISIONS
Section 15.01. Telephone Line. Tenant shall have the right at Tenant's
expense to install an underground telephone and computer lines to the Property
from its adjacent building located to the west of the Property. Following the
installation of the telephone
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and computer lines, Tenant shall return the parking lot to the same condition as
existed prior to any trenching.
Section 15.02. Options to Renew. Landlord grants Tenant two consecutive
options to extend the Lease Term for additional periods of one (1) year each,
provided, however, that written notice by registered or certified mail of the
exercise of such option shall be given to Landlord by Tenant at least 180 days
before the expiration of the then current Lease Term and Tenant may not be in
default in the performance of any of its obligations under this Lease at the
time of exercising the applicable option. All of the terms and conditions of
this Lease shall remain the same during the option periods except there shall be
no additional options and the monthly Base Rent for each of the option periods
shall be as follows:
First Option $ .69 per square foot;
Second Option $ .72 per square foot.
Each extended period of the Lease Term shall commence immediately at the end of
the immediately preceding period. Should Tenant fail to timely exercise any
option, all options to extend the Lease Term for any period after such
unexercised option shall lapse and terminate.
Section 15.03 First Right to Lease. In the event that Landlord elects
to lease Suites 201, 203 or 209 of 9318 N. 95th Way, Scottsdale, Arizona, and
provided that Tenant is not in default hereunder, Landlord shall deliver a
written notice (the "Offering Notice") to Tenant of such intention to lease. The
Offering Notice shall state the rent and term of the proposed lease, along with
a description of the property subject to the proposed lease. Delivery of the
Offering Notice to Tenant shall be deemed to be an offer by Landlord to lease
the space described in the Offering Notice (the "Option Space") to Tenant upon
the then customary lease form used by Landlord. The offer must be accepted
within three (3) days of the delivery of the Offering Notice to Tenant (the
"Acceptance Period") and may not be withdrawn by Landlord within that period.
Tenant may accept the offer by delivering a written notice of acceptance of the
offer to Landlord on or before the last day of the Acceptance Period. Tenant may
accept such offer for all but not less than all the space described in the
Offering Notice. Failure to give timely notice of acceptance shall be deemed
rejection of the offer.
Following Tenant's rejection of any offer made pursuant to this Section
15.03, Tenant shall execute, acknowledge and deliver any document or instrument
reasonably requested by Landlord acknowledging such rejection and confirming
Tenant's waiver of any and all rights to any qualifying lease. All rights and
obligations of the parties under this Section 15.03 shall cease and terminate
upon expiration or other termination of this Lease, and in that
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event, Tenant shall execute, acknowledge and deliver any document or instrument
reasonably requested by Landlord acknowledging the expiration or other
termination of this Lease and confirming the cessation and termination of all
rights and obligations of the parties.
Section 15.04. Option to Lease. In the event that (a) Landlord has not
entered into a lease for any or all of Suites 201, 203 and 209 of 9318 North
95th Way, Scottsdale, Arizona, by December 31, 1996, (b) the Acceptance Period,
if any, under Section 15.03 above has expired, and (c) there is no pending first
right to lease under Section 15.03 above, then as long as Tenant is not in
default under the terms of this Lease, Tenant shall, subject to the provisions
of Section 15.03, have the right upon thirty (30) days prior written notice to
Landlord to lease Suites 201, 203 and 209. In the event Tenant exercises its
option to lease Suites 201, 203 and 209 in accordance with this Section 15.04,
the rental shall be at the same rate then applicable for space as set forth in
Exhibit "B", and such rental rates shall increase by the same amount and on the
same dates as the rental increases for the space on Exhibit "B". The term of the
Lease for such space shall expire October 31, 1999. Except as specifically set
forth in this Section 15.04, Tenant's occupancy of Suites 201, 203 and 209 under
the provisions of this Section 15.04 shall be upon all the same terms and
conditions set forth in this Lease. Tenant agrees to accept Suites 201, 203 and
209 in "AS IS" condition. Notwithstanding any of the foregoing provisions of
this Section 15.04 to the contrary, the provisions of Section 15.03 shall take
precedence over the foregoing provisions of this Section and should Landlord,
pursuant to Section 15.03, lease all or any of Suites 201, 203 or 209 of 9318
North 95th Way, Scottsdale, Arizona, to a third party, their such suite or
suites shall thereafter be exempt from the provisions of this Section. If Tenant
has rejected or is deemed to have rejected any offering under Section 15.03,
Tenant shall not have the right to exercise its rights under this Section with
respect to the suite or suites included within the rejected offering during the
90-day period in which Landlord may rent such suite or suites to a third party.
Section 15.05. Representation of Landlord. Landlord represents and
warrants to Tenant as follows:
(a) Landlord is the owner of the buildings located at 9318 and 9332
North 95th Way, Scottsdale, Arizona (the "Buildings").
(b) The Buildings are in compliance with all applicable laws and
ordinances that are material to Tenant's occupancy and use of the Buildings.
(c) Landlord has full right and authority to enter into this Lease.
31
<PAGE>
(d) There are no latent defects in the Buildings that would materially
affect Tenant's use or occupancy of the Buildings.
(e) All utility service reasonably necessary for Tenant's use and
occupancy is already installed or available to the Property.
(f) There are no Hazardous Materials located upon or within the
Buildings that would materially affect Tenant's use or occupancy of the
Buildings.
(g) Any item of property that Tenant is required to maintain in
accordance with the terms of this Lease is on the date of this Lease in good
working order and repair.
Landlord and Tenant have signed this Lease on the dates specified
adjacent to their signatures below.
"LANDLORD"
Signed on July 26, 1996. PETROLEUM, INC.,
a Kansas corporation
By: /s/ Thomas D. Beard
Thomas D. Beard
Its: Senior Vice-President
Signed on August 22, 1996 "TENANT"
ANTIGUA GROUP, INC.,
an Arizona corporation
By: /s/ Thomas E. Dooley, Jr.
Thomas E. Dooley, Jr.
Its: President and CEO
32
<PAGE>
EXHIBIT A
SKETCH OF FIRST FLOOR PLAN - BUILDING A
Suites 101, 103, 104, 105, 106, 107, 108 and 109.
Gross Building Area: 37,454 sf
Common Area: 3,175 sf
Gross Less Common Area: 34,279 sf
Load Factor: 9.3%
SKETCH OF FIRST FLOOR PLAN - BUILDING B
Suites 101, 102, 103, 105, 107, 108 and 109.
Gross Building Area: 37,454 sf
Common Area: 3,175 sf
Gross Less Common Area: 34,279 sf
Load Factor: 9.3%
SECOND FLOOR PLAN - BUILDING A
Suites 201-203, 209, Roof Below
33
<PAGE>
EXHIBIT B
SUITE NO. SQ. FT.
BUILDING A 203 B 1,612
109 3,026
108 3,117
107 3,282
106 3,166
103 3,140
104-105 6,357
101 3,004
BUILDING B 109 3,025
TOTAL 29,729
EXHIBIT C
NONE.
34
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
---------------------
1. No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or printed or affixed on or to any part of the outside or inside of
the Building without the written consent of Landlord first had and obtained and
Landlord shall have the right to remove any such placard, picture,
advertisement, name or notice without to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted, affixed
or inscribed at the expense of the Tenant by a person approved of by Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the premises, provided, however, that Landlord may furnish and install a
Building standard window covering at all exterior windows. Tenant shall not
without prior written consent of Landlord cause or otherwise sunscreen any
window.
2. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the tenants or used by them for any purpose
other than for ingress and egress from their respective premises.
3. Tenant will be furnished keys to the Tenant's Premises without charge. Tenant
may duplicate such keys for its own use as needed at Tenant's own expense.
Tenant shall exercise strict care to ensure that any keys Tenant has in tenant's
possession are neither lost nor made available to any unauthorized party. Upon
expiration or any termination of a Tenant's Lease, all keys to tenant's premises
and to the Building in tenant's possession shall be surrendered to Landlord.
Tenant shall not add, change, or re-key the locks to or within its Premises
without the written consent of Landlord. Tenant shall not alter any lock or
install any new or additional locks or any bolts on any doors or windows of the
premises. Landlord's acceptance of any keys returned by Tenant shall not
constitute an agreement that any Lease is terminated or modified in any way.
Tenant shall not install security systems in its Premises without the prior
written consent of Landlord.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein and the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by the Tenant who, or those employees or invitees shall have caused it.
5. Tenant shall not overload the floor of the premises or in any way deface the
premises or any part thereof.
35
<PAGE>
6. No furniture, freight or equipment of any kind ("Movable Items") shall be
brought into the Building without the prior notice to Landlord and all moving of
the same into or out of the Building shall be done at such time and in such
manner as Landlord shall designate. Tenant shall notify Landlord reasonably in
advance of the date Tenant wishes to move such Movable Items into or out of the
building. Landlord shall designate which elevator is to be used for moving such
Movable Items. Movable Items shall be adequately padded in order to protect the
Building and elevator from scratches and damage. Movable Items may be moved into
or out of the Building only at such time as when the Building is normally open.
Any hand trucks or dollies used for moving Movable Items shall be equipped with
rubber wheels. Any vehicle used in the delivery or removal of Movable Items
shall be parked only where permitted by Landlord so as not to disrupt the normal
business of other Tenants of the Building or the normal operation of the
Building. Landlord shall have the unrestricted right to prescribe and limit
size, weight, final positioning and installation of any Movable Items brought
into the Building. In no event shall Tenant knowingly bring Movable Items into
the Building which exceed a weight per square foot of floor space utilized which
may be dangerous or detrimental to the Building. Any scratching or damage done
to the Building by Tenant while moving such Movable Items into or out of the
Building shall be immediately and professionally repaired at the Tenants
expense.
Landlord shall have the right to prescribe the weight, size and position of
all safes and other heavy equipment brought into the Building and also the times
and manner of moving the same in and out of the Building. Safes or other heavy
objects shall, if considered necessary by Landlord, stand on supports of such
thickness as is necessary to property distribute the weight. Landlord will not
be responsible for loss of or damage to any such safe or property from any cause
and all damage done to the building shall be repaired at the expense of Tenant.
36
<PAGE>
7. Tenant shall not use, keep or permit to be used any or kept any foul or
noxious gas or substance in the premises, or permit or suffer the premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any fish, birds, or animals be brought in or kept in or about the premises
or the Building, except when needed by the visually impaired.
8. No cooking shall be done or permitted by any Tenant on the premises, nor
shall the premises be used for the storage of merchandise, for washing clothes,
for lodging, or for any improper, objectionable or immoral purposes.
9. Tenant shall not use or keep in the premises or the Building any kerosene,
gasoline or flammable or combustible fluid or material, or use any method of
heating or air conditioning other than that supplied by Landlord.
10. Landlord will direct electricians as to where and how telephone wires are to
be introduced. No boring or cutting for wires will be allowed without the
consent of the Landlord. The location of telephones, call boxes and other office
equipment affixed to the premises shall be subject to the approval of Landlord.
11. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building, or
to the halls, corridors, elevators or stairways in the Building, or to the
premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
The Landlord shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other combination, the Landlord
reserves the right to prevent access to the Building during the continuance of
the same by closing of the doors or otherwise, for the safety of the tenants and
protection of property in the Building and the Building.
12. Landlord reserves the right to exclude or expel from the Building any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
13. No vending or arcade machine or machines of similar description shall be
installed, maintained or operated upon the premises without the written consent
of the Landlord.
14. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the premises are a part.
37
<PAGE>
15. Tenant shall not disturb, solicit, peddle or canvass any occupant of the
Building and shall cooperate to prevent same.
16. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
17. Landlord shall have the right to control and operate the public portions of
the Building, and the public facilities furnished for the common use of the
tenants, in such manner as it deems best for the benefit of the tenants
generally.
18. All entrance doors in the premises shall be left locked when the premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress from the premises.
19. Unless Tenant or its employees are using the Premises, no unattended vehicle
may be left in the parking area of the Building between the hours of 8:00 P.M.
and 6:00 A.M. of the following day. Parking spaces marked for the handicapped
shall only be used by persons who are handicapped and are driving vehicles
marked with a handicapped sticker. Anything to the contrary herein
notwithstanding, Landlord shall have the unrestricted right to control all
parking about the Building by whatever methods and means it desires. Tenant and
its employees shall adhere to and obey all parking control measures as may be
placed into effect at any time and from time to time by Landlord through the use
of numbered parking spaces, signs, stickers or identifying decals to be placed
on vehicles, or any other measures, methods, or means. Landlord may change such
parking control measures from time to time at its sole discretion. Any vehicle
violating the Buildings parking signs, parked in a reserved space in which it
has not right, parked in a visitor space when the driver is a Tenant or an
employee of Tenant, parked in a handicapped space without a handicapped sticker
affixed to the vehicle, blocking a driveway, or otherwise parked as prohibited
or in violation of Landlord's parking control measures, shall, by Landlord's
option, be towed away at the violating owner's expense or, when applicable, be
subject to citation, all without Landlord incurring any liability.
20. Upon noticing a situation concerning the Premises which could result in
damage to its Premises or the Building, Tenant shall immediately provide written
notice to Landlord. In an emergency situation, Tenant shall take immediate and
appropriate action to protect Tenant's Premises or the Building.
21. Tenant shall never at any time use its Premises as a sleeping or lodging
quarters. Tenant shall not install any lighting fixture or sound speaker or any
other device in or above the suspended ceiling of its Premises and shall not
hang potted plants or any other items from such ceiling without the prior
written consent of the Landlord. Tenant may hang pictures and other
light-weighted items on drywalled walls within its Premises by the use of metal
38
<PAGE>
picture hangers only, and on wood paneled walls by the use of small nails driven
into the grooving of such wood paneling. Except for the foregoing, no other type
of fastener or hanger shall ever be used for any purpose on any wall within the
Premises. Tenants are prohibited from painting any masonry, wallpapered or
paneled wall within its Premises without the prior written consent of Landlord.
22. Tenant shall keep a hard surface such as plastic or masonite under each and
every chair in the Premises which is located in a carpeted area and which is
used at a person's work station (as opposed to a visitor's chair) to protect the
carpeting. Also, all furniture having legs shall be equipped with a "coaster"
for each leg to protect the carpet from indentations. Tenant shall further
maintain all carpeting in its Premises which shall include shampooing and
re-stretching.
23. Tenant shall supply and install, at its expense, all lighting tubes for
fluorescent light fixtures in Tenant's Premises, and Tenant shall supply and
install, at its expense, all incandescent bulbs in its Premises.
24. Should a toilet room be a part of the Tenant's Premises, Tenant shall supply
and install, at its expense, all toilet room supplies.
25. Tenant shall never deposit used injection needles in any trash container.
Such needles shall be placed in some type of hardcover container and disposed of
as required by government regulations.
26. Landlord shall have the right to prohibit any advertising by any Tenant
which, in the Landlord's opinion, materially impairs the reputation of the
Building or its desirability and, upon written notice from Landlord, Tenant
shall refrain from or discontinue such advertising or promotion.
27. Tenant shall not install or affix any type of radio or television antenna to
any part of its Premises or the Building without the prior written consent of
Landlord.
28. Tenant shall not conduct any auction or permit any fire or bankruptcy sale
to be held in the Premises or about the Building.
29. Any door opening from Tenant's Premises onto any common area of the Building
shall be kept closed at all times, except for normal ingress and egress.
Bicycles or other vehicles shall not be permitted in the office or corridors in
the building.
30. Landlord shall not be responsible for lost or stolen personal property,
equipment, money, jewelry or any other item from Tenant's Premises or from
common areas of the Building regardless of whether such loss or theft occurs
when such Premises or whether or not the Building is locked.
39
<PAGE>
31. Tenant, when leaving its premises shall see that all water faucets or water
apparatus have been shut off, and that all electricity and electrical appliances
have been shut off, so as to prevent waste or damage.
32. Tenant shall not throw cigar or cigarette butts, or other substances or
litter of any kind, in or about the Building, except in receptacles provided for
that specific purpose, and in those areas as designated by Landlord for those
purposes.
33. Tenant shall not obstruct the driveways, parking areas, sidewalks or
entrances and exits of the Building, but shall use same only as ingress to and
egress from its Premises.
34. Tenant shall refer all contractors, service people, installation technicians
and the like who are rendering any service on or to its Premises to Landlord for
Landlord's reasonable approval and supervision prior to the performance of any
work or service. This requirement shall apply to all work or service to be
performed in Tenant's Premises or in the Building, including installation and
service of telephone, computers and any other items of a physical nature.
Landlord shall be given reasonable notice prior to a Tenant expecting Landlord's
approval or supervision.
35. Landlord shall not be responsible to Tenant or to any other person for the
non-observance or violation of these Rules and Regulations by any Tenant or by
any other person. Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition to their
occupancy of its Premises. Landlord shall use reasonable efforts to assist
Tenant with any problems it may have with a Tenant in an adjoining suit.
36. Should any Tenant incur or become liable for any cost, charge, or expense
under these Rules and Regulations, such Tenant shall pay same upon demand by
Landlord, and failure to do so within five (5) days after such demand shall
constitute, at Landlord's option, a material breach and default of Tenant under
its Lease.
37. Landlord shall have the unrestricted right, at any time, and from time to
time, to rescind any one or more of these Rules and Regulations, or to make such
other and further reasonable rules and regulations as in Landlord's judgment
may, from time to time, be necessary for the operation, maintenance, safety,
care and cleanliness of Tenant's Premises and of the Building and for the
preservation of order therein.
38. Increase in Risk. No tenant shall do anything in the Leased premises and/or
the Building or bring or keep anything therein which will in anyway increase or
tend to increase the risk of fire or which shall conflict with the regulations
of the fire Department or the fire laws or with any rule ordinances established
by the Board of Health. No tenant shall use any machinery which may cause
40
<PAGE>
any objectionable noise, jar or tremor to the floors or walls or which by its
weight may injure the floor of the building.
39. Locking of Leased Premises. Each tenant shall see that the windows and doors
of the Leased Premises are close and securely locked before leaving the Leased
Premises and that all lights are properly turned off.
40. Notice of Accidents. Each tenant shall give Landlord prompt notice of any
accident or defect on the Building, the Leased Premises, the plumbing,
electrical wiring, heating or air conditioning so that the same may be attended
to promptly.
41. Cooperation with Landlord. Each tenant shall cooperate with Landlord in
obtaining maximum effectiveness of the cooling system by closing spaces and/or
other window coverings when the sun's rays fall on the window of leased
Premises. No tenant shall temper with or alter or change the setting of any
thermostats or temperature control valves.
ANTIGUA GROUP, INC.,
an Arizona corporation
Date: ___________________ Signed ______________________________
By: Thomas E. Dooley, Jr.
Its: President
41
<PAGE>
EXHIBIT B
SUITE NO. SQ. FT.
BUILDING A 203 B 1,612
109 3,026
108 3,117
107 3,282
106 3,166
103 3,140
104-105 6,357
101 3,004
BUILDING B 109 3,025
------
TOTALS 29,729
======
42
Exhibit 10.10.1
LEASE MODIFICATION AGREEMENT #1
This Lease Modification Agreement #1 to Lease made this 7th day of
October, 1996, by and between Petroleum, Inc., a Kansas corporation, hereinafter
referred to as "Landlord" and Antigua Group, Inc., an Arizona corporation,
hereinafter referred to as "Tenant."
R E C I T A L S
WHEREAS, Landlord leased certain Premises to Tenant in the McCormick
Ranch Industrial Center III located at 9318 and 9332 North 95th Way, City of
Scottsdale, County of Maricopa, State of Arizona, pursuant to that certain
Office Building Lease between Landlord and Tenant dated August 22, 1996,
hereinafter referred to as the "Lease," in which the Premises are more
particularly described; and
WHEREAS, Landlord and Tenant are mutually desirous of modifying the
terms of the Lease as provided herein below.
NOW, THEREFORE, in consideration of these presents and the agreement on
each other, Landlord and Tenant hereby mutually agree as follows:
1. The effective date of this agreement is January 1, 1997.
2. The aforementioned Lease is revised to delete 1,740 S.F. in
suite 101 and to expand Suite 203 from 1,612 SF to 3,169 S.F.
for a total square footage reduction of 183 S.F. (see attached
Exhibits A-1 and A-2).
3. For the two (2) months of November and December 1996, the
amount of space, which Tenant will pay rent to Landlord, is to
be reduced by 2,191 S.F.
4. All modifications to premises are to be "building standard"
and subject to prior approval of Landlord.
5. All other terms and conditions of the Lease remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
TENANT: LANDLORD:
ANTIGUA GROUP, INC. PETROLEUM, INC.
<PAGE>
By: /s/ Thomas E. Dooley, Jr. By: /s/ Thomas D. Beard
Thomas D. Beard
Title: Title: Sr. Vice-President
Petroleum, Inc.
<PAGE>
EXHIBIT A-1
SKETCH OF FIRST FLOOR PLAN BUILDING A
Suites 101, 103, 104, 105, 106, 107, 108 and 109.
Gross Building Area 37,454 sf
Common area 3175 sf
Gross Less Common Area 34,279 sf
Load Factor 9.3%
<PAGE>
EXHIBIT A-2
SKETCH OF PARTIAL SECOND FLOOR PLAN BUILDING A
PREPARED BY THE PETERS DESIGN GROUP INC.
date stamped October 03 1996
Suite 201 (1553 sf OFFICE) (1697 SF RENTABLE)
Suite 202 (1204 sf OFFICE) (1316 SF RENTABLE)
Suite 203 (2900 sf OFFICE) (3169 SF RENTABLE)
Exhibit 10.10.2
LEASE MODIFICATION AGREEMENT #2
This Lease Modification Agreement #2 to Lease made this 8th day of January,
1997, by and between Petroleum, Inc., a Kansas corporation, hereinafter referred
to as "Landlord" and Antigua Group, Inc., an Arizona corporation, hereinafter
referred to as "Tenant."
R E C I T A L S
WHEREAS, Landlord leased certain Premises to Tenant in the McCormick Ranch
Industrial Center III located at 9318 and 9332 North 95th Way, City of
Scottsdale, County of Maricopa, State of Arizona, pursuant to that certain
Office Building Lease between Landlord and Tenant dated August 22, 1996,
hereinafter referred to as the "Lease," in which the Premises are more
particularly described; and
WHEREAS, Landlord and Tenant are mutually desirous of modifying the terms
of the Lease as provided herein below.
NOW, THEREFORE, in consideration of these presents and the agreement on
each other, Landlord and Tenant hereby mutually agree as follows:
1. The effective date of this agreement is January 8, 1997.
2. The aforementioned Lease is revised to add suite 201 in building A for
an additional 168 square feet of space. (See attached Exhibits A-1 and
A-2).
3. Tenant agrees to rent space "as is."
4. Tenant will install a dead bolt lock on one existing door at Tenant's
expense.
5. All modifications to premises are to be "building standard" and
subject to prior approval of Landlord.
6. All other terms and conditions of the Lease remain unchanged and in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the day and
year first above written.
TENANT: LANDLORD:
ANTIGUA GROUP, INC. PETROLEUM, INC.
By: /s/ Gerald K. Whitley By: /s/ Thomas D. Beard
<PAGE>
Thomas D. Beard
Title: Vice President - Finance Title: Sr. Vice-President
Petroleum, Inc.
Date Signed: 1/9/97 Date Signed: 1/8/97
<PAGE>
EXHIBIT A
[SKETCH OF FIRST FLOOR PLAN - BUILDING A]
<PAGE>
EXHIBIT A-2
[SKETCH OF PARTIAL SECOND FLOOR PLAN - BUILDING A]
Exhibit 10.11
National Football League Properties, Inc.
410 Park Avenue, New York, New York 10022
Area Code (212) 838-0660 FAX (212) 758-4239
Term Sheet - Licensing Agreement
Licensee: Antigua Sportswear, Inc. Date: February 27, 1996
Address: 9319 N. 94th Way No.: 641-149-6320
Scottsdale, AZ 85258
The following terms are made part of and are subject to all definitions, terms
and conditions set forth in License No. R02468.
MARKETING PROGRAM: NFL Pro Line
TERM: April 1, 1996-March 31, 1999
TERRITORY: The United States
LICENSED PRODUCTS: WOVEN SHIRTS, KNIT SHIRTS, SWEATERS,
WINDWEAR (ONE STYLE ONLY), WIND SHIRTS (ONE
STYLE ONLY)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR LICENSED PRODUCT ROYALTY %
<S> <C> <C>
YEAR I PO6054/A400 PRO LINE SWEATERS 9.00
04/01/96-3/31/97 P10010/A100 PRO LINE KNIT SWEATERS 9.00
P06057/A104 PRO LINE WOVEN SHIRTS 9.00
P10012/A100 PRO LINE WINDWEAR 9.00
P10013/A100 PRO LINE WIND SHIRTS 9.00
YEAR II P06054/A400 PRO LINE SWEATERS 9.00
04/01/97-3/31/98 P10010/A100 PRO LINE KNIT SHIRTS 9.00
P06057/A104 PRO LINE WOVEN SHIRTS 9.00
P10012/A100 PRO LINE WINDWEAR 9.00
P10013/A100 PRO LINE WIND SHIRTS 9.00
YEAR III P06054/A400 PRO LINE SWEATERS 10.00
04/09/98-03/31/99 P10010/A100 PRO LINE KNIT SHIRTS 10.00
P06057/A104 PRO LINE WOVEN SHIRTS 10.00
P10012/A100 PRO LINE WINDWEAR 10.00
P10013/A100 PRO LINE WIND SHIRTS 10.00
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR MINIMUM GUARANTEE ADVANCE
<S> <C> <C>
YEAR I 04/01/96-03/31/97 $*** $***
YEAR II 04/01/97-03/31/98 $*** $***
YEAR III 04/01/98-03/31/99 $*** $***
</TABLE>
- --------------------------------------------------------------------------------
*** This confidential material has been omitted and filed separately
with the Commission.
i
<PAGE>
AUTHORIZED BRANDS FOR
LICENSED PRODUCT(S): Antigua
LICENSED MARK(S) FOR Marketing Program logo, Club Marks, and the
LICENSED PRODUCT(S): following League Marks: "National Football
League," "NFL," "National Football
Conference," "American Football
Conference," "NFC," "AFC," and the NFL
Shield design.
DISTRIBUTION CHANNELS FOR Direct Retailers, Fan Shops, Footwear
LICENSED PRODUCT(S): Specialty Stores, Sporting Goods Stores,
Department Stores
RENEWAL REQUEST DATE: August 31, 1998
- --------------------------------------------------------------------------------
PROMOTIONAL PRODUCT(S):
<TABLE>
<CAPTION>
FISCAL YEAR LICENSED PRODUCTS NUMBER OF UNITS
<S> <C> <C>
YEAR I PRO LINE SWEATERS ***
PRO LINE KNIT SHIRTS ***
PRO LINE WOVEN SHIRTS ***
PRO LINE WINDWEAR ***
PRO LINE WIND SUITS ***
YEAR II PRO LINE SWEATERS ***
PRO LINE KNIT SHIRTS ***
PRO LINE WOVEN SHIRTS ***
PRO LINE WINDWEAR ***
PRO LINE WIND SUITS ***
YEAR III PRO LINE SWEATERS ***
PRO LINE KNIT SHIRTS ***
PRO LINE WOVEN SHIRTS ***
PRO LINE WINDWEAR ***
PRO LINE WIND SUITS ***
</TABLE>
- --------------------------------------------------------------------------------
ADVERTISEMENTS: N/A
- --------------------------------------------------------------------------------
COOPERATIVE FUND: N/A
- --------------------------------------------------------------------------------
SPONSORSHIPS: N/A
- --------------------------------------------------------------------------------
BROADCAST EXPOSURE FEE: N/A
- --------------------------------------------------------------------------------
ASSIGNED MEMBER CLUBS: N/A
- --------------------------------------------------------------------------------
MEMBER CLUB MARKETING COMMITMENT: N/A
- --------------------------------------------------------------------------------
*** This confidential material has been omitted and filed separately
with the Commission.
ii
<PAGE>
ADDITIONAL TERMS:
1. Promotional Fee
(a) In addition to all other amounts payable by Licensee pursuant
to this License, Licensee shall pay to NFLP *** each Fiscal
Year during the term ("Promotional Fee") in two equal
installments due on or before August 1 and December 1,
respectively.
(b) If the number of head coaches who are members of the NFL
Coaches Club ("Members") falls below twenty-five (25) for any
Fiscal Year of the Term (for purposes of this provision the
annual membership count in the Coaches Club will be made June
1st for each Fiscal Year), the Promotional Fee shall be
reduced as follows:
(1) If less than twenty-five (25) coaches, but at least
fifteen (15) coaches, are Members of the Coaches Club
in any Fiscal Year or the Term, the Promotional Fee
for such Fiscal Year shall be reduced by an amount
equal to *** multiplied by the difference between
twenty-five (25) and the total number of Coaches Club
members during such Fiscal Year.
(2) If less than fifteen (15) coaches are Members of the
Coaches Club in any Fiscal Year of the Term, License
will not be required to pay the Promotional Fee for
such Fiscal Year and Licensee and NFLP shall
negotiate in good faith as to an appropriate
reduction, if any, to the Advance Royalty Payment and
Minimum Royalty Guarantee for such Fiscal Year;
provided, however, that if Licensee fails to pay the
Promotional Fee pursuant to this provision in any
Fiscal Year, Licensee shall not be entitled to any of
the rights and benefits set forth in Additional Term
Nos. 2, 3, 4 and 5 below during such Fiscal Year.
2. Member Appearances
During each Fiscal Year of the Term, License shall be entitled
to personal appearances by five (5) Coaches Club Members. The specific
Members, appearance date(s), times, duration and event are to be
mutually agreed upon by Licensee and NFLP. Notwithstanding the above,
Licensee acknowledges ad agrees that such appearances will not
necessarily occur during the NFL season.
3. Product Supply
(a) During each Fiscal Year of the Term, Licensee will supply ***,
valued at Licensee's normal domestic wholesale sales price,
worth of Licensed Products, at no charge, to each NFL head
coach.
(b) During each Fiscal Year of the Term, Licensee will supply to
NFLP, at no charge, *** Pro Bowl Shirts (style to be selected
by NFLP).
*** This confidential material has been omitted and filed separately
with the Commission.
iii
<PAGE>
4. Designation Claims
Based on Licensee's supply of Licensed Products to all NFL head coaches
and NFLP and Licensee's financial support of the Coaches Club and the
NFL as set forth above, Licensee shall have the right, subject to all
terms and conditions of this License, to use the following Designation
Claims in its advertising and promotional materials:
(a) "Antigua Sportswear, Inc.: Official Sport Shirt of the NFL
Coaches Club";
(b) "Antigua Sportswear, Inc.: Official Sweater of the NFL Coaches
Club";
(c) "Antigua Sportswear, Inc.: Official Sport Shirt of the Pro
Bowl".
5. Use of Coaches Club Logo
Licensee shall have the right, subject to all terms and
conditions of this License, to utilize the NFL Coaches Club logo on
hangtags and in advertising and promotional materials for the Licensed
Products.
iv
- --------------------------------------------------------------------------------
<PAGE>
National Football League Properties, Inc.
410 Park Avenue, New York, New York 10022
Area Code (212) 838-0600 FAX (212) 758-4239
Retail Licensing Agreement
Licensee: Antigua Sportswear, Inc. Date: February 27, 1996
Address: 931 9 N. 94th Way No.: 641-149-6320
Scottsdale, AZ 85258 Lic. No.: R02468
National Football League Properties, Inc. ("NFLP") has the exclusive right to
license for commercial purposes the trademarks of the National Football League
("NFL") and the thirty professional football teams that comprise the NFL
("Member Clubs"). Licensee, whose name and address are set forth above, desires
to use certain of these trademarks in accordance with the terms and conditions
of this agreement ("License"). In consideration of the mutual premises,
covenants and undertakings contained in this License, the parties to this
License agree as follows:
1. Definitions
As used in this License, the terms listed on the attached Term Sheet
and elsewhere in this License have the following meanings:
a. "Advance Royalty Payment": The amount to be credited to Royalty
payments due for the corresponding Fiscal Year payable to NFLP upon the
execution of this License for Fiscal Year I and on or before April 15
for each successive Fiscal Year.
b. "Broadcast Exposure Fee": The amount Licensee shall pay to NFLP for
on-field exposure rights for the Exposure Products.
c. "Advertisements": Advertising space in designated NFLP publications to
be purchased by Licensee in accordance with this License.
d. "Affiliate": Any person or entity in which Licensee or any owner,
majority shareholder, officer or director of Licensee has any direct or
indirect beneficial or ownership interest or is a joint venture
partner.
e. "Assigned Member Clubs": The Member Clubs for which Licensee shall have
on-field exposure rights for the Exposure Products in accordance with
the terms of Paragraph 19.
f. "Authorized Brands": The only brand names Licensee may use in
association with the Licensed Products.
g. "Club Marks": The full team names, nicknames, helmet designs, uniform
designs, logos, slogans, and other identifying symbols and indicia
adopted for commercial purposes by the Member Clubs.
h. "Cooperative Fund": The amount payable to NFLP during each Fiscal Year
for use by NFLP in connection with the designated Cooperative Program.
i. "Distribution Channels": The channels of trade in the Territory in
which Licensee may distribute for sale or sell each Licensed Product as
defined in Exhibit I attached to this License and/or the attached Term
Sheet.
j. "Exposure Products": The Licensed Products for which Licensee shall
have on-field exposure rights for the Assigned Member Clubs.
k. "Fiscal Year": The period beginning on April 1 of any year and ending
on March 31 of the following year except for Fiscal Year I, which will
begin on the date this License is fully-executed and will end on March
31 of the following year.
l. "League Marks": "National Football League", "NFL", "National Football
Conference", "American Football Conference", "NFC", "AFC",
R02468 February 27, 1996 Antigua Sportswear, Inc. 1
<PAGE>
"Super Bowl", "Pro Bowl", the NFL Shield design, and other identifying
symbols and indicia adopted for commercial purposes by the NFL.
m. "Licensed Marks": The trademarks for which Licensee is granted certain
limited, non-exclusive rights under this License.
n. "Licensed Products": All products for which Licensee may use the
Licensed Marks in association with the Authorized Brands. This license
will refer to each distinct type of product as a "Licensed Product"
since more than one product may be licensed (e.g. T-shirts and jackets
would each be a Licensed Product).
o. "Marketing Program": The program established by NFLP in connection with
which Licensee may use the Licensed Marks as authorized under this
License. Licensee shall abide by all rules, guidelines and policies
established by NFLP for such Marketing Program, which are deemed part
of this License.
p. "Member Club Marketing Commitment": The amount Licensee shall pay to
NFLP in exchange for Member Club controlled advertising and promotional
inventory from each Assigned Member Club in such Member Club's local
marketing area.
q. "Minimum Royally Guarantee": The minimum amount of Royalty payments
payable to NFLP on or before the 15th day following the end of each
Fiscal Year.
r. "Net Sales": Gross sales of all Licensed Products sold or distributed
for sale at Licensee's invoiced selling price less sales derived from
returns received and credited only. Licensee shall not credit any
return at a rate greater than the original invoiced selling price for
such Licensed Products. There shall be no other deductions allowed
including, without limitation, deductions for manufacturing costs,
selling costs, distribution costs, advertising and promotional costs,
quantity discounts, freight, non-collected or uncollectable accounts,
commissions, taxes, cash discounts, close out sales, distress sales,
sales to employees, or any other costs. For purposes of this Agreement,
Net Sales and all other referenced sales occur when Licensee invoices
or ships any Licensed Product, whichever is earlier. If Net Sales are
made to an Affiliate, the dollar amount of gross sales will be the
greater of Licensee's regular price to unaffiliated accounts or the
Affiliate's gross sales price to an unaffiliated account.
s. "NFL Marks": All League Marks and Club Marks, collectively.
t. "Premiums": Any products, including the Licensed Products, bearing the
NFL Marks or other indicia of the NFL or its Member Clubs that Licensee
sells or gives away for the purposes of promoting, publicizing or
increasing the sale of its own products or services other than the
Licensed Products, or that Licensee sells or gives away to any other
party whom Licensee knows or should reasonably know intends to use such
products for the purposes of promoting, publicizing or increasing the
sale of any other party's products or services. Promotions include,
without limitation, combination sales, incentives for sales force, and
trade or consumer promotions.
u. "Promotional Products": The quantity of each Licensed Product that
Licensee shall provide to NFLP at no cost during each Fiscal Year for
use in connection with NFLP's Promotional Programs, as defined in
Paragraph 5 of this License.
v. "Renewal Request Date": The date by which NFLP must receive
notification from Licensee of Licensee's desire to renew the License.
w. "Royalty": The amount of Net Sales Licensee shall pay to NFLP for all
sales of the Licensed Products. Licensee shall calculate all
R02468 February 27, 1996 Antigua Sportswear, Inc. 2
<PAGE>
Royalty payments according to Net Sales based on Licensee's normal
domestic wholesale warehouse price. NFLP reserves the right to increase
the rate of the Royalty during the Term, provided that it gives
Licensee at least six (6) months written notice before such increase
takes effect.
x. "Sponsorship": The designated events for which Licensee will
participate as a sponsor during each Fiscal Year of the Term subject to
the execution of an NFLP Sponsorship Agreement.
y. "Style": A distinct prototype of a Licensed Product that differs from
any other prototype of that same Licensed Product in any form or manner
with respect to design; material, pattern, size, shape, Licensed Marks,
or any other distinguishing characteristic involving the specifications
for the production of all or any portion of that Licensed Product (e.g.
T-shirts bearing the San Francisco 49ers logo and T-shirts bearing the
San Diego Chargers logo would each be a Style of Licensed Product).
z. "Term": The time period for which this License shall be effective.
aa. "Territory": The geographic area in which Licensee shall have the right
to sell the Licensed Products.
bb. "Unit": A single Licensed Product (e.g. one T-shirt and one jacket
would each be a Unit).
2. Grant of License
Subject to all of the terms and conditions of this License, NFLP grants
Licensee the non-exclusive right to use the Licensed Marks in
connection with the manufacture, distribution, sale, and advertising of
the Licensed Products under the Authorized Brand in the Distribution
Channels in the Territory in accordance with all policies, rules and
regulations of the Marketing Program and NFLP, which are deemed part of
this License. Licensee shall have no right to sell or distribute any
Premiums unless Licensee receives a separate Premium License from NFLP
and pays NFLP the applicable Royalty under such Premium License.
Licensee shall not use the Licensed Products as Premiums or permit the
use of the Licensed Products as Premiums by any party whom Licensee
knows or should reasonably know intends to use the Licensed Products as
Premiums.
3. Terms of Payment
a. Licensee shall pay NFLP the Royalty on all sales of the Licensed
Products. Regardless of whether any sales occur during any Fiscal Year,
Licensee shall also pay NFLP the applicable Advance Royalty Payment and
Minimum Royalty Guarantee for each Fiscal Year during the Term. Advance
Royalty Payments and any payments made to satisfy the Minimum Royalty
Guarantee are not refundable. Licensee may credit the Advance Royalty
Payment and Royalty payments made to NFLP during each Fiscal Year to
the Minimum Royalty Guarantee for the corresponding Fiscal Year only.
Licensee may not credit such amounts to the Advance Royalty Payment,
Minimum Royalty Guarantee or any other payment required under this
License for any other Fiscal Year. If NFLP terminates this License, for
the Fiscal Year in which termination occurs ("Termination Fiscal Year")
Licensee shall pay NFLP the Royalty on all sales of the Licensed
Products made during the Termination Fiscal Year or a pro rated portion
of the Minimum Royalty Guarantee owed in excess of the Advance Royalty
Payment ("Termination Guarantee"), whichever is greater. For purposes
of this paragraph the pro rated Minimum Royalty Guarantee will be
calculated as follows:
R02468 February 27, 1996 Antigua Sportswear, Inc. 3
<PAGE>
Termination Guarantee x No. of Days Completed
in Termination Fiscal Year
1 365
b. On or before the 15th day of each month, Licensee shall make all
Royalty payments to NFLP due on sales of the Licensed Products during
the preceding calendar month. Simultaneously with the Royalty payment,
Licensee shall furnish full and accurate statements of the Net Sales of
each Licensed Product sold and distributed during such calendar month
on forms provided by NFLP. The statements will include the quantity and
description of each Licensed Product itemized by Member Club if
applicable, the gross sales price, itemized deductions from the gross
sales price, any returns made during the preceding month, and the
resulting Net Sales on which Licensee calculated the Royalty amount.
Licensee shall furnish such statements for each Licensed Product
regardless of whether it sold any such Licensed Product during the
preceding month. NFLP's receipt or acceptance of any statement or
Royalty payment or the cashing of a Royalty check will not preclude
NFLP from questioning the correctness of such statements or payments at
any time. Upon discovery of any verifiable inconsistency or mistake in
such statements or payments, Licensee shall immediately rectify such
inconsistency or mistake.
c. Licensee shall pay NFLP all other amounts listed on the Term Sheet
attached to this License in accordance with the dates provided in such
Term Sheet.
d. Licensee shall pay NFLP an additional charge of one and one-half
percent (1.5%) per month on any payment due under this License that
remains unpaid fifteen (15) days after such payment becomes due.
4. Quality Control
a. Prior to making any use of any Style of any Licensed Product, Licensee
shall submit to NFLP for its approval at Licensee's sole cost and
expense at the following applicable stages: (i) finished artwork or
final proofs; (ii) pre-production samples or strike-offs for such
proposed Style; and (iii) a sample Unit of the finished version of such
Style together with all packaging, cartons, containers, hangtags and
wrapping materials related to such Unit ("Related Materials"). For
Styles that differ solely with respect to the Licensed Marks, Licensee
may submit a sample Unit of one Style along with artwork of the Styles
bearing the other Licensed Marks for approval purposes unless NFLP
requests a sample Unit of each such Style. NFLP shall use its best
efforts to promptly evaluate all such submissions and provide Licensee,
if applicable, with quality standards and specifications for the
finished Units of each Style. Upon approval of the finished version of
a sample Unit of a Style, NFLP shall execute a Product Approval Form
that will contain any applicable quality standards and specifications.
License shall not manufacture, sell, distribute or advertise any Style
of a Licensed Product unless NFLP has executed a Product Approval Form
for such Style.
b. All Product Approval Forms are effective for one Fiscal Year only and
Licensee must resubmit to NFLP each Style of each Licensed Product
previously approved by NFLP for quality control approval within thirty
(30) days after the start of each successive Fiscal Year. From time to
time, NFLP may request additional sample Units of any Style of any
Licensed Product to confirm continued compliance with NFLP's quality
control guidelines and any applicable quality
R02468 February 27, 1996 Antigua Sportswear, Inc. 4
<PAGE>
standards and specifications. NFLP shall have the right to withdraw its
approval of any Style of any Licensed Product if, in NFLP's sole
judgment, such sample Units cease to conform to such guidelines,
standards or specifications or otherwise deviate in quality from the
previously approved sample Units. Upon notice by NFLP to Licensee that
the Product Approval Form for a Style of a Licensed Product has been
withdrawn, Licensee shall immediately cease to manufacture, distribute,
sell or advertise any further Units of such Style until such time as a
new Product Approval Form has been executed and delivered by NFLP.
c. Licensee shall not make any modification to any Style for which NFLP
has issued a Product Approval Form or depart from any applicable
quality standards and specifications for any Style unless NFLP has
approved such modification for such Style and issues a new Product
Approval Form. Licensee acknowledges that the manufacture, use, sale,
distribution, or advertising of any Style that deviates from the Style
approved by NFLP will constitute a material breach of this License.
Upon such breach, NFLP may terminate this License immediately.
d. No distribution or sale of irregulars or seconds is permitted except
when Licensee receives prior written approval from NFLP.
5. Advertising and Promotional Materials
a. Licensee will not use the Licensed Marks or any reproduction of them,
including without limitation, Photographs or Computer Art, as defined
in Paragraph 1Oa, in any advertising, promotion, publicity or display
materials (collectively "Promotional Materials") without receiving
NFLP's prior written approval executed on a Promotional Approval Form
supplied to Licensee by NFLP. Licensee may use such approved
Promotional Materials only in conjunction with the Styles of Licensed
Products that NFLP has approved. Licensee shall submit to NFLP all
Promotional Materials at the following applicable stages appropriate to
the medium used: (i) conceptual stage, pre-production art or rough
cuts; (ii) layout, storyboard and script: (iii) finished materials: and
(iv) at any other time as reasonably requested by NFLP. NFLP shall use
best efforts to evaluate all such Promotional Materials' submissions
within ten (10) business days of their receipt by NFLP. NFLP shall
execute a Promotional Approval Form for all Promotional Materials that
it approves. Licensee shall notify its retailers and/or Third Party
Distributors that NFLP must approve all Promotional Materials involving
or using in any form or manner the Licensed Marks. Licensee shall use
best efforts to ensure that its retailers and/or Third Party
Distributors do not publish, display or otherwise distribute such
Promotional Materials without NFLP's prior written approval.
b. NFLP has the exclusive right, in its sole discretion, to approve or
disapprove any Promotional Materials' submissions. Licensee
acknowledges that NFLP may disapprove Promotional Materials that, in
NFLP's opinion, reflect unfavorably upon NFLP, the NFL or its Member
Clubs including, without limitation, materials involving gambling,
lotteries or other games inconsistent with the image of the NFL, the
Member Clubs, or the Licensed Products.
c. NFLP may withdraw its approval of any Promotional Materials if: (i) the
Promotional Materials have been altered without the prior written
approval of NFLP; (ii) the Style and/or the Licensed Product promoted
in the Promotional Materials ceases to be approved under this License;
or (iii) an event occurs that, in NFLP's opinion,
R02468 February 27, 1996 Antigua Sportswear, Inc. 5
<PAGE>
causes NFLP's relationship with Licensee or any Licensed Product to
adversely reflect upon the professional or business reputation of the
NFL, its Member Clubs or NFLP.
d. Licensee represents that NFLP has the right to conduct promotions and
special events in its sole discretion and to print catalogs, sales
sheets and brochures involving representative merchandise from NFLP's
licensees ("Promotional Programs"). Licensee shall supply within ten
(10) business days of any request by NFLP, at no charge to NFLP, all or
any portion of the Promotional Products required by NFLP for use, in
NFLP's sole discretion, in such Promotional Programs.
e. Licensee shall pay NFLP the designated amounts for the Advertisements,
Sponsorship, and Cooperative Fund, if applicable, on or before the
corresponding dates listed on the Term Sheet attached to this License.
NFLP shall use such payments in a manner determined by NFLP in its sole
discretion.
f. During each Fiscal Year of the Term in which NFLP publishes the NFL
Merchandise Catalogue, Licensee shall purchase a full-page
advertisement in such catalogue at the rate established in NFLP's
then-existing rate card. Licensee shall make such payment within
fifteen (15) days from receiving an invoice from NFLP.
g. During each Fiscal Year of the Term, Licensee shall pay NFLP the Member
Club Marketing Commitment set forth in the Term Sheet attached to this
Licensee in accordance with the payment due dates listed on such sheet.
Licensee and each Assigned Member Club shall mutually agree to the
specific inventory that Licensee will receive in exchange for payment
of the Member Club Marketing Commitment.
6. Distribution Requirements
Licensee shall distribute for sale and sell each Licensed Product only
in the authorized Distribution Channels. Prior to distribution of any
Licensed Product, Licensee shall submit to NFLP a list of its retail
accounts for the Licensed Products for the purpose of determining which
accounts fall within the Distribution Channels. NFLP shall determine,
in its sole discretion, whether such retail accounts fall within the
Distribution Channels and shall provide Licensee with a list of the
approved retail accounts. Licensee shall manufacture, distribute, sell
and maintain inventory of sufficient quantities of each Style of each
Licensed Product to meet the reasonable market demand in the
Distribution Channels. Licensee shall not sell Licensed Products to any
third party that Licensee knows or should reasonably know intends to
sell the Licensed Products outside of the authorized Distribution
Channels. If Licensee sells or distributes for sale other merchandise
that does not bear the Licensed Marks but is of the same grade and
quality as the Licensed Products, Licensee shall not discriminate in
the granting of commissions and discounts to salespersons, dealers and
distributors for the sale of the Licensed Products. If the Licensed
Marks are Club Marks, Licensee acknowledges that it shall manufacture,
distribute and sell a commercially significant quantity of Units
bearing the trademarks of each Member Club individually in each Style.
Licensee shall have no right to distribute the Licensed Products via
computer on-line services unless expressly indicated on the Term Sheet.
7. Authorized Brands
Licensee shall only use the Authorized Brands, if applicable, in
connection with the manufacture, distribution, sale, and advertising
R02468 February 27, 1996 Antigua Sportswear, Inc. 6
<PAGE>
of each Licensed Product. NFLP shall have the right, in its sole
discretion, to remove or change any of the Authorized Brands, if
applicable, during the Term. Licensee must receive the prior written
approval of NFLP to use any other trademarks on the Licensed Products.
8. NFLP's Purchase of Licensed Products
In addition to the Promotional Products provided at no cost by
Licensee, NFLP, the NFL and its Member Clubs shall have the right to
purchase any of the Licensed Products in any quantity at the minimum
wholesale price, excluding Royalty payments, that Licensee charges to
its best customer, provided that NFLP will not require Licensee to pay
a Royalty on such sales.
9. Third Party Relationships
a. Licensee shall not assign, sublicense, transfer or otherwise encumber
any of its rights under this License to any Affiliate or other third
party without NFLP's prior written consent. If Licensee assigns,
sublicenses, transfers or encumbers any portion of this License without
such consent, NFLP shall have the right to terminate this License
immediately. Among other things, NFLP will consider the License
assigned and subject to the requirements of this subparagraph if: (i)
the beneficial ownership or control of fifty percent (50%) or more of
Licensee's capital stock is transferred or otherwise conveyed: (ii)
Licensee becomes part of any merger or consolidation; or (iii) the sale
or transfer of all or substantially all of Licensee's assets occurs.
b. Licensee must receive NFLP's prior written consent to use a domestic or
foreign third party distributor of any Licensed Product ("Third Party
Distributor") or domestic or foreign third party manufacturer of any
Licensed Product or any portion of any Licensed Product, including
patches, labels and emblems made by any party that is not already a
licensee of NFLP ("Third Party Manufacturer"). NFLP shall have the
right to approve or disapprove any Third Party Distributor or Third
Party Manufacturer in its sole discretion. In the case of a Third Party
Manufacturer, NFLP's approval of such Third Party Manufacturer, if
granted, will be contingent on the execution of an agreement between
NFLP and the approved Third Party Manufacturer. Notwithstanding such
agreement, Licensee shall at all times remain primarily obligated to
NFLP under this License and shall take all necessary efforts to ensure
that such Third Party Manufacturer uses the Licensed Marks only to
manufacture the designated Licensed Product and for no other purpose
including, without limitation, promoting or selling the Licensed
Product. If such Third Party Manufacturer has made an unauthorized use
of the Licensed Marks, Licensee shall fully cooperate with NFLP to
ensure that such unauthorized use ceases promptly. Licensee shall be
primarily obligated to ensure that each Licensed Product produced by
such Third Party Manufacturer complies with the requirements of
Paragraph 4 of this License.
c. Licensee represents and warrants that it shall manufacture and cause
all Third Party Manufacturers to manufacture the Licensed Products in
accordance with all applicable laws, rules and regulations of the
United States Department of Labor and state Departments of Labor,
including, without limitation, the federal Fair Labor Standards Act.
Licensee shall ensure that it will not distribute or cause the
distribution of Licensed Products that Licensee knows or should
R02468 February 27, 1996 Antigua Sportswear, Inc. 7
<PAGE>
reasonably know were manufactured in violation of any federal or state
labor law, rule or regulation. Upon a determination by the United
States Department of Labor or any state Department of Labor that the
Licensed Products have been manufactured in violation of any federal or
state labor law, rule or regulation, Licensee shall take all necessary
steps to correct such violation including, without limitation, paying
all applicable back wages found due to workers who manufactured the
Licensed Products or any portion of them.
d. Licensee shall not make any payments to any Member Club or to any
shareholder, officer, director, employee, agent or representative of
any Member Club, or to any employee, agent or representative of the NFL
or its affiliates in such person's individual capacity, in connection
with the use of any Licensed Marks under this License or otherwise as a
direct result of sales of any Licensed Product. Licensee shall disclose
to NFLP all existing agreements or agreements being negotiated by
Licensee or its agent between Licensee and any Member Club or any
shareholder, officer, director, employee, agent or representative of
any Member Club, or any employee, agent or representative of the NFL or
any of its affiliates in such person's individual capacity.
e. In the event that NFLP consents to any third party relationship under
this Paragraph 9 or otherwise under this License, Licensee acknowledges
that such approval will be contingent on the execution of an
appropriate form or agreement supplied by NFLP.
10. Computer Artwork and Photographs
a. Subject to the requirements of Paragraph 4, if Licensee wishes to use
computer artwork incorporating graphic depictions of the Licensed Marks
("Computer Art") or photographs owned and/or con- trolled by NFLP
("Photographs"), Licensee shall request such Computer Art or
Photographs in a Use Application provided to Licensee by NFLP. If NFLP,
in its sole discretion, approves such application, NFLP shall provide
Licensee with Computer Art or Photographs at a rate established by NFLP
in its sole discretion provided that, in the case of Photographs,
Licensee must first sign NFLP's standard Photo Use Agreement. Licensee
shall make any pay- ment for the Computer Art or Photographs within
thirty (30) days of receiving an invoice from NFLP. Licensee shall only
use the Com- puter Art or Photographs in accordance with the terms and
conditions of this License including, without limitation, Paragraph 11,
and, in the case of Photographs, the Photo Use Agreement. The terms of
the executed Photo Use Agreement will govern in the event of any con-
flict between the terms of this License and the terms of the Photo Use
Agreement.
b. Licensee shall not make copies of the Computer Art or Photographs
without the express written approval of NFLP and shall not use the
Computer Art or Photographs for any purpose other than the purpose set
forth in Licensee's Use Application. Licensee shall not provide the
Computer Art or Photographs to any other party including a manu-
facturer, unless NFLP approves such party in accordance with Para-
graph 9 of this License. Licensee shall take all steps necessary to
prevent the unauthorized copying or use of the Computer Art or
Photographs by third parties.
c. Upon the expiration or termination of this License, Licensee shall
immediately deliver to NFLP all Computer Art and Photographs provided
by NFLP and all copies and duplications of such Computer Art or
Photographs and all related materials.
R02468 February 27, 1996 Antigua Sportswear, Inc. 8
<PAGE>
d. Licensee acknowledges that it has no right, title or interest in or to
any of the Photographs, including, without limitation, copyrights in
the Photographs. Licensee represents that it will not assert any rights
in or to the Photographs during the Term of thereafter.
11. Protection of Rights
a. Licensee acknowledges that, as between NFLP and Licensee, NFLP
exclusively owns the NFL Marks and all copyrights, trademarks and other
proprietary rights in and to them. Licensee further acknowledges that
NFLP shall own worldwide in perpetuity: (i) all artwork produced under
this License bearing the NFL Marks (Artwork") and all copyrights and
other proprietary rights in such Artwork; (ii) all secondary marks
and/or promotional concepts ("Secondary Marks") developed for use and
used in connection with any Licensed Product and all copyrights and
other proprietary rights in such Secondary Marks; (iii) all derivative
works based on any of the NFL Marks, Secondary Marks, Computer Art, or
Artwork ("Derivative Works") and all copyrights and other proprietary
rights in such Derivative Works; and (iv) all Computer Art and all
copyrights and other proprietary rights in such Computer Art as well as
duplicates and copies of it. Licensee's use of the Licensed Marks,
Computer Art, Artwork, Secondary Marks and Derivative Works is for
NFLP's benefit and Licensee will not acquire any rights in any of them
by such use. Licensee acknowledges that NFLP will have the right to
terminate this License if Licensee asserts any rights in or to any of
the NFL Marks, Computer Art. Artwork, Secondary Marks and Derivative
Works other than those granted under this License. Licensee shall not
attack the trademarks, copyrights or other proprietary rights of NFLP,
the NFL, or its Member Clubs during the Term or thereafter.
b. Any Artwork, Computer Art, Secondary Marks, Derivative Works or other
materials created by Licensee or its agents in connection with this
Agreement shall be performed as a "work made for hire" for NFLP.
Licensee irrevocably assigns and transfers to NFLP all right, title and
interest, including all copyrights and extensions and renewals thereof,
in and to the Artwork, the Secondary Marks, the Derivative Works, the
Computer Art, and all related proprietary rights (collectively the
"Proprietary Materials"). At the request of NFLP, Licensee shall
execute all documents confirming NFLP's rights in and to the NFL Marks
and Proprietary Materials including an assignment of copyright in form
and substance satisfactory to NFLP. Licensee shall cause each third
party who makes or con- tributes to the creation of the Proprietary
Materials to agree that all rights, including the copyrights, in his or
her work shall be owned by NFLP whether as a 'work made for hire' or by
assignment, as appropriate.
c. Licensee shall only display or use the Licensed Marks in the form and
manner that NFLP has specifically approved in writing. Licensee shall
cause to be irremovably and legibly printed or affixed in a clearly
visible location approved by NFLP on every Unit of each Licensed
Product, and all Related Materials, Proprietary Materials, and
Promotional Materials the following:
(i) Trademark Notices as directed and specified by NFLP, including
a legend indicating that the NFL Marks are trademarks of the
NFL or the Member Clubs, and are being used by Licensee under
License from NFLP;
(ii) Copyright Notices as directed and specified by NFLP;
R02468 February 27, 1996 Antigua Sportswear, Inc. 9
<PAGE>
(iii) The Marketing Program symbol;
(iv) Hangtags, inserts, holograms, and other identifying material
required by NFLP;
(v) A permanent label displaying Licensee's name and the
Authorized Brand;
(vi) Licensee's name, trade name and address; and
(vii) All other notices required by NFLP to protect the interests of
NFLP, the NFL, and its Member Clubs.
d. Licensee will not use any Trademark or Copyright Notices on the
Licensed Products, Related Materials, Proprietary Materials, and
Promotional Materials that conflict with, negate or cause confusion
with any notices required under this Paragraph 11. Licensee represents
that, except for the Authorized Brands, if applicable, or as otherwise
authorized in writing by NFLP, it will not associate other licensed
properties, names, symbols, or designs with the Licensed Marks on any
of the Licensed Products, Related Materials, Promotional Materials, and
Proprietary Materials. Licensee will not use the Licensed Marks or NFL
Marks on any business sign, business card, invoice, sales sheet,
brochure, catalog, or other form, or as part of the name of Licensee's
business except as authorized by NFLP in writing prior to such usage.
e. NFLP shall have the right to secure trademark and/or copyright
registrations for the NFL Marks. Upon request by NFLP, in addition to
any other quantity of Licensed Products that Licensee must submit to
NFLP under this License, Licensee shall deliver to NFLP, free of cost,
twelve (12) Units of each Licensed Product with their Related Materials
for such registration purposes provided that Licensee shall not owe any
Royalty for such Units. Licensee shall provide NFLP with the date of
first use of each Licensed Product in interstate and intrastate
commerce. NFLP shall have the right to secure trademark and/or
copyright registrations in NFLP's name for any Proprietary Materials
created by Licensee or its agents for use in connection with any
Licensed Product. By execution of this License, Licensee appoints NFLP
as Licensee's attorney-in-fact coupled with an irrevocable interest to
execute, acknowledge, deliver and record all registrations and all
documents referred to in this Paragraph 11.
f. Licensee shall assist NFLP, at NFLP's expense, in the procurement,
protection, and maintenance of NFLP's rights in and to the NFL Marks
and the Proprietary Materials. NFLP may, in its sole discretion,
commence or prosecute and control the disposition of any claims or
suits relative to the imitation, infringement and/or unauthorized use
of the NFL Marks or the Proprietary Materials either in its own name,
or in the name of Licensee, or join Licensee as a party in the
prosecution of such claims or suits. Licensee shall cooperate fully
with and provide full assistance to NFLP in connection with any such
claims or suits. Licensee shall promptly notify NFLP in writing of any
infringement, imitations, or unauthorized use of the NFL Marks or
Proprietary Materials by others. NFLP shall, in its sole discretion,
determine whether to take action and the type of action, if any, to
take against such infringement. Licensee shall not institute any suit
or take any action on account of such infringe- ments, imitations or
unauthorized uses unless it receives NFLP's prior written consent. NFLP
will receive the full amount of any settlement made or damages awarded
in connection with any action taken against such infringement.
R02468 February 27, 1996 Antigua Sportswear, Inc. 10
<PAGE>
12. Indemnification and Insurance
a. During the Term and thereafter, Licensee shall be solely responsible
for, defend, indemnify and hold harmless NFLP, the NFL, its Member
Clubs, and their respective affiliates, shareholders, officers,
directors, agents and employees for, from and against any claims,
demands, causes of action, damages, costs and expenses, including
reasonable attorneys' fees, judgments, and settlements arising out of
or in connection with: (i) Licensee's breach of any of its
representations, warranties, covenants or obligations contained in this
License; (ii) Licensee's use of the Licensed Marks except as provided
in subparagraph (c) below; (iii) Licensee's noncompliance with any
applicable federal, state, or local laws or regulations: or (iv) the
manufacture, distribution, sale, advertising or use of any Licensed
Product.
b. Licensee shall obtain and maintain at its own expense from a licensed
and admitted insurance carrier with a rating not less than A from Best,
a product liability insurance policy that will provide coverage of
three million dollars ($3,000,000) for personal injuries arising out of
each occurrence and one million dollars ($1,000,000) for property
damage arising out of each occurrence and an advertising liability
insurance policy that will provide coverage of three million dollars
($3,000,000) for each occurrence. Licensee shall ensure that such
policies: (i) will list the NFL, its Member Clubs, NFLP, and their
respective affiliates, shareholders, officers, directors, agents, and
employees as additional insureds; and (ii) will each provide that they
can not be canceled without at least thirty (30) days written notice to
NFLP. Simultaneously with the execution of this License, Licensee shall
submit to NFLP the fully paid policies or certificates of insurance.
Compliance with this subparagraph (b) will not relieve Licensee of its
other obligations under this Paragraph 12. The insurance coverage
required under this License is not cumulative and will not extend to
any other License or Agreement between Licensee and NFLP unless
otherwise authorized by NFLP in writing.
c. During the Term and thereafter, NFLP shall indemnify and hold harmless
Licensee, its officers, directors, agents and employees for, from and
against any claims, demands, causes of action, damages, and reasonable
attorneys' fees for trademark infringement arising out of the use of
the Licensed Marks as strictly authorized under this License, provided
that NFLP is given immediate notice of and shall have the option to
undertake and conduct the defense of any such claim, demand or cause of
action and further provided that Licensee shall cooperate in the
defense of such claim as reasonably required by NFLP.
13. Financial Information
a. Upon request by NFLP, Licensee shall furnish NFLP within sixty (60)
days of such request a detailed statement by an independent certified
public accountant showing the number and description of the Licensed
Products sold during the Term including an itemization of each Licensed
Product by number of Units sold, Member Club, if applicable, the gross
sales price, itemized deductions from the gross sales price, any
returns made, and the resulting Net Sales on which Licensee calculated
the Royalty amount.
b. Within ninety (90) days after the last day of Licensee's fiscal year,
Licensee shall provide NFLP with all pertinent information pertaining
to Licensee's financial condition involving ownership,
R02468 February 27, 1996 Antigua Sportswear, Inc. 11
<PAGE>
credit, financial and other information about Licensee's business
including, without limitation, fiscal year-end financial statements and
operating statements certified by Licensee's chief financial officer as
accurate and complete and as constituting a fair presentation of
Licensee's financial condition. Licensee shall provide NFLP with full
and free access to inspect and copy all business records pertaining to
Licensee's financial condition.
c. On or before the 15th day of each month, Licensee shall provide NFLP
with Licensee's Fiscal Year projections for sales and income for its
overall business, including the Licensed Products. Upon request by
NFLP, Licensee shall provide NFLP with a list ranking its sales by
retailer and/or Third Party Distributors for its top twenty-five (25)
retail accounts or by retail accounts comprising seventy-five percent
(75%) of its Net Sales, whichever is greater, and itemizing for each
such retailer and/or Third Party Distributors a description and the
number of Units of each Licensed Product sold.
d. Licensee shall notify NFLP in writing of any adverse material change in
Licensee's financial condition that will likely affect its performance
under this License at the time such material change occurs.
14. Audits and Inspections
a. During the Term and for at least three (3) full Fiscal Years after the
expiration or termination of the License, Licensee shall keep, maintain
and preserve complete and accurate books of account and records
covering all transactions relating to this License, includ- ing,
without limitation, invoices, correspondence, inventory accounting,
banking and financial records ("Records"). Licensee shall designate a
symbol or number that will be used exclusively on Records relating to
the Licensed Products and with no other articles that Licensee
manufactures, distributes or sells. Licensee shall ensure that all
invoices for the sale of Licensed Products to its retailers and/or
Third Party Distributors will include the quantity and description of
each Licensed Product itemized by Marketing Program, Style and Member
Club, if applicable.
b. During the Term and for at least three (3) full Fiscal Years after the
expiration or termination of the License, NFLP and its duly authorized
representatives will have the right during reasonable business hours to
inspect and audit all Records and conduct a physical examination of
Licensee's premises including its warehouses and manufacturing
facilities and those of Third Party Distributors and Third Party
Manufacturers. NFLP shall provide Licensee with no less than five (5)
business days' written notice prior to such inspection, audit or
examination; provided however, if compelling circumstances exist, as
determined by NFLP in the exercise of its reasonable business judgment,
NFLP may conduct an immediate inspec- tion, audit or examination with
no prior notice to Licensee. Licen- see represents that it will fully
cooperate with the inspection, audit or examination and will not cause
or permit any interference with NFLP or its representatives during any
inspection, audit or examination. During an inspection, audit or
examination, NFLP shall have the right to make copies or extracts of
Licensee's Records.
c. Licensee shall pay NFLP for the cost of any audit that discloses a
payment deficiency of more than two percent (2%) between the amount due
to NFLP pursuant to the audit and the amount Licensee actually paid or
reported to NFLP. Licensee shall pay NFLP any deficiency amount
together with interest on the deficiency amount pursuant to the
provisions in Paragraph 3d of this License. Licensee shall pay such
amounts within ten (10) days of invoicing by NFLP.
R02468 February 27, 1996 Antigua Sportswear, Inc. 12
<PAGE>
16. Termination
Without prejudice to any other rights it may have in law, equity or
otherwise, NFLP shall have the right to immediately terminate this
License upon written notice to Licensee at any time if:
a. Licensee fails to generate Net Sales during any Fiscal Year satisfying
the corresponding Minimum Royalty Guarantee;
b. Licensee fails to deliver to NFLP or to maintain in full force and
effect the insurance coverage referred to in Paragraph 12b of this
License;
c. Licensee fails to make available its premises, Records or other
business information to NFLP or its representatives or fails to provide
full and complete information as required in Paragraphs 13 and 14 of
this License;
d. Licensee manufactures, sells, distributes, advertises or uses any Style
of any Licensed Product, or any Promotional Materials, or Proprietary
Materials without the prior written approval of NFLP as required in
this License, or after such written approval has been withdrawn by NFLP
or has expired;
e. Licensee distributes or sells any Licensed Product outside the
Territory or sells any Licensed Product to a third party that Licensee
knows or should reasonably know intends to sell such Licensed Product
outside the Territory;
f. Licensee distributes any Licensed Product outside the corresponding
Distribution Channels, or sells any Licensed Product to any third party
that Licensee knows or should reasonably know intends to sell such
Licensed Product outside the corresponding Distribution Channels;
g. Licensee fails to obtain NFLP's written approval prior to assigning,
sublicensing, transferring, or otherwise encumbering the License or
prior to using a Third Party Manufacturer or Third Party Distributor,
or any approved Third Party Manufacturer or Third Party Distributor
engages in conduct that would entitle NFLP to terminate the License if
Licensee had engaged in such conduct;
h. Licensee fails to satisfy the distribution requirements in Paragraph 6
of this License or otherwise fails to make timely and complete delivery
of orders it has taken for any Licensed Product to seventy percent
(70%) or more of its retail accounts and/or Third Party Distributors
that collectively account for eighty percent (80%) of its Net Sales on
one or more occasion during any Fiscal Year;
i. Licensee makes a material misrepresentation or omission in its license
application form;
j. Licensee fails to make any payment or deliver any statement required
under this License and fails to correct such default within ten (10)
days of written notice of such default;
k. Licensee breaches any other agreement in effect between Licensee and
NFLP;
l. Licensee makes or agrees to make a payment to any Member Club or any
shareholder, officer, director, employee, agent, or representative of a
Member Club, or to any agent, representative or employee of the NFL or
its affiliates in such person's individual capacity, in connection with
the use of any Licensed Marks under this License or otherwise as a
direct result of the sales of any Licensed Product, or Licensee fails
to disclose to NFLP any existing agreement or agreement being
negotiated by Licensee or Licensee's agent between Licensee and a
Member Club or any shareholder, officer, director, employee, agent, or
representative of a Member Club, or any agent,
R02468 February 27, 1996 Antigua Sportswear, Inc. 13
<PAGE>
representative or employee of the NFL or its affiliates in such
person's individual capacity;
m. Licensee disparages NFLP, the NFL, any of its Member Clubs, or any of
their respective shareholders, officers, directors and employees as
determined by NFLP in its sole discretion, or otherwise engages in
conduct that NFLP deems detrimental to the NFL or any of its Member
Clubs;
n. Licensee fails, in any way, to comply with the requirements of
Paragraph 19; or
o. Licensee fails to comply with any other material term or condition of
this License.
16. Goodwill and Reputation
Licensee recognizes the great value of the goodwill associated with the
NFL Marks and acknowledges that such goodwill belongs to the Member
Clubs and the NFL, and that such NFL Marks have secondary meaning in
the minds of the public. The nature of the business of NFLP, the NFL,
and its Member Clubs, requires public respect for and trust in the
reputation and integrity of the NFL and its Member Clubs. NFLP may, at
its sole option, terminate this License or withdraw some or all Product
Approval Forms or Promotional Approval Forms by written notice to
Licensee if any unanticipated factor, development or event causes
NFLP's continued association with any one or more Licensed Product or
Licensee to adversely reflect upon NFLP, the NFL or its Member as
determined by NFLP in its sole discretion. In the event of such
termination, Licensee shall pay to NFLP the Royalty on all sales of the
Licensed Products made during the Termination Fiscal Year or the
Termination Guarantee as defined in Paragraph 3a, whichever is greater,
and all other amounts due to NFLP. Upon receipt of such payment, NFLP
will reimburse Licensee for its salvage expenses or, in the case of
unsalvageable Licensed Products, Licensee's manufacturing costs if NFLP
does not permit Licensee to distribute the remaining inventory of
Licensed Products.
17. Renewal Request
NFLP must receive a written request from Licensee by no later than the
Renewal Request Date if Licensee desires to renew the License. If
Licensee has complied with all terms and conditions of this License
during the Term and NFLP desires, in its sole discretion, to negotiate
a renewal License, NFLP shall negotiate with Licensee for the terms and
conditions of a renewal License for a period of no more than sixty (60)
days following NFLP's receipt of Licensee's renewal request notice.
This License automatically expires at the end of the Term if NFLP does
not receive Licensee's written request by the Renewal Request Date,
Licensee has failed to comply with all terms and conditions of this
License, NFLP elects not to negotiate a renewal License, or the parties
are unable to reach an agreement within said sixty-day negotiation
period. Licensee acknowledges that NFLP has no express or implied
obligation to renew the License. NFLP will have no liability to
Licensee for any expenses incurred by Licensee in anticipation of any
renewal or extension of this License.
18. Effect of Expiration or Termination of the License
a. Sixty (60) days before the expiration of this License, Licensee will
furnish to NFLP a statement showing the number of Units and description
of such Units for each Style of each Licensed Product,
R02468 February 27, 1996 Antigua Sportswear, Inc. 14
<PAGE>
Promotional Materials, and Proprietary Materials on hand or in process
in Licensee's inventory. If this License is terminated by NFLP,
Licensee shall furnish such statement within ten (1 0) days after
notice of termination is given by NFLP.
b. After expiration or termination of this License for whatever reason,
all rights granted under this Licensee will revert to NFLP and Licensee
shall refrain from further use of, simulation of or reference to any
and all of the NFL Marks except as provided in this paragraph. Except
for termination of this License by NFLP, Licensee will have ninety (90)
days to dispose of the Licensed Products ("Sell-Off Period") that are
on hand or in process at the time of such expiration, provided all
statements and payments then due to NFLP are first made and such
sell-off occurs at Licensee's regular selling price and within the
Distribution Channels. During the Sell-Off Period, Licensee shall
submit all payments and statements required under this License in
accordance with the terms and conditions of the License.
c. If Licensee has remaining inventory of the Licensed Products upon the
termination of this License or after the Sell-Off Period, if
applicable, NFLP may, at its option: (i) purchase such inventory at
Licensee's cost; (ii) require Licensee to deliver such inventory to
NFLP for destruction at Licensee's expense; or (iii) require Licensee
to destroy such inventory at Licensee's expense and furnish NFLP with
an affidavit signed by an officer of Licensee attesting to such
destruction. NFLP will have the right at any time before expiration or
termination of this License and during the Sell-Off Period to conduct a
physical inventory to, among other things, verify the quantity and
Style of the Licensed Products in Licensee's inventory. If Licensee
refuses to permit such physical examination of the inventory or fails
to provide NFLP with the statement required in subparagraph a above,
Licensee will forfeit its right to any Sell-Off Period.
d. Upon the termination of this License or immediately after the Sell-Off
Period, Licensee shall deliver to NFLP all Proprietary Materials and
all related materials, including software, created or used by Licensee
in connection with this License and shall, at NFLP's option, destroy or
sell to NFLP at Licensee's cost, any molds, plates and other items used
to reproduce the Licensed Marks.
19. On-Field Product Exposure
a. Licensee acknowledges that in furtherance of the NFL's policy of
control of game operations, NFLP shall approve any and all visible
items worn or used on-field, including the sidelines, during all
pre-season, regular season and post-season NFL games. Except as
otherwise authorized in writing by NFLP or as otherwise provided in
this License, Licensee shall not during the Term or thereafter agree,
contractually or otherwise, with any Member Club, NFL player, coach, or
other Member Club employee, for any individual to wear, use or promote
any commercially identified product on-field, including the sidelines,
during any NFL game.
b. Licensee acknowledges that in furtherance of the NFL's policy of
control of game operations, there are specific rules and regulations
regarding the size of a manufacturers logo or other commercial
identification that may appear on visible merchandise worn or used
on-field, including the sidelines, during any NFL game. Licensee agrees
that it will strictly adhere to the standards set forth in any and all
such rules and regulations with regard to any of the products that NFLP
may, in its sole discretion, authorize Licensee
R02468 February 27, 1996 Antigua Sportswear, Inc. 15
<PAGE>
to have worn or used on-field, including the sidelines, by NFL players,
coaches, or any other Member Club employees during any NFL game.
c. Licensee represents that it has received a copy of and is familiar with
NFLP's NFL Pro Line Policy, which is deemed part of this License. Any
breach by Licensee of any terms and conditions set forth in the NFL Pro
Line Policy shall be considered a material breach of this License.
During each Fiscal Year of the Term, NFLP shall assign on-field and
sideline exposure rights for the Exposure Products to Licensee with the
Assigned Member Clubs listed on the Term Sheet. Licensee acknowledges
that NFLP may, in its sole dis- cretion, assign on a yearly basis
on-field and sideline exposure rights for the remaining Member Clubs to
any other NFL Pro Line licensees. Licensee further acknowledges that
NFLP may, in its sole discretion, reassign any of the Assigned Member
Clubs to another NFL Pro Line licensee at any time.
d. During each Fiscal Year of the Term, Licensee shall pay NFLP the
Broadcast Exposure Fee set forth in the Term Sheet attached to this
License in accordance with the payment due dates listed on such sheet.
NFLP shall use such payments in a manner determined by NFLP in its sole
discretion.
20. Players and Coaches
Licensee acknowledges that this License does not grant Licensee any
rights with respect to the name, likeness, signature, or other
attributes of any player, coach, or other employee of the NFL. Licensee
shall be responsible for securing whatever rights may be required for
the use of such names, likeness, signatures, or other attributes.
Licensee represents that it will not exercise the rights granted in
this License in any manner that will imply that Licensee has obtained
any such rights without separate written authorization from the
appropriate player, coach, or employee.
21. NFL Films
Licensee understands and acknowledges that this License does not grant
Licensee any rights with respect to film or videotape footage of NFL
game action and that Licensee must obtain such footage directly from
NFL Films, Inc. ("NFL Films") on terms and conditions to be mutually
agreed upon by Licensee and NFL Films. If Licensee desires to use such
footage in connection with this License, NFLP must approve the proposed
usage and subject matter of such footage in writing prior to its usage.
22. Information Transmission
If NFLP obtains the capacity to receive computer transmissions of any
or all information required from Licensee under this License during the
Term, Licensee shall begin to provide such information by such computer
transmission as soon as practicably possible.
23. Notices
The parties to this License shall send all notices and statements
required under this License to the respective addresses of the parties
set forth above unless notification of a change of address is given in
writing. Licensee shall direct all notices to NFLP to the Vice
President of the Retail Licensing Department with a copy to the General
Counsel of NFLP. All notices required under this License must be in
writing, must be sent by registered or certified mail, facsimile, or a
private overnight delivery service generally
R02468 February 27, 1996 Antigua Sportswear, Inc. 16
<PAGE>
accepted in the industry that provides evidence of delivery, and shall
be deemed to have been given at the time they are sent.
24. Relationship of Parties
The parties to this License are not partners, joint venturers, or
agents and nothing in this License shall be construed to place them in
any such relationship. Neither party will have the power to obligate or
bind the other in any manner whatsoever. NFLP, the NFL, and its Member
Clubs in no way endorse, certify or guarantee the quality of the
Licensed Products.
25. Governing Law and Disputes
This License and any dispute arising under it shall be governed by and
construed in accordance with the laws of the State of New York without
regard to conflict of law principles. All disputes pertaining to this
License shall be decided by a state or federal court located in the
City of New York and Licensee consents to personal jurisdiction in such
courts.
26. Waiver
Neither party to this License can waive or modify any provision of this
License unless such waiver or modification is in a writing signed by
both parties. Licensee acknowledges that NFLP's prior forbearance of
any requirement of this License will not prevent NFLP from subsequently
requiring full and complete compliance with such requirement or from
exercising its rights under this License.
27. Confidentiality
The parties to this License acknowledge that the terms of this License
are confidential and each warrant that neither shall disclose such
terms to any third party other than the disclosing party's accountants,
agents or attorneys or as required by law, without the other party's
prior written consent.
28. Severability
If any paragraph or clause of this License is illegal or invalid or
void for any reason. the remaining paragraphs and clauses of the
License will remain in full force and effect.
29. Release
In consideration of the rights granted under this License, Licensee
releases NFLP, the NFL, its Member Clubs and each of their respective
affiliates, shareholders, officers, directors, agents and employees
from any claims, demands, losses, expenses or damages, whether known or
unknown, arising out of or in connection with or in any manner related
to the manufacture, distribution or sale of products bearing the
Licensed Marks.
30. Entire Agreement
This License constitutes the entire agreement and understanding between
the parties to this License with respect to the subject matter of this
License and cancels, terminates, and supersedes any prior or
contemporaneous agreement or understanding, whether oral or written, on
this subject between Licensee and the NFL, its affiliates or Member
Clubs, or NFLP. The headings in this License are for reference purposes
only and have no legal effect.
R02468 February 27. 1996 Antigua Sportswear, Inc. 17
<PAGE>
31. Execution
Licensee will make an offer to enter into this License by having a duly
authorized officer or representative sign below and return the License
with a check payable to NFLP for the Advance Royalty Payment required
for Fiscal Year I. An acceptance of the offer will occur and a binding
agreement will exist only after an authorized officer or duly
authorized representative of NFLP signs this License and delivers a
fully-executed copy to Licensee. Licensee acknowledges that this
License will be deemed to have been executed in New York City.
Licensee: Antigua Sportswear, Inc.
By: DATE: 12-10-96
(Signature of officer, partner
or individual duly authorized to sign)
Title: CEO, Chairman
NATIONAL FOOTBALL LEAGUE PROPERTIES, INC.
By: Jim Connelly DATE: 12/19/96
(Signature of officer, partner,
or individual duly authorized to sign)
Title: VP
R02468 February 27, 1996 Antigua Sportswear, Inc. 18
<PAGE>
EXHIBIT I
DISTRIBUTION CHANNELS
The following definitions shall apply to this License:
1. Department Store: A retail store that operates several departments
carrying higher-priced brands of apparel and non-apparel. Examples
include, without limitation, Macy's, Dillards, Nordstrom, Woodward and
Lothrop, JC Penney, Boscov's, Sears, May Co., Federated Group, Carson
Pirie Scott, Dayton Hudson, Bon Ton, Balks, Strawbridge & Clothier,
Jacobson and Bloomingdales.
2. Direct Retailer: An organization that markets products directly to
consumers without using retail space through the mediums of television
or catalog.
3. Discount Store: A retail store that operates several departments
carrying lower-priced brands of apparel and nonapparel with limited
service. Examples include, without limitation, Wal-Mart, Kmart,
Bradlees, Roses, Hills, Caldor, Venture, Target, Shopko, and Ames.
4. Distributors: Defined as Third Party Distributors in Paragraph 9b of
the License.
5. Drug Store: A retail store that carries as its primary retail items
pharmaceuticals, health and beauty aids, and convenience items.
Examples include, without limitation, OSCO, Walgreen, and Eckert.
6. Fan Shop: A retail store that carries as its primary retail item
licensed products of the NFL, National Basketball Association, National
Hockey League, Major League Baseball, and the National Collegiate
Athletic Association. Examples include, without limitation, Pro Image,
Team Spirit and Stadium Stuff.
7. Footwear Specialty Store: A retail store that carries as its primary
retail item athletic footwear and also carries, in limited quantities,
licensed apparel and headwear. Examples include, without limitation,
Foot Locker, FootAction, and Athletes Foot.
8. Grocery Store: A retail store that carries as its primary retail items
food and household products. Examples include, without limitation, A &
P, Shop Rite, Vons, Jewel, and Food Town.
9. Sporting Goods Store: A retail store that carries as its primary retail
items licensed apparel, athletic footwear and sporting goods equipment.
Examples include, without limitation, Champ's, Herman's, Koenig's, The
Sports Authority, Sportmart, Gart Brothers, and Modells.
R02468 February 27, 1996 Antigua Sportswear, Inc. 19
Exhibit 10.12
LOAN AND SECURITY AGREEMENT
Dated as of January 23, 1997
between
THE ANTIGUA GROUP, INC.,
as Borrower
and
LASALLE BUSINESS CREDIT, INC.,
as Lender
$14,275,000.00
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this _____
day of January, 1997, by and among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle"), with an office at 120 East Baltimore Street, Suite
1802, Baltimore, Maryland 21202, and THE ANTIGUA GROUP, INC., a Nevada
corporation ("Borrower"), with its principal office at 9319 North 94th Way,
Scottsdale, Arizona 85258.
WITNESSETH:
WHEREAS, from time to time Borrower may request LaSalle to make loans
and advances to and extend certain credit accommodations to Borrower, and the
parties wish to provide for the terms and conditions upon which such loans,
advances and credit accommodations shall be made;
NOW, THEREFORE, in consideration of any loans, advances and credit
accommodations (including any loans by renewal or extension) hereafter made to
Borrower by LaSalle, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrower, the parties agree
as follows:
1. DEFINITIONS.
(a) General Definitions
"Account," "Account Debtor," "Chattel Paper,"
"Documents," "Equipment," "General Intangibles," "Goods," "Instruments,"
"Inventory," and "Investment Property," shall have the respective meanings
assigned to such terms, as of the date of this Agreement, in the Maryland
Uniform Commercial Code.
"Acquisition" shall mean the acquisition by the
Guarantor of all of the issued and outstanding stock in the Borrower pursuant to
terms and conditions acceptable to LaSalle.
"Affiliate" shall mean any Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with Borrower, (b) that directly or beneficially owns
or holds five percent (5%) or more of any class of the voting stock of Borrower,
(c) five percent (5%) or more of whose voting stock (or in the case of a Person
which is not a corporation, five percent (5%) or more of the equity interest of
which) is owned directly or beneficially or held by Borrower, or (d) five
percent (5%) or more of whose voting stock (or in case of a Person which is not
a corporation, five percent (5%) or more of the equity interest of which) is
owned directly or beneficially or held by a Person referred to in (a), (b) or
(c) above.
"Borrowing Base" shall have the meaning specified in
paragraph 2(b) hereof.
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"Business Day" shall mean any day other than a
Saturday, Sunday, or such other day as banks in Illinois are authorized or
required to be closed for business.
"Capital Adequacy Charge" shall have the meaning
specified in paragraph 5(h) hereof.
"Capital Adequacy Demand" shall have the meaning
specified in paragraph 5(h) hereof.
"Capital Expenditures" shall mean, with respect to
any period, the aggregate of all expenditures (whether paid in cash or accrued
as liabilities and including expenditures for capitalized lease obligations) by
Borrower during such period that are required by GAAP to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
(or in intangible accounts subject to amortization) in the balance sheet of
Borrower.
"Closing Date" shall mean the date set forth on the
first page of this Agreement.
"Closing Document List" shall have the meaning
specified in paragraph 15(a)(i) hereof.
"Collateral" shall mean all of the personal property
of Borrower described in paragraph 7 hereof, and all other real or personal
property of any Obligor or any other Person now or hereafter pledged to LaSalle
to secure, either directly or indirectly, repayment of any of the Obligations.
"Cruttenden" shall mean The Cruttenden Roth Bridge
Fund, LLC, a California limited liability company.
"Cruttenden Loan" shall mean a One Million Dollar
($1,000,000.00) loan from Cruttenden to the Borrower pursuant to terms
acceptable to LaSalle.
"Debt Service Coverage Ratio" shall mean, with
respect to any period, the ratio of (A) net income after taxes for such period
(excluding any after-tax gains or losses on the sale of assets (other than the
sale of Inventory in the ordinary course of business) and excluding other
after-tax extraordinary gains or losses), plus deferred taxes, plus depreciation
and amortization deducted in determining net income for such period, minus
Capital Expenditures for such period not financed, minus any cash dividends paid
or accrued and cash withdrawals paid or accrued to shareholders or other
Affiliates for such period which were not calculated in determining net income
after taxes, and plus the after tax increase in LIFO reserves or minus the after
tax decrease in LIFO reserves, to (B) current principal maturities of long term
debt and capitalized leases paid or scheduled to be paid during such period,
plus any prepayments on indebtedness owed to any Person (except trade payables
and revolving loans) and paid during such period.
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"Default" shall mean any event, condition or default
which with the giving of notice, the lapse of time or both would be an Event of
Default.
"EBITDA" shall mean, with respect to any period, net
income after taxes for such period (excluding any after-tax gains or losses on
the sale of assets and excluding other after-tax extraordinary gains or losses)
plus interest expense, income tax expense, depreciation and amortization for
such period, less gains and losses attributable to any fixed asset sales made
during such period, minus any distributions or dividends permitted to be paid
pursuant to the terms hereof, plus or minus any other non-cash charges or gains
which have been subtracted or added in calculating net income after taxes for
such period.
"Eligible Account" shall mean an Account owing to
Borrower which is acceptable to LaSalle in its sole but reasonable discretion
for lending purposes. LaSalle shall, in general, consider an Account to be an
Eligible Account if it meets, and so long as it continues to meet, the following
requirements:
(i) it is genuine and in all respects is what it
purports to be;
(ii) it is owned by Borrower and Borrower has the
right to subject it to a security interest in favor of LaSalle;
(iii) it arises from (A) the performance of services
by Borrower and such services have been fully performed and acknowledged and
accepted by the Account Debtor thereunder; or (B) the sale or lease of Goods by
Borrower, and such Goods have been completed in accordance with the Account
Debtor's specifications (if any) and delivered to and accepted by the Account
Debtor, such Account Debtor has not refused to accept and has not returned or
offered to return any of the Goods, or has not refused to accept any of the
services, which are the subject of such Account, and Borrower has possession of,
or has delivered to LaSalle at LaSalle's request, shipping and delivery receipts
evidencing delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the
Account Debtor thereunder, is due and payable within thirty (30) days after the
stated invoice date thereof and does not remain unpaid more than one hundred
twenty (120) days past the stated invoice date thereof; provided, however, that
if more than twenty-five percent (25%) of the aggregate dollar amount of
invoices owing by a particular Account Debtor remain unpaid for more than one
hundred twenty (120) days past the respective invoice dates thereof, then all
Accounts owing to Borrower by that Account Debtor shall be deemed ineligible;
(v) it is not subject to any prior assignment, claim,
lien, security interest or encumbrance whatsoever, other than Permitted Liens;
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(vi) it is a valid, legally enforceable and
unconditional obligation of the Account Debtor thereunder, and is not subject to
setoff, counterclaim, credit, allowance or adjustment by such Account Debtor, or
to any claim by such Account Debtor denying liability thereunder in whole or in
part;
(vii) it does not arise out of a contract or order
which fails in any material respect to comply with the requirements of
applicable law;
(viii) the Account Debtor thereunder is not a
director, officer, employee or agent of Borrower, or a Subsidiary, Parent or
Affiliate of Borrower;
(ix) it is not an Account with respect to which the
Account Debtor is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment of such
Account to LaSalle pursuant to, and in full compliance with, the Assignment of
Claims Act of 1940, as amended;
(x) it is not an Account with respect to which the
Account Debtor is located in a state which requires Borrower, as a precondition
to commencing or maintaining an action in the courts of that state, either to
(A) receive a certificate of authority to do business and be in good standing in
such state, or (B) file a notice of business activities report or similar report
with such state's taxing authority, unless (x) Borrower has taken one of the
actions described in clauses (A) or (B), (y) the failure to take one of the
actions described in either clause (A) or (B) may be cured retroactively by
Borrower at its election, or (z) Borrower has proven, to LaSalle's satisfaction,
that it is exempt from any such requirements under any such state's laws;
(xi) it is an Account which arises out of a sale made
in the ordinary course of Borrower's business;
(xii) the Account Debtor is a resident or citizen of,
and is located within, the United States of America or the Canadian provinces of
Ontario, Manitoba, Saskatchewan, Alberta, Yukon or British Columbia, or the
Account is either (A) fully secured by an irrevocable letter of credit
acceptable to and assigned to LaSalle or (B) export credit insurance issued on a
policy acceptable to LaSalle by an insurer acceptable to LaSalle;
(xiii) it is not an Account with respect to which the
Account Debtor's obligation to pay is conditional upon the Account Debtor's
approval of the Goods or services or is otherwise subject to any repurchase
obligation or return right, as with sales made on a bill-and-hold, guaranteed
sale, sale on approval, sale or return or consignment basis;
(xiv) it is not an Account (A) with respect to which
any representation or warranty contained in this Agreement is
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untrue or (B) which violates any of the covenants of Borrower contained in this
Agreement;
(xv) it is not an Account which, when added to a
particular Account Debtor's other indebtedness to Borrower, exceeds the lesser
of ten percent (10%) of the aggregate of Borrower's Accounts or a credit limit
determined by LaSalle in its reasonable credit judgment for that Account Debtor,
provided, however, that Accounts excluded from Eligible Accounts solely by
reason of this paragraph (xv) shall be Eligible Accounts to the extent of such
credit limit; and
(xvi) it is not an Account with respect to which the
prospect of payment or performance by the Account Debtor is or will be impaired,
as determined by LaSalle in its sole discretion.
"Eligible Inventory" shall mean Inventory of Borrower
which is acceptable to LaSalle in its sole but reasonable discretion. Without
limiting LaSalle's discretion, LaSalle shall, in general, consider Inventory to
be Eligible Inventory if it meets, and so long as it continues to meet, the
following requirements:
(i) it constitutes either (A) raw materials and work
in process normally and currently used in the ordinary course of Borrower's
business or (B) finished goods held for sale by Borrower, normally and currently
saleable in the ordinary course of Borrower's business, and in either case it
does not constitute tubing, boxes or other packaging materials, storeroom
inventory, supplies, closeouts, any goods inventoried into Borrower's outlet
store (including over-runs and second quality merchandise), or reserves
appearing on Borrower's books and records (excluding LIFO reserves);
(ii) it is owned by Borrower and Borrower has the
right to subject it to a security interest in favor of LaSalle;
(iii) it is located on premises within the United
States of America and listed on Schedule 13(c) attached hereto and is not in
transit (unless title has passed to the Borrower);
(iv) it is not subject to any prior assignment,
claim, lien, security interest or encumbrance whatsoever, other than Permitted
Liens;
(v) it is held for sale or lease or furnishing under
contracts of service, it is of good and merchantable quality, and it is new and
unused and free from defects which would, in LaSalle's sole determination,
affect its market value;
(vi) it is not stored with a bailee, consignee,
warehouseman, processor or similar party unless LaSalle has given its prior
written approval and Borrower has caused any such bailee, consignee,
warehouseman, processor or similar party to issue and deliver to LaSalle, in
form and substance acceptable to LaSalle,
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such UCC financing statements, warehouse receipts, waivers and other documents
as LaSalle shall require;
(vii) LaSalle has determined in accordance with
LaSalle's customary business practices that it is not unacceptable due to age,
type, category or quantity; and
(viii) it is not Inventory (A) with respect to which
any of the representations and warranties contained in this Agreement are untrue
or (B) which violates any of the covenants of Borrower contained in this
Agreement.
"Event of Default" shall have the meaning specified
in paragraph 15 hereof.
"Excess Availability" shall mean, as of any date of
determination by LaSalle, the excess, if any, of (i) the Borrowing Base over
(ii) the outstanding Revolving Loans and Letter of Credit Obligations, in each
case as of the close of business on such date. For purposes of calculating
Borrower's Excess Availability and the amount of the Borrowing Base relating
thereto, LaSalle may, in the exercise of its sole discretion, establish a
reserve in an aggregate amount based on Borrower's outstanding trade payables
which are past due in any material respect with stated vendor terms, as of such
date of determination, to the extent thereof.
"GAAP" shall mean generally accepted accounting
principles and policies in the United States as in effect from time to time.
"Guarantor" shall mean Southhampton Enterprises
Corp., a British Columbia corporation.
"Indemnified Party" shall have the meaning specified
in paragraph 18 hereof.
"Intercreditor Agreement" shall mean an Intercreditor
Agreement between LaSalle and another Person holding a security interest in any
of the assets of the Borrower.
"Letters of Credit" shall mean all documentary and
stand-by letters of credit issued for Borrower's account in accordance with the
terms of paragraph 4 hereof.
"Letter of Credit Obligations" shall mean, as of any
date of determination, the sum of (i) the aggregate undrawn amount of all
Letters of Credit and (ii) the aggregate unreimbursed amount of all drawn
Letters of Credit.
"Liabilities" shall mean at any date all liabilities
required under GAAP to be recorded on a balance sheet as of such date.
"Loan" or "Loans" shall mean any and all Revolving
Loans, Term Loan A and Term Loan B, made by LaSalle to Borrower
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pursuant to paragraphs 2 and 3 hereof and all other loans, advances and
financial accommodations made by LaSalle to or on behalf of Borrower under the
terms of this Agreement.
"Lock Box" and "Blocked Account" shall have the
meanings specified in paragraph 10 hereof.
"Material Adverse Effect" shall mean with respect to
any event, act, condition or occurrence of whatever nature (including any
adverse determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a material
adverse effect upon, the business, assets, operations, condition (financial or
otherwise) or prospects of Borrower, taken as a whole.
"Merger Agreement" shall mean the Merger Agreement
dated July 18, 1996 among Guarantor, Southhampton Enterprises, Inc., a Texas
corporation, Borrower and Seller, as amended, pursuant to which the Guarantor
has agreed to acquire all of the issued and outstanding stock of Borrower.
"Net Worth" shall mean shareholders' equity as
determined in accordance with GAAP, consistently applied.
"Notes" shall collectively mean the Revolving Note,
the Term Loan A Note and the Term Loan B note.
"Obligations" shall mean all loans, advances,
overdrafts, debts, liabilities (including without limitation and all amounts
charged to Borrower's account pursuant to any agreement authorizing LaSalle to
charge Borrower's loan account), obligations, reimbursement and indemnity
obligations with respect to Letters of Credit, covenants, lease payments,
guarantees and duties owing by Borrower to LaSalle or to any parent, affiliate
or subsidiary of LaSalle, of any kind or description (whether advanced pursuant
to or evidenced by this Agreement, by any of the Notes, by any Other Agreement
or by other agreement, instrument or document or otherwise), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including without limitation any debt, liability or
obligation owing from Borrower to another Person which LaSalle may have obtained
by assignment (or otherwise as a result of a payment made by LaSalle on behalf
of Borrower as permitted under this Agreement or any Other Agreement) and
further including without limitation all interest, all fees, costs and expenses
which Borrower is required to pay or reimburse by this Agreement or any Other
Agreement, by law or otherwise.
"Obligor" shall mean Borrower, Guarantor and each
Person who is or shall become primarily or secondarily liable for any of the
Obligations, provided, however, that such term shall not include any Account
Debtor.
"Original Term" shall have the meaning specified in
paragraph 12 hereof.
"Other Agreements" shall mean all agreements,
instruments and documents including, without limitation,
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guaranties, mortgages, trust deeds, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases, financing
statements and all other writings heretofore, now or from time to time hereafter
executed by or on behalf of Borrower or any other Person and delivered to
LaSalle or to any parent, affiliate or subsidiary of LaSalle in connection with
the Obligations or the transactions contemplated hereby.
"Parent" shall mean any Person now or at any time or
times hereafter owning or controlling (alone or with any other Person) at least
a majority of the issued and outstanding stock of Borrower or any Subsidiary.
"Permitted Liens" shall mean: (i) statutory liens of
landlords, carriers, warehousemen, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder; (ii) liens or security interests in favor
of LaSalle; (iii) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business; (iv) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, in accordance with the terms set forth in paragraph
14(g); (v) liens incurred or deposits made in the ordinary course of Borrower's
business in connection with capitalized leases or purchase money security
interests for purchase of, and applying only to, Equipment included in the
permitted borrowings under paragraph 14(h) or permitted as Capital Expenditures
under paragraph 14(m), the documents relating to such liens to be in form and
substance acceptable to LaSalle; (vi) liens securing indebtedness owing by any
Subsidiary to Borrower to the extent such indebtedness is permitted under
paragraph 14(h), or to any other Subsidiary of Borrower; (vii) deposits to
secure performance of bids, trade contracts, leases and statutory obligations
(to the extent not excepted elsewhere herein); (viii) liens specifically
permitted by LaSalle in writing as set forth on Schedule 1(a) attached hereto;
(ix) any lien arising out of the refinancing, extension, renewal or refunding of
any indebtedness secured by a lien permitted by any of the foregoing sections
(i) through (viii) inclusive provided that (a) such indebtedness is not secured
by any additional assets, and (b) the amount of such indebtedness is not
increased; (x) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; (xi) grants of
security and rights of setoff in deposit accounts, securities and other
properties held at banks or financial institutions to secure the payment or
reimbursement under overdraft, acceptance and other facilities; and (xii) rights
of setoff, banker's lien and other similar rights arising solely by operation of
law.
"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
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organization, association, corporation, institution, entity, party or foreign or
United States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"Prime Rate" shall mean the publicly announced prime
rate of LaSalle National Bank, Chicago, Illinois, in effect from time to time.
The Prime Rate is not intended to be the lowest or most favorable rate of
LaSalle National Bank in effect at any time.
"Quadrant" shall mean Quadrant Financial Corp., a
British Columbia corporation.
"Quadrant Loan" shall mean a Three Million Dollar
($3,000,000.00) loan from Quadrant to the Borrower pursuant to terms acceptable
to LaSalle.
"Renewal Term" shall have the meaning specified in
paragraph 12 hereof.
"Revolving Loans" shall have the meaning specified in
paragraph 2 hereof.
"Revolving Loan Commitment" shall mean the sum of
Twelve Million Dollars ($12,000,000.00).
"Revolving Note" shall mean the promissory note in
the maximum principal amount of the Revolving Commitment executed by Borrower to
the order of LaSalle, dated as of the Closing Date.
"Seller" shall mean Thomas E. Dooley, Jr.
"Seller Debt" shall mean the indebtedness of the
Guarantor to the Seller in a maximum amount of Seven Million One Hundred Seventy
Thousand Dollars ($7,170,000.00) which is incurred by the Guarantor in
connection with the Acquisition.
"Subordinated Debt" shall mean the indebtedness of
the Borrower to the Seller under: (a) the promissory note from the Borrower to
the Seller dated March 25, 1996 in the principal amount of One Million One
Hundred Fifty Thousand Dollars ($1,150,000.00); and (b) the Promissory Note from
the Borrower to the Seller dated July 17, 1995 in the principal amount of One
Million Two Hundred Thousand Dollars ($1,200,000.00).
"Subsidiary" shall mean any corporation of which more
than fifty percent (50%) of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned by Borrower or by
any partnership or joint venture of which more than fifty percent (50%)
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of the outstanding equity interests are at the time, directly or indirectly,
owned by Borrower.
"Tangible Net Worth" shall mean shareholders' equity
(including retained earnings) less the book value of all intangible assets
including but not limited to advances to Affiliates, determined by LaSalle on a
consistent basis, plus the amount of any debt subordinated to LaSalle on terms
and conditions acceptable to LaSalle in its sole judgment, plus pre-tax LIFO
reserves, all as determined in accordance with GAAP, consistently applied.
"Term Loan A" shall have the meaning specified in
paragraph 3(a) hereof.
"Term Loan A Note" shall mean the Term Note in the
original principal amount of Term Loan A executed by Borrower to the order of
LaSalle, dated as of the Closing Date.
"Term Loan B" shall have the meaning specified in
paragraph 3(b) hereof.
"Term Loan B Note" shall mean the Term Note, in the
form attached hereto as Exhibit A, in the original principal amount of Term Loan
B executed by Borrower to the order of LaSalle, and delivered to LaSalle on the
date of the closing of the Acquisition.
"Total Credit Facility" shall mean the sum of
Fourteen Million Two Hundred Seventy-Five Dollars ($14,275,000.00).
(b) Accounting Terms and Definitions. Unless otherwise defined
or specified herein, all accounting terms used in this Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all material
respects with the financial statements delivered by Borrower to LaSalle on or
before the Closing Date. All accounting determinations for purposes of
determining compliance with the financial covenants contained in paragraph 13(m)
shall be made in accordance with GAAP as in effect on the Closing Date and
applied on a basis consistent in all material respects with the audited
financial statements delivered to LaSalle by Borrower on or before the Closing
Date. The financial statements required to be delivered hereunder from and after
the Closing Date, and all financial records, shall be maintained in accordance
with GAAP. If GAAP shall change from the basis used in preparing the audited
financial statements delivered to LaSalle by Borrower on or before the Closing
Date, the certificates required to be delivered pursuant to paragraph 11(i)
demonstrating compliance with the covenants contained herein shall include, at
the election of Borrower or upon the request of LaSalle, calculations setting
forth the adjustments necessary to demonstrate how Borrower is in compliance
with the financial covenants based upon GAAP as in effect on the Closing Date.
2. REVOLVING LOANS. Subject to the terms and conditions of this
Agreement and the Other Agreements, during the Original Term and any Renewal
Term, absent the existence of an Event of Default:
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(a) LaSalle shall make such revolving loans and advances (the
"Revolving Loans") to Borrower as Borrower shall from time to time request, in
accordance with the terms of paragraph 2(b) hereof. The aggregate unpaid
principal amount of all Revolving Loans outstanding at any one time made to
Borrower shall not exceed the lesser of (A) the Borrowing Base, minus one
hundred percent (100%) of the Letter of Credit Obligations for stand by Letters
of Credit and minus forty five percent (45%) of the Letter of Credit Obligations
for documentary Letters of Credit, and (B) the Revolving Loan Commitment, minus
the outstanding Letter of Credit Obligations. All Revolving Loans shall be
repaid in full upon the earlier to occur of (i) the end of the Original Term or
any Renewal Term, if either LaSalle or Borrower elects to terminate this
Agreement as of the end of any such term, and (ii) the acceleration of the
Obligations pursuant to paragraph 17 of this Agreement. If at any time the
outstanding principal balance of the Revolving Loans made to Borrower exceeds
(A) the Borrowing Base, minus one hundred percent (100%) of the Letter of Credit
Obligations for stand-by Letters of Credit and minus forty-five percent (45%) of
the Letter of Credit Obligations for documentary Letters of Credit, or (B) the
Revolving Loan Commitment, minus the outstanding Letter of Credit Obligations,
Borrower shall immediately, and without the necessity of a demand by LaSalle,
pay to LaSalle such amount as may be necessary to eliminate such excess, and
LaSalle shall apply such payment against the outstanding principal balance of
the Revolving Loans. In addition, if at any time the sum of (i) the outstanding
principal balance of the Loans and (ii) the outstanding Letter of Credit
Obligations exceeds the Total Credit Facility, Borrower shall immediately and
without the necessity of a demand by LaSalle pay to LaSalle such amount as may
be necessary to eliminate such excess, and LaSalle shall apply such payment
against the outstanding principal balance of the Loans in such order as LaSalle
shall determine in its sole discretion. Borrower hereby authorizes LaSalle to
charge any of Borrower's accounts to make any payments of principal or interest
required by this Agreement. All Revolving Loans shall, in LaSalle's sole
discretion, be evidenced by one or more promissory notes in form and substance
satisfactory to LaSalle. However, if such Revolving Loans are not so evidenced,
such Revolving Loans may be evidenced solely by entries upon the books and
records maintained by LaSalle.
(b) LaSalle shall make Revolving Loans to Borrower up to the
lesser of the following amounts:
(i) an amount equal to the sum of: (A) eighty-five
percent (85%) of the face amount of Eligible Accounts plus, (B) the lesser of
(x) fifty-five percent (55%) of the value of Eligible Inventory, calculated on
the basis of the lower of cost or market value on a first-in, first-out basis,
or (y) Six Million Dollars ($6,000,000.00), in each case, less such reserves as
LaSalle elects to establish from time to time in the exercise of its sole
discretion (the sum obtained by adding (A) and (B) is herein referred to as the
"Borrowing Base"); minus one hundred percent (100%) of the Letter of Credit
Obligations for stand-by Letters of
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Credit and minus forty-five percent (45%) of the Letter of Credit Obligations
for documentary Letters of Credit; or
(ii) the Revolving Loan Commitment, minus the
outstanding amount of all Letter of Credit Obligations.
3. TERM LOANS.
(a) On the Closing Date, LaSalle shall make a term loan to
Borrower in the original principal amount of Seven Hundred Seventy-Five Thousand
Dollars ($775,000.00) ("Term Loan A"). Principal payable on account of Term Loan
A shall be payable in accordance with the Term Loan A Note, in successive
monthly installments (i) payable on the first day of each month, commencing on
March 1, 1997, and (ii) based on an amortization schedule consisting of
eighty-four (84) equal and level payments, provided, however, that the entire
unpaid principal balance of Term Loan A shall be due and payable in full upon
the expiration of the Original Term of this Agreement, and provided further that
in the event that the Original Term of this Agreement is initially or
subsequently renewed in accordance with paragraph 12 hereof, then Borrower shall
continue to make such equal and level monthly payments, with a final installment
equal to the unpaid principal balance and any other amounts outstanding due and
payable upon the expiration of the Renewal Term. Notwithstanding anything
hereinabove to the contrary, the entire unpaid principal balance of Term Loan A,
and any accrued and unpaid interest thereon, shall be immediately due and
payable upon the earlier to occur of (i) the last day of the Original Term or
the last day of any Renewal Term, if either LaSalle or Borrower elects to
terminate this Agreement as of the end of any such Original or Renewal Term and
(ii) the acceleration of the Obligations pursuant to paragraph 17 of this
Agreement.
(b) Subject to the terms of paragraph (d) hereof, LaSalle
shall make a term loan to Borrower in the original principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00) ("Term Loan B"). Principal
payable on account of Term Loan B shall be payable in accordance with the Term
Loan B Note, in successive monthly installments (i) payable on the first day of
each month, commencing on the first day of the first month following the closing
of the Acquisition, and (ii) based on an amortization schedule consisting of
twenty-four (24) equal and level payments. Notwithstanding anything hereinabove
to the contrary, the entire unpaid principal balance of Term Loan B, and any
accrued and unpaid interest thereon, shall be immediately due and payable upon
the earlier to occur of (i) the date occurring two (2) years after the date of
the closing of the Acquisition, and (ii) the acceleration of the Obligations
pursuant to paragraph 17 of this Agreement.
(c) If Borrower sells any Equipment, or if any Equipment or
any other Collateral is damaged, destroyed or taken by condemnation, Borrower
shall pay to LaSalle, unless otherwise specifically provided herein or otherwise
agreed to by LaSalle, as
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and when received by Borrower and as a mandatory prepayment of Term Loan A and
Term Loan B, a sum equal to the proceeds received by Borrower from such sale.
All such prepayments shall be applied first to Term Loan A and then to Term Loan
B, against the last maturing installments of principal thereof, in the inverse
order thereof (or, at LaSalle's option, such of the other Obligations of
Borrower as LaSalle may elect). The contrary notwithstanding, without LaSalle's
consent, unless and until an Event of Default has occurred and is continuing,
obsolete or worn out Equipment may be sold or otherwise disposed of by Borrower
and the proceeds thereof may be retained by Borrower, so long as the fair market
value of any such Equipment sold or otherwise disposed of in any single
transaction is less than $30,000.00, and the fair market value, in the
aggregate, of all such Equipment sold or otherwise disposed of by Borrower
during any twelve-month period is less than $90,000.00.
(d) Notwithstanding anything contained in this Agreement or
Other Agreements to the contrary, LaSalle shall have no obligation to advance
proceeds of Term Loan B until all of the following conditions are satisfied:
(i) Guarantor shall have received, in connection with
the Acquisition, (A) the Seller Debt in an amount of not less than Seven Million
One Hundred Seventy Thousand Dollars ($7,170,000.00) pursuant to terms
acceptable to LaSalle, and (B) an equity capital investment in an amount not
less than Eight Million Five Hundred Dollars ($8,500,000.00), of which not less
than One Million Dollars ($1,000,000.00) shall be attributable to Steven Haynes
and Louis Lloyd;
(ii) LaSalle shall have reviewed and approved the
terms and conditions of the Merger Agreement and all other documents and
agreements to be executed in connection with the Acquisition, the Merger
Agreement and all other such documents and agreements shall have been executed
and delivered by all parties thereto, and Guarantor shall have acquired all of
the outstanding stock of Borrower;
(iii) LaSalle shall have reviewed and approved all
documents and agreements relating to the Cruttenden Loan and the Quadrant Loan,
and Cruttenden, the Seller and LaSalle shall have executed and delivered an
Intercreditor Agreement;
(iv) LaSalle shall have reviewed and approved the
form and terms of, including all documents and agreements relating to, the
equity capital investment to be made to Guarantor in connection with the
Acquisition, as well as all aspects of the Guarantor's capital structure as of
the closing of the Acquisition;
(v) There shall be no defaults of any of the terms or
provisions of this Agreement or any of the Other Agreements;
(vi) LaSalle shall have determined that immediately
after the closing of the Acquisition and the payment of all fees and expenses in
connection therewith, on a pro forma basis, the
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Excess Availability of Borrower shall not be less than Five Hundred Thousand
Dollars ($500,000.00);
(vii) LaSalle shall have received a certification
from Borrower's chief financial officer that in calculating Excess Availability
described in (vi) above, Borrower's outstanding trade payables were (and are)
current and not past due in any material respect;
(viii) Guarantor shall have executed and delivered to
LaSalle an unconditional guaranty of the Obligations, in a form acceptable to
LaSalle and shall also deliver to LaSalle (A) copies of all of the Guarantor's
organizational documents, (B) certified copy of the resolutions of the
Guarantor's Board of Directors approving the guaranty of the Obligations and the
Acquisition, and (C) an opinion letter from counsel to Guarantor in form and
substance acceptable to LaSalle; and
(ix) LaSalle and Borrower shall have entered into an
amendment to this Agreement modifying the covenants contained in paragraph 14(m)
in a manner acceptable to LaSalle; and
(x) LaSalle shall have approved the Acquisition and
all aspects related thereto.
4. LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, and the Other Agreements, during the Original Term or any Renewal
Term, LaSalle shall, absent the existence of an Event of Default, from time to
time cause the issuance of and co-sign for, upon Borrower's request, Letters of
Credit, provided that the aggregate undrawn amount of all such Letters of Credit
shall at no time exceed Four Million Dollars ($4,000,000.00), and provided
further that no Letter of Credit shall have an expiry date (i) more than 365
days from the date of issuance or (ii) beyond five (5) days prior to the
expiration of the Original Term or the Renewal Term, as the case may be.
Borrower's contingent reimbursement obligation in respect of the Letters of
Credit shall automatically reduce the amount which Borrower may borrow based
upon (A) the Revolving Loan Commitment, by one hundred percent (100%) of all of
the Letter of Credit Obligations and (B) the Borrowing Base, by one hundred
percent (100%) of the Letter of Credit Obligations for each stand-by Letter of
Credit and forty-five percent (45%) of the Letter of Credit Obligations for each
documentary Letter of Credit. Any payment made by LaSalle to any Person on
account of any Letter of Credit shall constitute a Revolving Loan hereunder. At
no time shall the aggregate sum of direct Revolving Loans by LaSalle to Borrower
plus the contingent liability of LaSalle under the outstanding Letters of Credit
be in excess of the Revolving Loan Commitment, and at no time shall the
aggregate sum of direct Revolving Loans by LaSalle to Borrower plus one hundred
percent (100%) of the contingent liability of LaSalle under the outstanding
stand-by Letters of Credit plus forty-five percent (45%) of the contingent
liability of LaSalle under the outstanding documentary Letters of Credit be in
excess of the Borrowing Base.
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5. INTEREST, FEES AND CHARGES.
(a) Rates of Interest. Interest accrued on the Revolving
Loans, Term Loan A and Term Loan B shall be due on the earliest of (i) the first
day of each month (for the immediately preceding month), computed through the
last calendar day of the preceding month, (ii) the occurrence of an Event of
Default in consequence of which LaSalle elects to accelerate the maturity and
payment of the Obligations, or (iii) termination of this Agreement pursuant to
paragraph 12 hereof. Except as otherwise provided in paragraph 5(c) hereof,
interest shall accrue on: (1) the principal amount of the Revolving Loans made
to Borrower outstanding at the end of each day at a fluctuating rate per annum
equal to one percent (1%) above the Prime Rate; (2) the unpaid principal balance
of Term Loan A made to Borrower outstanding at the end of each day at a
fluctuating rate per annum equal to one and one-quarter per cent (1.25%) above
the Prime Rate; and (3) the unpaid principal balance of Term Loan B made to the
Borrower outstanding at the end of each day at a fluctuating rate per annum
equal to two percent (2.0%) above the Prime Rate. The rate of interest payable
on the Loans shall increase or decrease by an amount equal to any increase or
decrease in the Prime Rate, effective as of the opening of business on the day
that any such change in the Prime Rate occurs. Upon and after the occurrence of
an Event of Default, and during the continuation thereof, the principal amount
of all Loans shall bear interest on demand at a rate per annum equal to the rate
of interest then in effect plus two percent (2%).
(b) Computation of Interest and Fees. Interest and collection
charges hereunder shall be calculated daily and shall be computed on the actual
number of days elapsed over a year consisting of three hundred and sixty (360)
days.
(c) Maximum Interest. It is the intent of the parties that the
rate of interest and the other charges to Borrower under this Agreement shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which LaSalle may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
(d) Letter of Credit Fees. Borrower shall remit to LaSalle a
Letter of Credit fee equal to two percent (2.0%) per annum on the aggregate
undrawn face amount of all outstanding Letters of Credit issued for the account
of Borrower, which fee shall be payable monthly in arrears on each day that
interest is payable hereunder. Borrower shall also pay on demand the normal and
customary administrative charges for issuance, amendment, negotiation, renewal
or extension of any Letter of Credit imposed by the bank issuing such Letter of
Credit. Upon the occurrence and during the continuance of an Event of Default,
all Letter of Credit
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fees shall be payable on demand at a rate equal to four percent (4.0%) per annum
on the aggregate undrawn face amount thereof.
(e) Closing Fee. Borrower shall pay to LaSalle: (i) a closing
fee, payable on or before the Closing Date, in an amount equal to Seventy-One
Thousand Three Hundred Seventy-Five Dollars ($71,375.00); and (ii) an additional
closing fee, payable on the date of the Acquisition, in an amount equal to
Seventy-One Thousand Three Hundred Seventy-Five Dollars ($71,375.00). No part of
the closing fee shall be applied to costs or expenses incurred by LaSalle in
connection with the Loans.
(f) Unused Line Fee. Borrower shall pay to LaSalle at the end
of each month, in arrears, an Unused Line Fee equal to one-half of one percent
(0.5%) per annum on the daily average amount by which the Revolving Loan
Commitment exceeds the sum of (i) the outstanding principal balance of the
Revolving Loans and (ii) the outstanding Letter of Credit Obligations. The
Unused Line Fee shall accrue from the Closing Date until the last day of the
Original Term, and if applicable, from the first day to the last day of each
Renewal Term.
(g) Examination and Appraisal Fees. In addition to the costs
and expenses described in paragraph 13(n) hereof, Borrower shall pay to LaSalle
an examination fee of $600.00 per auditor-day for each examination performed by
or at LaSalle's direction of Borrower's books and records and Collateral and
such other matters as LaSalle shall deem appropriate in its commercially
reasonable judgment, each such fee to be paid upon the completion of each such
examination.
(h) Capital Adequacy Charge. If LaSalle shall have determined
that the adoption of any law, rule or regulation regarding capital adequacy, or
any change therein or in the interpretation or application thereof, or
compliance by LaSalle with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority enacted after the Closing Date, does or shall have the effect of
reducing the rate of return on LaSalle's capital as a consequence of its
obligations hereunder to a level below that which LaSalle could have achieved
but for such adoption, change or compliance (taking into consideration LaSalle's
policies with respect to capital adequacy) by a material amount, then from time
to time, after submission by LaSalle to Borrower of a written demand therefor
("Capital Adequacy Demand") together with the certificate described below,
Borrower shall pay to LaSalle such additional amount or amounts ("Capital
Adequacy Charge") as will compensate LaSalle for such reduction, such Capital
Adequacy Demand to be made with reasonable promptness following such
determination. A certificate of LaSalle claiming entitlement to payment as set
forth above shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to such
reduction, the amount of the Capital Adequacy Charge to be paid to LaSalle, and
the method by which such amount was determined. In determining such amount,
LaSalle may use any
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reasonable averaging and attribution method, applied on a non-discriminatory
basis.
6. LOAN ADMINISTRATION.
(a) Revolving Loan Requests. A request for a Revolving Loan
shall be made or shall be deemed to be made, each in the following manner: (i)
Borrower shall give LaSalle same day notice, no later than 10:30 A.M. (Chicago
time) of such day, of its intention to borrow a Revolving Loan, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date, provided, however, that no such request may be made at a time
when there exists a Default or an Event of Default; and (ii) the coming due of
any amount required to be paid under this Agreement or any Note, whether on
account of interest or for any other Obligation, shall be deemed irrevocably to
be a request for a Revolving Loan on the due date thereof in the amount required
to pay such interest or other Obligation. As an accommodation to Borrower,
LaSalle may permit telephone requests for Revolving Loans and electronic
transmittal of instructions, authorizations, agreements or reports to LaSalle by
Borrower. Unless Borrower specifically directs LaSalle in writing not to accept
or act upon telephonic or electronic communications from Borrower, LaSalle shall
have no liability to Borrower for any loss or damage suffered by Borrower as a
result of LaSalle's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to LaSalle by
Borrower and LaSalle shall have no duty to verify the origin of any such
communication or the authority of the Person sending it. Each notice of
borrowing shall be irrevocable by and binding on Borrower.
(b) Disbursement. Borrower hereby irrevocably authorizes
LaSalle to disburse the proceeds of each Revolving Loan requested by Borrower,
or deemed to be requested by Borrower, as follows: (i) the proceeds of each
Revolving Loan requested under paragraph 6(a)(i) shall be disbursed by LaSalle
in lawful money of the United States of America in immediately available funds,
in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from Borrower, and in the case of each subsequent
borrowing, by depositing the sums to be advanced into Borrower's operating
account with LaSalle National Bank or by wire transfer to such bank account as
may be agreed upon by Borrower and LaSalle from time to time, or elsewhere if
pursuant to a written direction from Borrower; and (ii) the proceeds of each
Revolving Loan requested under paragraph 6(a)(ii) shall be disbursed by LaSalle
by way of direct payment of the relevant interest or other Obligation.
7. GRANT OF SECURITY INTEREST TO LASALLE.
As security for the payment of the Loans now or in the future
made by LaSalle to Borrower hereunder and for the payment or other satisfaction
of all other Obligations, Borrower hereby
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assigns to LaSalle and grants to LaSalle a continuing security interest in the
following property of Borrower, whether now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located: (i) all Accounts
(whether or not Eligible Accounts) and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned to or
repossessed or stopped in transit by Borrower; (ii) all Chattel Paper,
Instruments, Documents and General Intangibles (including, without limitation,
all patents, patent applications, trademarks, trademark applications,
tradenames, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contracts rights, security interests, security
deposits and any rights to indemnification); (iii) all Inventory; (iv) all Goods
(other than Inventory) including, without limitation, Equipment, and fixtures;
(v) all deposits and cash and any other property of Borrower now or hereafter in
the possession, custody or control of LaSalle or any agent or any parent,
affiliate or subsidiary of LaSalle or any participant with LaSalle in the Loans
for any purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); (vi) all Investment Property; and (vii) all
additions and accessions to, substitutions for, and replacements, products and
proceeds of the foregoing property, including, without limitation, proceeds of
all insurance policies insuring the foregoing property, and all of Borrower's
books and records relating to any of the foregoing and to Borrower's business.
Notwithstanding the foregoing provisions of this paragraph 7, such grant of a
security interest shall not extend to, and the term "Collateral" shall not
include, any licenses which are now or hereafter held by the BORROWER as
licensee, to the extent that (i) such licenses are not assignable or capable of
being encumbered as a matter of law or under the terms of the license applicable
thereto (but solely to the extent that any such restriction shall be enforceable
under applicable law), without the consent of the licensor thereof and (ii) such
consent has not been obtained; provided, however, that the foregoing grant of
security interest shall extend to, and the term Collateral shall include, (A)
any and all proceeds of such licenses to the extent that the assignment or
encumbering of such proceeds is not so restricted and (B) upon any such
licensor's consent with respect to any such otherwise excluded license being
obtained, thereafter such licenses as well as any and all proceeds thereof that
might theretofore have been excluded from such grant of a security interest and
the term Collateral.
8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall, at LaSalle's request, at any time and from time to
time, execute and deliver to LaSalle such financing statements, documents and
other agreements and instruments (and pay the cost of filing or recording the
same in all public offices deemed reasonably necessary or desirable by LaSalle)
and do such other acts and things as LaSalle may deem necessary or desirable in
order to establish and maintain a valid, attached and perfected security
interest in the Collateral in favor of LaSalle (free and clear of all other
liens, claims and rights of
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third parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the Obligations, and in order to
facilitate the collection of the Collateral. Borrower irrevocably hereby makes,
constitutes and appoints LaSalle (and all Persons designated by LaSalle for that
purpose) as Borrower's true and lawful attorney and agent-in-fact to execute
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect LaSalle's
security interest in the Collateral. Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement.
9. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of
Default has occurred, Borrower shall have the right, except as otherwise
provided in this Agreement, in the ordinary course of Borrower's business, to
(a) sell, lease or furnish under contracts of service any of Borrower's
Inventory normally held by Borrower for any such purpose, and (b) use and
consume any raw materials, work in process or other materials normally held by
Borrower for such purpose, provided, however, that a sale in the ordinary course
of business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by Borrower.
10. COLLECTIONS.
(a) Borrower shall direct all of its Account Debtors to make
all payments on the Accounts directly to a post office box ("Lock Box") with
LaSalle National Bank in the name and under exclusive control of, LaSalle.
Borrower shall establish an account ("Blocked Account") in LaSalle's name for
the benefit of Borrower with LaSalle National Bank, into which all payments
received in the Lock Box shall be deposited, and into which Borrower will
immediately deposit all payments made for Inventory or services sold or rendered
by Borrower and received by Borrower in the identical form in which such
payments were made, whether by cash or check. If Borrower, any Affiliate or
Subsidiary of Borrower, or any shareholder, officer, director, employee or agent
of Borrower or any Affiliate or Subsidiary, or any other Person acting for or in
concert with Borrower shall receive any monies, checks, notes, drafts or other
payments relating to or as proceeds of Accounts, Inventory or other Collateral,
Borrower and each such Person shall receive all such items in trust for, and as
the sole and exclusive property of, LaSalle and, immediately upon receipt
thereof, shall remit the same (or cause the same to be remitted) in kind to the
Blocked Account. Borrower agrees that all payments made to the Blocked Account
established by Borrower or otherwise received by LaSalle, whether in respect of
the Accounts of Borrower or as proceeds of Inventory of the Borrower or
otherwise, will be applied on account of the Obligations of Borrower in
accordance with the terms of this Agreement. Borrower agrees to pay all
reasonable fees, costs and expenses which Borrower incurs in connection with
opening and maintaining a Lock Box and Blocked Account. All of such fees, costs
and expenses which remain unpaid by Borrower
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pursuant to any Lock Box or Blocked Account Agreement with Borrower, to the
extent same shall have been paid by LaSalle hereunder, shall constitute
Revolving Loans hereunder, shall be payable to LaSalle by Borrower upon demand,
shall bear interest at the highest rate then applicable to Revolving Loans
hereunder. All checks, drafts, instruments and other items of payment or
proceeds of Collateral delivered to LaSalle in kind shall be endorsed by
Borrower to LaSalle, and, if that endorsement of any such item shall not be made
for any reason, LaSalle is hereby irrevocably authorized to endorse the same on
Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints LaSalle (and all Persons designated by
LaSalle for that purpose) as Borrower's true and lawful attorney and
agent-in-fact (i) to endorse Borrower's name upon said items of payment and/or
proceeds of Collateral of Borrower and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account of
Borrower or goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof; (iii) to have access to any lock box or
postal box into which any of Borrower's mail is deposited; and (iv) open and
process all mail addressed to Borrower and deposited therein, provided, however,
that LaSalle shall not exercise any such powers described in clauses (i), (ii)
and (iv) unless and until an Event of Default has occurred.
(b) LaSalle may, at any time and from time to time after the
occurrence of an Event of Default, whether before or after notification to any
Account Debtor and whether before or after the maturity of any of the
Obligations, (i) enforce collection of any of Borrower's Accounts or contract
rights by suit or otherwise; (ii) exercise all of Borrower's rights and remedies
with respect to proceedings brought to collect any Accounts; (iii) surrender,
release or exchange all or any part of any Accounts of Borrower, or compromise
or extend or renew for any period (whether or not longer than the original
period) any indebtedness thereunder; (iv) sell or assign any Account of Borrower
upon such terms, for such amount and at such time or times as LaSalle deems
advisable; (v) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or other similar document against any Account Debtor indebted on an
Account of Borrower; and (vi) do all other acts and things which are necessary,
in LaSalle's sole discretion, to fulfill Borrower's obligations under this
Agreement and to allow LaSalle to collect the Accounts. In addition to any other
provision hereof, LaSalle may at any time on or after the occurrence of an Event
of Default, at Borrower's expense, notify any parties obligated on any of the
Accounts of Borrower to make payment directly to LaSalle of any amounts due or
to become due thereunder.
(c) LaSalle shall, within two (2) Business Days after receipt
by LaSalle at its office in Chicago, Illinois of cash or other immediately
available funds from collections of items of payment and proceeds of any
Collateral, apply the whole or any part of such collections or proceeds against
the Obligations in such order as LaSalle shall determine in its sole discretion.
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(d) In its sole credit judgment, without waiving or releasing
any obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, at any time or times hereafter, LaSalle may
(but shall not be obligated to) pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person in, upon or
against the Collateral. All sums paid by LaSalle in respect thereof and all
reasonable costs, fees and expenses (including without limitation reasonable
attorney fees, all court costs and all other charges relating thereto) incurred
by LaSalle shall constitute Revolving Loans, payable by Borrower to LaSalle on
demand and, until paid, shall bear interest at the highest rate then applicable
to Revolving Loans hereunder.
(e) Immediately upon Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document including, without
limitation, any Chattel Paper, Borrower shall deliver the original thereof to
LaSalle together with an appropriate endorsement or other specific evidence of
assignment thereof to LaSalle (in form and substance acceptable to LaSalle). If
an endorsement or assignment of any such items shall not be made for any reason,
LaSalle is hereby irrevocably authorized, as Borrower's attorney and
agent-in-fact, to endorse or assign the same on Borrower's behalf.
11. SCHEDULES AND REPORTS. Borrower shall furnish or cause to be
furnished to LaSalle the following:
(a) Borrower shall provide LaSalle with an executed daily loan
report and certificate in LaSalle's then current form on each day on which
Borrower requests a Revolving Loan, and in any event at least one each week,
which shall be accompanied by copies of Borrower's sales journal, cash receipts
journal and credit memo journal for the relevant period. Such report shall
reflect the activity of Borrower with respect to Accounts for the immediately
preceding week, and shall be in a form and with such specificity as is
satisfactory to LaSalle and shall contain such additional information as LaSalle
may reasonably require concerning Accounts and Inventory included, described or
referred to in such report and any other documents in connection therewith
requested by LaSalle, including, without limitation, but only if specifically
requested by LaSalle, copies of all invoices prepared in connection with such
Accounts.
(b) Within sixty (60) days after the Closing Date, Borrower
shall deliver to LaSalle a balance sheet and income statement of the Borrower
for the fiscal year ending immediately prior to the Closing Date audited by
independent certified public accountants of recognized national standing. In
addition, within sixty (60) days after the date of the closing of the
Acquisition (i) the Borrower shall deliver to LaSalle a balance sheet of the
Borrower as of the day immediately following the closing of the Acquisition,
which balance sheet shall reflect the adjustments made from the fiscal year end
balance sheet referred to in the immediately preceding sentence and be certified
by the Chief
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Financial Officer of the Borrower; and (ii) Guarantor shall deliver to LaSalle a
balance sheet of the Guarantor as of the day immediately following the Closing
Date which balance sheet shall be certified by an officer of the Guarantor in a
form acceptable to the Lender.
(c) As soon as practicable and in any event within twenty-five
(25) days following the end of each calendar month, (i) statements of income and
statements of cash flow of Borrower for each such month and for the period from
beginning of the then current fiscal year of Borrower to the end of such month,
and (ii) balance sheets of Borrower as of the end of such month, such statements
of income and balance sheets to include, in comparative form, figures for the
corresponding periods in the preceding fiscal year of Borrower, all in
reasonable detail and certified by the chief financial officer of Borrower that
such statements fairly present the financial condition of Borrower in accordance
with GAAP, subject to changes resulting from normal year-end adjustments and the
absence of footnotes, together with detailed computations of Borrower's
compliance with the covenants set forth in this Agreement.
(d) As soon as practicable and in any event within thirty (30)
days following the end of each fiscal quarter, (i) statements of income and
statements of cash flow of Guarantor for each such quarter and for the period
from beginning of the then current fiscal year of Guarantor to the end of such
quarter, and (ii) balance sheets of Guarantor as of the end of such quarter,
such statements of income and balance sheets to include, in comparative form,
figures for the corresponding periods in the preceding fiscal year of Guarantor,
all in reasonable detail and certified by the chief financial officer of
Guarantor that such statements fairly present the financial condition of
Guarantor in accordance with GAAP, subject to changes resulting from normal
year-end adjustments and the absence of footnotes.
(e) In addition to any other reports: (i) as soon as
practicable and in any event within ten (10) days after the end of each month
(A) a detailed aged trial balance of Borrower's accounts, in form and substance
satisfactory to LaSalle in its sole discretion, and (B) a summary and detail of
accounts payable (such Accounts and accounts payable divided into such time
intervals as LaSalle may require in its sole discretion), including a listing of
any held checks; (ii) as soon as practicable and in any event within ten (10)
days after the end of each month, the general ledger inventory account balance,
a physical inventory report and LaSalle's standard form of Inventory report then
in effect, for Borrower by each category of Inventory, together with a
description of the monthly change in each category of Inventory; (iii) within
five (5) days after a request by LaSalle, but in any event within ten (10) days
after the end of each March and September, an updated list of all Account
Debtors of Borrower, which list shall include names and addresses; and (iv)
until such time as the Borrower delivers to LaSalle a landlord's waiver in a
form acceptable to LaSalle executed by D&D Development Co., within fifteen (15)
days
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after the end of each month, evidence in a form acceptable to LaSalle that the
Borrower has paid all rent for the preceding month for the property known as
9319 North 94th Way, Scottsdale, Arizona.
(f) As soon as practicable and in any event within ninety (90)
days after the end of each fiscal year of Borrower, (i) statements of income of
Borrower for such fiscal year, (ii) a balance sheet of Borrower as of the end of
such fiscal year, and (iii) statements of cash flow of Borrower for such fiscal
year, all setting forth in comparative form, corresponding figures for the
period covered by the preceding annual audit and as of the end of the preceding
fiscal year, such statements to be presented in accordance with Borrower's
normal method of accounting for Inventory and (if Borrower uses the LIFO method)
disclosing all LIFO reserves, all in reasonable detail and in scope in
accordance with audits performed for Borrower in prior years and examined and
certified by independent certified public accountants of recognized national
standing selected by Borrower and satisfactory to LaSalle, whose opinion shall
be unqualified and shall be in scope in accordance with audits performed for
Borrower in prior years, in form and substance satisfactory to LaSalle.
(g) As soon as practicable and in any event within ninety (90)
days after the end of each fiscal year of Guarantor, (i) statements of income of
Guarantor for such fiscal year, (ii) a balance sheet of Guarantor as of the end
of such fiscal year, and (iii) statements of cash flow of Guarantor for such
fiscal year, all setting forth in comparative form, corresponding figures for
the period covered by the preceding annual audit and as of the end of the
preceding fiscal year, all in reasonable detail and in scope in accordance with
audits performed for Guarantor in prior years and examined and certified by
independent certified public accountants of recognized national standing
selected by Guarantor and satisfactory to LaSalle, whose opinion shall be
unqualified and shall be in scope in accordance with audits performed for
Guarantor in prior years, in form and substance satisfactory to LaSalle.
(h) As soon as practicable and in any event prior to the
beginning of each fiscal year of Borrower, projected balance sheets, statements
of income and cash flow for Borrower, for each of the twelve (12) months during
such fiscal year, which shall include the assumptions used therein, together
with appropriate supporting details as requested by LaSalle.
(i) As soon as practicable and in any event within ten (10)
days of delivery to Borrower, a copy of any letter issued by Borrower's
independent public accountants or other management consultants with respect to
Borrower's financial or accounting systems or controls, including all so-called
"management letters".
(j) In conjunction with the delivery of the annual
presentation of projections or budgets referred to in paragraph 11(h) above, a
letter signed by the President or a Vice President of Borrower and by the
Treasurer or Chief Financial Officer of Borrower, describing, comparing and
analyzing, in detail, all
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changes and developments between the anticipated financial results included in
such projections or budgets and the historical financial statements of Borrower.
(k) With reasonable promptness, such other business or
financial data, reports, appraisals and projections as LaSalle may reasonably
request.
(l) All financial statements delivered to LaSalle pursuant to
the requirements of this paragraph (except where otherwise expressly indicated)
shall be prepared in accordance with GAAP as provided in this Agreement.
Together with each delivery of financial statements required by paragraphs 11(c)
and 11(f) above, Borrower shall deliver to LaSalle an officer's certificate in
the form attached hereto as Exhibit B, which shall include a calculation of
financial covenants in the schedule attached to such officer's certificate in
form satisfactory to LaSalle. Together with each delivery of annual financial
statements required by paragraph 11(f) Borrower shall deliver to LaSalle a
certificate of the accountants who performed the audit in connection with such
statements stating that in making the audit necessary to the issuance of a
report on such financial statements, they have obtained no knowledge of any
event or circumstance which is or which with the passage of time, the giving of
notice, or both would constitute an Event of Default, or, if such accountants
have obtained knowledge of such an event or circumstance, specifying the nature
and period of existence thereof.
12. TERMINATION.
(a) This Agreement shall be in effect from the date hereof
until that date which is exactly three (3) years after the Closing Date
("Original Term") and shall automatically renew itself from year to year
thereafter (each such one year renewal being referred to herein as a "Renewal
Term") unless (i) the due date of the Obligations is accelerated pursuant to
paragraph 17 hereof; or (ii) Borrower elects or LaSalle elects to terminate this
Agreement at the end of the Original Term or at the end of any Renewal Term by
giving the other party written notice of such election at least ninety (90) days
prior to the end of the Original Term or the then current Renewal Term, in which
case Borrower shall pay all of the Obligations in full on the last day of such
term. If one or more of the events specified in clauses (i) or (ii) occurs, this
Agreement shall terminate on the date thereafter that the Obligations are paid
in full, provided, however, that the security interests and liens created under
this Agreement and the Other Agreements shall survive such termination until the
date upon which payment and satisfaction in full of the Obligations shall have
occurred. If Borrower obtains new financing from another lender in order to
repay all of the Obligations, Borrower shall deliver such lender's
indemnification of LaSalle, in form and substance satisfactory to LaSalle, for
checks which LaSalle has credited to Borrower's account, but which subsequently
are dishonored for any reason.
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(b) If, during the term of this Agreement, Borrower prepays
all of the Revolving Loans and/or the Term Loans, and in connection therewith,
Borrower either (i) permits any security agreement, financing statement or
analogous instrument to be executed or filed with respect to the Collateral for
the benefit of someone other than LaSalle (other than in connection with a
Permitted Lien), or (ii) creates, incurs or assumes any liability for borrowed
money (except for borrowings from LaSalle and borrowings permitted pursuant to
paragraph 14(h) hereof), owing by Borrower, such prepayment shall constitute a
termination of the Revolving Loans and/or the Term Loans, as the case may be,
and Borrower agrees to pay to LaSalle, as a prepayment fee, in addition to the
payment of all other Obligations owing by Borrower, an amount equal to: (i)
three percent (3%) of the Revolving Loan Commitment if the Revolving Loans are
terminated during the first year of the Original Term; (ii) two percent (2%) of
the Revolving Loan Commitment if the Revolving Loans are terminated during the
second year of the Original Term; (iii) one percent (1%) of the Revolving Loan
Commitment if the Revolving Loans are terminated during the third year of the
Original Term or during any Renewal Term, (iv) three percent (3%) of the amount
of the Term Loans prepaid if the Term Loans are prepaid during the first year of
the Original Term, (v) two percent (2%) of the amount of the Term Loans prepaid
if the Term Loans are prepaid during the second year of the Original Term, and
(vi) one percent (1%) of the amount of the Term Loans prepaid if the Term Loans
are prepaid during the third year of the Original Term or during any Renewal
Term, except if terminated or prepaid at the end of the Original Term or any
Renewal Term, pursuant to the terms set forth herein, or if such prepayment is
the result of LaSalle's election to terminate the Loan Agreement for any reason
other than Borrower's default hereunder.
13. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
representations, warranties and covenants:
(a) the financial statements delivered or to be delivered by
Borrower to LaSalle at or prior to the date of this Agreement and at all times
subsequent thereto accurately reflect the financial condition of Borrower, and
since the date of the Borrower's financial statements delivered to LaSalle most
recently prior to the date of this Agreement, no event or condition has occurred
which has had, or is reasonably likely to have, a Material Adverse Effect;
(b) the office where Borrower keeps its books, records and
accounts (or copies thereof) concerning the Collateral, Borrower's principal
place of business and all of Borrower's other places of business, locations of
Collateral and post office boxes are as set forth in Schedule 13(b) attached
hereto; Borrower shall promptly (but in no event less than ten (10) days prior
thereto) advise LaSalle in writing of the proposed opening of any new place of
business, the closing of any existing place of business, any change in the
location of Borrower's books, records and accounts
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(or copies thereof) or the opening or closing of any post office box of
Borrower;
(c) the Collateral, including without limitation the Equipment
(except any part thereof which prior to the date of this Agreement Borrower
shall have advised LaSalle in writing consists of Collateral normally used in
more than one state) is and shall be kept, or, in the case of vehicles, based,
only at the addresses set forth on Schedule 13(c) attached hereto, and at other
locations within the continental United States of which LaSalle has been advised
by Borrower in writing;
(d) Borrower shall immediately give written notice to LaSalle
of any use of any Goods in any state other than a state in which Borrower has
previously advised LaSalle Goods shall be used, and Goods shall not, unless
LaSalle shall otherwise consent in writing, be used outside of the continental
United States;
(e) no security agreement, financing statement or analogous
instrument exists or shall exist with respect to any of the Collateral other
than any security agreement, financing statement or analogous instrument
evidencing Permitted Liens;
(f) each Account or item of Inventory which Borrower shall,
expressly or by implication, request LaSalle to classify as an Eligible Account
or as Eligible Inventory, respectively, shall, as of the time when such request
is made, conform in all respects to the requirements of such classification as
set forth in the respective definitions of Eligible Account and Eligible
Inventory and as otherwise established by LaSalle from time to time, and
Borrower shall promptly notify LaSalle in writing if any such Eligible Account
or Eligible Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Original
Term or any Renewal Term be the lawful owner of all Collateral now purportedly
owned or hereafter purportedly acquired by Borrower, free from all liens,
claims, security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized
and empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Borrower, and Borrower's execution, delivery and
performance of this Agreement and the Other Agreements shall not result in the
imposition of any lien or other encumbrance upon any of Borrower's property
under any existing indenture, mortgage, deed of trust, loan or credit
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agreement or other agreement or instrument by which Borrower or any of its
property may be bound or affected;
(i) there are no actions or proceedings which are pending or,
to the best of Borrower's knowledge, threatened against Borrower which are
reasonably likely to have a Material Adverse Effect and Borrower shall, promptly
upon becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to LaSalle;
(j) To the best of the Borrower's knowledge, Borrower has
obtained all licenses, authorizations, approvals and permits, the lack of which
would have a material adverse effect on the operation of its business, and to
the best of Borrower's knowledge, Borrower is and shall remain in compliance in
all material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, statutes, orders, regulations, rules and ordinances relating to
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters), the failure to comply with which would have a Material
Adverse Effect;
(k) all written information now, heretofore or hereafter
furnished by Borrower to LaSalle is and shall be true and correct in all
material respects as of the date with respect to which such information was or
is furnished (except for financial projections, which have been prepared in good
faith based upon reasonable assumptions);
(l) Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Obligations remain outstanding) be owned by any Affiliate;
(m) To the best of the Borrower's knowledge, during the five
(5) years prior to this Agreement, Borrower's name has always been as set forth
on the first page of this Agreement and Borrower has used no tradenames or
division names in the operation of its business, except as otherwise disclosed
in writing to LaSalle; Borrower shall notify LaSalle in writing within ten (10)
days of the change of its name or the use of any tradenames or division names
not previously disclosed to LaSalle in writing;
(n) with respect to Borrower's Equipment: (i) Borrower has
good and indefeasible and merchantable title to and ownership of all Equipment,
including, without limitation, the Equipment described or listed on the
appraisal schedule of Equipment prepared by Daley Hodkin and dated June 1996
delivered to LaSalle prior to the date of this Agreement; (ii) Borrower shall
keep and maintain the Equipment in good operating condition and repair and shall
make all reasonable necessary replacements thereof and renewals thereto so that
the value and operating efficiency thereof shall at all times be preserved and
maintained, ordinary wear and tear excepted;
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(iii) Borrower shall not permit any such items to become a fixture to real
estate or an accession to other personal property unless LaSalle will have a
perfected first priority lien in such fixture or accession; (iv) from time to
time Borrower may sell, exchange or otherwise dispose of obsolete, unused or
worn out Equipment, but only to the extent the fair market value in the
aggregate, of all such Equipment sold or otherwise disposed of by the Borrower
during any twelve-month period is less than Ninety Thousand Dollars ($90,000.00)
and the fair market value of any such Equipment sold or otherwise disposed of in
any single transaction is less than Thirty Thousand Dollars ($30,000.00); and
(v) Borrower, immediately on demand by LaSalle, shall deliver to LaSalle any and
all evidence of ownership of, including, without limitation, certificates of
title and applications of title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which Borrower
is a party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms, except
to the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights of
creditors generally;
(p) Borrower is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business, now owns
property having a value both at fair valuation and at present fair saleable
value greater than the amount required to pay its debts, and will not be
rendered insolvent by the execution and delivery of this Agreement or any of the
Other Agreements or by completion of the transactions contemplated hereunder or
thereunder;
(q) Borrower is not now obligated, whether directly or
indirectly, for any loans or other indebtedness for borrowed money other than
(i) the Obligations, (ii) indebtedness disclosed to LaSalle on Schedule 13(q)
attached hereto, (iii) unsecured indebtedness to trade creditors arising in the
ordinary course of Borrower's business, (iv) the Subordinated Debt, and (v)
unsecured indebtedness arising from the endorsement of drafts and other
instruments for collection, in the ordinary course of Borrower's business.
(r) Borrower does not own any margin securities, and none of
the proceeds of the Loans hereunder shall be used for the purpose of purchasing
or carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed on Schedule 13(s) attached
hereto, Borrower has no Parents, Subsidiaries or divisions, nor is Borrower
engaged in any joint venture or partnership with any other Person;
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(t) Borrower is duly organized and in good standing in its
state of organization and Borrower is duly qualified and in good standing in all
states where the nature and extent of the business transacted by it or the
ownership of its assets makes such qualification necessary, except for such
other states in which the failure to so qualify would not have a Material
Adverse Effect;
(u) Borrower is not in default under any material contract,
lease or commitment to which it is a party or by which it is bound, nor does
Borrower know of any dispute regarding any contract, lease or commitment which
is material to the continued financial success and well-being of Borrower;
(v) There are no controversies pending or, to the best of the
Borrower's knowledge, threatened between Borrower and any of its employees,
other than employee grievances arising in the ordinary course of business which
are not, in the aggregate, material to the continued financial success and
well-being of Borrower, and to the best of the Borrower's knowledge, Borrower is
in compliance in all material respects with all federal and state laws
respecting employment and employment terms, conditions and practices, except
where the failure to so comply would not have a Material Adverse Effect;
(w) Borrower possesses, and shall continue to possess,
adequate licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications, tradestyles and tradenames to continue to
conduct its business as heretofore conducted by it; and
(x) The Merger Agreement has been executed and delivered by
each party thereto, and the terms and conditions of the Merger Agreement
constitute the valid and binding obligations of each party thereto, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally.
Borrower represents, warrants and covenants to LaSalle that all representations,
warranties and covenants of Borrower contained in this Agreement (whether
appearing in paragraphs 13 or 14 hereof or elsewhere) shall be true at the time
of Borrower's execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full of all of the Obligations and termination of this Agreement, and shall be
remade by Borrower at the time each Revolving Loan is made and each Letter of
Credit is issued pursuant to this Agreement.
14. COVENANTS. Until payment or satisfaction in full of all Obligations
and termination of this Agreement, unless Borrower obtains LaSalle's prior
written consent waiving or modifying any of Borrower's covenants hereunder in
any specific instance, Borrower agrees as follows:
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(a) Borrower shall at all times keep accurate and complete
books, records and accounts with respect to all of Borrower's business
activities, in accordance with sound accounting practices and GAAP, and shall
keep such books, records and accounts, and any copies thereof, only at the
addresses indicated for such purpose on Schedule 13(b) attached hereto;
(b) LaSalle, or any Persons designated by it, shall have the
right, at any time, in the exercise of its commercially reasonable credit
judgment, to call at Borrower's places of business at any reasonable times, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from Borrower's books, records, journals, orders,
receipts and any correspondence and other data relating to Borrower's business,
the Collateral or any transactions between the parties hereto, and shall have
the right to make such verification concerning Borrower's business as LaSalle
may consider reasonable under the circumstances, provided that so long as there
exists no Default or Event of Default, the periodic filed examinations to be
conducted at Borrower's expense of Borrower and its financial records will not
be conducted more often than quarterly. Borrower shall furnish to LaSalle such
information relevant to LaSalle's rights under this Agreement as LaSalle shall
at any time and from time to time reasonably request. Borrower authorizes
LaSalle to discuss the affairs, finances and business of Borrower with any
officers or directors of Borrower or any Affiliate, or with those employees of
Borrower with whom LaSalle has determined in its commercially reasonable
judgment to be necessary or desirable to converse, and to discuss the financial
condition of Borrower with Borrower's independent public accountants. Any such
discussions shall be without liability to LaSalle or to such accountants.
Borrower shall pay to or reimburse LaSalle for all reasonable fees, costs, and
out-of-pocket expenses incurred by LaSalle in the exercise of its rights
hereunder (in addition to the fees payable by Borrower pursuant to paragraph
5(g) hereof in connection with LaSalle's examination of Borrower's books and
records and Collateral) and all of such costs, fees and expenses shall
constitute Revolving Loans hereunder, shall be payable on demand and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(c) (i) Borrower shall: keep the Collateral properly housed
and shall keep the Collateral insured against such risks and in such amounts as
are customarily insured against by Persons engaged in businesses similar to that
of Borrower with such companies, in such amounts and under policies in such form
as shall be reasonably satisfactory to LaSalle. Originals or certified copies of
such policies of insurance have been or shall be delivered to LaSalle within
fifteen (15) days after the Closing Date, together with evidence of payment of
all premiums therefor, and shall contain an endorsement, in form and substance
acceptable to LaSalle, showing loss under such insurance policies payable to
LaSalle. Such endorsement, or an independent instrument furnished to LaSalle,
shall provide that the insurance company shall give LaSalle at least thirty (30)
days written notice before any such
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policy of insurance is altered or canceled and that no act, whether willful or
negligent, or default of Borrower or any other Person shall affect the right of
LaSalle to recover under such policy of insurance in case of loss or damage.
Subject to the terms of the Intercreditor Agreement, Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable thereunder
directly to LaSalle. Borrower irrevocably makes, constitutes and appoints
LaSalle (and all officers, employees or agents designated by LaSalle) as
Borrower's true and lawful attorney (and agent-in- fact) for the purpose of
making, settling and adjusting claims under such policies of insurance,
endorsing the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and making all
determinations and decisions with respect to such policies of insurance,
provided, however, that LaSalle shall exercise such rights only upon the
occurrence of an Event of Default. Subject to the terms of the Intercreditor
Agreement, the proceeds of any insured loss shall be paid to LaSalle and shall
be applied by LaSalle to the Obligations, in such order of application as
determined by LaSalle, unless LaSalle permits the use thereof to repair or
replace damaged or destroyed Collateral;
(ii) Borrower shall maintain, at its expense, such public
liability and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of Borrower with such companies and in
such amounts, with such deductibles and under policies in such form as shall be
reasonably satisfactory to LaSalle and originals or certified copies of such
policies have been or shall be delivered to LaSalle within fifteen (15) days
after the Closing Date, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing LaSalle as
additional insured thereunder and providing that the insurance company shall
give LaSalle at least thirty (30) days written notice before any such policy
shall be altered or canceled;
(iii) Borrower shall maintain, at its expense, such business
interruption insurance as is customary for Persons engaged in businesses similar
to that of Borrower with such companies and in such amounts, with such
deductibles and under policies in such form as shall be reasonably satisfactory
to LaSalle and originals or certified copies of such policies (or binders
evidencing the existence of coverage in compliance with this paragraph) have
been or shall be delivered to LaSalle on or before the Closing Date, together
with evidence of payment of all premiums therefor; each such policy shall
contain an endorsement showing LaSalle as additional insured and loss payee
thereunder and providing that the insurance company shall give LaSalle at least
thirty (30) days written notice before any such policy shall be altered or
canceled; each such policy shall be assigned to LaSalle pursuant to LaSalle's
standard form of assignment; and
(iv) If Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating
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thereto, then LaSalle, without waiving or releasing any obligation or default by
Borrower hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as LaSalle deems advisable. All sums disbursed by
LaSalle in connection with any such actions, including, without limitation,
court costs, expenses, other charges relating thereto and reasonable attorneys'
fees, shall constitute Revolving Loans hereunder and, until paid, shall bear
interest at the highest rate then applicable to Revolving Loans hereunder;
(d) Borrower shall not use the Collateral, or any part
thereof, in any unlawful business or for any unlawful purpose or use or maintain
any of the Collateral in any manner that does or could result in material damage
to the environment or a violation of any applicable environmental laws, rules or
regulations; Borrower shall keep the Collateral in good condition, repair and
order, ordinary wear and tear excepted; Borrower shall not permit the
Collateral, or any part thereof, to be levied upon under execution, attachment,
distraint or other legal process; Borrower shall not sell, lease, grant a
security interest in or otherwise dispose of any of the Collateral except as
expressly permitted by this Agreement; and Borrower shall not secrete or abandon
any of the Collateral, or remove or permit removal of any of the Collateral from
any of the locations listed on Schedule 13(c) attached hereto or in any written
notice to LaSalle pursuant to paragraph 13(c) hereof, except for the removal of
Inventory sold in the ordinary course of Borrower's business as permitted
herein;
(e) all monies and other property obtained by Borrower from
LaSalle pursuant to this Agreement will be used only (i) to refinance Borrower's
existing indebtedness owed to institutional lenders, and (ii) for Borrower's
working capital needs;
(f) Borrower shall, at the request of LaSalle, indicate on its
records concerning the Collateral a notation, in form satisfactory to LaSalle,
of the security interest of LaSalle hereunder, and Borrower shall not maintain
duplicates or copies of such records at any address other than Borrower's
principal place of business set forth on the first page of this Agreement;
provided, however, that Borrower, in the ordinary course of its business, may
furnish copies of such records to its accountants, attorneys and other agents or
advisors as it may determine to be necessary or desirable, in the exercise of
its commercially reasonable judgment;
(g) Borrower shall file all required tax returns and pay all
of its taxes when due, including, without limitation, taxes imposed by federal,
state or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) upon the
occurrence of an Event of Default, Borrower
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keeps on deposit with LaSalle (such deposit to be held without interest) an
amount of money which, in the sole judgment of LaSalle, is sufficient to pay
such taxes and any interest or penalties that may accrue thereon, and (iv) if
Borrower fails to prosecute such contest with reasonable diligence, LaSalle may
apply the money so deposited in payment of such taxes. If Borrower fails to pay
any such taxes and in the absence of any such contest by Borrower, LaSalle may
(but shall be under no obligation to) advance and pay any sums required to pay
any such taxes and/or to secure the release of any lien therefor, and any sums
so advanced by LaSalle shall constitute Revolving Loans hereunder, shall be
payable by Borrower to LaSalle on demand, and, until paid, shall bear interest
at the highest rate then applicable to Revolving Loans hereunder;
(h) Borrower shall not (i) incur, create, assume or suffer to
exist any indebtedness other than (A) indebtedness arising under this Agreement,
(B) unsecured indebtedness owing in the ordinary course of business to trade
suppliers, (C) the Cruttenden Loan, (D) the Quadrant Loan, (E) the Subordinated
Debt, and (F) indebtedness described on Schedule 13(q) attached hereto; or (ii)
assume, guarantee or endorse, or otherwise become liable in connection with, the
obligations of any Person, except by endorsement of instruments for deposit or
collection or similar transactions in the ordinary course of business;
(i) Borrower shall not: (i) except with the prior written
consent of LaSalle, enter into any merger or consolidation, issue any shares of,
or warrants or other rights to receive or purchase any shares of, any class of
its stock, redeem or repurchase any of its stock or have more than ten percent
(10%) of its stock sold or transferred in any manner; (ii) sell, lease or
otherwise dispose of all or substantially all of its assets; (iii) create any
new Subsidiary or Affiliate; (iv) sell or enter into any contract or agreement
providing for the sale of all or any part of the Collateral, except for the sale
of inventory in the ordinary course of Borrower's business; or (v) permit the
Collateral to be encumbered or charged with a lien or security interest of any
kind or nature, whether voluntary or involuntary, other than: (A) Permitted
Liens; (B) liens securing the Cruttenden Loan provided Cruttenden executes and
delivers to LaSalle an Intercreditor Agreement in a form acceptable to LaSalle;
and (C) liens securing obligations of the Guarantor to the Seller under the
Seller Debt provided the Seller executes and delivers to LaSalle an
Intercreditor Agreement in a form acceptable to LaSalle.
(j) Borrower shall not make any advance, loan, investment or
material acquisition of assets (other than Capital Expenditures permitted
pursuant to paragraph 14(m)(v) below) other than (i) advances made to employees
in the ordinary course of business so long as the aggregate amount of such
advances do not exceed Fifty Thousand Dollars ($50,000.00) in the aggregate
outstanding at any time; (ii) investments in marketable securities so long as
the aggregate amount of such investments do not exceed One Hundred Thousand
Dollars ($100,000.00) at any time;
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(iii) investments in short-term direct obligations of the United States
government; (iv) investments in negotiable certificates of deposit issued by a
bank satisfactory to LaSalle, payable to the order of Borrower or to bearer, (v)
investments in commercial paper rated A-1 or P-1; provided, that with respect to
clauses (ii), (iii), (iv), and (v), Borrower shall assign all such investments
to LaSalle in form acceptable to LaSalle.
(k) Borrower shall not (i) except as permitted pursuant to
paragraph 14(r) below, declare or pay any dividend or other distribution
(whether in cash or in kind) on, purchase, redeem or retire any shares of any
class of its stock, or make any payment on account of, or set apart assets for
the repurchase, redemption, defeasance or retirement of, any class of its stock;
or (ii) except for prepayments of the Cruttenden Loan or the Quadrant Loan with
proceeds from an initial public offering of stock in the Borrower and
prepayments on the Subordinated Debt permitted by the Subordination Agreement
executed by the Seller and LaSalle, make any optional payment or prepayment on
or redemption (including without limitation by making payments to a sinking fund
or analogous fund) or repurchase of any indebtedness for borrowed money other
than indebtedness pursuant to this Agreement;
(l) Borrower shall not amend its organizational documents or
change its fiscal year, except for a change to a calendar year fiscal period;
(m) Borrower shall maintain and keep in full force and effect
each of the financial covenants set forth below. The calculation and
determination of each such financial covenant, and all accounting terms
contained therein, shall be so calculated and construed in accordance with GAAP,
applied on a basis consistent with the financial statements of Borrower
delivered on or before the Closing Date:
(i) Tangible Net Worth. Borrower shall maintain at
all times a Tangible Net Worth of not less than Five Million Five Hundred
Thousand Dollars ($5,500,000.00).
(ii) Interest Coverage Ratio. Borrower shall have as
of each date of calculation, a ratio of (A) EBITDA for such fiscal quarter to
(B) interest expense for such fiscal quarter, of not less than 1.50 to 1.00,
calculated quarterly on a cumulative basis for the fiscal quarters of Borrower
ending March 31, 1997, June 30, 1997, September 30, and December 31, 1997, and
thereafter calculated monthly on a rolling twelve month basis commencing with
the month ending January 31, 1998;
(iii) Debt Service Coverage Ratio. Borrower shall
have as of each date of calculation, a Debt Service Coverage Ratio, of not less
than 1.25 to 1.00, calculated quarterly on a cumulative basis for the fiscal
quarters of Borrower ending March 31, 1997, June 30, 1997, September 30, and
December 31, 1997, and thereafter calculated monthly on a rolling twelve month
basis commencing with the month ending January 31, 1998;
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(iv) Liabilities to Tangible Net Worth Ratio.
Borrower shall have at all time a ratio of Liabilities (excluding the
Subordinated Debt) to Tangible New Worth of not more than 2.0 to 1.0.
(v) Capital Expenditures. Borrower shall not make:
(A) Capital Expenditures of an aggregate amount of more than Five Hundred
Thousand Dollars ($500,000.00) during any fiscal year (prorated for the fiscal
year ending December 31, 1997); or (B) Capital Expenditures in the form of
expenditures for capital lease obligations of an aggregate amount of more than
Five Hundred Thousand Dollars ($500,000.00) during any fiscal year (pro-rated
for the fiscal year ending December 31, 1997).
(n) Borrower shall reimburse LaSalle for all costs and
expenses including, without limitation, legal expenses and reasonable attorneys'
fees (both in-house and outside counsel), incurred by LaSalle in connection with
the documentation and consummation of this transaction and any other
transactions between Borrower and LaSalle, including, without limitation,
Uniform Commercial Code and other public record searches, lien filings, Federal
Express or similar express or messenger delivery, appraisal costs, surveys,
title insurance and environmental audit or review costs, and in seeking to
collect, protect or enforce any rights in or to the Collateral or incurred by
LaSalle in seeking to collect any Obligations and to administer and enforce any
of LaSalle's rights under this Agreement. Borrower shall also pay all normal
service charges with respect to accounts maintained by LaSalle for the benefit
of Borrower. All such costs, expenses and charges shall constitute Revolving
Loans hereunder, shall be payable by Borrower to LaSalle on demand, and, until
paid, shall bear interest at the highest rate then applicable to Revolving Loans
hereunder;
(o) Within thirty (30) calendar days after the Closing Date,
Borrower shall transfer all of its primary operating bank accounts to, and shall
thereafter maintain such accounts with, LaSalle National Bank;
(p) After obtaining the Cruttenden Loan and the Quadrant Loan,
Borrower will not modify any of the terms of the Cruttenden Loan or the Quadrant
Loan or any of the documents evidencing, securing or otherwise documenting the
Cruttenden Loan or the Quadrant Loan without the prior written consent of
LaSalle.
(q) Borrower shall not guaranty any aspect of the equity
capital investment to be provided to Guarantor in connection with the
acquisition by Guarantor of all of the outstanding stock of Borrower; and
(r) Prior to the Acquisition the Borrower may, with respect to
any period in which the Borrower is an "S" corporation as defined in Section
1361(a) of the Internal Revenue Code, pay dividends to each of its shareholders,
provided such dividends do not exceed in the aggregate for any taxable year, the
product of the taxable income of the Borrower for such taxable year multiplied
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by the sum of: (a) the highest federal income tax rate in effect for such
shareholders for such taxable year; and (b) the highest state and local income
tax rates in effect for such shareholders for such taxable year. Following the
Acquisition, except for dividends, made with proceeds from an initial public
offering of stock in the Borrower, in an aggregate amount not exceeding the
principal amount owed by the Guarantor to the Seller on the Seller Debt,
Borrower may only make distributions of dividends to the Guarantor in an
aggregate amount equal to: (i) the Guarantor's interest expense on the Seller
Debt; and (ii) One Hundred Thousand Dollars ($100,000.00) per fiscal quarter.
Notwithstanding anything contained herein to the contrary, no distributions of
dividends may be made during the continuance of an Event of Default.
15. CONDITIONS PRECEDENT.
(a) The obligation of LaSalle to fund the initial Revolving
Loan, to fund Term Loan A and Term Loan B, and to co-sign as applicant for the
initial Letter of Credit, is subject to the satisfaction or waiver on or before
the Closing Date of the following conditions precedent:
(i) LaSalle shall have received each of the
agreements, opinions, reports, approvals, consents, certificates and other
documents set forth on the closing document list attached hereto as Schedule
15(a)(i) (the "Closing Document List");
(ii) No event shall have occurred which has had or
could reasonably be expected to have a Material Adverse Effect, as determined by
LaSalle in its sole discretion;
(iii) LaSalle shall have received payment in full of
all fees and expenses payable to it by Borrower on or before the Closing Date;
(iv) LaSalle shall have determined that immediately
after giving effect to (A) the making of the Loans requested to be made on the
Closing Date, if any, (B) the issuance of the initial Letter of Credit, if any,
requested to be made on the Closing Date, and (C) the payment or reimbursement
by Borrower to LaSalle for all closing costs and expenses incurred by or owed to
LaSalle in connection with the transactions contemplated hereby, including
without limitation the closing fee and the fees and expenses of LaSalle's
counsel, on a pro forma basis the Excess Availability of Borrower shall not be
less than Five Hundred Thousand Dollars ($500,000.00);
(v) LaSalle shall have received a certificate from
Borrower's chief executive officer or chief financial officer, pursuant to which
such officer shall certify that in calculating the Excess Availability described
in clause (iv) above, Borrower's outstanding trade payables were (and are)
current and not past due in any material respect;
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(vi) There shall have been no sale or other
disposition or damage or destruction of any Equipment, unless such sale or other
disposition or damage or destruction has been fully disclosed to LaSalle, and
LaSalle has in writing agreed to advance the proceeds of Term Loan A
notwithstanding such sale or other disposition or damage or destruction,
provided that in such event LaSalle, in its sole discretion, may reduce the
amount available to be advanced under Term Loan A by such amount as LaSalle may
deem appropriate;
(vii) LaSalle shall have received opinions of
Borrower's general and local counsel in states in which Borrower conducts its
business or owns property on such matters as LaSalle deems appropriate;
(viii) LaSalle shall have received, and shall have
reviewed and approved, an opening balance sheet for Borrower as well as monthly
projections for Borrower's fiscal year ending December 31, 1997;
(ix) LaSalle shall have completed its background
checks and inquiries regarding Borrower and its principals, and shall have
discovered no information regarded as unfavorable by LaSalle; and
(x) The Obligors shall have executed and delivered to
LaSalle all documents which LaSalle determines are reasonably necessary to
consummate the transactions contemplated hereby; and
(xi) LaSalle shall have received a Subordination
Agreement executed by the Seller pursuant to which the Subordinated Debt is
subordinated to the Obligations pursuant to terms acceptable to LaSalle.
(b) After the Closing Date, the obligation of LaSalle to make
any requested Revolving Loan, or to co-sign as applicant for any requested
Letter of Credit is subject to the satisfaction of the conditions precedent set
forth below. Each such request shall constitute a representation and warranty
that such conditions are satisfied:
(i) All representations and warranties contained in
this Agreement and the Other Agreements shall be true and correct on and as of
the date of such request, as if then made, other than representations and
warranties that relate solely to an earlier date;
(ii) No Default or Event of Default shall have
occurred, or would result from the making of the requested Revolving Loan or the
issuance of the requested Letter of Credit, which has not been waived; and
(iii) No event shall have occurred which has had or
could reasonably be expected to have a Material Adverse Effect.
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16. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder:
(a) the failure of any Obligor to pay any payment of
principal, interest or principal and interest when and as due under any Note; or
the failure to pay any of the other Obligations when due, declared due, or
demanded by LaSalle in accordance with the terms hereof, and the failure to make
payment of any of such other Obligations when due is not cured within five (5)
calendar days after notice from LaSalle to the Borrower;
(b) the failure of any Obligor to perform, keep or observe any
of the covenants, conditions, promises, agreements or obligations of such
Obligor under this Agreement or any of the Other Agreements, which failure
continues for five (5) calendar days after notice from LaSalle to Borrower,
provided that a failure by Borrower to perform any obligations under any of the
following paragraphs of this Agreement shall constitute an immediate Event of
Default without Borrower having any notice or cure rights: paragraph 11;
paragraphs 13(a), (b), (c), (d), (e), (f), (o) and (p); and paragraphs 14(a),
(b), (m), (p) and (r).
(c) the making or furnishing by any Obligor to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and LaSalle, which is
untrue or misleading in any respect, or the failure of any Obligor to perform,
keep or observe any of the covenants, conditions, promises, agreement of such
Obligor under any other agreement with any Person if such failure has or is
reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or other encumbrance upon any of the Collateral,
other than the Permitted Liens and judgment liens which do not constitute an
Event of Default under paragraph 16(g) hereof, or the making or any attempt to
make any levy, seizure or attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by
or against any Obligor, (ii) for the liquidation or reorganization of any
Obligor, (iii) alleging that such Obligor is insolvent or unable to pay its
debts as they mature, or (iv) for the readjustment or arrangement of any
Obligor's debts, whether under the United States Bankruptcy Code or under any
other law, whether state or federal, now or hereafter existing for the relief of
debtors, or the commencement of any analogous statutory or non-statutory
proceedings involving any Obligor; provided, however, that if such commencement
of proceedings against such Obligor is involuntary, such action shall not
constitute an Event of Default unless such proceedings are not dismissed within
ninety (90) days after the commencement of such proceedings;
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(f) the appointment of a receiver or trustee for any Obligor,
for any of the Collateral or for any substantial part of any Obligor's assets or
the institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within ninety (90) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of Fifty
Thousand Dollars ($50,000.00) against any Obligor which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution;
(h) the occurrence of an event of default under, or the
revocation or termination of, any agreement, instrument or document executed and
delivered by any Person to LaSalle pursuant to which such Person has guaranteed
to LaSalle the payment of all or any of the Obligations or has granted LaSalle a
security interest in or lien upon some or all of such Person's real and/or
personal property to secure the payment of all or any of the Obligations;
(i) the occurrence of an event of default under (i) the
Cruttenden Loan; (ii) Seller Debt; (iii) the Quadrant Loan; or (iv) any
agreement or instrument evidencing indebtedness for borrowed money in excess of
Fifty Thousand Dollars ($50,000.00) executed or delivered by Borrower or
pursuant to which agreement or instrument Borrower or its properties is or may
be bound; or
(j) the occurrence of any event or condition which has or is
reasonably likely to have a Material Adverse Effect.
17. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
paragraph 16(e) hereof, all of the Obligations shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all of the Obligations may, at the
option of LaSalle, and without demand, notice or legal process of any kind, be
declared, and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, LaSalle may
exercise from time to time any rights and remedies available to it under the
Uniform Commercial Code and any other applicable law in addition to, and not in
lieu of, any rights and remedies expressly granted in this Agreement or in any
of the Other Agreements and all of LaSalle's rights and remedies shall be
cumulative and non-exclusive to the extent permitted by law. In particular, but
not by way of limitation of the foregoing, LaSalle may, without notice, demand
or legal process of any kind, take possession of any or all of the Collateral
(in addition to Collateral of which it already has possession), wherever it may
be
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found, and for that purpose may pursue the same wherever it may be found, and
may enter into any of Borrower's premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of, and LaSalle shall have
the right to store the same at any of Borrower's premises without cost to
LaSalle. At LaSalle's request, Borrower shall, at Borrower's expense, assemble
the Collateral and make it available to LaSalle at one or more places to be
designated by LaSalle and reasonably convenient to LaSalle and Borrower.
Borrower recognizes that if Borrower fails to perform, observe or discharge any
of its Obligations under this Agreement or the Other Agreements, no remedy at
law will provide adequate relief to LaSalle, and Borrower agrees that LaSalle
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition. Any proceeds of any disposition by LaSalle of any of the Collateral
may be applied by LaSalle to the payment of expenses in connection with the
Collateral including, without limitation, legal expenses and reasonable
attorneys' fees (both in-house and outside counsel) and any balance of such
proceeds may be applied by LaSalle toward the payment of such of the
Obligations, and in such order of application, as LaSalle may from time to time
elect.
18. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably
satisfactory to LaSalle), protect, indemnify and hold harmless LaSalle, each
affiliate or subsidiary of LaSalle, and each of their respective officers,
directors, employees, attorneys and agents (each an "Indemnified Party") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loans or any Letters of
Credit or the use or intended use of the proceeds of the Loans or any Letters of
Credit; provided, however, that Borrower shall not have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability,
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obligation, loss, damage, penalty, cost or expense covered by this indemnity
shall be paid to each Indemnified Party on demand, and, failing prompt payment,
shall, together with interest thereon at the highest rate then applicable to
Revolving Loans hereunder from the date incurred by each Indemnified Party until
paid by Borrower, be added to the Obligations of Borrower and be secured by the
Collateral. The provisions of this paragraph 18 shall survive the satisfaction
and payment of the other Obligations and the termination of this Agreement.
19. NOTICES. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in the
form and manner specified below, and shall be addressed to the party to the
following addresses or to such other address as each party designates to the
other by Notice in the manner herein prescribed:
If To LaSalle At:
LASALLE BUSINESS CREDIT, INC.
120 East Baltimore Street, Suite 1802
Baltimore, Maryland 21202
Attn.: Herbert M. Kidd, II,
First Vice President
If To Borrower At:
THE ANTIGUA GROUP, INC.
9319 North 94th Way
Scottsdale, Arizona 85258
Attn.: Thomas E. Dooley, Jr.,
Chief Executive Officer
Notice shall be deemed given hereunder if (i) delivered personally or otherwise
actually received, (ii) sent by overnight delivery service, (iii) mailed by
first-class United States mail, postage prepaid, registered or certified, with
return receipt requested, or (iv) sent via telecopy machine with a duplicate
signed copy sent on the same day as provided in clause (ii) above. Notice mailed
as provided in clause (iii) above shall be effective upon the expiration of
three (3) Business Days after its deposit in the United States mail, and notice
telecopied as provided in clause (iv) above shall be effective upon receipt of
such telecopy if the duplicate signed copy is sent under clause (iv) above.
Notice given in any other manner described in this section shall be effective
upon receipt by the addressee thereof; provided, however, that if any notice is
tendered to an addressee and delivery thereof is refused by such addressee, such
notice shall be effective upon such tender unless expressly set forth in such
notice.
20. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the
Other Agreements are submitted by Borrower to LaSalle for LaSalle's acceptance
or rejection at LaSalle's place of business in the State of Maryland as an offer
by Borrower to borrow monies from LaSalle now and from time to time hereafter,
and shall not be
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binding upon LaSalle or become effective until accepted by LaSalle, in writing,
at said place of business. If so accepted by LaSalle, this Agreement and the
Other Agreements shall be deemed to have been made at said place of business.
THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE STATE OF MARYLAND AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT
LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED
AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION. If any provision of
this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or remaining
provisions of this Agreement.
21. FORUM SELECTION AND SERVICE OF PROCESS. To induce LaSalle to accept
this Agreement, Borrower irrevocably agrees that, subject to LaSalle's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE
COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF
MARYLAND. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURTS LOCATED WITHIN SAID STATE. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY LASALLE IN ACCORDANCE WITH THIS PARAGRAPH.
22. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower and LaSalle. Borrower may not sell, assign or
transfer this Agreement, or the Other Agreements or any portion thereof
including, without limitation, Borrower's rights, titles, interest, remedies,
powers or duties thereunder. Borrower hereby consents to LaSalle's sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement, or the Other Agreements, or of any portion
thereof, or participations therein including, without limitation, LaSalle's
rights, titles, interest, remedies, powers and/or duties thereunder. Borrower
agrees that it shall execute and deliver such documents as LaSalle may request
in connection with any such sale, assignment, transfer or other disposition.
23. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
24. POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of LaSalle as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Obligations are paid in full and this Agreement
is terminated.
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25. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) LASALLE AND BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT OF BORROWER OR LASALLE OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND
LASALLE. IN NO EVENT SHALL LASALLE BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL
OR CONSEQUENTIAL DAMAGES.
(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF
ANY KIND PRIOR TO THE EXERCISE BY LASALLE OF ITS RIGHTS TO REPOSSESS THE
COLLATERAL OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY
UPON SUCH COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Borrower hereby waives demand, presentment, protest and
notice of nonpayment, and further waives the benefit of all valuation, appraisal
and exemption laws.
(d) LaSalle's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement or any
of the Other Agreements shall not waive, affect or diminish any right of LaSalle
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by LaSalle of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of LaSalle in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by LaSalle
unless such suspension or waiver is in writing, signed by a duly authorized
officer of LaSalle and directed to Borrower specifying such suspension or
waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the 23rd day of January, 1997.
WITNESS: LASALLE BUSINESS CREDIT, INC.
/s/ Joseph R.S. Tyssowski By: /s/ Herbert M. Kidd, II (SEAL)
Name: Herbert M. Kidd, II
Title: First Vice President
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THE ANTIGUA GROUP, INC.
/s/ Joseph R.S. Tyssowski By: /s/ T.E. Dooley (SEAL)
Name: T.E. Dooley
Title: CEO
ACKNOWLEDGMENTS
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY that on this 23rd day of January, 1997, before me, the
undersigned Notary Public of the State aforesaid, in personally appeared Herbert
M. Kidd II, and acknowledged himself to be the First Vice President of LASALLE
BUSINESS CREDIT, INC., a Delaware corporation, and that he, as such First Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of LASALLE BUSINESS CREDIT, INC.,
by himself as First Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Cynthia L. Woods (SEAL)
NOTARY PUBLIC
My Commission Expires:
9/1/97
ACKNOWLEDGMENTS
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY that on this 23rd day of January, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared T. E.
Dooley, and acknowledged himself to be the CEO of THE ANTIGUA GROUP, INC., a
Nevada corporation, and that he, as such CEO, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of THE ANTIGUA GROUP, INC., by himself as CEO.
IN WITNESS MY Hand and Notarial Seal.
/s/ Cynthia L. Woods (SEAL)
NOTARY PUBLIC
My Commission Expires:
9/1/97
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EXHIBIT A
TERM NOTE B
Executed as of the _____ day of
___________, 1997 at Baltimore, Maryland
Amount: $1,500,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to
pay to the order of LASALLE BUSINESS CREDIT, INC. (hereinafter, together with
any holder hereof, called "LaSalle") , at the main office of the LaSalle, the
principal sum of One Million Five Hundred Thousand Dollars ($1,500,000.00),
together with interest on the outstanding principal amount hereof on the dates
and at the rates provided in the Loan Agreement (as hereafter defined) from the
date hereof until payment in full hereof.
This Term Note is referred to in and was delivered pursuant to
paragraph 3(b) of that certain Loan and Security Agreement dated January 1 1997,
as it may be amended from time to time, together with all exhibits thereto,
between LaSalle and Borrower (the "Loan Agreement"). All terms which are
capitalized and used herein (which are not otherwise defined herein) shall have
the meanings ascribed to such terms in the Loan Agreement.
For so long as no Event of Default shall have occurred under
the Loan Agreement, the principal amount and accrued interest of this Note shall
be due and payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in
arrears, on the first day of each month, commencing
on the first day of the first month after the date of
this Note, and continuing until such time as the full
principal balance, together with all other amounts
owing hereunder, shall have been paid in full;
(b) Commencing on ________________________ 1, 1997, and
continuing on the first day of each month thereafter
to and including the first day of ___________ 1,
1999, principal payments in the amount of Sixty-Two
Thousand Five Hundred Dollars ($62,500.00) each; and
(c) On ______________ 1, 1999, a final principal payment
equal to the entire unpaid principal balance hereof,
together with any and all other amounts due
hereunder.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement.
Borrower hereby authorizes LaSalle to charge any account of
Borrower for all sums due hereunder. If payment hereunder
<PAGE>
becomes due and payable on a Saturday, Sunday or legal holiday under the laws of
the United States or the State of Illinois, the due date thereof shall be
extended to the next succeeding business day, and interest shall be payable
thereon at the rate specified during such extension. Credit shall be given for
payments made in the manner and at the times provided in the Loan Agreement. It
is the intent of the parties that the rate of interest and other charges to
Borrower under this Note shall be lawful; therefore, if for any reason the
interest or other charges payable hereunder are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which LaSalle may
lawfully charge Borrower, then the obligation to pay interest or other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to Borrower.
The principal and all accrued interest hereunder may be
prepaid by Borrower, in part or in full, at any time; provided, however, that if
Borrower prepays all of the Obligations prior to the end of the original Term or
any Renewal Term, Borrower shall pay a prepayment fee as provided in the Loan
Agreement.
Borrower waives the benefit of any law that would otherwise
restrict or limit LaSalle in the exercise of its right, which is hereby
acknowledged, to set-off against the Obligations, without notice and at any time
hereafter, any indebtedness matured or unmatured owing from LaSalle to Borrower.
Borrower's obligations under this Note shall be the absolute and unconditional
duty and obligation of Borrower and shall be independent of any rights of
set-off, recoupment or counterclaim which Borrower might otherwise have against
LaSalle, and Borrower shall pay absolutely the payments of principal, interest,
fees and expenses required hereunder, free of any deductions and without
abatement, diminution, or set-off.
Time is of the essence of this Note. Borrower, any other party
liable with respect to the Obligations and any and all endorsers and
accommodation parties, and each one of them, if more than one, waive any and all
presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of LaSalle's rights hereunder.
Upon the occurrence of an Event of Default, including without
limitation the failure to pay in full any installment of principal or interest
on the due date thereof or the failure to pay all sums due hereunder upon the
maturity date, in addition to all other rights or remedies available to LaSalle
under the Loan Agreement or any Other Agreement or under applicable law,
Borrower authorizes any attorney admitted to practice before any court of record
in the United States to appear on behalf of Borrower in any court in one or more
proceedings, or before any clerk thereof or prothonotary or other court
official, and to confess judgment against Borrower in favor of LaSalle in the
full amount due on this Note (including principal, accrued interest and any and
all charges, fees and costs), plus attorneys, fees equal to fifteen percent
(15%;) of the amount due, plus court costs, all without prior notice or
opportunity of Borrower for prior hearing. Borrower agrees and consents that
venue and jurisdiction shall be proper in the Circuit Court of any County of the
State of Maryland
<PAGE>
or of Baltimore City, Maryland, or in the United States District Court for the
District of Maryland. Borrower waives the benefit of any and every statute,
ordinance, or rule of court which may be lawfully waived conferring upon
Borrower any right or privilege of exemption, homestead rights, stay of
execution, or supplementary proceedings, or other relief from the enforcement or
immediate enforcement of a judgment or related proceedings on a judgment. The
authority and power to appear for and enter judgment against Borrower shall not
be exhausted by one or more exercises thereof, or by any imperfect exercise
thereof, and shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions, as often as LaSalle shall deem
necessary, convenient, or proper.
No delay or failure on the part of LaSalle in the exercise of
any right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by LaSalle
of any right or remedy preclude any other right or remedy. LaSalle, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrower, any guarantor of the indebtedness
evidenced hereby or any other property or indebtedness due or to become due to
Borrower. Borrower agrees that, without releasing or impairing Borrower's
liability hereunder, LaSalle may at any time release, surrender, substitute or
exchange any collateral securing this Note and may at any time release any party
primarily or secondarily liable for the indebtedness evidenced by this Note.
The loan evidenced hereby has been made and this Note shall be
deemed to have been delivered at Baltimore, Maryland. THIS NOTE SHALL BE
GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, and shall be binding upon Borrower and Borrower's heirs, legal
representatives, successors and assigns. if this Note contains any blanks when
executed by Borrower, LaSalle is hereby authorized, without notice to Borrower
to complete any such blanks according to the terms upon which the loan or loans
were granted. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited by or be invalid under
such law, such provision shall be severable, and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining provisions of
this Note. If more than one party shall execute this Note, the term "Borrower"
as used herein shall mean all parties signing this Note, and each one of them,
and all such parties, their respective heirs, executors, administrators,
successors and assigns, shall be jointly and severally obligated hereunder.
To induce LaSalle to make the loan evidenced by this Note,
Borrower (i) irrevocably agrees that, subject to LaSalle's sole and absolute
election, all actions arising directly or indirectly as a result or in
consequence of this Note or any other agreement with LaSalle, or the Collateral,
shall be instituted and litigated only in courts having situs in the State of
Maryland,
<PAGE>
(ii) hereby consents to the exclusive jurisdiction and venue of any State or
Federal Court located and having its situs in said state, and (iii) hereby
waives any objection based on forum non-conveniens. Borrower waives personal
service of any and all process, and consents that all such service of process
may be made by certified mail, return receipt requested, directed to Borrower at
the address indicated in the Loan Agreement, and service so made shall be
complete five (5) days after the same has been deposited in the U.S. mails as
aforesaid.
IN ADDITION, BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR
LASALLE, OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES
TO THE RELATIONSHIP BETWEEN BORROWER AM LASALLE.
As used herein, all provisions shall include the masculine,
feminine, neuter, singular and plural thereof, wherever the context and facts
require such construction and in particular the word "Borrower" shall be so
construed.
IN WITNESS WHEREOF, Borrower has executed this Note on the
date above set forth, with the intention that this Note constitute an instrument
under seal.
ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
By:________________________(SEAL)
Name:____________________________
Title:___________________________
ACKNOWLEDGEMENT
STATE OF MARYLAND, CITY/COUNTY OF _________________________ TO WIT:
I HEREBY CERTIFY that on this _______ day of October, 1996, before me,
the undersigned Notary Public of the State of Maryland, in and for the
City/County of personally appeared ______________ and acknowledged himself to be
the ______________________ of THE ANTIGUA GROUP, INC., a Nevada corporation, and
that he, as the ______________________________ being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of THE ANTIGUA GROUP, INC., by himself as ________________.
IN WITNESS MY Hand and Notarial Seal.
_____________________________(SEAL)
NOTARY PUBLIC
My Commission Expires:
- ------------------------------
<PAGE>
FOR INTERNAL USE ONLY
Officer's Initials:__________
Approval:________
<PAGE>
SCHEDULE 1(a)
Permitted Liens
Liens evidenced by the following financing statements filed with the
Arizona Secretary of State:
a. File #842851 Secured Party
IBM Credit Corporation.
b. File #839610 Secured Party
American Business Credit Corp.
c. File #836137 Secured Party
El Camino Resources, Inc.
<PAGE>
EXHIBIT B
Officer's Certificate
This Certificate is submitted pursuant to paragraph 11(l) of the Loan
and Security Agreement dated January ___, 1997 ("Loan Agreement") between
LaSalle Business Credit, Inc. ("LaSalle") and The Antigua Group, Inc.
("Borrower").
The undersigned hereby certifies to LaSalle that as of the date of this
Agreement:
1. The undersigned is the __________________ of the Borrower.
2. There exists no event or circumstance which is or which with the
passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Loan Agreement, or, if such an event or
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that Borrower has taken or proposes
to take with respect thereto.
3. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Borrower has occurred since
________________, or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that Borrower has taken or proposes
to take with respect thereto.
4. All insurance premiums due as of such date have been paid.
5. All taxes due as of such date have been paid or, for those taxes
which have not been paid, or, if any taxes have not been paid, a writing
attached hereto describes the nature and amount of such taxes, and sets forth
Borrower's rationale for not paying such taxes and the action that Borrower has
taken or proposes to take with respect thereto.
6. To the best of the undersigned's knowledge, after appropriate
inquiry, except as previously disclosed to LaSalle in writing, no litigation,
investigation or proceeding, or injunction, writ or restraining order is pending
or threatened against the Borrower, or, if any litigation, investigation or
proceeding, or injunction, writ or restraining order is pending or threatened
against the Borrower, a writing attached hereto specifies the nature thereof and
the action that Borrower has taken or proposes to take with respect thereto.
7. Borrower is in compliance with the representations, warranties and
covenants in the Loan Agreement, or, if Borrower is not in compliance with any
representations, warranties or covenants in the Loan Agreement, a writing
attached hereto specifies the nature thereof, the period of existence thereof
and the action that Borrower has taken or proposes to take with respect thereto.
<PAGE>
8. Attached hereto is a true and correct calculation of the financial
covenants contained in paragraph 14(m) of the Loan Agreement.
The Antigua Group, Inc.
By: _______________________(SEAL)
Name: ________________
Title: ________________
<PAGE>
SCHEDULE 13(b)
Chief Executive Office/Records
9319 N. 94th Way, Scottsdale, Arizona
<PAGE>
SCHEDULE 13(c)
Locations
9319 N. 94th Way, Scottsdale, AZ
9318 N. 95th Way, Scottsdale, AZ
9332 N. 95th Way, Scottsdale, AZ
9445 E. Doubletree Ranch Road, Scottsdale, AZ
<PAGE>
SCHEDULE 13(q)
Permitted Indebtedness
Promissory Note in the original principal amount of $334,619 dated January 1,
1993 payable to Ronald A. McPherson. Current outstanding balance is $250,964.25.
Promissory Note in the original principal amount of $334,619 dated January 1,
1993 payable to Gerald K. Whitley. Current outstanding balance is $250,964.25.
Various loans to employees, current or prior, with various maturity dates with
outstanding principal balances not in excess of $19,565.32 in the aggregate.
Loan relating to one auto show van with an outstanding principal balance
totaling $14,889.00
Note payable to IBM related to an AS400 upgrade. Current outstanding balance is
$68,393.00.
<PAGE>
SCHEDULE 13(s)
Affiliates
None
<PAGE>
SCHEDULE 15(a)(i)
Closing Documents List
LOAN DOCUMENTS
Revolver And Equipment Term Loan
Loan And Security Agreement
Exhibit A - Term Note B
Exhibit B - Officer's Certificate
Revolving Loan Note
Term Note A
Financing Statements
Nevada
Arizona
Trademark Security Agreement
Blocked Account Agreement
Assignment Of Business Interruption Insurance
Disbursement Authorization
Subordination Agreement
MATTERS OF PUBLIC RECORD
UCC-1 and other Record Searches
UCC-3 Terminations
Trademark Searches
Release Of Trademark Security Agreement
Post Closing Record Searches
Pay-Off Letters
MATERIALS TO BE SUBMITTED PRIOR TO CLOSING
Perfection Certificate
Opinion Of Borrower's Counsel
Secretary's Certificate (Borrower)
Exhibit A - List of Officers and Directors
Exhibit B - Resolutions
Exhibit C - Bylaws
Exhibit D - Articles of Incorporation
Certification Regarding Trade Payables
Leases
Landlord's Agreements
Insurance Policies or Certificates:
-- Casualty
-- Business Interruption with Assignment
-- Public Liability/Product Liability and
Property Damage
Appraisal
Initial Borrowing Base Certificate
Copy of Licenses
MATERIALS TO BE SUBMITTED PRIOR TO ACQUISITION CLOSING Opinion Of Guarantor's
Counsel Licensor's Consent To Merger
-- NBC
-- NFL
-- NBA
Seller Notes And Related Documents
Cruttenden Loan Documents
<PAGE>
Geometry Partners Stock Purchase Agreement And Related Documents
Amendments To Whitley & McPherson Notes
Quadrant Loan Documents
Evidence of Equity Contributions
Merger Agreement And Related Acquisition Documents
Certification Regarding Trade Payables
Continuing Unconditional Guaranty
Secretary's Certificate (Guarantor)
Exhibit A - List of Officers and Directors
Exhibit B - Resolutions
Exhibit C - Bylaws
Exhibit D - Articles of Incorporation
Certificates of Good Standing (Borrower)
Nevada
Arizona
Certificates of Good Standing (Guarantor)
Exhibit 10.13
TERM NOTE A
(Machinery & Equipment)
Executed as of the 23rd day of
January, 1997 at Baltimore, Maryland
Amount: $775,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to
pay to the order of LASALLE BUSINESS CREDIT, INC. (hereinafter, together with
any holder hereof, called "LaSalle"), at the main office of the LaSalle, the
principal sum of Seven Hundred Seventy-Five Thousand Dollars ($775,000.00),
together with interest on the outstanding principal amount hereof on the dates
and at the rates provided in the Loan Agreement (as hereafter defined) from the
date hereof until payment in full hereof.
This Term Note is referred to in and was delivered pursuant to
paragraph 3(a) of that certain Loan and Security Agreement dated January ___,
1997, as it may be amended from time to time, together with all exhibits
thereto, between LaSalle and Borrower (the "Loan Agreement"). All terms which
are capitalized and used herein (which are not otherwise defined herein) shall
have the meanings ascribed to such terms in the Loan Agreement.
For so long as no Event of Default shall have occurred under
the Loan Agreement, the principal amount and accrued interest of this Note shall
be due and payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in
arrears, on the first day of each month, commencing on
February 1, 1997, and continuing until such time as the full
principal balance, together with all other amounts owing
hereunder, shall have been paid in full;
(b) Commencing on March 1, 1997, and continuing on
the first day of each month thereafter to and including the
first day of December, 1999, principal payments in the amount
of Nine Thousand Two Hundred Twenty-Six Dollars ($9,226.00)
each; and
(c) On February 1, 2000, a final principal payment
equal to the entire unpaid principal balance hereof, together
with any and all other amounts due hereunder.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement.
<PAGE>
Borrower hereby authorizes LaSalle to charge any account of
Borrower for all sums due hereunder. If payment hereunder becomes due and
payable on a Saturday, Sunday or legal holiday under the laws of the United
States or the State of Illinois, the due date thereof shall be extended to the
next succeeding business day, and interest shall be payable thereon at the rate
specified during such extension. Credit shall be given for payments made in the
manner and at the times provided in the Loan Agreement. It is the intent of the
parties that the rate of interest and other charges to Borrower under this Note
shall be lawful; therefore, if for any reason the interest or other charges
payable hereunder are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which LaSalle may lawfully charge Borrower,
then the obligation to pay interest or other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
The principal and all accrued interest hereunder may be
prepaid by Borrower, in part or in full, at any time; provided, however, that if
Borrower prepays all of the Obligations prior to the end of the Original Term or
any Renewal Term, Borrower shall pay a prepayment fee as provided in the Loan
Agreement.
Borrower waives the benefit of any law that would otherwise
restrict or limit LaSalle in the exercise of its right, which is hereby
acknowledged, to set-off against the Obligations, without notice and at any time
hereafter, any indebtedness matured or unmatured owing from LaSalle to Borrower.
Borrower's obligations under this Note shall be the absolute and unconditional
duty and obligation of the Borrower and shall be independent of any rights of
set-off, recoupment or counterclaim which Borrower might otherwise have against
LaSalle, and Borrower shall pay absolutely the payments of principal, interest,
fees and expenses required hereunder, free of any deductions and without
abatement, diminution or set-off.
Time is of the essence of this Note. Borrower, any other party
liable with respect to the Obligations and any and all endorsers and
accommodation parties, and each one of them, if more than one, waive any and all
presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of LaSalle's rights hereunder.
Upon the occurrence of an Event of Default, including without
limitation the failure to pay in full any installment of principal or interest
on the due date thereof or the failure to pay all sums due hereunder upon the
maturity date, in addition to all other rights or remedies available to LaSalle
under the Loan Agreement or any Other Agreement or under applicable law,
Borrower authorizes any attorney admitted to practice before any court of record
in the United States to appear on behalf of Borrower in any court in one or more
proceedings, or before any clerk thereof or prothonotary or other court
official, and to confess judgment against Borrower in favor of LaSalle in the
full amount due on this Note (including principal, accrued interest and any and
all charges, fees and costs), plus attorneys' fees equal to fifteen
-2-
<PAGE>
percent (15%) of the amount due, plus court costs, all without prior notice or
opportunity of Borrower for prior hearing. Borrower agrees and consents that
venue and jurisdiction shall be proper in the Circuit Court of any County of the
State of Maryland or of Baltimore City, Maryland, or in the United States
District Court for the District of Maryland. Borrower waives the benefit of any
and every statute, ordinance, or rule of court which may be lawfully waived
conferring upon Borrower any right or privilege of exemption, homestead rights,
stay of execution, or supplementary proceedings, or other relief from the
enforcement or immediate enforcement of a judgment or related proceedings on a
judgment. The authority and power to appear for and enter judgment against
Borrower shall not be exhausted by one or more exercises thereof, or by any
imperfect exercise thereof, and shall not be extinguished by any judgment
entered pursuant thereto; such authority and power may be exercised on one or
more occasions from time to time, in the same or different jurisdictions, as
often as LaSalle shall deem necessary, convenient, or proper. Notwithstanding
LaSalle's right to obtain a judgment by confession which includes attorneys'
fees in an amount equal to fifteen percent (15%) of the amount due hereunder,
LaSalle shall only collect attorneys' fees in an amount equal to the actual
legal fees and expenses incurred by LaSalle in connection with the collection of
the sums due under this Revolving Loan Note and the enforcement of LaSalle's
rights under this Revolving Loan Note and the Loan Agreement.
No delay or failure on the part of LaSalle in the exercise of
any right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by LaSalle
of any right or remedy preclude any other right or remedy. LaSalle, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrower, any guarantor of the indebtedness
evidenced hereby or any other property or indebtedness due or to become due to
Borrower. Borrower agrees that, without releasing or impairing Borrower's
liability hereunder, LaSalle may at any time release, surrender, substitute or
exchange any collateral securing this Note and may at any time release any party
primarily or secondarily liable for the indebtedness evidenced by this Note.
The loan evidenced hereby has been made and this Note shall be
deemed to have been delivered at Baltimore, Maryland. THIS NOTE SHALL BE
GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, and shall be binding upon Borrower and Borrower's heirs, legal
representatives, successors and assigns. If this Note contains any blanks when
executed by Borrower, LaSalle is hereby authorized, without notice to Borrower
to complete any such blanks according to the terms upon which the loan or loans
were granted. Wherever possible, each provision of this Note shall be
interpreted in such
-3-
<PAGE>
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited by or be invalid under such law, such provision
shall be severable, and be ineffective to the extent of such prohibition or
invalidity, without invalidating the remaining provisions of this Note. If more
than one party shall execute this Note, the term "Borrower" as used herein shall
mean all parties signing this Note, and each one of them, and all such parties,
their respective heirs, executors, administrators, successors and assigns, shall
be jointly and severally obligated hereunder.
To induce LaSalle to make the loan evidenced by this Note,
Borrower (i) irrevocably agrees that, subject to LaSalle's sole and absolute
election, all actions arising directly or indirectly as a result or in
consequence of this Note or any other agreement with LaSalle, or the Collateral,
shall be instituted and litigated only in courts having situs in the State of
Maryland, (ii) hereby consents to the exclusive jurisdiction and venue of any
State or Federal Court located and having its situs in said state, and (iii)
hereby waives any objection based on forum non-conveniens. Borrower waives
personal service of any and all process, and consents that all such service of
process may be made by certified mail, return receipt requested, directed to
Borrower at the address indicated in the Loan Agreement, and service so made
shall be complete five (5) days after the same has been deposited in the U.S.
mails as aforesaid.
IN ADDITION, BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE, THE OBLIGATIONS,
THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LASALLE, OR WHICH IN
ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN BORROWER AND LASALLE.
As used herein, all provisions shall include the masculine,
feminine, neuter, singular and plural thereof, wherever the context and facts
require such construction and in particular the word "Borrower" shall be so
construed.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note on the
date above set forth, with the intention that this Note constitute an instrument
under seal.
ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
/s/ Joseph R.S. Tyssowski By: /s/ T.E. Dooley (SEAL)
Name: T.E. Dooley
Title: CEO
ACKNOWLEDGEMENT
STATE OF MARYLAND, CITY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY that on this 23rd day of January, 1997, before me,
the undersigned Notary Public of the State of Maryland, in and for the County of
Howard, personally appeared T.E. Dooley, and acknowledged himself to be the CEO
of THE ANTIGUA GROUP, INC., a Nevada corporation, and that he, as the CEO being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of THE ANTIGUA GROUP, INC., by himself as CEO.
IN WITNESS MY Hand and Notarial Seal.
/s/ Cynthia L. Woods (SEAL)
NOTARY PUBLIC
My Commission Expires:
9/1/97
================================================================================
FOR INTERNAL USE ONLY
Officer's Initials: __________
Approval: __________
-5-
Exhibit 10.14
REVOLVING LOAN NOTE
Executed as of the 23rd day of
January, 1997 at Baltimore, Maryland.
Amount $12,000,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to
pay to the order of LASALLE BUSINESS CREDIT, INC. (hereinafter, together with
any holder hereof, called "LaSalle"), at the main office of LaSalle, the
principal sum of Twelve Million Dollars ($12,000,000.00) plus the aggregate
unpaid principal amount of all advances made by LaSalle to Borrower pursuant to
and in accordance with Paragraph 2 of the Loan Agreement (as hereinafter
defined) in excess of such amount, or, if less, the aggregate unpaid principal
amount of all advances made by LaSalle to Borrower pursuant to and in accordance
with Paragraph 2 of the Loan Agreement. Borrower further promises to pay
interest on the outstanding principal amount hereof on the dates and at the
rates provided in the Loan Agreement from the date hereof until payment in full
hereof.
This Revolving Loan Note is referred to in and was delivered
pursuant to that certain Loan and Security Agreement of even date herewith by
and among Borrower and LaSalle, as it may be amended from time to time, together
with all exhibits thereto, between LaSalle and Borrower (the "Loan Agreement").
All terms which are capitalized and used herein (which are not otherwise defined
herein) shall have the meanings ascribed to such terms in the Loan Agreement.
For so long as no Event of Default shall have occurred under
the Loan Agreement, the principal amount and accrued interest of this Revolving
Loan Note shall be due and payable on the dates and in the manner hereinafter
set forth:
(a) Interest shall be due and payable monthly, in arrears, on
the first day of each month, commencing on February 1, 1997,
and continuing until such time as the full principal balance,
together with all other amounts owing hereunder, shall have
been paid in full;
(b) Upon the maturity date, which (subject to LaSalle's right
upon default to accelerate and declare immediately due and
payable all sums due hereunder) shall be the expiration of the
Original Term or any Renewal Term if either LaSalle or
Borrower elects to terminate the Loan Agreement, all
principal, interest and any and all other amounts due
hereunder, shall be paid in full.
Borrower hereby authorizes LaSalle to charge any account of
Borrower for all sums due hereunder. If payment hereunder becomes due and
payable on a Saturday, Sunday or legal holiday under the laws of the United
States or the State of Illinois, the
<PAGE>
due date thereof shall be extended to the next succeeding business day, and
interest shall be payable thereon at the rate specified during such extension.
Credit shall be given for payments made in the manner and at the times provided
in the Loan Agreement. It is the intent of the parties that the rate of interest
and other charges to Borrower under this Revolving Loan Note shall be lawful;
therefore, if for any reason the interest or other charges payable hereunder are
found by a court of competent jurisdiction, in a final determination, to exceed
the limit which LaSalle may lawfully charge Borrower, then the obligation to pay
interest or other charges shall automatically be reduced to such limit and, if
any amount in excess of such limit shall have been paid, then such amount shall
be refunded to Borrower.
The principal and all accrued interest hereunder may be
prepaid by Borrower, in part or in full, at any time; provided, however, that if
Borrower prepays all of the Obligations prior to the end of the Original Term or
any Renewal Term, Borrower shall pay a prepayment fee as provided in the Loan
Agreement.
Borrower waives the benefit of any law that would otherwise
restrict or limit LaSalle in the exercise of its right, which is hereby
acknowledged, to set-off against the Obligations, without notice and at any time
hereafter, any indebtedness matured or unmatured owing from LaSalle to Borrower.
Borrower's obligations under this Note shall be the absolute and unconditional
duty and obligation of the Borrower and shall be independent of any rights of
set-off, recoupment or counterclaim which Borrower might otherwise have against
LaSalle, and Borrower shall pay absolutely the payments of principal, interest,
fees and expenses required hereunder, free of any deductions and without
abatement, diminution or set-off.
Time is of the essence of this Revolving Loan Note. Borrower,
any other party liable with respect to the Obligations and any and all endorsers
and accommodation parties, and each one of them, if more than one, waive any and
all presentment, demand, notice of dishonor, protest, and except as expressly
provided in the Loan Agreement, all other notices and demands in connection with
the enforcement of LaSalle's rights hereunder.
Upon the occurrence of an Event of Default, including without
limitation the failure to pay in full any installment of principal or interest
on the due date thereof or the failure to pay all sums due hereunder upon the
maturity date, in addition to all other rights or remedies available to LaSalle
under the Loan Agreement or any Other Agreement or under applicable law,
Borrower authorizes any attorney admitted to practice before any court of record
in the United States to appear on behalf of Borrower in any court in one or more
proceedings, or before any clerk thereof or prothonotary or other court
official, and to confess judgment against Borrower in favor of LaSalle in the
full amount due on this Revolving Loan Note (including principal, accrued
interest and any and all charges, fees and costs), plus attorneys' fees equal to
fifteen percent (15%) of the amount due, plus court costs, all without prior
notice or opportunity of Borrower for prior hearing. Borrower agrees and
consents that venue and jurisdiction shall be
<PAGE>
proper in the Circuit Court of any County of the State of Maryland or of
Baltimore City, Maryland, or in the United States District Court for the
District of Maryland. Borrower waives the benefit of any and every statute,
ordinance, or rule of court which may be lawfully waived conferring upon
Borrower any right or privilege of exemption, homestead rights, stay of
execution, or supplementary proceedings, or other relief from the enforcement or
immediate enforcement of a judgment or related proceedings on a judgment. The
authority and power to appear for and enter judgment against Borrower shall not
be exhausted by one or more exercises thereof, or by any imperfect exercise
thereof, and shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions, as often as LaSalle shall deem
necessary, convenient, or proper. Notwithstanding LaSalle's right to obtain a
judgment by confession which includes attorneys' fees in an amount equal to
fifteen percent (15%) of the amount due hereunder, LaSalle shall only collect
attorneys' fees in an amount equal to the actual legal fees and expenses
incurred by LaSalle in connection with the collection of the sums due under this
Revolving Loan Note and the enforcement of LaSalle's rights under this Revolving
Loan Note and the Loan Agreement.
No delay or failure on the part of LaSalle in the exercise of
any right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by LaSalle
of any right or remedy preclude any other right or remedy. LaSalle, at its
option, may enforce its rights against any collateral securing this Revolving
Loan Note without enforcing its rights against Borrower, or any other property
or indebtedness due or to become due to Borrower. Borrower agrees that, without
releasing or impairing Borrower's liability hereunder, LaSalle may at any time
release, surrender, substitute or exchange any collateral securing this
Revolving Loan Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Revolving Loan Note.
The loan evidenced hereby has been made and this Revolving
Loan Note has been delivered at Baltimore, Maryland. THIS REVOLVING LOAN NOTE
SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF MARYLAND
AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL
OTHER RESPECTS, INCLUDING WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE
AND OTHER CHARGES, and shall be binding upon Borrower and Borrower's heirs,
legal representatives, successors and assigns. If this Revolving Loan Note
contains any blanks when executed by Borrower, LaSalle is hereby authorized,
without notice to Borrower to complete any such blanks according to the terms
upon which the loan or loans were granted. Wherever possible, each provision of
this Revolving Loan Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Revolving Loan Note
shall be prohibited by or be invalid under such law, such provision shall be
severable, and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Revolving Loan Note. The
term "Borrower" as used herein shall mean the Borrower and its successors and
assigns.
<PAGE>
To induce LaSalle to make the loan evidenced by this Revolving
Loan Note, Borrower (i) irrevocably agrees that, subject to LaSalle's sole and
absolute election, all actions arising directly or indirectly as a result or in
consequence of this Revolving Loan Note or any other agreement with LaSalle, or
the Collateral, shall be instituted and litigated only in courts having situs in
the State of Maryland, (ii) hereby consents to the exclusive jurisdiction and
venue of any State or Federal Court located and having its situs in said state,
and (iii) hereby waives any objection based on forum non-conveniens. Borrower
waives personal service of any and all process, and consents that all such
service of process may be made by certified mail, return receipt requested,
directed to Borrower at the address indicated in the Loan Agreement, and service
so made shall be complete five (5) days after the same has been deposited in the
U.S. mails as aforesaid.
IN ADDITION, BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS REVOLVING
LOAN NOTE, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY
BORROWER OR LASALLE, OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF
OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LASALLE.
As used herein, all provisions shall include the masculine,
feminine, neuter, singular and plural thereof, wherever the context and facts
require such construction and in particular the word "Borrower" shall be so
construed.
IN WITNESS WHEREOF, Borrower has executed this Revolving Loan
Note on the date above set forth, with the intention that this Revolving Loan
Note constitute an instrument under seal.
ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
/s/ Joseph R.S. Tyssowski By: /s/ Thomas E. Dooley (SEAL)
Name: TE Dooley
Title: CEO
<PAGE>
ACKNOWLEDGEMENT
STATE OF MARYLAND, CITY OF Baltimore, TO WIT:
I HEREBY CERTIFY that on this 23rd day of January, 1997, before me, the
undersigned Notary Public of the State of Maryland, in and for the County of
Howard, personally appeared T.E. Dooley, and acknowledged himself to be the CEO
of THE ANTIGUA GROUP, INC., a Nevada corporation, and that he, as such CEO,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained by signing the name of THE ANTIGUA GROUP, INC., by himself as
CEO.
IN WITNESS MY Hand and Notarial Seal.
/s/ Cynthia L. Woods (SEAL)
NOTARY PUBLIC
My Commission Expires:
9/1/97
================================================================================
FOR INTERNAL USE ONLY
Officer's Initials: __________
Approval: __________
Exhibit 10.15
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is dated as of January 23,
1997, by and between THE ANTIGUA GROUP, INC., a Nevada corporation ("Borrower"),
with its mailing address at 9314 N. 94th Way, Scottsdale, Maricopa County,
Arizona 85258, and LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LaSalle"), with its principal place of business at 120 E. Baltimore Street,
Suite 1800, Baltimore, Maryland 21202.
RECITALS
--------
The Borrower has applied to LaSalle for certain credit accommodations.
LaSalle has agreed to extend the credit accommodations to the Borrower, under
the terms and conditions set forth in a Loan And Security Agreement of even date
herewith ("Loan Agreement") by and between the Borrower and LaSalle, and various
other documents, instruments and agreements executed by or on behalf of the
Borrower in connection with the above-described credit accommodations (together
with the Loan Agreement, collectively, "Loan Documents").
In order to induce LaSalle to enter into the above-described credit
accommodations, the Borrower, pursuant to the terms and conditions of the Loan
Agreement, has agreed to grant to LaSalle a lien and security interest in all
trademark and service mark rights owned by the Borrower, and also has granted to
LaSalle a lien on and security interest in all of the Borrower's assets,
including but not limited to those assets relating to products sold under the
trademarks and services rendered under the service marks, whereby LaSalle, upon
the occurrence of an Event of Default (as such term is defined in the Loan
Agreement), shall have the right to foreclose on the trademarks, service marks
and other assets of the Borrower, in order that LaSalle or its assignee may
continue the sale of products sold and services rendered under the trademarks
and service marks.
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
adequacy of which are hereby acknowledged, the Borrower agrees with LaSalle as
follows:
Section 1. Grant Of Security Interest. The Borrower, as additional security
for the complete and timely payment, performance and satisfaction of all of the
Obligations (as hereafter defined), hereby grants unto LaSalle, its successors
and assigns, upon the following terms and conditions, a continuing lien and
security interest in those certain trademarks and service marks registered with
the United States Patent and Trademark Office in the name of the Borrower, and
described on Exhibit A attached hereto and made a part hereof, together with any
renewals thereof,
<PAGE>
and the entire goodwill of the business in connection with which such trademarks
and service marks are used, and all claims for damages by reason of past
infringement of such trademarks and service marks with the right to sue for and
collect the same, to LaSalle (collectively, "Trademarks") and all license rights
in the Trademarks. As used herein, the term "Obligations" shall mean all duties
of payment and performance, whether direct or indirect, both now existing and
arising from time to time, owed by the Borrower to LaSalle under the Loan
Agreement and the other Loan Documents. This Agreement is delivered pursuant to
and in confirmation of the terms and conditions of the Loan Agreement, which
terms and conditions are incorporated by reference into this Agreement and made
a part hereof as if fully set out herein.
Section 2. Additional Trademarks Or Service Mark. If, before the
Obligations shall have been satisfied in full, the Borrower shall obtain rights
to any new trademarks or service marks, the provisions of Section 1 shall
automatically apply thereto and the Borrower shall give prompt written notice
thereof to LaSalle. The Borrower irrevocably and unconditionally authorizes
LaSalle to modify this Agreement by amending Exhibit A to include any additional
or future trademarks, service marks and applications therefor owned or acquired
by the Borrower without any further assent or signature of the Borrower.
Section 3. Purpose. This Agreement has been executed and delivered by the
Borrower for the purpose of recording the grant of security interest herein with
the United States Patent and Trademark Office. The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to LaSalle under the Loan Agreement. The terms and
conditions of the Loan Agreement shall remain in full force and effect in
accordance with its terms, notwithstanding the execution, delivery and
recordation of this Agreement.
Section 4. Representations And Warranties. The Borrower represents and
warrants that:
a. The Trademarks are subsisting and have not been adjudged invalid or
unenforceable in whole or in part;
b. Each of the Trademarks is valid and enforceable;
c. No claim has been made that the use of any of the Trademarks does
or may violate the rights of any third person;
d. The Borrower is the sole and exclusive owner of the entire
unencumbered right, title and interest in and to each of the Trademarks, free
and clear of any liens, charges and encumbrances, including without limitation
pledges, assignments, licenses, registered user agreements and covenants by the
Borrower not to sue third persons, except for the liens and security interests
permitted pursuant to the terms of the Loan Agreement;
<PAGE>
e. The Borrower has the unqualified right to enter into this Agreement
and to perform its terms;
f. The Borrower has used, and will continue to use for the duration of
this Agreement, proper statutory notice in connection with its use of the
Trademarks; and
g. The Borrower has used or required the use of, and will continue to
use or require the use of for the duration of this Agreement, consistent
standards of quality in the manufacture of products sold and services rendered
under the Trademarks.
Section 5. Maintenance of Trademarks; Prosecution Of Applications And
Proceedings. The Borrower shall: (a) maintain the registration of the
Trademarks; (b) take all actions necessary to maintain, preserve and continue
the validity and enforceability of the Trademarks, including but not limited to
the filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings, and
the payment of any and all application, renewal, extension or other fees; and
(c) through counsel acceptable to LaSalle, (i) prosecute diligently any
trademark applications of the Trademarks pending as of the date of this
Agreement or thereafter, (ii) make federal application on registrable but
unregistered Trademarks, (iii) file and prosecute opposition and cancellation
proceedings, and (iv) do any and all acts which are necessary or desirable to
preserve and maintain all rights in the Trademarks. The Borrower shall not,
without the prior written consent of LaSalle: (a) abandon any of the Trademarks,
or (b) bring any cancellation proceedings in connection with the Trademarks. Any
expenses incurred in connection with the Trademarks shall be borne by the
Borrower. In the event of any litigation involving the Trademarks, LaSalle may,
if necessary, be joined as a nominal party to such suit if LaSalle shall have
been satisfied that it is not thereby incurring any risk of liability because of
such joinder. The Borrower hereby agrees to reimburse and indemnify LaSalle for
all damages, costs and expenses, including attorney's fees, incurred by LaSalle
in the fulfillment of the provisions of this Section.
Section 6. Agreement to Assign Interest. Upon the occurrence of an Event of
Default, in addition to all other rights and remedies available to LaSalle under
the Loan Agreement or applicable law, the Borrower hereby agrees to execute any
and all documents, agreements and instruments considered necessary, appropriate
or convenient by LaSalle or its counsel to effectuate the assignment, transfer
and conveyance of the Trademarks to LaSalle or its assignee. The Borrower hereby
irrevocably and unconditionally authorizes and empowers LaSalle to make,
constitute and appoint any officer or agent of LaSalle as LaSalle may select, in
its exclusive discretion, as the Borrower's true and lawful attorney-in-fact,
with the power to endorse the Borrower's name on all such documents, agreements
and instruments, including without limitation assignments. The Borrower hereby
ratifies all that such
<PAGE>
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney shall be irrevocable for the life of this Agreement, and constitutes a
power of attorney coupled with an interest. All of LaSalle's rights and remedies
with respect to the Trademarks, whether established by this Agreement, by the
Loan Agreement, by any other Loan Document, or by law shall be cumulative and
may be exercised singularly or concurrently.
Section 7. Patent And Trademark Office May Rely Upon This Agreement. If
LaSalle shall elect to exercise any of the rights hereunder, the United States
Patent and Trademark Office shall have the right to rely upon LaSalle's written
statement of LaSalle's right to sell, assign and transfer the Trademarks and the
Borrower hereby irrevocably and unconditionally authorizes the United States
Patent and Trademark Office to recognize such sale by LaSalle either in the
Borrower's name or in LaSalle's name without the necessity or obligation of the
United States Patent and Trademark Office to ascertain the existence of any
default by the Borrower under the Loan Agreement.
Section 8. Costs And Expenses. Any and all fees, costs and expenses, of
whatever kind or nature, including the reasonable attorney's fees and legal
expenses incurred by LaSalle in connection with the preparation of this
Agreement and all other documents relating hereto and the consummation of this
transaction, the filing or recording of any documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
counsel fees, maintenance fees, encumbrances or otherwise protecting,
maintaining or preserving the Trademarks, or in defending or prosecuting any
actions or proceedings arising out of or related to the Trademarks, shall be
borne and paid by the Borrower on demand by LaSalle and until so paid shall be
added to the principal amount of the Obligations and shall bear interest at the
highest rate prescribed in the Loan Agreement.
Section 9. Notices. Notices that are required or permitted to be delivered
hereunder shall be sufficient if in writing and sent to the addresses set forth
in the Loan Agreement, in the manner and within the time specified in the Loan
Agreement.
Section 10. No Assignment Or Further Lien. The Borrower shall not assign,
transfer or convey its interests in the Trademarks, nor shall the Borrower grant
any further lien or security interest in all or any of the Trademarks except as
permitted pursuant to the terms of the Loan Agreement.
Section 11. Further Assurances. The Borrower shall execute any further or
additional documents considered necessary, appropriate or proper by LaSalle to
effectuate the purposes and intent of this Agreement.
Section 12. Amendment. The terms and conditions of this Agreement may be
modified, altered, waived, or amended only by a writing executed by LaSalle
consenting to the modification,
<PAGE>
alteration, waiver, or amendment.
Section 13. Severability. If any of the provisions of this Agreement are
judicially determined to be in conflict with any law of the State of Maryland or
otherwise judicially determined to be unenforceable for any reason whatsoever,
such provision shall be deemed null and void to the extent of such
unenforceability but shall be deemed separable from and shall not invalidate any
other provision of this Agreement.
Section 14. Successors And Assigns. The terms, covenants and conditions
contained in this Agreement shall inure to the benefit of LaSalle and its
successors and assigns, and shall be binding upon the Borrower and its
successors and assigns.
Section 15. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Agreement and the rights and obligations of the
parties hereto, including the validity, construction, interpretation, and
enforceability of this Agreement and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this Agreement or which occurred or were to occur as a direct or indirect
result of this Agreement having been executed.
Section 16. Consent To Jurisdiction; Agreement As To Venue. The Borrower
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court For The District Of
Maryland, if a basis for federal jurisdiction exists. The Borrower agrees that
venue shall be proper in any circuit court of the State of Maryland selected by
LaSalle or in the United States District Court For The District Of Maryland if a
basis for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
Section 17. Waiver Of Jury Trial. The Borrower (by its execution hereof)
and LaSalle (by its acceptance of this Agreement) agree that any suit, action,
or proceeding, whether claim or counterclaim, brought or instituted by any party
hereto or any successor or assign of any party hereto, with respect to this
Agreement, the Loan Documents, or any other document or agreement which in any
way relates, directly or indirectly, to this Agreement, the Loan Documents, the
Obligations or any event, transaction or occurrence arising out of or in any way
connected with this Agreement, the Loan Documents, any of the Obligations, or
the dealings of the parties with respect thereto, shall be tried only by a
court, and not by a jury. THE BORROWER AND LASALLE HEREBY EXPRESSLY WAIVE ANY
AND ALL RIGHTS TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING. The
Borrower acknowledges and agrees that this provision is a specific and material
aspect of the agreement between the parties hereto and that LaSalle would not
<PAGE>
enter into the subject transactions if this provision were not part of this
Agreement.
IN WITNESS WHEREOF, the Borrower has executed this Agreement as of the date
first above written with the specific intention of creating an instrument under
seal.
ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
/s/ illegible By: /s/ T. E. Dooley (SEAL)
Name: T. E. Dooley
Title: CEO
ACKNOWLEDGMENT
--------------
STATE OF Maryland, CITY of Baltimore, TO WIT:
I HEREBY CERTIFY that on this 23rd day of January, 1997, before me, the
undersigned Notary Public of the State aforesaid, in and for the County of
Howard, personally appeared T. E. Dooley, and acknowledged himself to be the CEO
of THE ANTIGUA GROUP, INC., a Nevada corporation, and that he, as the CEO being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of THE ANTIGUA GROUP, INC., by himself as CEO.
IN WITNESS MY Hand and Notarial Seal.
/s/ Cynthia L. Woods (SEAL)
NOTARY PUBLIC
My Commission Expires:
9/1/97
<PAGE>
EXHIBIT A
---------
TO TRADEMARK SECURITY AGREEMENT
-------------------------------
Schedule of Trademarks
----------------------
Trademark Reg. No. Reg. Date
- --------- -------- ---------
ANTIGUA 1,242,152 06/14/83
ANTIGUA 1,480,871 03/15/88
miscellaneous design 1,561,053 10/17/89
ANTECH 1,683,030 04/14/92
A II APPAREL 1,809,289 12/07/93
ANTIGUA SPORT AND DESIGN 1,940,578 12/12/95
Exhibit 10.16
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT ("MODIFICATION") is made as of the 7th day
of May, 1997 by and between THE ANTIGUA GROUP, INC., a Nevada corporation
("BORROWER") and LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LASALLE").
R E C I T A L S
Pursuant to the terms and provisions of a Loan And Security Agreement
dated as of January 23, 1997 ("LOAN AGREEMENT") LASALLE is providing the
BORROWER with a revolving line of credit in the maximum principal amount of
Twelve Million Dollars ($12,000,000.00) ("REVOLVER") and a term loan in the
principal amount of Seven Hundred Seventy-Five Thousand Dollars ($775,000.00)
("TERM LOAN A").
In addition, pursuant to the terms of the LOAN AGREEMENT, LASALLE has
agreed to provide the BORROWER with an additional term loan in the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) ("TERM LOAN
B") subject to various terms and conditions set forth in the LOAN AGREEMENT. The
LOAN AGREEMENT provides that the proceeds of TERM LOAN B are to be used in
connection with the acquisition by Southhampton Enterprises Corp., a British
Columbia corporation ("SOUTHHAMPTON CORP.") of all of the stock of the BORROWER.
In addition, the LOAN AGREEMENT provides that prior to the acquisition of the
BORROWER'S stock by SOUTHHAMPTON CORP. the following things, among others, must
occur:
(a) The BORROWER and LASALLE must enter into a Modification Agreement
in order to amend certain provisions of the LOAN AGREEMENT in a manner
satisfactory to LASALLE;
(b) LASALLE must approve all of the terms and provisions of the
acquisition of the BORROWER'S stock; and
(c) SOUTHHAMPTON CORP. must execute and deliver to LASALLE a Guaranty
Agreement, in form and substance acceptable to LASALLE, pursuant to which
SOUTHHAMPTON CORP. shall guarantee all of the obligations of the BORROWER to
LASALLE.
The BORROWER has informed LASALLE that it is now the intent that
Southhampton Enterprises, Inc., a Texas corporation and a subsidiary of
SOUTHHAMPTON CORP. ("SEI"), shall acquire all of the stock in the BORROWER. The
BORROWER has requested that LASALLE: (a) consent to SEI acquiring the stock of
the BORROWER; (b) agree to the modification of certain other terms of the LOAN
AGREEMENT; and (c) provide the BORROWER with a term loan in the principal amount
of Three Million Five Hundred Thousand Dollars ($3,500,000.00) ("NEW LOAN")
instead of TERM LOAN B.
<PAGE>
LASALLE is willing to consent to the request of the BORROWER pursuant
to the terms and provisions of this MODIFICATION and the various documents to be
executed in connection with the NEW LOAN.
NOW, THEREFORE, in consideration of the above premises, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Section 1. Recitals. The parties hereto hereby acknowledge the accuracy
of the above recitals and hereby incorporate the recitals into this
modification.
Section 2. Amendment To Loan Agreement. The LOAN AGREEMENT is hereby
amended as follows:
A. Section 1(a) of the LOAN AGREEMENT is hereby amended as
follows:
i. The definition of "Acquisition" is hereby amended
by deleting the words "the Guarantor" and substituting in lieu thereof the words
"Southhampton Enterprises, Inc., a Texas corporation ("SEI")".
ii. The following definitions are inserted
immediately preceding the definition of "Guarantor":
"Imperial" means Imperial Bank Arizona.
"Imperial Loan" shall mean the term loan
from Imperial to the Borrower in the principal amount of Two Million
Five Hundred Thousand Dollars ($2,500,000.00), together with any
refinance of such term loan provided any such refinance: (a) does not
increase the amount of the debt, increase the interest rate on the
debt, or accelerate the dates principal is due on the debt and is not
otherwise less favorable to the Borrower; and (b) is subject to the
terms of an Intercreditor Agreement and Subordination Agreement with
LaSalle in the same respective forms as the Intercreditor Agreement of
which LaSalle and Imperial are parties and the Subordination Agreement
between LaSalle and Imperial.
iii. The definition of "Merger Agreement" shall mean
the Stock Purchase Agreement dated April 21, 1997, by and between the Guarantor,
SEI, and the Seller, pursuant to which SEI has agreed to acquire all of the
issued and outstanding stock of the Borrower.
iv. The definitions of "Quadrant" and "Quadrant Loan"
are hereby deleted in their entirety.
2
<PAGE>
v. The definition of "Seller" is hereby amended by
deleting the name "Thomas E. Dooley, Jr." and substituting in lieu thereof
"collectively (a) Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the
Thomas E. Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88; (b)
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim L.
Dooley; (c) Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act
fbo Shawn T. Dooley; (d) Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees
under the Thomas E. Dooley and Gail Dooley Revocable Trust of 1988, dated
10/4/88; (e) E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable
Intervivos Trust dated December 31, 1982; and (f) Bobbi D. Hunter, Trustee under
the 1989 Trust Agreement established separate irrevocable Gift Trusts f/b/o the
children of Thomas and Gail Dooley dated March 7, 1989."
vi. The definition of "Seller Debt" is hereby amended
by deleting the words and numbers "Seven Million One Hundred Seventy Thousand
Dollars ($7,170,000.00)" and substituting in lieu thereof the words and number
"Six Million Three Hundred Seventy-Eight Thousand Dollars ($6,378,000.00)".
B. Section 4 of the LOAN AGREEMENT is hereby amended by
deleting the words and number "the aggregate undrawn amount of all such Letters
of Credit shall at no time exceed Four Million Dollars ($4,000,000.00)" and
substituting in lieu thereof the words and number "the aggregate undrawn amount
of all such Letters of Credit shall at no time exceed Five Million Dollars
($5,000,000.00)."
C. Section 13(e) of the LOAN AGREEMENT is hereby amended by
deleting its present language in its entirety and substituting in lieu thereof
the following:
(e) No security agreement, financing
statement or analogous instrument exists or shall exist with
respect to any of the Collateral other than: (i) any security
agreement, financing statement or analogous instrument
evidencing Permitted Liens; and (ii) any security agreement,
financing statement or analogous instrument evidencing the
liens securing the Cruttenden Loan, the Imperial Loan, or the
Seller Debt which are permitted pursuant to paragraph 14(i) of
this Agreement;
D. Section 13(g) of the LOAN AGREEMENT is hereby amended by
deleting the words "the PERMITTED LIENS" and substituting in lieu thereof the
words "the liens permitted pursuant to paragraph 14(i) below."
E. Section 13(q) of the LOAN AGREEMENT is hereby amended by
deleting its present language in its entirety and substituting in lieu thereof
the following:
3
<PAGE>
(q) Borrower is not now obligated, whether
directly or indirectly, for any loans or other indebtedness
for borrowed money other than those loans and indebtedness
permitted pursuant to paragraph 14(h) below.
F. Section 13(s) of the LOAN AGREEMENT is hereby amended by
deleting its present language in its entirety and substituting in lieu thereof
the following:
(s) Except as otherwise disclosed on
Schedule 13(s) attached hereto, Borrower has no Parents,
Subsidiaries or divisions, nor is Borrower engaged in any
joint venture or partnership with any other Person; provided,
however, that following the Acquisition, SEI shall be the
Parent of the Borrower and the Guarantor is the Parent of SEI;
G. Section 14(h) of the LOAN AGREEMENT is hereby amended by
deleting its present language in its entirety and substituting in lieu thereof
the following:
(h) Borrower shall not (i) incur, create,
assume or suffer to exist any indebtedness other than (A)
indebtedness under this Agreement, (B) unsecured indebtedness
owing in the ordinary course of business to trade suppliers,
(C) the Cruttenden Loan, provided Cruttenden has executed a
subordination agreement in form acceptable to LaSalle, (D) the
Imperial Loan, provided Imperial has executed a subordination
agreement in form acceptable to LaSalle, and (E) indebtedness
described on Schedule 13(q) attached hereto; or (ii) except in
connection with the Seller Debt, assume, guaranty or endorse,
or otherwise become liable in connection with, the obligations
of any Person, except by endorsement of instruments for
deposit or collection or similar transactions in the ordinary
course of business;
H. Section 14(i) of the LOAN AGREEMENT is hereby amended by
inserting at the end thereof, immediately preceding the period, the following ";
and (D) liens securing the Imperial Loan provided Imperial executes and delivers
to LaSalle an Intercreditor Agreement in a form acceptable to LaSalle."
I. Section 14(k) of the LOAN AGREEMENT is hereby amended by
deleting the term "Quadrant Loan" and substituting in lieu thereof the term
"Imperial Loan."
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<PAGE>
J. Section 14(m) of the LOAN AGREEMENT is hereby amended by
deleting its present language in its entirety and substituting in lieu thereof
the following:
m. Borrower shall maintain and keep in full
force and effect each of the financial covenants set forth
below. The calculation and determination of each such
financial covenant, and all accounting terms contained
therein, shall be calculated and construed in accordance with
GAAP, applied on a basis consistent with the financial
statements of Borrower delivered on or before the Closing
Date:
i. Tangible Net Worth.
Borrower shall maintain at all times a
Tangible Net Worth of not less than the sum
of (A) Three Million Seven Hundred Fifty
Thousand Dollars ($3,750,000.00), plus (B) a
sum equal to the aggregate of fifty percent
(50%) of the annual net income of the
Borrower for each fiscal year of the Borrower
(without reduction for any annual net losses)
commencing with fiscal year 1997 through the
date of determination, all as determined in
accordance with GAAP.
ii. Interest Coverage Ratio.
Borrower shall have as of each date of
calculation, a ratio of (A) EBITDA for such
fiscal quarter to (B) interest expense for
such fiscal quarter, of not less than 1.50 to
1.00, calculated quarterly on a cumulative
basis for the fiscal quarters of Borrower
ending March 31, 1997, June 30, 1997,
September 30, and December 31, 1997, and
thereafter calculated monthly on a rolling
twelve month basis commencing with the month
ending January 31, 1998;
iii. Debt Service Coverage
Ratio. Borrower shall have as of each date of
calculation, a Debt Service Coverage Ratio,
of not less than 1.25 to 1.00, calculated
quarterly on a cumulative basis for the
fiscal quarters of Borrower ending March 31,
1997, June 30, 1997, September 30, and
December 31, 1997, and thereafter calculated
monthly on a rolling twelve month basis
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<PAGE>
commencing with the month ending January 31,
1998;
iv. Liabilities to Tangible
Net Worth Ratio. Borrower shall have at all
time a ratio of Liabilities (excluding the
Seller Debt) to Tangible New Worth of not
more than 3.0 to 1.0.
v. Capital Expenditures.
Borrower shall not make: (A) Capital
Expenditures of an aggregate amount of more
than Five Hundred Thousand Dollars
($500,000.00) during any fiscal year
(pro-rated for the fiscal year ending
December 31, 1997); or (B) Capital
Expenditures in the form of expenditures for
capital lease obligations of an aggregate
amount of more than Five Hundred Thousand
Dollars ($500,000.00) during any fiscal year
(pro-rated for the fiscal year ending
December 31, 1997).
K. Section 14(p) of the LOAN AGREEMENT is hereby amended by
deleting its existing language in its entirety and substituting in lieu thereof
the following:
(p) After obtaining the Cruttenden Loan and the
Imperial Loan, Borrower will not modify any of the terms of the
Cruttenden Loan or the Imperial Loan or any of the documents
evidencing, securing or otherwise documenting the Cruttenden Loan or
the Imperial Loan without the prior written consent of LaSalle.
L. Section 14(r) of the LOAN AGREEMENT is hereby amended by
deleting the second sentence of such Section in its entirety and substituting in
lieu thereof the following:
(r) Following the Acquisition, and subject to the
terms of the last sentence of this paragraph, the only dividends which
may be made by the Borrower are dividends in an amount equal to the
regularly scheduled payments due under the Seller Debt, provided such
payments are permitted to be made pursuant to the terms of the
Subordination Agreement between the Seller, LaSalle, Cruttenden and
Imperial and such dividends are used to make such payments.
M. Section 16(i) of the LOAN AGREEMENT is hereby amended by
deleting the term "Quadrant Loan" and substituting in lieu thereof the term
"Imperial Loan".
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<PAGE>
Section 3. Term Loan B. The BORROWER acknowledges and agrees that
LASALLE shall have no obligation to provide the BORROWER with TERM LOAN B and
that LASALLE will not provide the BORROWER with TERM LOAN B.
Section 4. Other Terms. Except as specifically modified herein, all
other terms and provisions of the LOAN AGREEMENT remain in full force and effect
are hereby ratified and confirmed.
Section 5. Miscellaneous.
(a) Incorporation; Limited Modification. The terms and
conditions of the documents evidencing, securing or otherwise documenting the
BORROWER'S obligations to the LASALLE under the REVOLVER and TERM LOAN A
(together with the LOAN AGREEMENT, collectively, "LOAN DOCUMENTS") are
incorporated herein by reference and made a part hereof as if fully set forth
herein. Except as specifically modified by or pursuant to this MODIFICATION, all
terms and conditions of the LOAN DOCUMENTS remain unchanged, in full force and
effect, and are hereby ratified and confirmed in all respects. In the event of
any inconsistencies between the terms and conditions of this MODIFICATION and
any of the terms and conditions of the other LOAN DOCUMENTS, LASALLE shall
determine, in its sole discretion, which of the terms and conditions shall
control.
(b) Integration. This MODIFICATION and the other LOAN
DOCUMENTS constitute the entire agreement between LASALLE and the BORROWER with
respect to the subject matter hereof, and any term or condition not expressed in
this MODIFICATION or the other LOAN DOCUMENTS does not constitute a part of the
agreement of LASALLE and the BORROWER with respect to such subject matter.
(c) No Novation. This MODIFICATION shall not cause a novation
of any of the obligations of the BORROWER under the LOAN DOCUMENTS, nor shall it
extinguish, terminate or impair the BORROWER'S obligations under the LOAN
DOCUMENTS. In addition, this MODIFICATION shall not release, affect or impair
the priority of any security interests and liens held by LASALLE against any
assets of the BORROWER.
(d) Severability. If any provision or part of any provision of
this MODIFICATION shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this MODIFICATION and this MODIFICATION shall be
construed as if such invalid, illegal or unenforceable provision or part thereof
had never been contained herein, but only to the extent of its invalidity,
illegality, or unenforceability.
7
<PAGE>
(e) Number, Gender, And Captions. As used herein, the singular
shall include the plural and the plural may refer to only the singular. The use
of any gender shall be applicable to all genders. The captions contained herein
are for purposes of convenience only and are not a part of this MODIFICATION.
(f) Further Assurances. As part of this MODIFICATION, and in
consideration for the agreements of LASALLE as set forth therein, the BORROWER
agrees to execute and deliver to LASALLE such other and further documents as
may, from time to time, in the sole opinion of LASALLE and LASALLE's counsel, be
necessary or appropriate to carry out the terms and conditions of this
MODIFICATION and the LOAN DOCUMENTS.
(g) Choice Of Law. The laws of the State of Maryland shall
govern and be applied to determine all issues relating to this MODIFICATION and
the rights and obligations of the parties hereto, including the validity,
construction, interpretation, and enforceability of this MODIFICATION and its
various provisions and the consequences and legal effect of all transactions and
events which resulted in the execution of this MODIFICATION or which occurred or
were to occur as a direct or indirect result of this MODIFICATION having been
executed.
(h) Binding Effect; No Oral Modification. This MODIFICATION
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives, successors and assigns. This MODIFICATION
may not be altered, modified or amended unless such alteration, modification or
amendment is in writing and executed by LASALLE.
Section 6. Release. The BORROWER releases and forever discharges
LASALLE and LASALLE'S officers, directors, employees, agents and representatives
("RELEASED PARTIES") from any and all claims, causes of action and liabilities
of any kind or character whatsoever, which the BORROWER ever had or now has
against any of the RELEASED PARTIES, which in any way relate or pertain to or
arise from, directly or indirectly, the LOAN DOCUMENTS or any of the BORROWER'S
obligations to LASALLE.
Section 7. Waiver Of Jury Trial. The parties hereto agree that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by any party to this MODIFICATION, or any of their successors or
assigns, on or with respect to this MODIFICATION or any other LOAN DOCUMENT or
which in any way relates, directly or indirectly, to the obligations of any of
the BORROWER to LASALLE under the LOAN DOCUMENTS, or the dealings of the parties
with respect thereto, shall be tried only by a court and not by a jury. THE
PARTIES EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTION OR
PROCEEDINGS. The parties acknowledge and agree that this provision is a specific
and material aspect of the agreement between the parties and that the
8
<PAGE>
parties would not enter into this MODIFICATION if this provision, or any other
provision of this MODIFICATION, were not contained herein.
IN WITNESS WHEREOF, the parties have executed this MODIFICATION as of
the date first above written with the specific intention of creating a document
under seal.
WITNESS: THE ANTIGUA GROUP, INC.
/s/ Joseph R.S. Tyssowski By: /s/ Gerald K. Whitley
(SEAL)
Name: Gerald K. Whitley
Title: Vice President Finance
LASALLE BUSINESS CREDIT, INC.
/s/ Joseph R.S. Tyssowski By: /s/ Patrick E. Killpatrick
(SEAL)
Patrick E. Killpatrick,
Vice President
9
<PAGE>
ACKNOWLEDGMENTS
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared George K.
Whitley, and acknowledged himself to be the Vice President Finance of THE
ANTIGUA GROUP, INC., a Nevada corporation, and that he, as such Vice President
Finance, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of THE ANTIGUA GROUP, INC., by
himself as Vice President Finance.
IN WITNESS MY Hand and Notarial Seal.
/s/ Vickie L. Stripp (SEAL)
NOTARY PUBLIC
My Commission Expires:
September 23, 1998
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, in personally appeared Patrick
E. Killpatrick, and acknowledged himself to be a Vice President of LASALLE
BUSINESS CREDIT, INC., a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of LASALLE BUSINESS CREDIT, INC.,
by himself as Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Crosbie (SEAL)
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
10
Exhibit 10.17
LOAN AND SECURITY AGREEMENT
Dated as of May 7, 1997
between
THE ANTIGUA GROUP, INC.,
as Borrower
and
LASALLE BUSINESS CREDIT, INC.,
as Lender
$3,500,000.00
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this 7th
day of May, 1997, by and among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle"), with an office at 120 East Baltimore Street, Suite
1802, Baltimore, Maryland 21202, and THE ANTIGUA GROUP, INC., a Nevada
corporation ("Borrower"), with its principal office at 9319 North 94th Way,
Scottsdale, Arizona 85258.
WITNESSETH:
WHEREAS, the Borrower has requested LaSalle to make a term loan to the
Borrower, and the parties wish to provide for the terms and conditions upon
which such loan shall be made;
NOW, THEREFORE, in consideration of the term loan (including any loan
by renewal or extension thereof) hereafter made to Borrower by LaSalle, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by Borrower, the parties agree as follows:
1. DEFINITIONS.
(a) General Definitions.
"Account," "Account Debtor," "Chattel Paper," "Documents,"
"Equipment," "General Intangibles," "Goods," "Instruments," "Inventory," and
"Investment Property," shall have the respective meanings assigned to such
terms, as of the date of this Agreement, in the Maryland Uniform Commercial
Code.
"Acquisition" shall mean the acquisition by SEI of all of the
issued and outstanding stock in the Borrower pursuant to terms and conditions
acceptable to LaSalle.
"Affiliate" shall mean any Person: (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with Borrower; (b) that directly or beneficially owns or
holds five percent (5%) or more of any class of the voting stock of Borrower;
(c) five percent (5%) or more of whose voting stock (or in the case of a Person
which is not a corporation, five percent (5%) or more of the equity interest of
which) is owned directly or beneficially or held by Borrower; or (d) five
percent (5%) or more of whose voting stock (or in case of a Person which is not
a corporation, five percent (5%) or more of the equity interest of which) is
owned directly or beneficially or held by a Person referred to in (a), (b) or
(c) above.
"Business Day" shall mean any day other than a Saturday,
Sunday, or such other day as banks in Illinois are authorized or required to be
closed for business.
<PAGE>
"Capital Adequacy Charge" shall have the meaning specified in
paragraph 3(e) hereof.
"Capital Adequacy Demand" shall have the meaning specified in
paragraph 3(e) hereof.
"Capital Expenditures" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including expenditures for capitalized lease obligations) by
Borrower during such period that are required by GAAP to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
(or in intangible accounts subject to amortization) in the balance sheet of
Borrower.
"Cash Flow" shall mean, with respect to any period, net income
after taxes for such period (excluding any after-tax gains or losses on the sale
of assets (other than the sale of Inventory in the ordinary course of business)
and excluding other after-tax extraordinary gains or losses), plus deferred
taxes, plus depreciation and amortization deducted in determining net income for
such period, minus Capital Expenditures for such period not financed, minus any
cash dividends paid or accrued and cash withdrawals paid or accrued to
shareholders or other Affiliates for such period which were not calculated in
determining net income after taxes, and plus the after tax increase in LIFO
reserves or minus the after tax decrease in LIFO reserves.
"Closing Date" shall mean the date the Loan is advanced by
LaSalle either directly to the Borrower or into an escrow in which the proceeds
of the Loan will be held and not delivered to Borrower until the conditions
established in such escrow are satisfied (or if those conditions are not
satisfied, the proceeds of the Loan will be returned to LaSalle).
"Closing Document List" shall have the meaning specified in
paragraph 12(a)(i) hereof.
"Collateral" shall mean all of the personal property of
Borrower described in paragraph 4 hereof, and all other real or personal
property of any Obligor or any other Person now or hereafter pledged to LaSalle
to secure, either directly or indirectly, repayment of any of the Obligations.
"Cruttenden" shall mean The Cruttenden Roth Bridge Fund, LLC,
a California limited liability company.
"Cruttenden Loan" shall mean a One Million Twenty Thousand
Dollar ($1,020,000.00) loan from Cruttenden to the Borrower pursuant to terms
acceptable to LaSalle.
"Debt Service" shall mean, with respect to any period, current
principal maturities of long term debt
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<PAGE>
(specifically excluding any portion of such current principal maturities which
are deemed current principal maturities of long term debt solely because such
principal is payable due to a Securities Offering) and capitalized leases paid
or scheduled to be paid during such period, plus any prepayments on indebtedness
owed to any Person (except trade payables, revolving loans and prepayments made
with proceeds of Securities Offerings) and paid during such period.
"Debt Service Coverage Ratio" shall mean, with respect to any
period, the ratio of (A) Cash Flow, to (B) Debt Service.
"Default" shall mean any event, condition or default which
with the giving of notice, the lapse of time or both would be an Event of
Default.
"EBITDA" shall mean, with respect to any period, net income
after taxes for such period (excluding any after-tax gains or losses on the sale
of assets and excluding other after-tax extraordinary gains or losses) plus
interest expense, income tax expense, depreciation and amortization for such
period, less gains and losses attributable to any fixed asset sales made during
such period, minus any distributions or dividends permitted to be paid pursuant
to the terms hereof, plus or minus any other non-cash charges or gains which
have been subtracted or added in calculating net income after taxes for such
period.
"Event of Default" shall have the meaning specified in
paragraph 12 hereof.
"Excess Cash Flow" shall mean for any fiscal year of the
Borrower, the amount by which the Borrower's Cash Flow for such fiscal year
exceeds the Borrower's Debt Service for such fiscal year.
"GAAP" shall mean generally accepted accounting principles and
policies in the United States as in effect from time to time.
"Guarantors" shall mean collectively, SEI and SEC.
"Imperial" means Imperial Bank.
"Imperial Loan" means a Two Million Five Hundred Thousand
($2,500,000.00) Loan from Imperial to the Borrower pursuant to terms acceptable
to LaSalle.
"Indemnified Party" shall have the meaning specified in
paragraph 15 hereof.
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<PAGE>
"Intercreditor Agreement" shall mean an Intercreditor
Agreement between LaSalle and another Person holding a security interest in any
of the assets of the Borrower.
"Liabilities" shall mean at any date all liabilities required
under GAAP to be recorded on a balance sheet as of such date.
"Loan" shall mean the term loan made by LaSalle to Borrower
pursuant to paragraph 2 hereof and all other advances and financial
accommodations made by LaSalle to or on behalf of Borrower under the terms of
this Agreement.
"Lock Box" and "Blocked Account" shall have the meanings
specified in paragraph 7 hereof.
"Material Adverse Effect" shall mean with respect to any
event, act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, the
business, assets, operations, condition (financial or otherwise) or prospects of
Borrower, taken as a whole.
"Net Worth" shall mean shareholders' equity as determined in
accordance with GAAP, consistently applied.
"Note" shall mean the Term Note in the original principal
amount of Three Million Five Hundred Thousand Dollars ($3,500,000.00) executed
by the Borrower to the order of LaSalle, dated as of the Closing Date.
"Obligations" shall mean all liabilities, obligations, and
duties owing by Borrower to LaSalle or to any parent, affiliate or subsidiary of
LaSalle, of any kind or description in connection with or related to the Loan,
including all obligations to pay: (a) all principal advanced pursuant to or
evidenced by this Agreement, by the Note, or by any other Agreement; and (b) all
interest, all fees, costs and expenses which Borrower is required to pay or
reimburse pursuant to this Agreement or any Other Agreement, by law or
otherwise.
"Obligor" shall mean Borrower, Guarantors and each Person who
is or shall become primarily or secondarily liable for any of the Obligations,
provided, however, that such term shall not include any Account Debtor.
"Other Agreements" shall mean all agreements, instruments and
documents including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements,
4
<PAGE>
leases, financing statements and all other writings heretofore, now or from time
to time hereafter executed by or on behalf of Borrower or any other Person and
delivered to LaSalle or to any parent, affiliate or subsidiary of LaSalle in
connection with the Obligations or the transactions contemplated hereby.
"Other Facilities" shall mean the revolving line of credit
facility and term loan provided by LaSalle pursuant to the Other Loan Agreement.
"Other Loan Agreement" shall mean the Loan And Security
Agreement between the Borrower and LaSalle dated January 23, 1997.
"Parent" shall mean any Person now or at any time or times
hereafter owning or controlling (alone or with any other Person) at least a
majority of the issued and outstanding stock of Borrower or any Subsidiary.
"Permitted Liens" shall mean: (a) statutory liens of
landlords, carriers, warehousemen, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder; (b) liens or security interests in favor
of LaSalle; (c) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business; (d) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, in accordance with the terms set forth in paragraph
11(g); (e) liens incurred or deposits made in the ordinary course of Borrower's
business in connection with capitalized leases or purchase money security
interests for purchase of, and applying only to, Equipment included in the
permitted borrowings under paragraph 11(h) or permitted as Capital Expenditures
under paragraph 11(m), the documents relating to such liens to be in form and
substance acceptable to LaSalle; (f) liens securing indebtedness owing by any
Subsidiary to Borrower to the extent such indebtedness is permitted under
paragraph 11(h), or to any other Subsidiary of Borrower; (g) deposits to secure
performance of bids, trade contracts, leases and statutory obligations (to the
extent not excepted elsewhere herein); (h) liens specifically set forth on
Schedule 1(a) attached hereto; (i) any lien arising out of the refinancing,
extension, renewal or refunding of any indebtedness secured by a lien permitted
by any of the foregoing sections (a) through (h) inclusive provided that (i)
such indebtedness is not secured by any additional assets, and (ii) the amount
of such indebtedness is not increased; (j) pledges or deposits in connection
with worker's compensation, unemployment insurance and other social security
legislation; (k) grants of security and rights of setoff in deposit accounts,
securities and
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<PAGE>
other properties held at banks or financial institutions to secure the payment
or reimbursement under overdraft, acceptance and other facilities; and (l)
rights of setoff, banker's lien and other similar rights arising solely by
operation of law.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.
"Prime Rate" shall mean the publicly announced prime rate of
LaSalle National Bank, Chicago, Illinois, in effect from time to time. The Prime
Rate is not intended to be the lowest or most favorable rate of LaSalle National
Bank in effect at any time.
"Purchase Agreement" shall mean the Stock Purchase Agreement
dated April 21, 1997 among Guarantors, Borrower and Seller, as amended, pursuant
to which the Guarantors has agreed to acquire all of the issued and outstanding
stock of Borrower.
"SEC" shall mean Southhampton Enterprises Corp., a British
Columbia corporation.
"Securities Offering" shall mean any equity securities
offering of the stock of SEC after May 30, 1997.
"SEI" shall mean Southhampton Enterprises, Inc., a Texas
corporation.
"Seller" shall mean collectively: (a) Thomas E. Dooley, Jr.
and Gail E. Dooley, Trustees under the Thomas E. Dooley and Gail Dooley
Revocable Trust of 1988, dated 10/4/88; (b) Thomas E. Dooley as Custodian Under
the Uniform Gifts to Minors Act fbo Kim L. Dooley; (c) Thomas E. Dooley as
Custodian Under the Uniform Gifts to Minors Act fbo Shawn T. Dooley; (d) Thomas
E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E. Dooley and Gail
Dooley Revocable Trust of 1988, dated 10/4/88; (e) E. Louis Werner, Jr.,
Trustee, E. Louis Werner, Jr., Revocable Intervivos Trust dated December 31,
1982; and (f) Bobbi D. Hunter, Trustee under the 1989 Trust Agreement
established separate irrevocable Gift Trusts f/b/o the children of Thomas and
Gail Dooley dated March 7, 1989.
"Seller Debt" shall mean the indebtedness of the Borrower and
the Guarantors to the Seller in a maximum amount of Six Million Three Hundred
Seventy-Eight Thousand Dollars ($6,378,000.00) which is incurred in connection
with the Acquisition.
"Subordinated Debt" shall mean collectively: (a) the Seller
Debt; (b) the Cruttenden Loan; (c) the Imperial Loan; (d)
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<PAGE>
the indebtedness under the Second Amended And Restated NonNegotiable Note dated
January 1, 1993 in the original principal amount of Three Hundred Thirty-Four
Thousand Six Hundred Nineteen Dollars ($334,619.00) from the Borrower to Ronald
A. McPherson, as amended; and (e) the indebtedness under the Second Amended And
Restated Non-Negotiable Note dated January 1, 1993 in the original principal
amount of Three Hundred Thirty-Four Thousand Six Hundred Nineteen Dollars
($334,619.00) from the Borrower to Gerald K. Whitley, as amended.
"Subordination Agreements" shall mean collectively: (a) the
Subordination Agreement of even date herewith by and between the Seller,
Imperial, Cruttenden and LaSalle; (b) the Subordination Agreement of even date
herewith between Imperial, Cruttenden and LaSalle; (c) the Subordination
Agreement of even date herewith between LaSalle, Imperial, Cruttenden, and
Gerald K. Whitley; (d) the Subordination Agreement of even date herewith between
LaSalle, Imperial, Cruttenden and Ronald A. McPherson; and (e) the Subordination
Agreement of even date herewith between LaSalle and Imperial.
"Subsidiary" shall mean any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned by Borrower or by
any partnership or joint venture of which more than fifty percent (50%) of the
outstanding equity interests are at the time, directly or indirectly, owned by
Borrower.
"Tangible Net Worth" shall mean shareholders' equity
(including retained earnings) less the book value of all intangible assets
including but not limited to advances to Affiliates, determined by LaSalle on a
consistent basis, plus the amount of any debt subordinated to LaSalle on terms
and conditions acceptable to LaSalle in its sole judgment, plus pre-tax LIFO
reserves, all as determined in accordance with GAAP, consistently applied.
"Term" shall have the meaning specified in paragraph 9 hereof.
(b) Accounting Terms And Definitions. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Borrower to LaSalle on or before the
Closing Date. All accounting determinations for purposes of determining
compliance with the financial covenants contained in paragraph 11(m) shall be
made in accordance with GAAP as in effect on the Closing Date and applied on a
basis consistent in all material respects with the audited financial statements
delivered
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to LaSalle by Borrower on or before the Closing Date. The financial statements
required to be delivered hereunder from and after the Closing Date, and all
financial records, shall be maintained in accordance with GAAP. If GAAP shall
change from the basis used in preparing the audited financial statements
delivered to LaSalle by Borrower on or before the Closing Date, the certificates
required to be delivered pursuant to paragraph 11(i) demonstrating compliance
with the covenants contained herein shall include, at the election of Borrower
or upon the request of LaSalle, calculations setting forth the adjustments
necessary to demonstrate how Borrower is in compliance with the financial
covenants based upon GAAP as in effect on the Closing Date.
2. LOAN.
On the Closing Date, LaSalle shall make a term loan to Borrower in
the original principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000.00) ("Loan"). Principal payable on account of the Loan shall be
payable in accordance with the Note, in successive monthly installments (i)
payable on the first day of each month, commencing on June 1, 1997, and (ii)
based on an amortization schedule consisting of thirty-six (36) equal and level
principal payments, provided, however, that the entire unpaid principal balance
of the Loan shall be due and payable in full upon the expiration of the Term of
this Agreement, and provided further that in the event of a Securities Offering,
or group of Securities Offerings, for which SEC receives an aggregate of not
less than Two Million Dollars ($2,000,000.00), the Borrower shall make an
additional principal payment of not less than Two Million Dollars
($2,000,000.00) within ten (10) Business Days after the Securities Offering,
such additional principal payment to be applied in the inverse order of
scheduled maturities. In addition to the principal payments as set forth above,
the Borrower shall also make annual mandatory prepayments on the Loan during the
first one hundred twenty (120) days of each fiscal year, each such prepayment in
an amount equal to twenty-five percent (25%) of the sum which is equal to: (a)
the Borrower's Cash Flow for the preceding fiscal year, minus (b) one hundred
percent (100%) of the amount of Cash Flow which the Borrower needed to have for
such fiscal year in order to satisfy (but not exceed) the Debt Service Coverage
Ratio covenant for such fiscal year as set forth in paragraph 11(m)(iii) of this
Agreement. Notwithstanding anything hereinabove to the contrary, the entire
unpaid principal balance of the Loan, and any accrued and unpaid interest
thereon, shall be immediately due and payable upon the earlier to occur of (i)
the last day of the Term, and (ii) the acceleration of the Obligations pursuant
to paragraph 14 of this Agreement.
3. INTEREST, FEES AND CHARGES.
(a) Rates of Interest. Interest accrued on the Loan shall be due on
the earliest of (i) the first day of each month (for the immediately preceding
month), computed through the last
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calendar day of the preceding month, (ii) the occurrence of an Event of Default
in consequence of which LaSalle elects to accelerate the maturity and payment of
the Loan, or (iii) termination of this Agreement pursuant to paragraph 19
hereof. Except as otherwise provided in paragraph 3(c) hereof, interest shall
accrue on the principal amount of the Loan outstanding at the end of each day at
a fluctuating rate per annum equal to three percent (3%) above the Prime Rate.
The rate of interest payable on the Loan shall increase or decrease by an amount
equal to any increase or decrease in the Prime Rate, effective as of the opening
of business on the day that any such change in the Prime Rate occurs. Upon and
after the occurrence of an Event of Default, and during the continuation
thereof, the principal amount of the Loan shall bear interest on demand at a
rate per annum equal to the rate of interest then in effect plus two percent
(2%).
(b) Computation of Interest and Fees. Interest and collection
charges hereunder shall be calculated daily and shall be computed on the actual
number of days elapsed over a year consisting of three hundred and sixty (360)
days. Interest shall commence accruing on the Loan on the Closing Date.
(c) Maximum Interest. It is the intent of the parties that the rate
of interest and the other charges to Borrower under this Agreement shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which LaSalle may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
(d) Closing Fee. Borrower shall pay to LaSalle a closing fee,
payable on or before the Closing Date, in an amount equal to Seventy Thousand
Dollars ($70,000.00). No part of the closing fee shall be applied to costs or
expenses incurred by LaSalle in connection with the Loan.
(e) Capital Adequacy Charge. If LaSalle shall have determined that
the adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
LaSalle with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority enacted
after the Closing Date, does or shall have the effect of reducing the rate of
return on LaSalle's capital as a consequence of its obligations hereunder to a
level below that which LaSalle could have achieved but for such adoption, change
or compliance (taking into consideration LaSalle's policies with respect to
capital adequacy) by a material amount, then from time to time, after submission
by LaSalle to Borrower of a written demand therefor ("Capital Adequacy Demand")
together with the
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certificate described below, Borrower shall pay to LaSalle such additional
amount or amounts ("Capital Adequacy Charge") as will compensate LaSalle for
such reduction, such Capital Adequacy Demand to be made with reasonable
promptness following such determination. A certificate of LaSalle claiming
entitlement to payment as set forth above shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such reduction, the amount of the Capital Adequacy Charge to be
paid to LaSalle, and the method by which such amount was determined. In
determining such amount, LaSalle may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.
4. GRANT OF SECURITY INTEREST TO LASALLE.
As security for the payment of the Loan now or in the future made by
LaSalle to Borrower hereunder and for the payment or other satisfaction of all
other Obligations, Borrower hereby assigns to LaSalle and grants to LaSalle a
continuing security interest in the following property of Borrower, whether now
or hereafter owned, existing, acquired or arising and wherever now or hereafter
located: i) all Accounts and all Goods whose sale, lease or other disposition by
Borrower has given rise to Accounts and have been returned to or repossessed or
stopped in transit by Borrower; ii) all Chattel Paper, Instruments, Documents
and General Intangibles (including, without limitation, all patents, patent
applications, trademarks, trademark applications, tradenames, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer lists, tax
refund claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to
indemnification); iii) all Inventory; iv) all Goods (other than Inventory)
including, without limitation, Equipment, and fixtures; v) all deposits and cash
and any other property of Borrower now or hereafter in the possession, custody
or control of LaSalle or any agent or any parent, affiliate or subsidiary of
LaSalle or any participant with LaSalle in the Loan for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise);
vi) all Investment Property; and vii) all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of Borrower's books and records
relating to any of the foregoing and to Borrower's business. Notwithstanding the
foregoing provisions of this paragraph 4, such grant of a security interest
shall not extend to, and the term "Collateral" shall not include, any licenses
which are now or hereafter held by the BORROWER as licensee, to the extent that
(i) such licenses are not assignable or capable of being encumbered as a matter
of law or under the terms of the license applicable thereto (but solely to the
extent that any such restriction shall be enforceable under applicable law),
without the consent of the licensor thereof and (ii) such consent has not been
obtained; provided, however, that the
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foregoing grant of security interest shall extend to, and the term Collateral
shall include, (A) any and all proceeds of such licenses to the extent that the
assignment or encumbering of such proceeds is not so restricted and (B) upon any
such licensor's consent with respect to any such otherwise excluded license
being obtained, thereafter such licenses as well as any and all proceeds thereof
that might theretofore have been excluded from such grant of a security interest
and the term Collateral. In addition, the Borrower agrees that so long as the
Borrower has any obligations to LaSalle, the Borrower will cause all of the
Borrower's obligations to LaSalle to be secured by a valid and enforceable lien
and security interest in all assets of the Borrower.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall, at LaSalle's request, at any time and from time to
time, execute and deliver to LaSalle such financing statements, documents and
other agreements and instruments (and pay the cost of filing or recording the
same in all public offices deemed reasonably necessary or desirable by LaSalle)
and do such other acts and things as LaSalle may deem necessary or desirable in
order to establish and maintain a valid, attached and perfected security
interest in the Collateral in favor of LaSalle (free and clear of all other
liens, claims and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Obligations, and in order to facilitate the collection of the Collateral.
Borrower irrevocably hereby makes, constitutes and appoints LaSalle (and all
Persons designated by LaSalle for that purpose) as Borrower's true and lawful
attorney and agent-in-fact to execute such financing statements, documents and
other agreements and instruments and do such other acts and things as may be
necessary to preserve and perfect LaSalle's security interest in the Collateral.
Borrower further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement. The security interests and liens granted herein are
subject and subordinate to the security interests and liens granted to LaSalle
in the Loan And Security Agreement dated January 23, 1997 between Borrower and
LaSalle which secure the Other Facilities.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of
Default has occurred, Borrower shall have the right, except as otherwise
provided in this Agreement, in the ordinary course of Borrower's business, to
(a) sell, lease or furnish under contracts of service any of Borrower's
Inventory normally held by Borrower for any such purpose, and (b) use and
consume any raw materials, work in process or other materials normally held by
Borrower for such purpose, provided, however, that a sale in the ordinary course
of business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by Borrower.
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7. COLLECTIONS.
(a) Borrower shall direct all of its Account Debtors to make all
payments on the Accounts directly to a post office box ("Lock Box") with LaSalle
National Bank in the name and under exclusive control of, LaSalle. Borrower
shall establish an account ("Blocked Account") in LaSalle's name for the benefit
of Borrower with LaSalle National Bank, into which all payments received in the
Lock Box shall be deposited, and into which Borrower will immediately deposit
all payments made for Inventory or services sold or rendered by Borrower and
received by Borrower in the identical form in which such payments were made,
whether by cash or check. If Borrower, any Affiliate or Subsidiary of Borrower,
or any shareholder, officer, director, employee or agent of Borrower or any
Affiliate or Subsidiary, or any other Person acting for or in concert with
Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as proceeds of Accounts, Inventory or other Collateral, Borrower
and each such Person shall receive all such items in trust for, and as the sole
and exclusive property of, LaSalle and, immediately upon receipt thereof, shall
remit the same (or cause the same to be remitted) in kind to the Blocked
Account. LaSalle shall from time to time apply the sums held in the Blocked
Account to the Borrower's obligations to LaSalle with such application first to
be made to the revolving line of credit being provided by LaSalle to the
Borrower and then to the other obligations in such order as LaSalle may
determine. All checks, drafts, instruments and other items of payment or
proceeds of Collateral delivered to LaSalle in kind shall be endorsed by
Borrower to LaSalle, and, if that endorsement of any such item shall not be made
for any reason, LaSalle is hereby irrevocably authorized to endorse the same on
Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints LaSalle (and all Persons designated by
LaSalle for that purpose) as Borrower's true and lawful attorney and
agent-in-fact (i) to endorse Borrower's name upon said items of payment and/or
proceeds of Collateral of Borrower and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account of
Borrower or goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof; (iii) to have access to any lock box or
postal box into which any of Borrower's mail is deposited; and (iv) open and
process all mail addressed to Borrower and deposited therein, provided, however,
that LaSalle shall not exercise any such powers described in clauses (i), (ii)
and (iv) unless and until an Event of Default has occurred.
(b) Immediately upon Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document including, without
limitation, any Chattel Paper, Borrower shall deliver the original thereof to
LaSalle together with an appropriate endorsement or other specific evidence of
assignment thereof to LaSalle (in form and substance acceptable to LaSalle). If
an endorsement or assignment of any such items shall not be made
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for any reason, LaSalle is hereby irrevocably authorized, as Borrower's attorney
and agent-in-fact, to endorse or assign the same on Borrower's behalf.
8. SCHEDULES AND REPORTS. Borrower shall furnish or cause to be
furnished to LaSalle the following:
(a) Within sixty (60) days after the Closing Date: (i) Borrower
shall deliver to LaSalle a balance sheet of the Borrower as of the day
immediately following the closing of the Acquisition, which balance sheet shall
reflect the adjustments made from the fiscal year end balance sheet of the
Borrower previously delivered to LaSalle and be certified by the Chief Financial
Officer of the Borrower; and (ii) Guarantors shall deliver to LaSalle a balance
sheet of the Guarantors as of the day immediately following the Closing Date
which balance sheet shall be certified by an officer of the Guarantors in a form
acceptable to the Lender.
(b) As soon as practicable and in any event within twenty-five (25)
days following the end of each calendar month, (i) statements of income and
statements of cash flow of Borrower for each such month and for the period from
beginning of the then current fiscal year of Borrower to the end of such month,
and (ii) balance sheets of Borrower as of the end of such month, such statements
of income and balance sheets to include, in comparative form, figures for the
corresponding periods in the preceding fiscal year of Borrower, all in
reasonable detail and certified by the chief financial officer of Borrower that
such statements fairly present the financial condition of Borrower in accordance
with GAAP, subject to changes resulting from normal year-end adjustments and the
absence of footnotes, together with detailed computations of Borrower's
compliance with the covenants set forth in this Agreement.
(c) As soon as practicable and in any event within thirty (30) days
following the end of each fiscal quarter, (i) statements of income and
statements of cash flow of Guarantors for each such quarter and for the period
from beginning of the then current fiscal year of Guarantors to the end of such
quarter, and (ii) balance sheets of Guarantors as of the end of such quarter,
such statements of income and balance sheets to include, in comparative form,
figures for the corresponding periods in the preceding fiscal year of
Guarantors, all in reasonable detail and certified by the chief financial
officer of Guarantors that such statements fairly present the financial
condition of Guarantors in accordance with GAAP, subject to changes resulting
from normal year-end adjustments and the absence of footnotes.
(d) In addition to any other reports: (i) as soon as practicable and
in any event within ten (10) days after the end of each month (A) a detailed
aged trial balance of Borrower's accounts, in form and substance satisfactory to
LaSalle in its sole discretion, and (B) a summary and detail of accounts payable
(such
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Accounts and accounts payable divided into such time intervals as LaSalle may
require in its sole discretion), including a listing of any held checks; (ii) as
soon as practicable and in any event within ten (10) days after the end of each
month, the general ledger inventory account balance, a physical inventory report
and LaSalle's standard form of Inventory report then in effect, for Borrower by
each category of Inventory, together with a description of the monthly change in
each category of Inventory; (iii) within five (5) days after a request by
LaSalle, but in any event within ten (10) days after the end of each March and
September, an updated list of all Account Debtors of Borrower, which list shall
include names and addresses; and (iv) until such time as the Borrower delivers
to LaSalle a landlord's waiver in a form acceptable to LaSalle executed by D&D
Development Co., within fifteen (15) days after the end of each month, evidence
in a form acceptable to LaSalle that the Borrower has paid all rent for the
preceding month for the property known as 9319 North 94th Way, Scottsdale,
Arizona.
(e) As soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of Borrower, (i) statements of income of
Borrower for such fiscal year, (ii) a balance sheet of Borrower as of the end of
such fiscal year, and (iii) statements of cash flow of Borrower for such fiscal
year, all setting forth in comparative form, corresponding figures for the
period covered by the preceding annual audit and as of the end of the preceding
fiscal year, such statements to be presented in accordance with Borrower's
normal method of accounting for Inventory and (if Borrower uses the LIFO method)
disclosing all LIFO reserves, all in reasonable detail and in scope in
accordance with audits performed for Borrower in prior years and examined and
certified by independent certified public accountants of recognized national
standing selected by Borrower and satisfactory to LaSalle, whose opinion shall
be unqualified and shall be in scope in accordance with audits performed for
Borrower in prior years, in form and substance satisfactory to LaSalle.
(f) As soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of Guarantors, (i) statements of income of
Guarantors for such fiscal year, (ii) a balance sheet of Guarantors as of the
end of such fiscal year, and (iii) statements of cash flow of Guarantors for
such fiscal year, all setting forth in comparative form, corresponding figures
for the period covered by the preceding annual audit and as of the end of the
preceding fiscal year, all in reasonable detail and in scope in accordance with
audits performed for Guarantors in prior years and examined and certified by
independent certified public accountants of recognized national standing
selected by Guarantors and satisfactory to LaSalle, whose opinion shall be
unqualified and shall be in scope in accordance with audits performed for
Guarantors in prior years, in form and substance satisfactory to LaSalle.
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(g) As soon as practicable and in any event prior to the beginning
of each fiscal year of Borrower, projected balance sheets, statements of income
and cash flow for Borrower, for each of the twelve (12) months during such
fiscal year, which shall include the assumptions used therein, together with
appropriate supporting details as requested by LaSalle.
(h) As soon as practicable and in any event within ten (10) days of
delivery to Borrower, a copy of any letter issued by Borrower's independent
public accountants or other management consultants with respect to Borrower's
financial or accounting systems or controls, including all so-called "management
letters".
(i) In conjunction with the delivery of the annual presentation of
projections or budgets referred to in paragraph 8(g) above, a letter signed by
the President or a Vice President of Borrower and by the Treasurer or Chief
Financial Officer of Borrower, describing, comparing and analyzing, in detail,
all changes and developments between the anticipated financial results included
in such projections or budgets and the historical financial statements of
Borrower.
(j) With reasonable promptness, such other business or financial
data, reports, appraisals and projections as LaSalle may reasonably request.
(k) All financial statements delivered to LaSalle pursuant to the
requirements of this paragraph (except where otherwise expressly indicated)
shall be prepared in accordance with GAAP as provided in this Agreement.
Together with each delivery of financial statements required by paragraphs 8(b)
and 8(e) above, Borrower shall deliver to LaSalle an officer's certificate in
the form attached hereto as Exhibit B, which shall include a calculation of
financial covenants in the schedule attached to such officer's certificate in
form satisfactory to LaSalle. Together with each delivery of annual financial
statements required by paragraph 8(e) Borrower shall deliver to LaSalle a
certificate of the accountants who performed the audit in connection with such
statements stating that in making the audit necessary to the issuance of a
report on such financial statements, they have obtained no knowledge of any
event or circumstance which is or which with the passage of time, the giving of
notice, or both would constitute an Event of Default, or, if such accountants
have obtained knowledge of such an event or circumstance, specifying the nature
and period of existence thereof.
9. TERMINATION.
(a) This Agreement shall be in effect from the date hereof until
January 23, 2000 ("Term") unless the due date of the Obligations is accelerated
pursuant to paragraph 14 hereof; or
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(b) If, during the term of this Agreement, Borrower prepays the Loan
and the Other Facilities in full, and in connection therewith, Borrower either
(i) permits any security agreement, financing statement or analogous instrument
to be executed or filed with respect to the Collateral for the benefit of
someone other than LaSalle (other than in connection with a Permitted Lien), or
(ii) creates, incurs or assumes any liability for borrowed money (except for
borrowings from LaSalle and borrowings permitted pursuant to paragraph 11(h)
hereof), owing by Borrower, Borrower agrees to pay to LaSalle, as a prepayment
fee, in addition to the payment of all other Obligations owing by Borrower and
in addition to the fee due under the Other Loan Agreement, an amount equal to:
(i) five percent (5%) of the amount of the Loan prepaid if the Loan is prepaid
during the first year of the Term, (ii) three percent (3%) of the amount of the
Loan prepaid if the Loan is prepaid during the second year of the Term, and
(iii) one percent (1%) of the amount of the Loan prepaid if the Loan is prepaid
during the third year of the Term.
10. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
representations, warranties and covenants:
(a) the financial statements delivered or to be delivered by
Borrower to LaSalle at or prior to the date of this Agreement and at all times
subsequent thereto accurately reflect the financial condition of Borrower, and
since the date of the Borrower's financial statements delivered to LaSalle most
recently prior to the date of this Agreement, no event or condition has occurred
which has had, or is reasonably likely to have, a Material Adverse Effect;
(b) the office where Borrower keeps its books, records and accounts
(or copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of Collateral
and post office boxes are as set forth in Schedule 10(b) attached hereto;
Borrower shall promptly (but in no event less than ten (10) days prior thereto)
advise LaSalle in writing of the proposed opening of any new place of business,
the closing of any existing place of business, any change in the location of
Borrower's books, records and accounts (or copies thereof) or the opening or
closing of any post office box of Borrower;
(c) the Collateral, including without limitation the Equipment
(except any part thereof which prior to the date of this Agreement Borrower
shall have advised LaSalle in writing consists of Collateral normally used in
more than one state) is and shall be kept, or, in the case of vehicles, based,
only at the addresses set forth on Schedule 10(c) attached hereto, and at other
locations within the continental United States of which LaSalle has been advised
by Borrower in writing;
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(d) Borrower shall immediately give written notice to LaSalle of any
use of any Goods in any state other than a state in which Borrower has
previously advised LaSalle Goods shall be used, and Goods shall not, unless
LaSalle shall otherwise consent in writing, be used outside of the continental
United States;
(e) no security agreement, financing statement or analogous
instrument exists or shall exist with respect to any of the Collateral other
than any security agreement, financing statement or analogous instrument
evidencing Permitted Liens;
(f) Borrower is and shall at all times during the Term be the lawful
owner of all Collateral now purportedly owned or hereafter purportedly acquired
by Borrower, free from all liens, claims, security interests and encumbrances
whatsoever, whether voluntarily or involuntarily created and whether or not
perfected, other than liens permitted pursuant to paragraph 11(i) below;
(g) Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Borrower, and Borrower's execution, delivery and
performance of this Agreement and the Other Agreements shall not result in the
imposition of any lien or other encumbrance upon any of Borrower's property
under any existing indenture, mortgage, deed of trust, loan or credit agreement
or other agreement or instrument by which Borrower or any of its property may be
bound or affected;
(h) there are no actions or proceedings which are pending or, to the
best of Borrower's knowledge, threatened against Borrower which are reasonably
likely to have a Material Adverse Effect and Borrower shall, promptly upon
becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to LaSalle;
(i) To the best of the Borrower's knowledge, Borrower has obtained
all licenses, authorizations, approvals and permits, the lack of which would
have a material adverse effect on the operation of its business, and to the best
of Borrower's knowledge, Borrower is and shall remain in compliance in all
material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, statutes, orders, regulations, rules and ordinances relating to
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters), the failure to comply with which would have a Material
Adverse Effect;
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(j) all written information now, heretofore or hereafter furnished
by Borrower to LaSalle is and shall be true and correct in all material respects
as of the date with respect to which such information was or is furnished
(except for financial projections, which have been prepared in good faith based
upon reasonable assumptions);
(k) Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Obligations remain outstanding) be owned by any Affiliate;
(l) To the best of the Borrower's knowledge, during the five (5)
years prior to this Agreement, Borrower's name has always been as set forth on
the first page of this Agreement and Borrower has used no tradenames or division
names in the operation of its business, except as otherwise disclosed in writing
to LaSalle; Borrower shall notify LaSalle in writing within ten (10) days of the
change of its name or the use of any tradenames or division names not previously
disclosed to LaSalle in writing;
(m) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment,
including, without limitation, the Equipment described or listed on the
appraisal schedule of Equipment prepared by Daley Hodkin and dated June 1996
delivered to LaSalle prior to the date of this Agreement; (ii) Borrower shall
keep and maintain the Equipment in good operating condition and repair and shall
make all reasonable necessary replacements thereof and renewals thereto so that
the value and operating efficiency thereof shall at all times be preserved and
maintained, ordinary wear and tear excepted; (iii) Borrower shall not permit any
such items to become a fixture to real estate or an accession to other personal
property unless LaSalle will have a perfected first priority lien in such
fixture or accession; (iv) from time to time Borrower may sell, exchange or
otherwise dispose of obsolete, unused or worn out Equipment, but only to the
extent the fair market value in the aggregate, of all such Equipment sold or
otherwise disposed of by the Borrower during any twelve-month period is less
than Ninety Thousand Dollars ($90,000.00) and the fair market value of any such
Equipment sold or otherwise disposed of in any single transaction is less than
Thirty Thousand Dollars ($30,000.00); and (v) Borrower, immediately on demand by
LaSalle, shall deliver to LaSalle any and all evidence of ownership of,
including, without limitation, certificates of title and applications of title
to, any of the Equipment;
(n) this Agreement and the Other Agreements to which Borrower is a
party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms, except
to the extent that such enforceability may be limited by applicable bankruptcy,
insolvency,
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reorganization, moratorium and similar laws affecting the rights of creditors
generally;
(o) Borrower is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(p) Borrower is not now obligated, whether directly or indirectly,
for any loans or other indebtedness for borrowed money other than (i) the
Obligations, (ii) indebtedness disclosed to LaSalle on Schedule 10(p) attached
hereto, (iii) unsecured indebtedness to trade creditors arising in the ordinary
course of Borrower's business, (iv) the Subordinated Debt, and (v) unsecured
indebtedness arising from the endorsement of drafts and other instruments for
collection, in the ordinary course of Borrower's business.
(q) Borrower does not own any margin securities, and none of the
proceeds of the Loan hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(r) Except as otherwise disclosed on Schedule 10(r) attached hereto,
the Borrower has no Parents, Subsidiaries or divisions, nor is the Borrower
engaged in any joint venture or partnership with any other Person; provided,
however, that following the Acquisition, SEI shall be the Parent of the Borrower
and SEC is the Parent of SEI;
(s) Borrower is duly organized and in good standing in its state of
organization and Borrower is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary, except for such other states in
which the failure to so qualify would not have a Material Adverse Effect;
(t) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which is
material to the continued financial success and well-being of Borrower;
(u) There are no controversies pending or, to the best of the
Borrower's knowledge, threatened between Borrower and any of
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its employees, other than employee grievances arising in the ordinary course of
business which are not, in the aggregate, material to the continued financial
success and well-being of Borrower, and to the best of the Borrower's knowledge,
Borrower is in compliance in all material respects with all federal and state
laws respecting employment and employment terms, conditions and practices,
except where the failure to so comply would not have a Material Adverse Effect;
(v) Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it; and
(w) The Purchase Agreement has been executed and delivered by each
party thereto, and the terms and conditions of the Purchase Agreement constitute
the valid and binding obligations of each party thereto, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally.
Borrower represents, warrants and covenants to LaSalle that all representations,
warranties and covenants of Borrower contained in this Agreement (whether
appearing in paragraphs 10 or 11 hereof or elsewhere) shall be true at the time
of Borrower's execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full of all of the Obligations and termination of this Agreement.
11. COVENANTS. Until payment or satisfaction in full of all Obligations
and termination of this Agreement, unless Borrower obtains LaSalle's prior
written consent waiving or modifying any of Borrower's covenants hereunder in
any specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and GAAP, and shall keep such books,
records and accounts, and any copies thereof, only at the addresses indicated
for such purpose on Schedule 11(a) attached hereto;
(b) LaSalle, or any Persons designated by it, shall have the right,
at any time, in the exercise of its commercially reasonable credit judgment, to
call at Borrower's places of business at any reasonable times, and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower's
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business, the Collateral or any transactions between the parties hereto, and
shall have the right to make such verification concerning Borrower's business as
LaSalle may consider reasonable under the circumstances, provided that so long
as there exists no Default or Event of Default, the periodic filed examinations
to be conducted at Borrower's expense of Borrower and its financial records will
not be conducted more often than quarterly. Borrower shall furnish to LaSalle
such information relevant to LaSalle's rights under this Agreement as LaSalle
shall at any time and from time to time reasonably request. Borrower authorizes
LaSalle to discuss the affairs, finances and business of Borrower with any
officers or directors of Borrower or any Affiliate, or with those employees of
Borrower with whom LaSalle has determined in its commercially reasonable
judgment to be necessary or desirable to converse, and to discuss the financial
condition of Borrower with Borrower's independent public accountants. Any such
discussions shall be without liability to LaSalle or to such accountants.
Borrower shall pay to or reimburse LaSalle for all reasonable fees, costs, and
out-of-pocket expenses incurred by LaSalle in the exercise of its rights
hereunder and all of such costs, fees and expenses shall be payable on demand
and, until paid, shall bear interest at the highest rate then applicable to
Loan;
(c) i) Borrower shall: keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as are
customarily insured against by Persons engaged in businesses similar to that of
Borrower with such companies, in such amounts and under policies in such form as
shall be reasonably satisfactory to LaSalle. Originals or certified copies of
such policies of insurance have been or shall be delivered to LaSalle within
fifteen (15) days after the Closing Date, together with evidence of payment of
all premiums therefor, and shall contain an endorsement, in form and substance
acceptable to LaSalle, showing loss under such insurance policies payable to
LaSalle. Such endorsement, or an independent instrument furnished to LaSalle,
shall provide that the insurance company shall give LaSalle at least thirty (30)
days written notice before any such policy of insurance is altered or canceled
and that no act, whether willful or negligent, or default of Borrower or any
other Person shall affect the right of LaSalle to recover under such policy of
insurance in case of loss or damage. Subject to the terms of the Intercreditor
Agreement, Borrower hereby directs all insurers under such policies of insurance
to pay all proceeds payable thereunder directly to LaSalle. Borrower irrevocably
makes, constitutes and appoints LaSalle (and all officers, employees or agents
designated by LaSalle) as Borrower's true and lawful attorney (and agent-in-
fact) for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance, provided, however, that LaSalle shall exercise such
rights only upon the occurrence of an Event of Default. The
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proceeds of any insured loss shall be paid to LaSalle and shall be applied by
LaSalle to the Obligations, in such order of application as determined by
LaSalle, unless LaSalle permits the use thereof to repair or replace damaged or
destroyed Collateral;
ii) Borrower shall maintain, at its expense, such public
liability and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of Borrower with such companies and in
such amounts, with such deductibles and under policies in such form as shall be
reasonably satisfactory to LaSalle and originals or certified copies of such
policies have been or shall be delivered to LaSalle within fifteen (15) days
after the Closing Date, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing LaSalle as
additional insured thereunder and providing that the insurance company shall
give LaSalle at least thirty (30) days written notice before any such policy
shall be altered or canceled;
iii) Borrower shall maintain, at its expense, such business
interruption insurance as is customary for Persons engaged in businesses similar
to that of Borrower with such companies and in such amounts, with such
deductibles and under policies in such form as shall be reasonably satisfactory
to LaSalle and originals or certified copies of such policies (or binders
evidencing the existence of coverage in compliance with this paragraph) have
been or shall be delivered to LaSalle on or before the Closing Date, together
with evidence of payment of all premiums therefor; each such policy shall
contain an endorsement showing LaSalle as additional insured and loss payee
thereunder and providing that the insurance company shall give LaSalle at least
thirty (30) days written notice before any such policy shall be altered or
canceled; each such policy shall be assigned to LaSalle pursuant to LaSalle's
standard form of assignment; and
iv) If Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then LaSalle, without waiving or
releasing any obligation or default by Borrower hereunder, may (but shall be
under no obligation to) obtain and maintain such policies of insurance and pay
such premiums and take such other actions with respect thereto as LaSalle deems
advisable. All sums disbursed by LaSalle in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall be due on the demand of LaSalle
and, until paid, shall bear interest at the highest rate then applicable to the
Loan;
(d) Borrower shall not use the Collateral, or any part thereof, in
any unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation
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of any applicable environmental laws, rules or regulations; Borrower shall keep
the Collateral in good condition, repair and order, ordinary wear and tear
excepted; Borrower shall not permit the Collateral, or any part thereof, to be
levied upon under execution, attachment, distraint or other legal process;
Borrower shall not sell, lease, grant a security interest in or otherwise
dispose of any of the Collateral except as expressly permitted by this
Agreement; and Borrower shall not secrete or abandon any of the Collateral, or
remove or permit removal of any of the Collateral from any of the locations
listed on Schedule 10(c) attached hereto or in any written notice to LaSalle
pursuant to paragraph 10(c) hereof, except for the removal of Inventory sold in
the ordinary course of Borrower's business as permitted herein;
(e) all monies and other property obtained by Borrower from LaSalle
pursuant to this Agreement will be used only in connection with the Acquisition;
(f) Borrower shall, at the request of LaSalle, indicate on its
records concerning the Collateral a notation, in form satisfactory to LaSalle,
of the security interest of LaSalle hereunder, and Borrower shall not maintain
duplicates or copies of such records at any address other than Borrower's
principal place of business set forth on the first page of this Agreement;
provided, however, that Borrower, in the ordinary course of its business, may
furnish copies of such records to its accountants, attorneys and other agents or
advisors as it may determine to be necessary or desirable, in the exercise of
its commercially reasonable judgment;
(g) Borrower shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) upon the
occurrence of an Event of Default, Borrower keeps on deposit with LaSalle (such
deposit to be held without interest) an amount of money which, in the sole
judgment of LaSalle, is sufficient to pay such taxes and any interest or
penalties that may accrue thereon, and (iv) if Borrower fails to prosecute such
contest with reasonable diligence, LaSalle may apply the money so deposited in
payment of such taxes. If Borrower fails to pay any such taxes and in the
absence of any such contest by Borrower, LaSalle may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by LaSalle
shall be payable by Borrower to LaSalle on demand, and, until paid, shall bear
interest at the highest rate then applicable to the Loan hereunder;
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(h) Borrower shall not (i) incur, create, assume or suffer to exist
any indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers, (C) the Subordinated Debt, and (D) indebtedness described on Schedule
10(p) attached hereto; or (ii) assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business;
(i) Borrower shall not: (i) except with the prior written consent of
LaSalle, enter into any merger or consolidation, issue any shares of, or
warrants or other rights to receive or purchase any shares of, any class of its
stock, redeem or repurchase any of its stock or have more than ten percent (10%)
of its stock sold or transferred in any manner; (ii) sell, lease or otherwise
dispose of all or substantially all of its assets; (iii) create any new
Subsidiary or Affiliate; (iv) sell or enter into any contract or agreement
providing for the sale of all or any part of the Collateral, except for the sale
of inventory in the ordinary course of Borrower's business; or (v) permit the
Collateral to be encumbered or charged with a lien or security interest of any
kind or nature, whether voluntary or involuntary, other than: (A) Permitted
Liens; (B) liens securing the Cruttenden Loan provided Cruttenden executes and
delivers to LaSalle an Intercreditor Agreement and Subordination Agreement in
forms acceptable to LaSalle; (C) liens securing obligations of the Guarantors to
the Seller under the Seller Debt provided the Seller executes and delivers to
LaSalle an Intercreditor Agreement and Subordination Agreement in forms
acceptable to LaSalle; (D) liens securing the Imperial Loan provided Imperial
executes and delivers to LaSalle an Intercreditor Agreement and Subordination
Agreement in forms acceptable to LaSalle; and (E) liens arising out of the
refinancing, extension or renewal of any indebtedness secured by the liens
described in (B), (C), or (D) above, provided that (1) such indebtedness is not
secured by additional assets, (2) the amount of such indebtedness is not
increased, (3) the term of such indebtedness is not less than the term of the
indebtedness being refinanced, (4) the holder of the indebtedness executes and
delivers to LaSalle an Intercreditor Agreement and Subordination Agreement on
substantially the same terms as the Intercreditor Agreement and Subordination
Agreement executed by the holder of the indebtedness which was refinanced.
(j) Borrower shall not make any advance, loan, investment or
material acquisition of assets (other than Capital Expenditures permitted
pursuant to paragraph 11(m)(v) below) other than (i) advances made to employees
in the ordinary course of business so long as the aggregate amount of such
advances do not exceed Fifty Thousand Dollars ($50,000.00) in the aggregate
outstanding at any time; (ii) investments in marketable securities so long as
the aggregate amount of such investments do not exceed One Hundred Thousand
Dollars ($100,000.00) at any time; (iii)
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investments in short-term direct obligations of the United States government;
(iv) investments in negotiable certificates of deposit issued by a bank
satisfactory to LaSalle, payable to the order of Borrower or to bearer, (v)
investments in commercial paper rated A- 1 or P-1; provided, that with respect
to clauses (ii), (iii), (iv), and (v), Borrower shall assign all such
investments to LaSalle in form acceptable to LaSalle.
(k) Borrower shall not (i) except as permitted pursuant to paragraph
11(r) below, declare or pay any dividend or other distribution (whether in cash
or in kind) on, purchase, redeem or retire any shares of any class of its stock,
or make any payment on account of, or set apart assets for the repurchase,
redemption, defeasance or retirement of, any class of its stock; or (ii) except
for prepayments on the Subordinated Debt permitted by the Subordination
Agreements, make any optional payment or prepayment on or redemption (including
without limitation by making payments to a sinking fund or analogous fund) or
repurchase of any indebtedness for borrowed money other than indebtedness
pursuant to this Agreement;
(l) Borrower shall not amend its organizational documents or change
its fiscal year, except for a change to a calendar year fiscal period;
(m) Borrower shall maintain and keep in full force and effect each
of the financial covenants set forth below. The calculation and determination of
each such financial covenant, and all accounting terms contained therein, shall
be so calculated and construed in accordance with GAAP, applied on a basis
consistent with the financial statements of Borrower delivered on or before the
Closing Date:
(i) Tangible Net Worth. Borrower shall maintain at all times a
Tangible Net Worth of not less than the sum of (A) Three Million Seven Hundred
Fifty Thousand Dollars ($3,750,000.00), plus (B) a sum equal to the aggregate of
fifty percent (50%) of the annual net income of the Borrower for each fiscal
year of the Borrower (without reduction for any annual net losses) commencing
with fiscal year 1997 through the date of determination, all as determined in
accordance with GAAP.
(ii) Interest Coverage Ratio. Borrower shall have as of each
date of calculation, a ratio of (A) EBITDA for such fiscal quarter to (B)
interest expense for such fiscal quarter, of not less than 1.50 to 1.00,
calculated quarterly on a cumulative basis for the fiscal quarters of Borrower
ending March 31, 1997, June 30, 1997, September 30, and December 31, 1997, and
thereafter calculated monthly on a rolling twelve month basis commencing with
the month ending January 31, 1998;
(iii) Debt Service Coverage Ratio. Borrower shall have as of
each date of calculation, a Debt Service Coverage Ratio,
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of not less than 1.25 to 1.00, calculated quarterly on a cumulative basis for
the fiscal quarters of Borrower ending March 31, 1997, June 30, 1997, September
30, and December 31, 1997, and thereafter calculated monthly on a rolling twelve
month basis commencing with the month ending January 31, 1998;
(iv) Liabilities to Tangible Net Worth Ratio. Borrower shall
have at all time a ratio of Liabilities (excluding the Seller Debt) to Tangible
Net Worth of not more than 3.0 to 1.0.
(v) Capital Expenditures. Borrower shall not make: (A) Capital
Expenditures of an aggregate amount of more than Five Hundred Thousand Dollars
($500,000.00) during any fiscal year (prorated for the fiscal year ending
December 31, 1997); or (B) Capital Expenditures in the form of expenditures for
capital lease obligations of an aggregate amount of more than Five Hundred
Thousand Dollars ($500,000.00) during any fiscal year (pro-rated for the fiscal
year ending December 31, 1997).
(n) Borrower shall reimburse LaSalle for all costs and expenses
including, without limitation, legal expenses and reasonable attorneys' fees
(both in-house and outside counsel), incurred by LaSalle in connection with the
documentation and consummation of this transaction and any other transactions
between Borrower and LaSalle, including, without limitation, Uniform Commercial
Code and other public record searches, lien filings, Federal Express or similar
express or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs, and in seeking to collect, protect or
enforce any rights in or to the Collateral or incurred by LaSalle in seeking to
collect any Obligations and to administer and enforce any of LaSalle's rights
under this Agreement. Borrower shall also pay all normal service charges with
respect to accounts maintained by LaSalle for the benefit of Borrower. All such
costs, expenses and charges shall be payable by Borrower to LaSalle on demand,
and, until paid, shall bear interest at the highest rate then applicable to the
Loan hereunder;
(o) After obtaining the Cruttenden Loan, the Imperial Loan, and the
Seller Debt, Borrower will not modify any of the terms of the Cruttenden Loan,
the Imperial Loan, or the Seller Debt or any of the documents evidencing,
securing or otherwise documenting the Cruttenden Loan, the Imperial Loan, or the
Seller Debt without the prior written consent of LaSalle.
(p) Borrower shall not guaranty any aspect of the equity capital
investment to be provided to either Guarantor in connection with the acquisition
by SEI of all of the outstanding stock of Borrower; and
(q) Following the Acquisition, the only dividends which may be made
by the Borrower are dividends in an amount equal to the payments owed under the
Seller Debt, provided such payments are
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permitted to be made pursuant to the terms of the Subordination Agreements and
such dividends are used to make such payments.
12. CONDITIONS PRECEDENT.
(a) The obligation of LaSalle to fund the Loan is subject to the
satisfaction or waiver on or before the Closing Date of the following conditions
precedent:
(i) LaSalle shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other documents set
forth on the closing document list attached hereto as Schedule 12(a)(i) (the
"Closing Document List");
(ii) No event shall have occurred which has had or could
reasonably be expected to have a Material Adverse Effect, as determined by
LaSalle in its sole discretion;
iii) LaSalle shall have received payment in full of all fees and
expenses payable to it by Borrower on or before the Closing Date;
(iv) LaSalle shall have determined that immediately after giving
effect to (A) the making of the Loan requested to be made on the Closing Date,
if any, and (B) the payment or reimbursement by Borrower to LaSalle and all
other entities for all closing costs and expenses incurred by or owed by the
Borrower in connection with the Acquisition and the transactions contemplated
hereby, including without limitation the closing fee and the fees and expenses
of LaSalle's counsel, on a pro forma basis the "Excess Availability" (as defined
in the Other Loan Agreement) of Borrower shall not be less than Five Hundred
Thousand Dollars ($500,000.00);
(v) LaSalle shall have received a certificate from Borrower's
chief executive officer or chief financial officer, pursuant to which such
officer shall certify that in calculating the Excess Availability described in
clause (iv) above, Borrower's outstanding trade payables were (and are) current
and not past due in any material respect;
(vi) LaSalle shall have received opinions of Borrower's and
Guarantors' general and local counsel in states in which the Obligors conduct
their respective businesses or own properties on such matters as LaSalle deems
appropriate;
(vii) LaSalle shall have completed its background checks and
inquiries regarding Borrower and its principals, and shall have discovered no
information regarded as unfavorable by LaSalle; and
(viii) The Obligors shall have executed and delivered to LaSalle
all documents which LaSalle determines are reasonably necessary to consummate
the transactions contemplated hereby;
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(ix) LaSalle shall have received fully executed Subordination
Agreements pursuant to which all of the Subordinated Debt is subordinated to the
Obligations pursuant to terms acceptable to LaSalle; and
(x) LaSalle shall have reviewed and approved of all documents to
be executed in connection with the Acquisition, including but not limited to all
documents pursuant to which SEC and/or SEI have obtained equity contributions in
connection with the Acquisition.
13. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder:
(a) the failure of any Obligor to pay any payment of principal,
interest or principal and interest when and as due under any Note; or the
failure to pay any of the other Obligations when due, declared due, or demanded
by LaSalle in accordance with the terms hereof, and the failure to make payment
of any of such other Obligations when due is not cured within five (5) calendar
days after notice from LaSalle to the Borrower;
(b) the failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under this Agreement or any of the Other Agreements, which failure continues for
five (5) calendar days after notice from LaSalle to Borrower, provided that a
failure by Borrower to perform any obligations under any of the following
paragraphs of this Agreement shall constitute an immediate Event of Default
without Borrower having any notice or cure rights: paragraph 8; paragraphs
10(a), (b), (c), (d), (e), (f), (n) and (o); and paragraphs 11(a), (b), (m), (p)
and (r).
(c) the making or furnishing by any Obligor to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and LaSalle, which is
untrue or misleading in any respect, or the failure of any Obligor to perform,
keep or observe any of the covenants, conditions, promises, agreement of such
Obligor under any other agreement with any Person if such failure has or is
reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or other encumbrance upon any of the Collateral,
other than the liens permitted pursuant to paragraph 11(i) and judgment liens
which do not constitute an Event of Default under paragraph 13(g) hereof, or the
making or any attempt to make any levy, seizure or attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or
against any Obligor, (ii) for the liquidation or
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reorganization of any Obligor, (iii) alleging that such Obligor is insolvent or
unable to pay its debts as they mature, or (iv) for the readjustment or
arrangement of any Obligor's debts, whether under the United States Bankruptcy
Code or under any other law, whether state or federal, now or hereafter existing
for the relief of debtors, or the commencement of any analogous statutory or
non-statutory proceedings involving any Obligor; provided, however, that if such
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such proceedings are not
dismissed within ninety (90) days after the commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within ninety (90) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of Fifty Thousand
Dollars ($50,000.00) against any Obligor which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution;
(h) the occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to LaSalle pursuant to which such Person has guaranteed to LaSalle
the payment of all or any of the Obligations or has granted LaSalle a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Obligations;
(i) the occurrence of an event of default under (i) the Other Loan
Agreement; (ii) the Cruttenden Loan; (iii) Seller Debt; (iv) the Imperial Loan;
or (v) any agreement or instrument evidencing indebtedness for borrowed money in
excess of Fifty Thousand Dollars ($50,000.00) executed or delivered by Borrower
or pursuant to which agreement or instrument Borrower or its properties is or
may be bound; or
(j) the occurrence of any event or condition which has or is
reasonably likely to have a Material Adverse Effect.
14. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
paragraph 13(e) hereof, all of the Obligations shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all of
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the Obligations may, at the option of LaSalle, and without demand, notice or
legal process of any kind, be declared, and immediately shall become, due and
payable.
(b) Upon the occurrence of an Event of Default, LaSalle may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of LaSalle's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by way
of limitation of the foregoing, LaSalle may, without notice, demand or legal
process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
may enter into any of Borrower's premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of, and LaSalle shall have
the right to store the same at any of Borrower's premises without cost to
LaSalle. At LaSalle's request, Borrower shall, at Borrower's expense, assemble
the Collateral and make it available to LaSalle at one or more places to be
designated by LaSalle and reasonably convenient to LaSalle and Borrower.
Borrower recognizes that if Borrower fails to perform, observe or discharge any
of its Obligations under this Agreement or the Other Agreements, no remedy at
law will provide adequate relief to LaSalle, and Borrower agrees that LaSalle
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition. Any proceeds of any disposition by LaSalle of any of the Collateral
may be applied by LaSalle to the payment of expenses in connection with the
Collateral including, without limitation, legal expenses and reasonable
attorneys' fees (both in-house and outside counsel) and any balance of such
proceeds may be applied by LaSalle toward the payment of such of the
Obligations, and in such order of application, as LaSalle may from time to time
elect.
15. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably
satisfactory to LaSalle), protect, indemnify and hold harmless LaSalle, each
affiliate or subsidiary of LaSalle, and each of their respective officers,
directors, employees, attorneys and agents (each an "Indemnified Party") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by,
30
<PAGE>
or asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loan or the use or
intended use of the proceeds of the Loan; provided, however, that Borrower shall
not have any obligation hereunder to any Indemnified Party with respect to
matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnified Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Borrower shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and, failing prompt payment, shall, together with
interest thereon at the highest rate then applicable to the Loan hereunder from
the date incurred by each Indemnified Party until paid by Borrower, be added to
the Obligations of Borrower and be secured by the Collateral. The provisions of
this paragraph 15 shall survive the satisfaction and payment of the other
Obligations and the termination of this Agreement.
16. NOTICES. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in the
form and manner specified below, and shall be addressed to the party to the
following addresses or to such other address as each party designates to the
other by Notice in the manner herein prescribed:
If To LaSalle At:
LASALLE BUSINESS CREDIT, INC.
120 East Baltimore Street, Suite 1802
Baltimore, Maryland 21202
Attn.: Patrick E. Killpatrick,
Vice President
If To Borrower At:
THE ANTIGUA GROUP, INC.
9319 North 94th Way
Scottsdale, Arizona 85258
Attn.: L. Steven Haynes and
Gerald K. Whitley
Notice shall be deemed given hereunder if (i) delivered personally or otherwise
actually received, (ii) sent by overnight delivery service, (iii) mailed by
first-class United States mail, postage prepaid, registered or certified, with
return receipt requested, or
31
<PAGE>
(iv) sent via telecopy machine with a duplicate signed copy sent on the same day
as provided in clause (ii) above. Notice mailed as provided in clause (iii)
above shall be effective upon the expiration of three (3) Business Days after
its deposit in the United States mail, and notice telecopied as provided in
clause (iv) above shall be effective upon receipt of such telecopy if the
duplicate signed copy is sent under clause (iv) above. Notice given in any other
manner described in this section shall be effective upon receipt by the
addressee thereof; provided, however, that if any notice is tendered to an
addressee and delivery thereof is refused by such addressee, such notice shall
be effective upon such tender unless expressly set forth in such notice.
17. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the
Other Agreements are submitted by Borrower to LaSalle for LaSalle's acceptance
or rejection at LaSalle's place of business in the State of Maryland as an offer
by Borrower to borrow monies from LaSalle now and from time to time hereafter,
and shall not be binding upon LaSalle or become effective until accepted by
LaSalle, in writing, at said place of business. If so accepted by LaSalle, this
Agreement and the Other Agreements shall be deemed to have been made at said
place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS,
INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL,
WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION.
If any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
18. FORUM SELECTION AND SERVICE OF PROCESS. To induce LaSalle to accept
this Agreement, Borrower irrevocably agrees that, subject to LaSalle's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE
COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF
MARYLAND. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURTS LOCATED WITHIN SAID STATE. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY LASALLE IN ACCORDANCE WITH THIS PARAGRAPH.
19. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower and LaSalle. Borrower may not sell, assign or
transfer this Agreement, or the Other Agreements or any portion thereof
including, without limitation, Borrower's rights, titles, interest, remedies,
powers or duties thereunder. Borrower hereby consents to LaSalle's sale,
32
<PAGE>
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement, or the Other Agreements, or of any portion
thereof, or participations therein including, without limitation, LaSalle's
rights, titles, interest, remedies, powers and/or duties thereunder. Borrower
agrees that it shall execute and deliver such documents as LaSalle may request
in connection with any such sale, assignment, transfer or other disposition.
20. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
21. POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of LaSalle as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Obligations are paid in full and this Agreement
is terminated.
22. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) LASALLE AND BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT OF BORROWER OR LASALLE OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND
LASALLE. IN NO EVENT SHALL LASALLE BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL
OR CONSEQUENTIAL DAMAGES.
(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY LASALLE OF ITS RIGHTS TO REPOSSESS THE COLLATERAL
OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Borrower hereby waives demand, presentment, protest and notice
of nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(d) LaSalle's failure, at any time or times hereafter, to require
strict performance by Borrower of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of LaSalle
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by LaSalle of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of LaSalle in
the exercise of any right or remedy under this Agreement or any
33
<PAGE>
Other Agreement shall preclude other or further exercise thereof or the exercise
of any right or remedy. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of
the Other Agreements and no Event of Default under this Agreement or default
under any of the Other Agreements shall be deemed to have been suspended or
waived by LaSalle unless such suspension or waiver is in writing, signed by a
duly authorized officer of LaSalle and directed to Borrower specifying such
suspension or waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the 7th day of May, 1997.
WITNESS: LASALLE BUSINESS CREDIT, INC.
/s/ Joseph R.S. Tyssowski By: /s/ Patrick E. Killpatrick
(SEAL)
Patrick E. Killpatrick,
Vice President
THE ANTIGUA GROUP, INC.
/s/ Joseph R.S. Tyssowski By: /s/ Gerald K. Whitley (SEAL)
Gerald K. Whitley,
Vice President -- Finance
ACKNOWLEDGMENTS
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, in personally appeared Patrick
E. Killpatrick, and acknowledged himself to be a Vice President of LASALLE
BUSINESS CREDIT, INC., a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of LASALLE BUSINESS CREDIT, INC.,
by himself as Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derkaz (SEAL)
NOTARY PUBLIC
My Commission Expires:
34
<PAGE>
My Commission Expires July 31, 1997
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared Gerald K.
Whitley, and acknowledged himself to be the Vice President of Finance of THE
ANTIGUA GROUP, INC., a Nevada corporation, and that he, as such Vice President,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained by signing the name of THE ANTIGUA GROUP, INC., by himself as
Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derhaz (SEAL)
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
35
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
This Certificate is submitted pursuant to paragraph 8(l) of the Loan
and Security Agreement dated May 7, 1997 (Loan Agreement) between LaSalle
Business Credit, Inc. (LaSalle) and The Antigua Group, Inc. (Borrower).
The undersigned hereby certifies to LaSalle that as of the date of this
Agreement:
1. The undersigned is the VP - Finance of the Borrower.
2. There exists no event or circumstance which is or which with the
passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Loan Agreement, or, if such an event or
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that Borrower has taken or proposes
to take with respect thereto.
3. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Borrower has occurred since
________________, or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that Borrower has taken or proposes
to take with respect thereto.
4. All insurance premiums due as of such date have been paid.
5. All taxes due as of such date have been paid or, for those taxes
which have not been paid, or, if any taxes have not been paid, a writing
attached hereto describes the nature and amount of such taxes, and sets forth
Borrower's rationale for not paying such taxes and the action that Borrower has
taken or proposes to take with respect thereto.
6. To the best of the undersigned's knowledge, after appropriate
inquiry, except as previously disclosed to LaSalle in writing, no litigation,
investigation or proceeding, or injunction, writ or restraining order is pending
or threatened against the Borrower, or, if any litigation, investigation or
proceeding, or injunction, writ or restraining order is pending or threatened
against the Borrower, a writing attached hereto specifies the nature thereof and
the action that Borrower has taken or proposes to take with respect thereto.
7. Borrower is in compliance with the representations, warranties and
covenants in the Loan Agreement, or, if Borrower is not in compliance with any
representations, warranties or covenants in the Loan Agreement, a writing
attached hereto specifies the
<PAGE>
nature thereof, the period of existence thereof and the action that Borrower has
taken or proposes to take with respect thereto.
8. Attached hereto is a true and correct calculation of the financial
covenants contained in paragraph 11(m) of the Loan Agreement.
The Antigua Group, Inc.
By: /s/ Gerald K. Whitley (SEAL)
Name: Gerald K. Whitley
Title: VP - Finance
<PAGE>
SCHEDULE 1(a)
Permitted Liens
Liens evidenced by the following financing statements filed with the
Arizona Secretary of State:
a. File #842851 Secured Party
IBM Credit Corporation.
b. File #839610 Secured Party
American Business Credit Corp.
c. File #836137 Secured Party
El Camino Resources, Inc.
<PAGE>
SCHEDULE 10(b)
Chief Executive Office/Records
9319 N. 94th Way, Scottsdale, Arizona
<PAGE>
SCHEDULE 10(c)
Locations
9319 N. 94th Way, Scottsdale, AZ
9318 N. 95th Way, Scottsdale, AZ
9332 N. 95th Way, Scottsdale, AZ
9445 E. Doubletree Ranch Road, Scottsdale, AZ
<PAGE>
SCHEDULE 10(p)
Permitted Indebtedness
Promissory Note in the original principal amount of $334,619 dated January 1,
1993 payable to Ronald A. McPherson. Current outstanding balance is $250,964.25.
Promissory Note in the original principal amount of $334,619 dated January 1,
1993 payable to Gerald K. Whitley. Current outstanding balance is $250,964.25.
Various loans to employees, current or prior, with various maturity dates with
outstanding principal balances not in excess of $19,565.32 in the aggregate.
Loan relating to one auto show van with an outstanding principal balance
totaling $14,889.00
Note payable to IBM related to an AS400 upgrade. Current outstanding balance is
$68,393.00.
<PAGE>
SCHEDULE 10(r)
Affiliates
None
<PAGE>
SCHEDULE 12(a)(i)
Closing Documents List
LOAN DOCUMENTS
Loan And Security Agreement
Note
Financing Statements
Nevada
Arizona
Trademark Security Agreement
Intercreditor Agreement
Subordination Agreements
a. Seller
b. Cruttenden
c. Whitley
d. McPherson
e. Imperial
Continuing Unconditional Guaranty
a. SEI
b. SEC
Security Agreement
a. SEI
b. SEC
Financing Statements
a. SEI
i. Texas
ii. Dallas County
ii. Ontario
b. SEC
i. Texas
ii. Dallas County
iii. Ontario
iv. British Columbia
MATTERS OF PUBLIC RECORD
UCC-1 and other Record Searches
UCC-3 Terminations
a. Prestige Capital Corporation
b. Banc One Arizona Leasing Corporation
Post Closing Record Searches
Judgment Satisfactions
Release Of Tax Lien
<PAGE>
MATERIALS TO BE SUBMITTED PRIOR TO CLOSING
Perfection Certificate
a. Antigua
b. SEI
c. SEC
Opinion Of Borrower's Counsel
Opinion Of Guarantors' Counsel
Secretary's Certificate (Borrower)
Exhibit A - List of Officers and Directors
Exhibit B - Resolutions
Exhibit C - Bylaws
Exhibit D - Articles of Incorporation
Certificates of Good Standing (Borrower)
Nevada
Arizona
Certification Regarding Trade Payables
Licensor's Consent To Merger
a. NBC
b. NFL
c. NBA
Seller Notes And Related Documents
Cruttenden Loan Documents
Imperial Loan Documents
Copies of Documents Evidencing Equity in SEC
a. Geometry Partners
b. Junction Partners
c. WestCoast Gulf Promotions, Inc.
d. KOZ Capital Corp.
Amendments To Whitley & McPherson Notes
Purchase Agreement And Related Acquisition Documents
Certification Regarding Trade Payables
Secretary's Certificate (SEI)
Exhibit A - List of Officers and Directors
Exhibit B - Resolutions
Exhibit C - Bylaws
Exhibit D - Articles of Incorporation
Secretary's Certificate (SEC)
Exhibit A - List of Officers and Directors
Exhibit B - Resolutions
Exhibit C - Bylaws
Exhibit D - Articles of Incorporation
Certificates of Good Standing
a. SEI
b. SEC
Insurance Certificates with Lender
Loss Payee Endorsements
a. SEI
b. SEC
Exhibit 10.18
TERM NOTE
Executed as of the 7th day of
May, 1997 at Baltimore, Maryland
Amount: $3,500,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the
order of LASALLE BUSINESS CREDIT, INC. (hereinafter, together with any holder
hereof, called "LaSalle"), at the main office of the LaSalle, the principal sum
of Three Million Five Hundred Thousand Dollars ($3,500,000.00), together with
interest on the outstanding principal amount hereof on the dates and at the
rates provided in the Loan Agreement (as hereafter defined) from the date hereof
until payment in full hereof.
This Term Note is referred to in and was delivered pursuant to
paragraph 2 of that certain Loan And Security Agreement dated May 7, 1997, as it
may be amended from time to time, together with all exhibits thereto, between
LaSalle and Borrower (the "Loan Agreement"). All terms which are capitalized and
used herein (which are not otherwise defined herein) shall have the meanings
ascribed to such terms in the Loan Agreement.
For so long as no Event of Default shall have occurred under the Loan
Agreement, the principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on
the first day of each month, commencing on the first day of the first
month after the date of this Note, and continuing until such time as
the full principal balance, together with all other amounts owing
hereunder, shall have been paid in full;
(b) Commencing on June 1, 1997, and continuing on the first
day of each month thereafter to and including the first day of January,
2000, principal payments in the amount of Ninety-Seven Thousand Two
Hundred Twenty-Two Dollars and Twenty-Two Cents ($97,222.22) each; and
(c) On January 23, 2000, a final principal payment equal to
the entire unpaid principal balance hereof, together with any and all
other amounts due hereunder.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement. In addition, within ten (10) business days after a
Securities Offering, the Borrower shall pay LaSalle a principal payment in the
<PAGE>
amount of Two Million Dollars ($2,000,000.00) to be applied in the inverse order
of scheduled maturities.
Borrower hereby authorizes LaSalle to charge any account of Borrower
for all sums due hereunder. If payment hereunder becomes due and payable on a
Saturday, Sunday or legal holiday under the laws of the United States or the
State of Illinois, the due date thereof shall be extended to the next succeeding
business day, and interest shall be payable thereon at the rate specified during
such extension. Credit shall be given for payments made in the manner and at the
times provided in the Loan Agreement. It is the intent of the parties that the
rate of interest and other charges to Borrower under this Note shall be lawful;
therefore, if for any reason the interest or other charges payable hereunder are
found by a court of competent jurisdiction, in a final determination, to exceed
the limit which LaSalle may lawfully charge Borrower, then the obligation to pay
interest or other charges shall automatically be reduced to such limit and, if
any amount in excess of such limit shall have been paid, then such amount shall
be refunded to Borrower.
The principal and all accrued interest hereunder may be prepaid by
Borrower, in part or in full, at any time; provided, however, that if Borrower
prepays all of the Obligations prior to the end of the Term, Borrower shall pay
a prepayment fee as provided in the Loan Agreement.
Borrower waives the benefit of any law that would otherwise restrict or
limit LaSalle in the exercise of its right, which is hereby acknowledged, to
set-off against the Obligations, without notice and at any time hereafter, any
indebtedness matured or unmatured owing from LaSalle to Borrower. Borrower's
obligations under this Note shall be the absolute and unconditional duty and
obligation of Borrower and shall be independent of any rights of set-off,
recoupment or counterclaim which Borrower might otherwise have against LaSalle,
and Borrower shall pay absolutely the payments of principal, interest, fees and
expenses required hereunder, free of any deductions and without abatement,
diminution, or set-off.
Time is of the essence of this Note. Borrower, any other party liable
with respect to the Obligations and any and all endorsers and accommodation
parties, and each one of them, if more than one, waive any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of LaSalle's rights hereunder.
Upon the occurrence of an Event of Default, including without
limitation the failure to pay in full any installment of principal or interest
on the due date thereof or the failure to pay all sums due hereunder upon the
maturity date, in addition to all other rights or remedies available to LaSalle
under the Loan Agreement or any Other Agreement or under applicable law,
Borrower authorizes any attorney admitted to practice before any court of record
in the United States to appear on behalf of Borrower in any court in one or more
proceedings, or before any clerk thereof or prothonotary or other court
official, and to confess judgment against Borrower in
<PAGE>
favor of LaSalle in the full amount due on this Note (including principal,
accrued interest and any and all charges, fees and costs), plus attorneys' fees
equal to fifteen percent (15%) of the amount due, plus court costs, all without
prior notice or opportunity of Borrower for prior hearing. Borrower agrees and
consents that venue and jurisdiction shall be proper in the Circuit Court of any
County of the State of Maryland or of Baltimore City, Maryland, or in the United
States District Court for the District of Maryland. Borrower waives the benefit
of any and every statute, ordinance, or rule of court which may be lawfully
waived conferring upon Borrower any right or privilege of exemption, homestead
rights, stay of execution, or supplementary proceedings, or other relief from
the enforcement or immediate enforcement of a judgment or related proceedings on
a judgment. The authority and power to appear for and enter judgment against
Borrower shall not be exhausted by one or more exercises thereof, or by any
imperfect exercise thereof, and shall not be extinguished by any judgment
entered pursuant thereto; such authority and power may be exercised on one or
more occasions from time to time, in the same or different jurisdictions, as
often as LaSalle shall deem necessary, convenient, or proper. Notwithstanding
LaSalle's right to obtain a judgment by confession which includes attorneys'
fees in an amount equal to fifteen percent (15%) of the amount due hereunder,
LaSalle shall only collect attorneys' fees in an amount equal to the actual
legal fees and expenses incurred by LaSalle in connection with the collection of
the sums due under this Term Note and the enforcement of LaSalle's rights under
this Term Note and the Loan Agreement.
No delay or failure on the part of LaSalle in the exercise of any right
or remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by LaSalle of any right or
remedy preclude any other right or remedy. LaSalle, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrower. Borrower
agrees that, without releasing or impairing Borrower's liability hereunder,
LaSalle may at any time release, surrender, substitute or exchange any
collateral securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
The loan evidenced hereby has been made and this Note shall be deemed
to have been delivered at Baltimore, Maryland. THIS NOTE SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS,
INCLUDING WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, and shall be binding upon Borrower and Borrower's heirs, legal
representatives, successors and assigns. If this Note contains any blanks when
executed by Borrower, LaSalle is hereby authorized, without notice to Borrower
to complete any such blanks according to the terms upon which the loan or loans
were granted. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited by or be invalid
<PAGE>
under such law, such provision shall be severable, and be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Note. If more than one party shall execute this Note, the
term "Borrower" as used herein shall mean all parties signing this Note, and
each one of them, and all such parties, their respective heirs, executors,
administrators, successors and assigns, shall be jointly and severally obligated
hereunder.
To induce LaSalle to make the loan evidenced by this Note, Borrower (i)
irrevocably agrees that, subject to LaSalle's sole and absolute election, all
actions arising directly or indirectly as a result or in consequence of this
Note or any other agreement with LaSalle, or the Collateral, shall be instituted
and litigated only in courts having situs in the State of Maryland, (ii) hereby
consents to the exclusive jurisdiction and venue of any State or Federal Court
located and having its situs in said state, and (iii) hereby waives any
objection based on forum non-conveniens. Borrower waives personal service of any
and all process, and consents that all such service of process may be made by
certified mail, return receipt requested, directed to Borrower at the address
indicated in the Loan Agreement, and service so made shall be complete five (5)
days after the same has been deposited in the U.S. mails as aforesaid.
IN ADDITION, BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS NOTE, THE OBLIGATIONS,
THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LASALLE, OR WHICH IN
ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN BORROWER AND LASALLE.
As used herein, all provisions shall include the masculine, feminine,
neuter, singular and plural thereof, wherever the context and facts require such
construction and in particular the word "Borrower" shall be so construed.
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note on the date above
set forth, with the intention that this Note constitute an instrument under
seal.
ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
/s/ Joseph R.S. Tyssowski By: /s/ Gerald K. Whitley (SEAL)
Gerald K. Whitley
Vice President - Finance
ACKNOWLEDGEMENT
STATE OF ARIZONA, CITY/COUNTY OF MARICOPA, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared Gerald K.
Whitley and acknowledged himself to be the Vice President of Finance of THE
ANTIGUA GROUP, INC., a Nevada corporation, and that he, as the Vice President,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained by signing the name of THE ANTIGUA GROUP, INC., by himself as
Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Vickie L. Stripp (SEAL)
NOTARY PUBLIC
My Commission Expires:
September 23, 1998
================================================================================
FOR INTERNAL USE ONLY
Officer's Initials: __________
Approval: __________
Exhibit 10.19
CONTINUING UNCONDITIONAL GUARANTY
WHEREAS, THE ANTIGUA GROUP, INC., a Nevada corporation
("Borrower") has entered into a Loan and Security Agreement dated January 23,
1997, ("First Loan Agreement") with LaSalle Business Credit, Inc ("LaSalle") and
a Loan And Security Agreement dated May 7, 1997 with LaSalle ("Second Loan
Agreement"), pursuant to which LaSalle has made or may, in its sole discretion,
from time to time hereafter, make loans and advances to or extend other
financial accommodations to Borrower; and
WHEREAS, Southhampton Enterprises, Inc., a Texas corporation
("SEI") desires to acquire all of the outstanding stock in the Borrower. The
proceeds from the term loan being provided under the Second Loan Agreement shall
be used in connection with such acquisition. In addition, pursuant to the terms
of the First Loan Agreement, the terms of any acquisition of the stock in the
Borrower needs to be approved by LaSalle. LaSalle has required that the
undersigned, Southhampton Enterprises Corp., a British Columbia
corporation("Guarantor"), which is the sole shareholder of SEI, execute and
deliver this Guaranty to LaSalle as a condition of LaSalle providing the term
loan under the Second Loan Agreement and its approval of SEI's acquisition of
the stock in the Borrower.
NOW, THEREFORE, for value received and in consideration of any
loan, advance, or financial accommodation of any kind whatsoever heretofore, now
or hereafter made, given or granted to Borrower by LaSalle (including, without
limitation, the Loans as defined in, and made or to be made by LaSalle to
Borrower pursuant to, the Loan Agreement), the undersigned, and each of them, if
there be more than one, hereby gives the following guaranty and indemnification
to and for the benefit of LaSalle.
1. Guaranty. The Guarantor unconditionally guaranties (i) the full and
prompt payment when due, whether at maturity or earlier, by reason of
acceleration or otherwise, and at all times thereafter, of all of the
indebtedness, liabilities and obligations of every kind and nature of Borrower
to LaSalle or any parent, affiliate or subsidiary of LaSalle (the term "LaSalle"
as used hereafter shall include such parents, affiliates and subsidiaries),
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, joint or several, now or hereafter existing, or due or to become
due, and howsoever owned, held or acquired by LaSalle, whether through discount,
overdraft, purchase, direct loan or as collateral or otherwise, including
without limitation all obligations and liabilities of Borrower to LaSalle under
the Loan Agreement and (ii) the prompt, full and faithful discharge by Borrower
of each and every term, condition, agreement, representation and warranty now or
hereafter made by Borrower to LaSalle (all such indebtedness, liabilities and
obligations being hereinafter referred to as the "Borrower's Liabilities").
Guarantor further agrees to pay all costs and expenses, including, without
limitation, all court costs and
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reasonable attorneys' and paralegals' fees paid or incurred by LaSalle in
endeavoring to collect all or any part of Borrower's Liabilities from, or in
prosecuting any action against, Guarantor or any other guarantor of all or any
part of Borrower's Liabilities. All amounts payable by Guarantor under this
Guaranty shall be payable upon demand by LaSalle.
2. No Fraudulent Conveyance. Notwithstanding any provision of this
Guaranty to the contrary, it is intended that this Guaranty, and any liens and
security interests granted by Guarantor to secure this Guaranty, not constitute
a "Fraudulent Conveyance" (as defined below). Consequently, Guarantor agrees
that if the Guaranty, or any liens or security interests securing this Guaranty,
would, but for the application of this sentence, constitute a Fraudulent
Conveyance, this Guaranty and each such lien and security interest shall be
valid and enforceable only to the maximum extent that would not cause this
Guaranty or such lien or security interest to constitute a Fraudulent
Conveyance, and this Guaranty shall automatically be deemed to have been amended
accordingly at all relevant times. For purposes hereof, "Fraudulent Conveyance"
means a fraudulent conveyance under Section 548 of the "Bankruptcy Code" (as
hereinafter defined) or a fraudulent conveyance or fraudulent transfer under the
provisions of any applicable fraudulent conveyance or fraudulent transfer law or
similar law of any state, nation or other governmental unit, as in effect from
time to time.
3. Obligations Unconditional. Guarantor hereby agrees that, except as
hereinafter provided, its obligations under this Guaranty shall be
unconditional, irrespective of (i) the validity or enforceability of Borrower's
Liabilities or any part thereof, or of any promissory note or other document
evidencing all or any part of Borrower's Liabilities, (ii) the absence of any
attempt to collect Borrower's Liabilities from Borrower or any other guarantor
or other action to enforce the same, (iii) the waiver or consent by LaSalle with
respect to any provision of any instrument evidencing Borrower's Liabilities, or
any part thereof, or any other agreement heretofore, now or hereafter executed
by Borrower and delivered to LaSalle, (iv) failure by LaSalle to take any steps
to perfect and maintain its security interest in, or to preserve its rights to,
any security or collateral for Borrower's Liabilities, (v) the institution of
any proceeding under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
ss.101 et seq.), as amended (the "Bankruptcy Code"), or any similar proceeding,
by or against Borrower, or LaSalle's election in any such proceeding of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or
grant of a security interest by Borrower as debtor-in- possession, under Section
364 of the Bankruptcy Code, (vii) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any portion of LaSalle's claim(s) for repayment of
Borrower's Liabilities, or (viii) any other circumstance which might otherwise
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<PAGE>
constitute a legal or equitable discharge or defense of a guarantor.
4. Waivers By Guarantor. Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of Borrower, protest or notice with respect to
Borrower's Liabilities and all demands whatsoever, and covenants that this
Guaranty will not be discharged, except by complete performance of the
obligations and liabilities contained herein.
5. Primary Obligation. Upon any default by Borrower as provided in any
instrument or document evidencing all or any part of Borrower's Liabilities,
including without limitation the Loan Agreement, LaSalle may, at its sole
election, proceed directly and at once, without notice, against Guarantor to
collect and recover the full amount or any portion of Borrower's Liabilities,
without first proceeding against Borrower, or any other person, firm, or
corporation, or against any security or collateral for Borrower's Liabilities.
6. Certain Rights Of Lender. LaSalle is hereby authorized, without
notice or demand and without affecting the liability of Guarantor hereunder, to
at any time and from time to time (i) renew, extend, accelerate or otherwise
change the time for payment of, or other terms relating to, Borrower's
Liabilities or otherwise modify, amend or change the terms of any promissory
note or other agreement, document or instrument now or hereafter executed by
Borrower and delivered to LaSalle; (ii) accept partial payments on Borrower's
Liabilities; (iii) take and hold security or collateral for the payment of
Borrower's Liabilities guaranteed hereby, or for the payment of this Guaranty,
or for the payment of any other guaranties of Borrower's Liabilities or other
liabilities of Borrower, and exchange, enforce, waive and release any such
security or collateral; (iv) apply such security or collateral and direct the
order or manner of sale thereof as in its sole discretion it may determine; and
(v) settle, release, compromise, collect or otherwise liquidate Borrower's
Liabilities and any security or collateral therefor in any manner, without
affecting or impairing the obligations of Guarantor hereunder. LaSalle shall
have the exclusive right to determine the time and manner of application of any
payments or credits, whether received from Borrower or any other source, and
such determination shall be binding on Guarantor. All such payments and credits
may be applied, reversed and reapplied, in whole or in part, to any of
Borrower's Liabilities as LaSalle shall determine in its sole discretion without
affecting the validity or enforceability of this Guaranty.
7. Events Authorizing Acceleration. The occurrence of any of the
following shall constitute an "Event of Default" and shall entitle LaSalle,
without notice or demand, to accelerate and call
3
<PAGE>
due the Guarantor's obligations hereunder, even if LaSalle has not accelerated
and called due the Borrower's Liabilities by Borrower: (a) the commencement by
Borrower or Guarantor of a voluntary case or proceeding under any federal or
state bankruptcy, insolvency or similar law, (b) the commencement of an
involuntary case or proceeding against Borrower or Guarantor under any federal
or state bankruptcy, insolvency, or similar law; (c) the appointment of a
receiver, assignee, custodian, trustee or similar official under any federal or
state insolvency or creditors' rights law for any property of Borrower or
Guarantor; (d) the entry of a judgment or judgments in an aggregate amount in
excess of Fifty Thousand Dollars ($50,000.00) against Guarantor or Borrower and
the failure to satisfy such judgment within thirty (30) days either by payment
or by the filing of a supersedeas bond; (e) a failure by Borrower to satisfy any
of the existing or future obligations of Borrower to LaSalle; (f) a failure of
Guarantor to perform any covenant or agreement contained in this Guaranty; (g)
the liquidation or dissolution of Borrower or Guarantor; or (h) the occurrence
of an "Event of Default," as that term is defined in the Security Agreement of
even date herewith from the Guarantor to LaSalle, as the same may be hereafter
amended; provided, however that any involuntary proceeding under paragraphs (b)
or (c) immediately above shall not constitute an Event of Default unless such
proceeding is not dismissed within sixty (60) days after the commencement of
such proceeding.
8. Expenses of Collection. Should this Guaranty be referred to an
attorney for collection, Guarantor shall pay all of the holder's reasonable
costs, fees and expenses resulting from such referral, including reasonable
attorneys' fees, which the holder may incur, even though judgment has not been
confessed or suit has not been filed.
9. Confession of Judgment. Upon the occurrence of any Event of Default,
Guarantor authorizes any attorney admitted to practice before any court of
record in the United States, or the clerk of such court, to appear on behalf of
Guarantor and to confess judgment in any such court against Guarantor in the
full amount due on this Guaranty at such time plus an attorneys' fee equal to
fifteen percent (15%) of the amount due. Guarantor waives any right to notice or
a hearing prior to the entry of judgment and to the benefit of any and every
statute, ordinance, or rule of court which may be lawfully waived conferring
upon Guarantor any right or privilege of exemption, appeal, stay of execution,
or supplementary proceedings, or other relief from the enforcement or immediate
enforcement of a judgment or related proceedings on a judgment. The authority
and power which Guarantor has given for any attorney admitted to practice before
any court of record in the United States, or the clerk of such court, to appear
for and confess judgment against Guarantor shall be a continuous authority which
shall not be exhausted or extinguished by any one or more exercises or imperfect
exercises thereof or by any one or more judgments
4
<PAGE>
entered pursuant thereto and may be exercised on one or more occasions and at
such times and from time to time after default and in the same or different
courts or jurisdictions as LaSalle may consider necessary or advisable.
Notwithstanding LaSalle's right to obtain a judgment by confession which
includes attorney's fees in an amount equal to fifteen percent (15%) of the
amount due hereunder, LaSalle shall only collect attorney's fees in an amount
equal to the actual legal fees and expenses incurred by LaSalle in connection
with the collection of the sums due hereunder and the enforcement of LaSalle's
rights under this Guaranty and the documents evidencing, securing and
documenting the Borrower's Liabilities.
10. Information Regarding Borrower. Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of
Borrower, and any and all endorsers and/or other guarantors of any instrument or
document evidencing all or any part of Borrower's Liabilities and of all other
circumstances bearing upon the risk of nonpayment of Borrower's Liabilities or
any part thereof that diligent inquiry would reveal and Guarantor hereby agrees
that LaSalle shall have no duty to advise Guarantor of information known to
LaSalle regarding such condition or any such circumstances or to undertake any
investigation not a part of its regular business routine. If LaSalle, in its
sole discretion, undertakes at any time or from time to time to provide any such
information to any Guarantor, LaSalle shall be under no obligation to update any
such information or to provide any such information to Guarantor on any
subsequent occasion.
11. Additional Agreements of Guarantor. Guarantor consents and agrees
that LaSalle shall be under no obligation to marshall any assets in favor of
Guarantor or against or in payment of any or all of Borrower's Liabilities.
Guarantor further agrees that, to the extent that Borrower makes a payment or
payments to LaSalle, or LaSalle receives any proceeds of collateral, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, Guarantor, under any bankruptcy law, state or federal law, common
law or equitable theory, then to the extent of such payment or repayment,
Borrower's Liabilities or the part thereof which has been paid, reduced or
satisfied by such amount, and Guarantor's obligations hereunder with respect to
such portion of Borrower's Liabilities, shall be reinstated and continued in
full force and effect as of the date such initial payment, reduction or
satisfaction occurred.
12. Subordination Of Indebtedness. Guarantor agrees that any and all
claims of Guarantor against Borrower, any endorser or any other guarantor of all
or any part of Borrower's Liabilities, or against any of Borrower's properties,
whether arising by reason of any payment by Guarantor to LaSalle pursuant to the
provisions
5
<PAGE>
hereof, or otherwise, shall be subordinate and subject in right of payment to
the prior payment, in full, of all of Borrower's Liabilities.
13. Assignment By LaSalle. LaSalle may, without notice to anyone, sell
or assign Borrower's Liabilities or any part thereof, or grant participations
therein, and in any such event each and every immediate or remote assignee or
holder of, or participant in, all or any of Borrower's Liabilities shall have
the right to enforce this Guaranty, by suit or otherwise for the benefit of such
assignee, holder, or participant, as fully as if herein by name specifically
given such right, but LaSalle shall have an unimpaired right, prior and superior
to that of any such assignee, holder or participant, to enforce this Guaranty
for the benefit of LaSalle, as to any part of Borrower's Liabilities retained by
LaSalle.
14. Continuing Nature of Guaranty. This Guaranty shall continue in full
force and effect, and LaSalle shall be entitled to make loans and advances and
extend financial accommodations to Borrower on the faith hereof until such time
as LaSalle has, in writing, notified Guarantor that all of Borrower's
Liabilities have been paid in full and discharged and the Loan Agreement has
been terminated or until LaSalle has actually received written notice from any
Guarantor of the discontinuance of this Guaranty as to that Guarantor, or
written notice of the death, incompetency or dissolution of any Guarantor. In
case of any discontinuance by, or death, incompetency or dissolution of, any
Guarantor (collectively, a "Termination Event"), this Guaranty and the
obligations of such Guarantor and his or its heirs, legal representatives,
successors or assigns, as the case may be, shall remain in full force and effect
with respect to all of Borrower's Liabilities incurred prior to the receipt by
LaSalle of written notice of the Terminating Event. The occurrence of a
Terminating Event with respect to one Guarantor shall not affect or impair the
obligations of any other Guarantor hereunder.
15. Miscellaneous. This Guaranty shall be binding upon Guarantor and
upon the successors (including without limitation, any receiver, trustee or
debtor in possession of or for Guarantor) of Guarantor and shall inure to the
benefit of LaSalle and its successors and assigns. If there is more than one
signatory hereto, all references to Guarantor herein shall include each and
every Guarantor and each and every obligation of Guarantor hereunder shall be
the joint and several obligation of each Guarantor. Each Guarantor that is a
corporation or a partnership hereby represents and warrants that it has all
necessary corporate or partnership authority, as the case may be, to execute and
deliver this Guaranty and to perform its obligations hereunder. Wherever
possible each provision of this Guaranty shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such provision shall
be
6
<PAGE>
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Guaranty.
16. Remedies Cumulative. All of LaSalle's rights and remedies shall be
cumulative and any failure of LaSalle to exercise any right hereunder shall not
be construed as a waiver of the right to exercise the same or any other right at
any time, and from time to time, thereafter.
17. Rights of Subrogation, Etc. In the event Guarantor pays any sum to
or for the benefit of LaSalle pursuant to this Guaranty, Guarantor shall have no
right of contribution, indemnification, exoneration, reimbursement, subrogation
or other right or remedy against or with respect to Borrower, any other
guarantor, or any collateral, whether real, personal, or mixed, securing the
obligations of Borrower to LaSalle or the obligations of any other guarantor,
and Guarantor hereby waives and releases all and any such rights which it may
now or hereafter have.
18. Setoff. LaSalle shall have the right to setoff and apply against
the Guarantor's obligations under this Guaranty any sums which Guarantor at any
time has on deposit with LaSalle whether such deposits are general or special,
time or demand, provisional or final, and Guarantor hereby pledges and grants to
LaSalle a security interest in all such deposits.
19. Renewals, Etc. This Guaranty shall apply to all sums now or
hereafter owed by Borrower to LaSalle and to all extensions, modifications,
amendments, renewals, substitutions, and refinancings thereof.
20. Proof Of Sums Due On Guaranty. In any action or proceeding brought
by LaSalle to collect the sums owed on this Guaranty, a certificate signed by an
officer of LaSalle setting forth the unpaid balances of principal, and any
accrued interest, default interest, attorneys' fees, and late charges owed with
respect hereto shall be presumed correct and shall be admissible in evidence for
the purpose of establishing the truth of what it asserts.
21. Choice of Law. THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY
THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO THE INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS.
22. Jurisdiction. Guarantor irrevocably agrees that, subject to
LaSalle's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF MARYLAND. GUARANTOR HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN
7
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SAID STATE. Guarantor hereby waives personal service of any and all process, and
consents that all such service of process may be made by certified mail, return
receipt requested, directed to Guarantor at 9211 Diplomacy Row, Dallas, Texas
75247, Attention: L. Stephen Haynes; and service so made shall be completed five
(5) days after the same has been deposited in the U.S. Mail as aforesaid.
GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST GUARANTOR BY LASALLE IN ACCORDANCE WITH THIS
PARAGRAPH.
24. Payments Under Guaranty. All payments required to be made by
Guarantor hereunder shall be made in lawful money of the United States. The
obligation of the Guarantor to make payments hereunder (or under any judgment
obtained hereunder) in lawful money of the United States will not be discharged
or satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than lawful money of the United States or any
other realization in such currency, except to the extent to which such tender,
recovery or realization results in the effective receipt by LaSalle of the full
amount of lawful money of the United States to be payable hereunder and the
Guarantor will indemnify LaSalle (as an alternative or additional cause of
action) for the amount (if any) by which such effective receipt falls short of
the full amount of lawful money of the United States to be payable hereunder and
such obligation to indemnify will not be affected by judgment being obtained.
All payments made by or for the account of the Guarantor under this Guaranty
shall be made free and clear of, and without deduction or withholding for or on
the account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any governmental authority,
excluding only those franchise taxes or taxes on LaSalle's income which are
imposed on LaSalle by the jurisdiction under the laws of which LaSalle is
incorporated or any political subdivision thereof, and taxes imposed on
LaSalle'S income and franchise taxes imposed on LaSalle by any jurisdiction in
which LaSalle maintains a lending office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, charges, fees, deductions and
withholdings are referred to in this paragraph as "Taxes"). If any Taxes are
required to be withheld from any amounts payable to LaSalle, the amounts so
payable to LaSalle shall be increased to the extent necessary to yield to
LaSalle (after payment of all Taxes) such amounts payable under this Guaranty in
the amounts specified in this Guaranty. Whenever any Taxes are payable by the
Guarantor, as promptly as possible thereafter the Guarantor shall send to
LaSalle a certified copy of an original official receipt received by the
Guarantor showing payment thereof. If the Guarantor fails to pay any Taxes when
due to the appropriate taxing authority or fails to remit to the LaSalle the
required receipts or other required documentary evidence, the Guarantor shall
indemnify LaSalle for any Taxes,
8
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interest or penalties that may become payable by LaSalle as a result of any such
failure.
25. Waiver Of Jury Trial. GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
undersigned as of this 7th day of May, 1997.
ATTEST: GUARANTOR:
SOUTHHAMPTON ENTERPRISES CORP.,
A British Columbia Corporation
/s/ Joseph R.S. Tyssowski By: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes,
Chief Executive Officer
ACKNOWLEDGMENT
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared L. Steven
Haynes, and acknowledged himself to be the Chief Executive Officer of
SOUTHHAMPTON ENTERPRISES CORP., a British Columbia corporation, and that he, as
such Chief Executive Officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing the name of
SOUTHHAMPTON ENTERPRISES CORP., by himself as Chief Executive Officer.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derhaz (SEAL)
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
9
Exhibit 10.20
CONTINUING UNCONDITIONAL GUARANTY
WHEREAS, THE ANTIGUA GROUP, INC., a Nevada corporation
("Borrower") has entered into a Loan and Security Agreement dated January 23,
1997, ("First Loan Agreement") with LaSalle Business Credit, Inc ("LaSalle") and
a Loan And Security Agreement dated May 7, 1997 with LaSalle ("Second Loan
Agreement"), pursuant to which LaSalle has made or may, in its sole discretion,
from time to time hereafter, make loans and advances to or extend other
financial accommodations to Borrower; and
WHEREAS, the undersigned, Southhampton Enterprises, Inc., a
Texas corporation ("Guarantor") desires to acquire all of the outstanding stock
in the Borrower. The proceeds from the term loan being provided under the Second
Loan Agreement shall be used in connection with such acquisition. In addition,
pursuant to the terms of the First Loan Agreement, the terms of any acquisition
of the stock in the Borrower needs to be approved by LaSalle. LaSalle has
required that the Guarantor execute and deliver this Guaranty to LaSalle as a
condition of LaSalle providing the term loan under the Second Loan Agreement and
its approval of the Guarantor'S acquisition of the stock in the Borrower.
NOW, THEREFORE, for value received and in consideration of any
loan, advance, or financial accommodation of any kind whatsoever heretofore, now
or hereafter made, given or granted to Borrower by LaSalle (including, without
limitation, the Loans as defined in, and made or to be made by LaSalle to
Borrower pursuant to, the Loan Agreement), the undersigned, and each of them, if
there be more than one, hereby gives the following guaranty and indemnification
to and for the benefit of LaSalle.
1. Guaranty. The Guarantor unconditionally guaranties (i) the full and
prompt payment when due, whether at maturity or earlier, by reason of
acceleration or otherwise, and at all times thereafter, of all of the
indebtedness, liabilities and obligations of every kind and nature of Borrower
to LaSalle or any parent, affiliate or subsidiary of LaSalle (the term "LaSalle"
as used hereafter shall include such parents, affiliates and subsidiaries),
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, joint or several, now or hereafter existing, or due or to become
due, and howsoever owned, held or acquired by LaSalle, whether through discount,
overdraft, purchase, direct loan or as collateral or otherwise, including
without limitation all obligations and liabilities of Borrower to LaSalle under
the Loan Agreement and (ii) the prompt, full and faithful discharge by Borrower
of each and every term, condition, agreement, representation and warranty now or
hereafter made by Borrower to LaSalle (all such indebtedness, liabilities and
obligations being hereinafter referred to as the "Borrower's Liabilities").
Guarantor further agrees to pay all costs and
<PAGE>
expenses, including, without limitation, all court costs and reasonable
attorneys' and paralegals' fees paid or incurred by LaSalle in endeavoring to
collect all or any part of Borrower's Liabilities from, or in prosecuting any
action against, Guarantor or any other guarantor of all or any part of
Borrower's Liabilities. All amounts payable by Guarantor under this Guaranty
shall be payable upon demand by LaSalle.
2. No Fraudulent Conveyance. Notwithstanding any provision of this
Guaranty to the contrary, it is intended that this Guaranty, and any liens and
security interests granted by Guarantor to secure this Guaranty, not constitute
a "Fraudulent Conveyance" (as defined below). Consequently, Guarantor agrees
that if the Guaranty, or any liens or security interests securing this Guaranty,
would, but for the application of this sentence, constitute a Fraudulent
Conveyance, this Guaranty and each such lien and security interest shall be
valid and enforceable only to the maximum extent that would not cause this
Guaranty or such lien or security interest to constitute a Fraudulent
Conveyance, and this Guaranty shall automatically be deemed to have been amended
accordingly at all relevant times. For purposes hereof, "Fraudulent Conveyance"
means a fraudulent conveyance under Section 548 of the "Bankruptcy Code" (as
hereinafter defined) or a fraudulent conveyance or fraudulent transfer under the
provisions of any applicable fraudulent conveyance or fraudulent transfer law or
similar law of any state, nation or other governmental unit, as in effect from
time to time.
3. Obligations Unconditional. Guarantor hereby agrees that, except as
hereinafter provided, its obligations under this Guaranty shall be
unconditional, irrespective of (i) the validity or enforceability of Borrower's
Liabilities or any part thereof, or of any promissory note or other document
evidencing all or any part of Borrower's Liabilities, (ii) the absence of any
attempt to collect Borrower's Liabilities from Borrower or any other guarantor
or other action to enforce the same, (iii) the waiver or consent by LaSalle with
respect to any provision of any instrument evidencing Borrower's Liabilities, or
any part thereof, or any other agreement heretofore, now or hereafter executed
by Borrower and delivered to LaSalle, (iv) failure by LaSalle to take any steps
to perfect and maintain its security interest in, or to preserve its rights to,
any security or collateral for Borrower's Liabilities, (v) the institution of
any proceeding under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
ss.101 et seq.), as amended (the "Bankruptcy Code"), or any similar proceeding,
by or against Borrower, or LaSalle's election in any such proceeding of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or
grant of a security interest by Borrower as debtor-in-possession, under Section
364 of the Bankruptcy Code, (vii) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any portion of LaSalle's claim(s) for repayment of
Borrower's Liabilities, or (viii) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
<PAGE>
4. Waivers By Guarantor. Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of Borrower, protest or notice with respect to
Borrower's Liabilities and all demands whatsoever, and covenants that this
Guaranty will not be discharged, except by complete performance of the
obligations and liabilities contained herein.
5. Primary Obligation. Upon any default by Borrower as provided in any
instrument or document evidencing all or any part of Borrower's Liabilities,
including without limitation the Loan Agreement, LaSalle may, at its sole
election, proceed directly and at once, without notice, against Guarantor to
collect and recover the full amount or any portion of Borrower's Liabilities,
without first proceeding against Borrower, or any other person, firm, or
corporation, or against any security or collateral for Borrower's Liabilities.
6. Certain Rights Of Lender. LaSalle is hereby authorized, without
notice or demand and without affecting the liability of Guarantor hereunder, to
at any time and from time to time (i) renew, extend, accelerate or otherwise
change the time for payment of, or other terms relating to, Borrower's
Liabilities or otherwise modify, amend or change the terms of any promissory
note or other agreement, document or instrument now or hereafter executed by
Borrower and delivered to LaSalle; (ii) accept partial payments on Borrower's
Liabilities; (iii) take and hold security or collateral for the payment of
Borrower's Liabilities guaranteed hereby, or for the payment of this Guaranty,
or for the payment of any other guaranties of Borrower's Liabilities or other
liabilities of Borrower, and exchange, enforce, waive and release any such
security or collateral; (iv) apply such security or collateral and direct the
order or manner of sale thereof as in its sole discretion it may determine; and
(v) settle, release, compromise, collect or otherwise liquidate Borrower's
Liabilities and any security or collateral therefor in any manner, without
affecting or impairing the obligations of Guarantor hereunder. LaSalle shall
have the exclusive right to determine the time and manner of application of any
payments or credits, whether received from Borrower or any other source, and
such determination shall be binding on Guarantor. All such payments and credits
may be applied, reversed and reapplied, in whole or in part, to any of
Borrower's Liabilities as LaSalle shall determine in its sole discretion without
affecting the validity or enforceability of this Guaranty.
7. Events Authorizing Acceleration. The occurrence of any of the
following shall constitute an "Event of Default" and shall entitle LaSalle,
without notice or demand, to accelerate and call due the Guarantor's obligations
hereunder, even if LaSalle has not accelerated and called due the Borrower's
Liabilities by Borrower: (a) the commencement by Borrower or Guarantor of a
voluntary case or proceeding under any federal or state bankruptcy, insolvency
or similar law, (b) the commencement of an involuntary case or
<PAGE>
proceeding against Borrower or Guarantor under any federal or state bankruptcy,
insolvency, or similar law; (c) the appointment of a receiver, assignee,
custodian, trustee or similar official under any federal or state insolvency or
creditors' rights law for any property of Borrower or Guarantor; (d) the entry
of a judgment or judgments in an aggregate amount in excess of Fifty Thousand
Dollars ($50,000.00) against Guarantor or Borrower and the failure to satisfy
such judgment within thirty (30) days either by payment or by the filing of a
supersedeas bond; (e) a failure by Borrower to satisfy any of the existing or
future obligations of Borrower to LaSalle; (f) a failure of Guarantor to perform
any covenant or agreement contained in this Guaranty; (g) the liquidation or
dissolution of Borrower or Guarantor; or (h) the occurrence of an "Event of
Default," as that term is defined in the Security Agreement of even date
herewith from the Guarantor to LaSalle, as the same may be hereafter amended;
provided, however that any involuntary proceeding under paragraphs (b) or (c)
immediately above shall not constitute an Event of Default unless such
proceeding is not dismissed within sixty (60) days after the commencement of
such proceeding.
8. Expenses Of Collection. Should this Guaranty be referred to an
attorney for collection, Guarantor shall pay all of the holder's reasonable
costs, fees and expenses resulting from such referral, including reasonable
attorneys' fees, which the holder may incur, even though judgment has not been
confessed or suit has not been filed.
9. Confession Of Judgment. Upon the occurrence of any Event of Default,
Guarantor authorizes any attorney admitted to practice before any court of
record in the United States, or the clerk of such court, to appear on behalf of
Guarantor and to confess judgment in any such court against Guarantor in the
full amount due on this Guaranty at such time plus an attorneys' fee equal to
fifteen percent (15%) of the amount due. Guarantor waives any right to notice or
a hearing prior to the entry of judgment and to the benefit of any and every
statute, ordinance, or rule of court which may be lawfully waived conferring
upon Guarantor any right or privilege of exemption, appeal, stay of execution,
or supplementary proceedings, or other relief from the enforcement or immediate
enforcement of a judgment or related proceedings on a judgment. The authority
and power which Guarantor has given for any attorney admitted to practice before
any court of record in the United States, or the clerk of such court, to appear
for and confess judgment against Guarantor shall be a continuous authority which
shall not be exhausted or extinguished by any one or more exercises or imperfect
exercises thereof or by any one or more judgments entered pursuant thereto and
may be exercised on one or more occasions and at such times and from time to
time after default and in the same or different courts or jurisdictions as
LaSalle may consider necessary or advisable. Notwithstanding LaSalle's right to
obtain a judgment by confession which includes attorney's fees in an amount
equal to fifteen percent (15%) of the amount due hereunder, LaSalle shall only
collect attorney's fees in an amount
<PAGE>
equal to the actual legal fees and expenses incurred by LaSalle in connection
with the collection of the sums due hereunder and the enforcement of LaSalle's
rights under this Guaranty and the documents evidencing, securing and
documenting the Borrower's Liabilities.
10. Information Regarding Borrower. Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of
Borrower, and any and all endorsers and/or other guarantors of any instrument or
document evidencing all or any part of Borrower's Liabilities and of all other
circumstances bearing upon the risk of nonpayment of Borrower's Liabilities or
any part thereof that diligent inquiry would reveal and Guarantor hereby agrees
that LaSalle shall have no duty to advise Guarantor of information known to
LaSalle regarding such condition or any such circumstances or to undertake any
investigation not a part of its regular business routine. If LaSalle, in its
sole discretion, undertakes at any time or from time to time to provide any such
information to any Guarantor, LaSalle shall be under no obligation to update any
such information or to provide any such information to Guarantor on any
subsequent occasion.
11. Additional Agreements of Guarantor. Guarantor consents and agrees
that LaSalle shall be under no obligation to marshall any assets in favor of
Guarantor or against or in payment of any or all of Borrower's Liabilities.
Guarantor further agrees that, to the extent that Borrower makes a payment or
payments to LaSalle, or LaSalle receives any proceeds of collateral, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, Guarantor, under any bankruptcy law, state or federal law, common
law or equitable theory, then to the extent of such payment or repayment,
Borrower's Liabilities or the part thereof which has been paid, reduced or
satisfied by such amount, and Guarantor's obligations hereunder with respect to
such portion of Borrower's Liabilities, shall be reinstated and continued in
full force and effect as of the date such initial payment, reduction or
satisfaction occurred.
12. Subordination Of Indebtedness. Guarantor agrees that any and all
claims of Guarantor against Borrower, any endorser or any other guarantor of all
or any part of Borrower's Liabilities, or against any of Borrower's properties,
whether arising by reason of any payment by Guarantor to LaSalle pursuant to the
provisions hereof, or otherwise, shall be subordinate and subject in right of
payment to the prior payment, in full, of all of Borrower's Liabilities.
13. Assignment By LaSalle. LaSalle may, without notice to anyone, sell
or assign Borrower's Liabilities or any part thereof, or grant participations
therein, and in any such event each and every immediate or remote assignee or
holder of, or participant in, all or any of Borrower's Liabilities shall have
the right to
<PAGE>
enforce this Guaranty, by suit or otherwise for the benefit of such assignee,
holder, or participant, as fully as if herein by name specifically given such
right, but LaSalle shall have an unimpaired right, prior and superior to that of
any such assignee, holder or participant, to enforce this Guaranty for the
benefit of LaSalle, as to any part of Borrower's Liabilities retained by
LaSalle.
14. Continuing Nature of Guaranty. This Guaranty shall continue in full
force and effect, and LaSalle shall be entitled to make loans and advances and
extend financial accommodations to Borrower on the faith hereof until such time
as LaSalle has, in writing, notified Guarantor that all of Borrower's
Liabilities have been paid in full and discharged and the Loan Agreement has
been terminated or until LaSalle has actually received written notice from any
Guarantor of the discontinuance of this Guaranty as to that Guarantor, or
written notice of the death, incompetency or dissolution of any Guarantor. In
case of any discontinuance by, or death, incompetency or dissolution of, any
Guarantor (collectively, a "Termination Event"), this Guaranty and the
obligations of such Guarantor and his or its heirs, legal representatives,
successors or assigns, as the case may be, shall remain in full force and effect
with respect to all of Borrower's Liabilities incurred prior to the receipt by
LaSalle of written notice of the Terminating Event. The occurrence of a
Terminating Event with respect to one Guarantor shall not affect or impair the
obligations of any other Guarantor hereunder.
15. Miscellaneous. This Guaranty shall be binding upon Guarantor and
upon the successors (including without limitation, any receiver, trustee or
debtor in possession of or for Guarantor) of Guarantor and shall inure to the
benefit of LaSalle and its successors and assigns. If there is more than one
signatory hereto, all references to Guarantor herein shall include each and
every Guarantor and each and every obligation of Guarantor hereunder shall be
the joint and several obligation of each Guarantor. Each Guarantor that is a
corporation or a partnership hereby represents and warrants that it has all
necessary corporate or partnership authority, as the case may be, to execute and
deliver this Guaranty and to perform its obligations hereunder. Wherever
possible each provision of this Guaranty shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.
16. Remedies Cumulative. All of LaSalle's rights and remedies shall be
cumulative and any failure of LaSalle to exercise any right hereunder shall not
be construed as a waiver of the right to exercise the same or any other right at
any time, and from time to time, thereafter.
17. Rights Of Subrogation, Etc. In the event Guarantor pays
<PAGE>
any sum to or for the benefit of LaSalle pursuant to this Guaranty, Guarantor
shall have no right of contribution, indemnification, exoneration,
reimbursement, subrogation or other right or remedy against or with respect to
Borrower, any other guarantor, or any collateral, whether real, personal, or
mixed, securing the obligations of Borrower to LaSalle or the obligations of any
other guarantor, and Guarantor hereby waives and releases all and any such
rights which it may now or hereafter have.
18. Setoff. LaSalle shall have the right to setoff and apply against
the Guarantor's obligations under this Guaranty any sums which Guarantor at any
time has on deposit with LaSalle whether such deposits are general or special,
time or demand, provisional or final, and Guarantor hereby pledges and grants to
LaSalle a security interest in all such deposits.
19. Renewals, Etc.. This Guaranty shall apply to all sums now or
hereafter owed by Borrower to LaSalle and to all extensions, modifications,
amendments, renewals, substitutions, and refinancings thereof.
20. Proof Of Sums Due On Guaranty. In any action or proceeding brought
by LaSalle to collect the sums owed on this Guaranty, a certificate signed by an
officer of LaSalle setting forth the unpaid balances of principal, and any
accrued interest, default interest, attorneys' fees, and late charges owed with
respect hereto shall be presumed correct and shall be admissible in evidence for
the purpose of establishing the truth of what it asserts.
21. Choice of Law. THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY
THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO THE INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS.
22. Jurisdiction. Guarantor irrevocably agrees that, subject to
LaSalle's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF MARYLAND. GUARANTOR HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID STATE. Guarantor hereby waives personal service of any and
all process, and consents that all such service of process may be made by
certified mail, return receipt requested, directed to Guarantor at 9211
Diplomacy Row, Dallas, Texas 75247, Attention: L. Steven Haynes; and service so
made shall be completed five (5) days after the same has been deposited in the
U.S. Mail as aforesaid. GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST GUARANTOR BY
LASALLE IN ACCORDANCE WITH THIS PARAGRAPH.
23. Payments Under Guaranty. All payments required to be made by
Guarantor hereunder shall be made in lawful money of the United States. The
obligation of the Guarantor to make payments
<PAGE>
hereunder (or under any judgment obtained hereunder) in lawful money of the
United States will not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in or converted into any currency other than
lawful money of the United States or any other realization in such currency,
except to the extent to which such tender, recovery or realization results in
the effective receipt by LaSalle of the full amount of lawful money of the
United States to be payable hereunder and the Guarantor will indemnify LaSalle
(as an alternative or additional cause of action) for the amount (if any) by
which such effective receipt falls short of the full amount of lawful money of
the United States to be payable hereunder and such obligation to indemnify will
not be affected by judgment being obtained. All payments made by or for the
account of the Guarantor under this Guaranty shall be made free and clear of,
and without deduction or withholding for or on the account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any governmental authority, excluding only those
franchise taxes or taxes on LaSalle's income which are imposed on LaSalle by the
jurisdiction under the laws of which LaSalle is incorporated or any political
subdivision thereof, and taxes imposed on LaSalle'S income and franchise taxes
imposed on LaSalle by any jurisdiction in which LaSalle maintains a lending
office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, charges, fees, deductions and withholdings are referred to in
this paragraph as "Taxes"). If any Taxes are required to be withheld from any
amounts payable to LaSalle, the amounts so payable to LaSalle shall be increased
to the extent necessary to yield to LaSalle (after payment of all Taxes) such
amounts payable under this Guaranty in the amounts specified in this Guaranty.
Whenever any Taxes are payable by the Guarantor, as promptly as possible
thereafter the Guarantor shall send to LaSalle a certified copy of an original
official receipt received by the Guarantor showing payment thereof. If the
Guarantor fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the LaSalle the required receipts or other required
documentary evidence, the Guarantor shall indemnify LaSalle for any Taxes,
interest or penalties that may become payable by LaSalle as a result of any such
failure.
24. Waiver Of Jury Trial. GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
undersigned as of this 7th day of May, 1997.
WITNESS/ATTEST: GUARANTOR:
SOUTHHAMPTON ENTERPRISES, CORP.,
A British Columbia Corporation
<PAGE>
/s/ Joseph R.S. Tyssowski By: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes,
Chief Executive Officer
ACKNOWLEDGMENT
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared L. Steven
Haynes, and acknowledged himself to be the Chief Executive Officer of
SOUTHHAMPTON ENTERPRISES, CORP., a British Columbia corporation, and that he, as
such Chief Executive Officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing the name of
SOUTHHAMPTON ENTERPRISES, CORP., by himself as Chief Executive Officer.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derkaz (SEAL)
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
Exhibit 10.21
SECURITY AGREEMENT
Dated as of May 7, 1997
between
SOUTHHAMPTON ENTERPRISES CORP.
and
LASALLE BUSINESS CREDIT, INC.
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of this 7th day of
May, 1997, by and among LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LaSalle"), with an office at 120 East Baltimore Street, Suite 1802, Baltimore,
Maryland 21202, and SOUTHHAMPTON ENTERPRISES CORP., a British Columbia
corporation ("Debtor"), with its principal office at 9211 Diplomacy Row, Dallas,
Texas 75247.
WITNESSETH:
WHEREAS, The Antigua Group, Inc., a Nevada corporation ("Borrower") has
requested LaSalle to make a term loan to the Borrower. LaSalle has consented to
such request, provided that, among other things, the Debtor guarantees the
obligations of the Borrower and executes and delivers this Agreement in order to
secure the Debtor's guarantee obligations.
NOW, THEREFORE, in consideration of the loans made to the Borrower by
LaSalle, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Debtor, the parties agree as
follows:
1. DEFINITIONS.
(a) General Definitions.
"Account," "Account Debtor," "Chattel Paper," "Documents,"
"Equipment," "General Intangibles," "Goods," "Instruments," "Inventory," and
"Investment Property," shall have the respective meanings assigned to such
terms, as of the date of this Agreement, in the Maryland Uniform Commercial
Code.
"Affiliate" shall mean any Person: (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with Debtor; (b) that directly or beneficially owns or
holds five percent (5%) or more of any class of the voting stock of Debtor; (c)
five percent (5%) or more of whose voting stock (or in the case of a Person
which is not a corporation, five percent (5%) or more of the equity interest of
which) is owned directly or beneficially or held by Debtor; or (d) five percent
(5%) or more of whose voting stock (or in case of a Person which is not a
corporation, five percent (5%) or more of the equity interest of which) is owned
directly or beneficially or held by a Person referred to in (a), (b) or (c)
above.
"Borrower Debts" shall mean the obligations and debt of the
Borrower to LaSalle which is guaranteed by the Debtor pursuant to the Guaranty,
whether such obligations or debt is now existing or hereafter incurred.
<PAGE>
"Business Day" shall mean any day other than a Saturday,
Sunday, or such other day as banks in Illinois are authorized or required to be
closed for business.
"Closing Date" shall mean the date set forth on the first page
of this Agreement.
"Collateral" shall mean all of the personal property of Debtor
described in paragraph 2 hereof, and all other real or personal property of the
Debtor now or hereafter pledged to LaSalle to secure, either directly or
indirectly, repayment of any of the Obligations.
"Cruttenden" shall mean The Cruttenden Roth Bridge Fund, LLC,
a California limited liability company.
"Cruttenden Loan" shall mean a One Million Twenty Thousand
Dollar ($1,020,000.00) loan from Cruttenden to the Borrower pursuant to terms
acceptable to LaSalle.
"Default" shall mean any event, condition or default which
with the giving of notice, the lapse of time or both would be an Event of
Default.
"Event of Default" shall have the meaning specified in
paragraph 7 hereof.
"GAAP" shall mean generally accepted accounting principles and
policies in the United States as in effect from time to time.
"Guaranty" shall mean the Continuing Unconditional Guaranty of
even date herewith from the Debtor to and for the benefit of LaSalle, and any
renewals or replacements thereof and any amendments or modifications thereof.
"Imperial" shall mean Imperial Bank.
"Imperial Loan" shall mean a Two Million Five Hundred Thousand
Dollar ($2,500,000.00) loan from Imperial to the Borrower, pursuant to terms
acceptable to LaSalle.
"Indemnified Party" shall have the meaning specified in
paragraph 9 hereof.
"Intercreditor Agreement" shall mean an Intercreditor
Agreement between LaSalle and another Person holding a security interest in any
of the assets of the Debtor.
"Liabilities" shall mean at any date all liabilities required
under GAAP to be recorded on a balance sheet as of such date.
"Material Adverse Effect" shall mean with respect to any
event, act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), whether
<PAGE>
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, the business, assets,
operations, condition (financial or otherwise) or prospects of Debtor, taken as
a whole.
"Obligations" shall mean all liabilities, obligations, and
duties owing by Debtor to LaSalle or to any parent, affiliate or subsidiary of
LaSalle, of any kind or description whether now existing or hereafter incurred,
and whether direct or indirect, contingent or noncontingent, including, but not
limited to, all obligations now or hereafter existing under the Guaranty.
"Obligor" shall mean the Debtor, the Borrower, and each Person
who is or shall become primarily or secondarily liable for any of the Borrower
Debts.
"Other Agreements" shall mean all agreements, instruments and
documents including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of the Debtor in
connection with the Obligations or the transactions contemplated hereby.
"Permitted Liens" shall mean: (a) statutory liens of
landlords, carriers, warehousemen, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder; (b) liens or security interests in favor
of LaSalle; (c) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Debtor's
ability to use such real property for its intended purpose in connection with
Debtor's business; (d) liens securing the payment of taxes or other governmental
charges not yet delinquent or being contested in good faith and by appropriate
proceedings, in accordance with the terms set forth in paragraph 6(f); (e) liens
incurred or deposits made in the ordinary course of Debtor's business in
connection with capitalized leases or purchase money security interests for
purchase of, and applying only to, Equipment included in the permitted
borrowings under paragraph 6(g) the documents relating to such liens to be in
form and substance acceptable to LaSalle; (f) liens securing indebtedness owing
by any Subsidiary to Debtor to the extent such indebtedness is permitted under
paragraph 6(g); (g) deposits to secure performance of bids, trade contracts,
leases and statutory obligations (to the extent not excepted elsewhere herein);
(h) liens specifically permitted by LaSalle in writing as set forth on Schedule
1(a) attached hereto; (i) any lien arising out of the refinancing, extension,
renewal or refunding of any indebtedness secured by a lien permitted by any of
the foregoing subparagraphs (a) through (h) inclusive provided that (i) such
indebtedness is not secured by any additional assets, and (ii) the amount of
such indebtedness is not increased; (j) pledges or deposits in
<PAGE>
connection with worker's compensation, unemployment insurance and other social
security legislation; (k) grants of security and rights of setoff in deposit
accounts, securities and other properties held at banks or financial
institutions to secure the payment or reimbursement under overdraft, acceptance
and other facilities; and (l) rights of setoff, banker's lien and other similar
rights arising solely by operation of law.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.
"Prime Rate" shall mean the publicly announced prime rate of
LaSalle National Bank, Chicago, Illinois, in effect from time to time. The Prime
Rate is not intended to be the lowest or most favorable rate of LaSalle National
Bank in effect at any time.
"Seller" shall mean collectively: (a) Thomas E. Dooley, Jr.
and Gail E. Dooley, Trustees under the Thomas E. Dooley and Gail Dooley
Revocable Trust of 1988, dated 10/4/88; (b) Thomas E. Dooley as Custodian Under
the Uniform Gifts to Minors Act fbo Kim L. Dooley; (c) Thomas E. Dooley as
Custodian Under the Uniform Gifts to Minors Act fbo Shawn T. Dooley; (d) Thomas
E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E. Dooley and Gail
Dooley Revocable Trust of 1988, dated 10/4/88; (e) E. Louis Werner, Jr.,
Trustee, E. Louis Werner, Jr., Revocable Intervivos Trust dated December 31,
1982; and (f) Bobbi D. Hunter, Trustee under the 1989 Trust Agreement
established separate irrevocable Gift Trusts f/b/o the children of Thomas and
Gail Dooley dated March 7, 1989.
"Seller Debt" shall mean the indebtedness of the Debtor and
the Borrower to the Seller in a maximum amount of Six Million Three Hundred
Seventy-Eight Thousand Dollars ($6,378,000.00).
"Subordinated Debt" shall mean collectively: (a) the Seller
Debt; (b) the Cruttenden Loan; and (c) the Imperial Loan.
"Subordination Agreements" shall mean collectively: (a) the
Subordination Agreement of even date herewith by and between the Seller,
Imperial, Cruttenden and LaSalle; (b) the Subordination Agreement of even date
herewith between Imperial, Cruttenden and LaSalle; (c) the Subordination
Agreement of even date herewith between LaSalle and Imperial; (d) the
Subordination Agreement of even date herewith between LaSalle, Imperial,
Cruttenden, and Gerald K. Whitley; and (e) the Subordination Agreement of even
date herewith between LaSalle, Imperial, Cruttenden and Ronald A. McPherson.
"Subsidiary" shall mean any corporation of which more than
fifty percent (50%) of the outstanding capital
<PAGE>
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time stock of any other
class of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned by
Debtor or by any partnership or joint venture of which more than fifty percent
(50%) of the outstanding equity interests are at the time, directly or
indirectly, owned by Debtor.
(b) Accounting Terms And Definitions. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Debtor to LaSalle on or before the
Closing Date.
2. GRANT OF SECURITY INTEREST TO LASALLE.
As security for the payment and satisfaction of all of the
Obligations, Debtor hereby assigns to LaSalle and grants to LaSalle a continuing
security interest in the following property of Debtor, whether now or hereafter
owned, existing, acquired or arising and wherever now or hereafter located: (i)
all Accounts and all Goods whose sale, lease or other disposition by Debtor has
given rise to Accounts and have been returned to or repossessed or stopped in
transit by Debtor; (ii) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to
indemnification); (iii) all Inventory; (iv) all Goods (other than Inventory)
including, without limitation, Equipment, and fixtures; (v) all deposits and
cash and any other property of Debtor now or hereafter in the possession,
custody or control of LaSalle or any agent or any parent, affiliate or
subsidiary of LaSalle or any participant with LaSalle in the Loan for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); (vi) all Investment Property; and (vii) all
additions and accessions to, substitutions for, and replacements, products and
proceeds of the foregoing property, including, without limitation, proceeds of
all insurance policies insuring the foregoing property, and all of Debtor's
books and records relating to any of the foregoing and to Debtor's business.
Notwithstanding the foregoing provisions of this paragraph 2, such grant of a
security interest shall not extend to, and the term "Collateral" shall not
include, any licenses which are now or hereafter held by the Debtor as licensee,
to the extent that (i) such licenses are not assignable or capable of being
encumbered as a matter of law or under the terms of the license applicable
thereto (but solely to the extent that any such restriction shall be enforceable
under applicable law), without the consent of the licensor thereof and (ii) such
consent has not been obtained; provided, however, that the foregoing grant of
security interest shall extend to, and the term Collateral shall include, (A)
any and all proceeds of such licenses to the extent that the assignment or
<PAGE>
encumbering of such proceeds is not so restricted and (B) upon any such
licensor's consent with respect to any such otherwise excluded license being
obtained, thereafter such licenses as well as any and all proceeds thereof that
might theretofore have been excluded from such grant of a security interest and
the term Collateral. In addition, the Debtor agrees that until all Obligations
are paid in full, the Debtor will cause all of the Obligations to be secured by
a valid and enforceable lien and security interest in all assets of the Debtor
(except the Debtor's stock in Southhampton Enterprises, Inc.).
3. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Debtor shall, at LaSalle's request, at any time and from time to time,
execute and deliver to LaSalle such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed reasonably necessary or desirable by LaSalle) and do
such other acts and things as LaSalle may deem necessary or desirable in order
to establish and maintain a valid, attached and perfected security interest in
the Collateral in favor of LaSalle (free and clear of all other liens, claims
and rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Liens) to secure payment of the Obligations, and in
order to facilitate the collection of the Collateral. Debtor irrevocably hereby
makes, constitutes and appoints LaSalle (and all Persons designated by LaSalle
for that purpose) as Debtor's true and lawful attorney and agent-in-fact to
execute such financing statements, documents and other agreements and
instruments and do such other acts and things as may be necessary to preserve
and perfect LaSalle's security interest in the Collateral. Debtor further agrees
that a carbon, photographic, photostatic or other reproduction of this Agreement
or of a financing statement shall be sufficient as a financing statement.
4. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of
Default has occurred, Debtor shall have the right, except as otherwise provided
in this Agreement, in the ordinary course of Debtor's business, to (a) sell,
lease or furnish under contracts of service any of Debtor's Inventory normally
held by Debtor for any such purpose, and (b) use and consume any raw materials,
work in process or other materials normally held by Debtor for such purpose,
provided, however, that a sale in the ordinary course of business shall not
include any transfer or sale in satisfaction, partial or complete, of a debt
owed by Debtor.
5. REPRESENTATIONS AND WARRANTIES. Debtor hereby makes the following
representations, warranties and covenants:
(a) the office where Debtor keeps its books, records and accounts
(or copies thereof) concerning the Collateral, Debtor's principal place of
business and all of Debtor's other places of business, locations of Collateral
and post office boxes are as set forth in Schedule 5(a) attached hereto; Debtor
shall promptly (but in no event less than ten (10) days prior thereto) advise
LaSalle in writing of the proposed opening of any new place of business, the
closing of any existing place of business, any change in the location of
Debtor's books, records and accounts (or
<PAGE>
copies thereof) or the opening or closing of any post office box of Debtor;
(b) the Collateral, including without limitation the Equipment
(except any part thereof which prior to the date of this Agreement Debtor shall
have advised LaSalle in writing consists of Collateral normally used in more
than one state) is and shall be kept, or, in the case of vehicles, based, only
at the addresses set forth on Schedule 5(b) attached hereto, and at other
locations within the continental United States of which LaSalle has been advised
by Debtor in writing;
(c) Debtor shall immediately give written notice to LaSalle of any
use of any Goods in any state other than a state in which Debtor has previously
advised LaSalle Goods shall be used, and Goods shall not, unless LaSalle shall
otherwise consent in writing, be used outside of the continental United States;
(d) no security agreement, financing statement or analogous
instrument exists or shall exist with respect to any of the Collateral other
than any security agreement, financing statement or analogous instrument
evidencing Permitted Liens;
(e) Debtor is and shall at all times during the term of this
Agreement be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Debtor, free from all liens, claims, security
interests and encumbrances whatsoever, whether voluntarily or involuntarily
created and whether or not perfected, other than the Permitted Liens;
(f) Debtor has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Debtor's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Debtor, and Debtor's execution, delivery and
performance of this Agreement and the Other Agreements shall not result in the
imposition of any lien or other encumbrance upon any of Debtor's property under
any existing indenture, mortgage, deed of trust, loan or credit agreement or
other agreement or instrument by which Debtor or any of its property may be
bound or affected;
(g) there are no actions or proceedings which are pending or, to the
best of Debtor's knowledge, threatened against Debtor which are reasonably
likely to have a Material Adverse Effect and Debtor shall, promptly upon
becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to LaSalle;
(h) to the best of the Debtor's knowledge, Debtor has obtained all
licenses, authorizations, approvals and permits, the lack of which would have a
material adverse effect on the operation of its business, and to the best of
Debtor's knowledge, Debtor is and shall remain in compliance in all material
respects
<PAGE>
with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety or environmental matters), the
failure to comply with which would have a Material Adverse Effect;
(i) all written information now, heretofore or hereafter furnished
by Debtor to LaSalle is and shall be true and correct in all material respects
as of the date with respect to which such information was or is furnished
(except for financial projections, which have been prepared in good faith based
upon reasonable assumptions);
(j) Debtor is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Obligations remain outstanding) be owned by any Affiliate;
(k) To the best of the Debtor's knowledge, during the five (5) years
prior to this Agreement, Debtor's name has always been as set forth on the first
page of this Agreement and Debtor has used no tradenames or division names in
the operation of its business, except as otherwise disclosed in writing to
LaSalle; Debtor shall notify LaSalle in writing within ten (10) days of the
change of its name or the use of any tradenames or division names not previously
disclosed to LaSalle in writing;
(l) with respect to Debtor's Equipment: (i) Debtor has good and
indefeasible and merchantable title to and ownership of all Equipment; (ii)
Debtor shall keep and maintain the Equipment in good operating condition and
repair and shall make all reasonable necessary replacements thereof and renewals
thereto so that the value and operating efficiency thereof shall at all times be
preserved and maintained, ordinary wear and tear excepted; (iii) Debtor shall
not permit any such items to become a fixture to real estate or an accession to
other personal property unless LaSalle will have a perfected first priority lien
in such fixture or accession; (iv) from time to time Debtor may sell, exchange
or otherwise dispose of obsolete, unused or worn out Equipment, but only to the
extent the fair market value in the aggregate, of all such Equipment sold or
otherwise disposed of by the Debtor during any twelve-month period is less than
Ninety Thousand Dollars ($90,000.00) and the fair market value of any such
Equipment sold or otherwise disposed of in any single transaction is less than
Thirty Thousand Dollars ($30,000.00); and (v) Debtor, immediately on demand by
LaSalle, shall deliver to LaSalle any and all evidence of ownership of,
including, without limitation, certificates of title and applications of title
to, any of the Equipment;
(m) this Agreement and the Other Agreements to which Debtor is a
party are the legal, valid and binding obligations of Debtor and are enforceable
against Debtor in accordance with their respective terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
<PAGE>
insolvency, reorganization, moratorium and similar laws affecting the rights of
creditors generally;
(n) Debtor is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(o) Debtor is not now obligated, whether directly or indirectly, for
any loans or other indebtedness for borrowed money other than (i) the
Obligations, (ii) indebtedness disclosed to LaSalle on Schedule 5(o) attached
hereto, (iii) unsecured indebtedness to trade creditors arising in the ordinary
course of Debtor's business, (iv) the Subordinated Debt, and (v) unsecured
indebtedness arising from the endorsement of drafts and other instruments for
collection, in the ordinary course of Debtor's business.
(p) Debtor is duly organized and in good standing in its state of
organization and Debtor is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary, except for such other states in
which the failure to so qualify would not have a Material Adverse Effect;
(q) Debtor is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Debtor know
of any dispute regarding any contract, lease or commitment which is material to
the continued financial success and well-being of Debtor;
(r) There are no controversies pending or, to the best of the
Debtor's knowledge, threatened between Debtor and any of its employees, other
than employee grievances arising in the ordinary course of business which are
not, in the aggregate, material to the continued financial success and
well-being of Debtor, and to the best of the Debtor's knowledge, Debtor is in
compliance in all material respects with all federal and state laws respecting
employment and employment terms, conditions and practices, except where the
failure to so comply would not have a Material Adverse Effect;
(s) Debtor possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it; and
(t) The Purchase Agreement has been executed and delivered by each
party thereto, and the terms and conditions of the Purchase Agreement constitute
the valid and binding obligations of each party thereto, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable
<PAGE>
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights of creditors generally.
Debtor represents, warrants and covenants to LaSalle that all representations,
warranties and covenants of Debtor contained in this Agreement (whether
appearing in paragraphs 5 or 6 hereof or elsewhere) shall be true at the time of
Debtor's execution of this Agreement, shall survive the execution, delivery and
acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full of all of the Obligations and termination of this Agreement.
6. COVENANTS. Until payment or satisfaction in full of all Obligations
and termination of this Agreement, unless Debtor obtains LaSalle's prior written
consent waiving or modifying any of Debtor's covenants hereunder in any specific
instance, Debtor agrees as follows:
(a) Debtor shall at all times keep accurate and complete books,
records and accounts with respect to all of Debtor's business activities, in
accordance with sound accounting practices and GAAP, and shall keep such books,
records and accounts, and any copies thereof, only at the addresses indicated
for such purpose on Schedule 6(a) attached hereto;
(b) LaSalle, or any Persons designated by it, shall have the right,
at any time, in the exercise of its commercially reasonable credit judgment, to
call at Debtor's places of business at any reasonable times, and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from Debtor's books, records, journals, orders, receipts and any
correspondence and other data relating to Debtor's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Debtor's business as LaSalle may consider
reasonable under the circumstances, provided that so long as there exists no
Default or Event of Default, the periodic filed examinations to be conducted at
Debtor's expense of Debtor and its financial records will not be conducted more
often than quarterly. Debtor shall furnish to LaSalle such information relevant
to LaSalle's rights under this Agreement as LaSalle shall at any time and from
time to time reasonably request. Debtor authorizes LaSalle to discuss the
affairs, finances and business of Debtor with any officers or directors of
Debtor or any Affiliate, or with those employees of Debtor with whom LaSalle has
determined in its commercially reasonable judgment to be necessary or desirable
to converse, and to discuss the financial condition of Debtor with Debtor's
independent public accountants. Any such discussions shall be without liability
to LaSalle or to such accountants. Debtor shall pay to or reimburse LaSalle for
all reasonable fees, costs, and out-of-pocket expenses incurred by LaSalle in
the exercise of its rights hereunder and all of such costs, fees and expenses
shall be payable on demand and, until paid, shall bear interest at the highest
rate then applicable to Loan;
<PAGE>
(c) (i) Debtor shall: keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as are
customarily insured against by Persons engaged in businesses similar to that of
Debtor with such companies, in such amounts and under policies in such form as
shall be reasonably satisfactory to LaSalle. Originals or certified copies of
such policies of insurance have been or shall be delivered to LaSalle within
fifteen (15) days after the Closing Date, together with evidence of payment of
all premiums therefor, and shall contain an endorsement, in form and substance
acceptable to LaSalle, showing loss under such insurance policies payable to
LaSalle. Such endorsement, or an independent instrument furnished to LaSalle,
shall provide that the insurance company shall give LaSalle at least thirty (30)
days written notice before any such policy of insurance is altered or canceled
and that no act, whether willful or negligent, or default of Debtor or any other
Person shall affect the right of LaSalle to recover under such policy of
insurance in case of loss or damage. Subject to the terms of the Intercreditor
Agreement, Debtor hereby directs all insurers under such policies of insurance
to pay all proceeds payable thereunder directly to LaSalle. Debtor irrevocably
makes, constitutes and appoints LaSalle (and all officers, employees or agents
designated by LaSalle) as Debtor's true and lawful attorney (and agent-in-fact)
for the purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of Debtor on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance and making all
determinations and decisions with respect to such policies of insurance,
provided, however, that LaSalle shall exercise such rights only upon the
occurrence of an Event of Default. The proceeds of any insured loss shall be
paid to LaSalle and shall be applied by LaSalle to the Obligations, in such
order of application as determined by LaSalle, unless LaSalle permits the use
thereof to repair or replace damaged or destroyed Collateral;
(ii) Debtor shall maintain, at its expense, such public
liability and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of Debtor with such companies and in such
amounts, with such deductibles and under policies in such form as shall be
reasonably satisfactory to LaSalle and originals or certified copies of such
policies have been or shall be delivered to LaSalle within fifteen (15) days
after the Closing Date, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing LaSalle as
additional insured thereunder and providing that the insurance company shall
give LaSalle at least thirty (30) days written notice before any such policy
shall be altered or canceled;
(iii) Debtor shall maintain, at its expense, such business
interruption insurance as is customary for Persons engaged in businesses similar
to that of Debtor with such companies and in such amounts, with such deductibles
and under policies in such form as shall be reasonably satisfactory to LaSalle
and originals or certified copies of such policies (or binders evidencing the
existence of coverage in compliance with this paragraph) have been or shall be
delivered to LaSalle on or
<PAGE>
before the Closing Date, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing LaSalle as
additional insured and loss payee thereunder and providing that the insurance
company shall give LaSalle at least thirty (30) days written notice before any
such policy shall be altered or canceled; each such policy shall be assigned to
LaSalle pursuant to LaSalle's standard form of assignment; and
(iv) If Debtor at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then LaSalle, without waiving or
releasing any obligation or default by Debtor hereunder, may (but shall be under
no obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as LaSalle deems
advisable. All sums disbursed by LaSalle in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall be due on the demand of LaSalle
and, until paid, shall bear interest at the highest rate then applicable to the
Loan;
(d) Debtor shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; Debtor shall keep the Collateral in good condition, repair and
order, ordinary wear and tear excepted; Debtor shall not permit the Collateral,
or any part thereof, to be levied upon under execution, attachment, distraint or
other legal process; Debtor shall not sell, lease, grant a security interest in
or otherwise dispose of any of the Collateral except as expressly permitted by
this Agreement; and Debtor shall not secrete or abandon any of the Collateral,
or remove or permit removal of any of the Collateral from any of the locations
listed on Schedule 5(b) attached hereto or in any written notice to LaSalle
pursuant to paragraph 5(b) hereof, except for the removal of Inventory sold in
the ordinary course of Debtor's business as permitted herein;
(e) Debtor shall, at the request of LaSalle, indicate on its records
concerning the Collateral a notation, in form satisfactory to LaSalle, of the
security interest of LaSalle hereunder, and Debtor shall not maintain duplicates
or copies of such records at any address other than Obligor's principal place of
business set forth on the first page of this Agreement; provided, however, that
Debtor, in the ordinary course of its business, may furnish copies of such
records to its accountants, attorneys and other agents or advisors as it may
determine to be necessary or desirable, in the exercise of its commercially
reasonable judgment;
(f) Debtor shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Debtor shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
<PAGE>
contested is shown on Debtor's financial statements, (ii) the contesting of any
such payment does not give rise to a lien for taxes, (iii) upon the occurrence
of an Event of Default, Debtor keeps on deposit with LaSalle (such deposit to be
held without interest) an amount of money which, in the sole judgment of
LaSalle, is sufficient to pay such taxes and any interest or penalties that may
accrue thereon, and (iv) if Debtor fails to prosecute such contest with
reasonable diligence, LaSalle may apply the money so deposited in payment of
such taxes. If Debtor fails to pay any such taxes and in the absence of any such
contest by Debtor, LaSalle may (but shall be under no obligation to) advance and
pay any sums required to pay any such taxes and/or to secure the release of any
lien therefor, and any sums so advanced by LaSalle shall be payable by Debtor to
LaSalle on demand, and, until paid, shall bear interest at the highest rate then
applicable to the Loan hereunder;
(g) Debtor shall not (i) incur, create, assume or suffer to exist
any indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers, (C) the Subordinated Debt, and (D) indebtedness described on Schedule
5(o) attached hereto; or (ii) assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business;
(h) Debtor shall not: (i) except with the prior written consent of
LaSalle, enter into any merger or consolidation, issue any shares of, or
warrants or other rights to receive or purchase any shares of, any class of its
stock, redeem or repurchase any of its stock or have more than ten percent (10%)
of its stock sold or transferred in any manner; (ii) sell, lease or otherwise
dispose of all or substantially all of its assets; (iii) create any new
Subsidiary or Affiliate; (iv) sell or enter into any contract or agreement
providing for the sale of all or any part of the Collateral, except for the sale
of inventory in the ordinary course of Debtor's business; or (v) permit the
Collateral to be encumbered or charged with a lien or security interest of any
kind or nature, whether voluntary or involuntary, other than: (A) Permitted
Liens; (B) liens securing the Cruttenden Loan provided Cruttenden executes and
delivers to LaSalle an Intercreditor Agreement and Subordination Agreement in
forms acceptable to LaSalle; (C) liens securing obligations to the Seller under
the Seller Debt provided the Seller executes and delivers to LaSalle an
Intercreditor Agreement and Subordination Agreement in forms acceptable to
LaSalle; (D) liens securing the Imperial Loan provided Imperial executes and
delivers to LaSalle an Intercreditor Agreement and Subordination Agreement in
forms acceptable to LaSalle; and (E) liens arising out of the refinancing,
extension or renewal of any indebtedness secured by the liens described in (B),
(C), or (D) above, provided that (1) such indebtedness is not secured by
additional assets, (2) the amount of such indebtedness is not increased, (3) the
term of such indebtedness is not less than the term of the indebtedness being
refinanced, (4) the holder of the indebtedness executes and delivers to LaSalle
an Intercreditor Agreement and Subordination Agreement on
<PAGE>
substantially the same terms as the Intercreditor Agreement and Subordination
Agreement executed by the holder of the indebtedness which was refinanced.
(i) Debtor shall not make any advance, loan, investment or material
acquisition of assets other than (i) advances made to employees in the ordinary
course of business so long as the aggregate amount of such advances do not
exceed Fifty Thousand Dollars ($50,000.00) in the aggregate outstanding at any
time; (ii) investments in marketable securities so long as the aggregate amount
of such investments do not exceed One Hundred Thousand Dollars ($100,000.00) at
any time; (iii) investments in short-term direct obligations of the United
States government; (iv) investments in negotiable certificates of deposit issued
by a bank satisfactory to LaSalle, payable to the order of Debtor or to bearer,
(v) investments in commercial paper rated A-1 or P-1; provided, that with
respect to clauses (ii), (iii), (iv), and (v), Debtor shall assign all such
investments to LaSalle in form acceptable to LaSalle.
(j) Debtor shall not (i) except as permitted pursuant to paragraph
6(n) below, declare or pay any dividend or other distribution (whether in cash
or in kind) on, purchase, redeem or retire any shares of any class of its stock,
or make any payment on account of, or set apart assets for the repurchase,
redemption, defeasance or retirement of, any class of its stock; or (ii) except
for prepayments on the Subordinated Debt permitted by the Subordination
Agreements, make any optional payment or prepayment on or redemption (including
without limitation by making payments to a sinking fund or analogous fund) or
repurchase of any indebtedness for borrowed money other than indebtedness
pursuant to this Agreement;
(k) Debtor shall not amend its organizational documents or change
its fiscal year, except for a change to a calendar year fiscal period;
(l) Debtor shall reimburse LaSalle for all costs and expenses
including, without limitation, legal expenses and reasonable attorneys' fees
(both in-house and outside counsel), incurred by LaSalle in connection with the
documentation and consummation of this transaction and any other transactions
between Debtor and LaSalle, including, without limitation, Uniform Commercial
Code and other public record searches, lien filings, Federal Express or similar
express or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs, and in seeking to collect, protect or
enforce any rights in or to the Collateral or incurred by LaSalle in seeking to
collect any Obligations and to administer and enforce any of LaSalle's rights
under this Agreement. Debtor shall also pay all normal service charges with
respect to accounts maintained by LaSalle for the benefit of Debtor. All such
costs, expenses and charges shall be payable by Debtor to LaSalle on demand,
and, until paid, shall bear interest at the highest rate then applicable to the
Loan hereunder;
<PAGE>
(m) Debtor shall not guaranty any aspect of the equity capital
investment to be provided to Guarantor in connection with the acquisition by
Guarantor of all of the outstanding stock of Debtor; and
(n) Following the Acquisition the only dividends which may be made
by the Debtor are dividends in an amount equal to the payments owed under the
Seller Debt, provided such payments are permitted to be made pursuant to the
terms of the Subordination Agreements and such dividends are used to make such
payments.
7. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder:
(a) the failure of the Debtor to pay any of the Obligations when
due, declared due, or demanded by LaSalle in accordance with the terms hereof
and the Guaranty and such failure is not cured within five (5) calendar days
after notice from LaSalle to the Debtor;
(b) the failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under this Agreement or any of the Other Agreements, which failure continues for
five (5) calendar days after notice from LaSalle to Debtor, provided that a
failure by Debtor to perform any obligations under any of the following
paragraphs of this Agreement shall constitute an immediate Event of Default
without Debtor having any notice or cure rights: paragraphs 5(a), (b), (c), (d),
(e), (f), (m) and (n); and paragraphs 6(a), (b), (m), and (n).
(c) the making or furnishing by any Obligor to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and LaSalle, which is
untrue or misleading in any respect, or the failure of any Obligor to perform,
keep or observe any of the covenants, conditions, promises, agreement of such
Obligor under any other agreement with any Person if such failure has or is
reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or other encumbrance upon any of the Collateral,
other than liens permitted pursuant to paragraph 6(h) and judgment liens which
do not constitute an Event of Default under paragraph 7(g) hereof, or the making
or any attempt to make any levy, seizure or attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or
against any Obligor, (ii) for the liquidation or reorganization of any Obligor,
(iii) alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor's debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-
<PAGE>
statutory proceedings involving any Obligor; provided, however, that if such
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such proceedings are not
dismissed within ninety (90) days after the commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within ninety (90) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of Fifty Thousand
Dollars ($50,000.00) against any Obligor which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution;
(h) the occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by the Borrower to LaSalle under or in connection with the Borrower Debt;
(i) the occurrence of an event of default under: (i) the Cruttenden
Loan; (ii) Seller Debt; (iii) the Imperial Loan; and (iv) any agreement or
instrument evidencing indebtedness for borrowed money in excess of Fifty
Thousand Dollars ($50,000.00) executed or delivered by the Debtor or the
Borrower or pursuant to which agreement or instrument the Debtor or the Borrower
or either of their properties is or may be bound; or
(j) the occurrence of any event or condition which has or is
reasonably likely to have a Material Adverse Effect.
8. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
paragraph 7(e) hereof, all of the Obligations shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all of the Obligations may, at the
option of LaSalle, and without demand, notice or legal process of any kind, be
declared, and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, LaSalle may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of LaSalle's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by way
of limitation of the foregoing, LaSalle may, without notice, demand or legal
process of any kind, take
<PAGE>
possession of any or all of the Collateral (in addition to Collateral of which
it already has possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may enter into any of Debtor's
premises where any of the Collateral may be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of, and LaSalle shall have the right to store the same at any
of Debtor's premises without cost to LaSalle. At LaSalle's request, Debtor
shall, at Debtor's expense, assemble the Collateral and make it available to
LaSalle at one or more places to be designated by LaSalle and reasonably
convenient to LaSalle and Debtor. Debtor recognizes that if Debtor fails to
perform, observe or discharge any of its Obligations under this Agreement or the
Other Agreements, no remedy at law will provide adequate relief to LaSalle, and
Debtor agrees that LaSalle shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages. Any notification of intended disposition of any of the Collateral
required by law will be deemed reasonably and properly given if given at least
ten (10) calendar days before such disposition. Any proceeds of any disposition
by LaSalle of any of the Collateral may be applied by LaSalle to the payment of
expenses in connection with the Collateral including, without limitation, legal
expenses and reasonable attorneys' fees (both in-house and outside counsel) and
any balance of such proceeds may be applied by LaSalle toward the payment of
such of the Obligations, and in such order of application, as LaSalle may from
time to time elect.
9. INDEMNIFICATION. Debtor agrees to defend (with counsel reasonably
satisfactory to LaSalle), protect, indemnify and hold harmless LaSalle, each
affiliate or subsidiary of LaSalle, and each of their respective officers,
directors, employees, attorneys and agents (each an "Indemnified Party) from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loan or the use or
intended use of the proceeds of the Loan; provided, however, that Debtor shall
not have any obligation hereunder to any Indemnified Party with respect to
matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnified Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Debtor shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense
<PAGE>
covered by this indemnity shall be paid to each Indemnified Party on demand,
and, failing prompt payment, shall, together with interest thereon at the
highest rate then applicable to the Loan hereunder from the date incurred by
each Indemnified Party until paid by Debtor, be added to the Obligations of
Debtor and be secured by the Collateral. The provisions of this paragraph 9
shall survive the satisfaction and payment of the other Obligations and the
termination of this Agreement.
10. NOTICES. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in the
form and manner specified below, and shall be addressed to the party to the
following addresses or to such other address as each party designates to the
other by Notice in the manner herein prescribed:
If To LaSalle At:
LASALLE BUSINESS CREDIT, INC.
120 East Baltimore Street, Suite 1802
Baltimore, Maryland 21202
Attn.: Patrick E. Killpatrick,
Vice President
If To Debtor At:
SOUTHHAMPTON ENTERPRISES CORP.
9211 Diplomacy Row
Dallas, Texas 75247
Attn.: L. Steven Haynes
Notice shall be deemed given hereunder if (i) delivered personally or otherwise
actually received, (ii) sent by overnight delivery service, (iii) mailed by
first-class United States mail, postage prepaid, registered or certified, with
return receipt requested, or (iv) sent via telecopy machine with a duplicate
signed copy sent on the same day as provided in clause (ii) above. Notice mailed
as provided in clause (iii) above shall be effective upon the expiration of
three (3) Business Days after its deposit in the United States mail, and notice
telecopied as provided in clause (iv) above shall be effective upon receipt of
such telecopy if the duplicate signed copy is sent under clause (iv) above.
Notice given in any other manner described in this paragraph shall be effective
upon receipt by the addressee thereof; provided, however, that if any notice is
tendered to an addressee and delivery thereof is refused by such addressee, such
notice shall be effective upon such tender unless expressly set forth in such
notice.
11. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the
Other Agreements are submitted by Debtor to LaSalle for LaSalle's acceptance or
rejection at LaSalle's place of business in the State of Maryland, and shall not
be binding upon LaSalle or become effective until accepted by LaSalle, in
writing, at said place of business. If so accepted by LaSalle, this Agreement
and the Other Agreements shall be deemed to have been made at said place of
business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF
<PAGE>
THE STATE OF MARYLAND AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION,
EFFECT, AND IN ALL OTHER RESPECTS, BUT EXCLUDING PERFECTION OF THE SECURITY
INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS
OF THE RELEVANT JURISDICTION. If any provision of this Agreement shall be held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
12. FORUM SELECTION AND SERVICE OF PROCESS. To induce LaSalle to accept
this Agreement, Debtor irrevocably agrees that, subject to LaSalle's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE
COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF
MARYLAND. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURTS LOCATED WITHIN SAID STATE. DEBTOR HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST DEBTOR BY LASALLE IN ACCORDANCE WITH THIS PARAGRAPH.
13. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Debtor and LaSalle. Debtor may not sell, assign or transfer
this Agreement, or the Other Agreements or any portion thereof including,
without limitation, Debtor's rights, titles, interest, remedies, powers or
duties thereunder. Debtor hereby consents to LaSalle's sale, assignment,
transfer or other disposition, at any time and from time to time hereafter, of
this Agreement, or the Other Agreements, or of any portion thereof, or
participations therein including, without limitation, LaSalle's rights, titles,
interest, remedies, powers and/or duties thereunder. Debtor agrees that it shall
execute and deliver such documents as LaSalle may request in connection with any
such sale, assignment, transfer or other disposition.
14. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
15. POWER OF ATTORNEY. Debtor acknowledges and agrees that its
appointment of LaSalle as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Obligations are paid in full and this Agreement
is terminated.
16. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) LASALLE AND DEBTOR HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT OF DEBTOR OR LASALLE OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT
<PAGE>
OF OR RELATES TO THE RELATIONSHIP BETWEEN DEBTOR AND LASALLE. IN NO EVENT SHALL
LASALLE BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) DEBTOR HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY LASALLE OF ITS RIGHTS TO REPOSSESS THE COLLATERAL
OF DEBTOR WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Debtor hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(d) LaSalle's failure, at any time or times hereafter, to require
strict performance by Debtor of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of LaSalle
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by LaSalle of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of LaSalle in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Debtor contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by LaSalle
unless such suspension or waiver is in writing, signed by a duly authorized
officer of LaSalle and directed to Debtor specifying such suspension or waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the 7th day of May, 1997.
WITNESS: LASALLE BUSINESS CREDIT, INC.
/s/ Joseph R.S. Tyssowski By: /s/ Patrick E. Killpatrick
(SEAL)
Patrick E. Killpatrick,
Vice President
SOUTHHAMPTON ENTERPRISES CORP.
/s/ Joseph R.S. Tyssowski By: /s/ L. Steven Haynes (SEAL)
L. Steven Haynes,
Chief Executive Officer
<PAGE>
ACKNOWLEDGMENTS
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, in personally appeared Patrick
E. Killpatrick, and acknowledged himself to be a Vice President of LASALLE
BUSINESS CREDIT, INC., a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of LASALLE BUSINESS CREDIT, INC.,
by himself as Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derkaz (SEAL)
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
<PAGE>
STATE OF ARIZONA, CITY/COUNTY OF Maricopa, TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared L. Steven
Haynes, and acknowledged himself to be a Chief Executive Officer of SOUTHHAMPTON
ENTERPRISES CORP., a British Columbia corporation, and that he, as such Chief
Executive Officer, being authorized so to do, executed the foregoing instrument
for the purposes therein contained by signing the name of SOUTHHAMPTON
ENTERPRISES CORP. by himself as Chief Executive Officer.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derkaz (SEAL)
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
<PAGE>
Schedule 5(o), Indebtedness
1. Note-David Olson $28,000 USD
2. Note-St. Claire Group (secured by inventory) $189,000 CDN
3. Note Payable to Director - L. Lloyd $327,108
4. Notes Payable to Director - L.S. Haynes $113,723
5. Notes Payable to Director - J.W. Wood $85,500
<PAGE>
Schedule 1(a),
None
Exhibit 10.22
SECURITY AGREEMENT
------------------
Dated as of May 7, 1997
between
SOUTHHAMPTON ENTERPRISES, INC.
and
LASALLE BUSINESS CREDIT, INC.
<PAGE>
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT ("Agreement") is made as of this 7th day of May,
1997, by and among LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LaSalle"), with an office at 120 East Baltimore Street, Suite 1802, Baltimore,
Maryland 21202, and SOUTHHAMPTON ENTERPRISES, INC., a Texas corporation
("Debtor"), with its principal office at 9211 Diplomacy Row, Dallas, Texas
75247.
WITNESSETH:
WHEREAS, The Antigua Group, Inc., a Nevada corporation ("Borrower") has
requested LaSalle to make a term loan to the Borrower. LaSalle has consented to
such request, provided that, among other things, the Debtor guarantees the
obligations of the Borrower and executes and delivers this Agreement in order to
secure the Debtor's guarantee obligations.
NOW, THEREFORE, in consideration of the loans made to the Borrower by
LaSalle, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Debtor, the parties agree as
follows:
1. DEFINITIONS.
(a) General Definitions.
"Account," "Account Debtor," "Chattel Paper," "Documents,"
"Equipment," "General Intangibles," "Goods," "Instruments," "Inventory," and
"Investment Property," shall have the respective meanings assigned to such
terms, as of the date of this Agreement, in the Maryland Uniform Commercial
Code.
"Affiliate" shall mean any Person: (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with Debtor; (b) that directly or beneficially owns or
holds five percent (5%) or more of any class of the voting stock of Debtor; (c)
five percent (5%) or more of whose voting stock (or in the case of a Person
which is not a corporation, five percent (5%) or more of the equity interest of
which) is owned directly or beneficially or held by Debtor; or (d) five percent
(5%) or more of whose voting stock (or in case of a Person which is not a
corporation, five percent (5%) or more of the equity interest of which) is owned
directly or beneficially or held by a Person referred to in (a), (b) or (c)
above.
"Borrower Debts" shall mean the obligations and debt of the
Borrower to LaSalle which is guaranteed by the Debtor pursuant to the Guaranty,
whether such obligations or debt is now existing or hereafter incurred.
<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday,
or such other day as banks in Illinois are authorized or required to be closed
for business.
"Closing Date" shall mean the date set forth on the first page of
this Agreement.
"Collateral" shall mean all of the personal property of Debtor
described in paragraph 2 hereof, and all other real or personal property of the
Debtor now or hereafter pledged to LaSalle to secure, either directly or
indirectly, repayment of any of the Obligations.
"Cruttenden" shall mean The Cruttenden Roth Bridge Fund, LLC, a
California limited liability company.
"Cruttenden Loan" shall mean a One Million Twenty Thousand Dollar
($1,020,000.00) loan from Cruttenden to the Borrower pursuant to terms
acceptable to LaSalle.
"Default" shall mean any event, condition or default which with
the giving of notice, the lapse of time or both would be an Event of Default.
"Event of Default" shall have the meaning specified in paragraph
7 hereof.
"GAAP" shall mean generally accepted accounting principles and
policies in the United States as in effect from time to time.
"Guaranty" shall mean the Continuing Unconditional Guaranty of
even date herewith from the Debtor to and for the benefit of LaSalle, and any
renewals or replacements thereof and any amendments or modifications thereof.
"Imperial" shall mean Imperial Bank.
"Imperial Loan" shall mean a Two Million Five Hundred Thousand
Dollar ($2,500,000.00) loan from Imperial to the Borrower, pursuant to terms
acceptable to LaSalle.
"Indemnified Party" shall have the meaning specified in paragraph
9 hereof.
"Intercreditor Agreement" shall mean an Intercreditor Agreement
between LaSalle and another Person holding a security interest in any of the
assets of the Debtor.
"Liabilities" shall mean at any date all liabilities required
under GAAP to be recorded on a balance sheet as of such date.
<PAGE>
"Material Adverse Effect" shall mean with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, the
business, assets, operations, condition (financial or otherwise) or prospects of
Debtor, taken as a whole.
"Obligations" shall mean all liabilities, obligations, and duties
owing by Debtor to LaSalle or to any parent, affiliate or subsidiary of LaSalle,
of any kind or description whether now existing or hereafter incurred, and
whether direct or indirect, contingent or noncontingent, including, but not
limited to, all obligations now or hereafter existing under the Guaranty.
"Obligor" shall mean the Debtor, the Borrower, and each Person
who is or shall become primarily or secondarily liable for any of the Borrower
Debts.
"Other Agreements" shall mean all agreements, instruments and
documents including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of the Debtor in
connection with the Obligations or the transactions contemplated hereby.
"Permitted Liens" shall mean: (a) statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder; (b) liens or security interests in favor of
LaSalle; (c) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Debtor's
ability to use such real property for its intended purpose in connection with
Debtor's business; (d) liens securing the payment of taxes or other governmental
charges not yet delinquent or being contested in good faith and by appropriate
proceedings, in accordance with the terms set forth in paragraph 6(f); (e) liens
incurred or deposits made in the ordinary course of Debtor's business in
connection with capitalized leases or purchase money security interests for
purchase of, and applying only to, Equipment included in the permitted
borrowings under paragraph 6(g) the documents relating to such liens to be in
form and substance acceptable to LaSalle; (f) liens securing indebtedness owing
by any Subsidiary to Debtor to the extent such indebtedness is permitted under
paragraph 6(g); (g) deposits to secure performance of bids, trade contracts,
leases and statutory
<PAGE>
obligations (to the extent not excepted elsewhere herein); (h) liens
specifically permitted by LaSalle in writing as set forth on Schedule 1(a)
attached hereto; (i) any lien arising out of the refinancing, extension, renewal
or refunding of any indebtedness secured by a lien permitted by any of the
foregoing subparagraphs (a) through (h) inclusive provided that (i) such
indebtedness is not secured by any additional assets, and (ii) the amount of
such indebtedness is not increased; (j) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation; (k) grants of security and rights of setoff in deposit accounts,
securities and other properties held at banks or financial institutions to
secure the payment or reimbursement under overdraft, acceptance and other
facilities; and (l) rights of setoff, banker's lien and other similar rights
arising solely by operation of law.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or United States government
(whether federal, state, county, city, municipal or otherwise), including,
without limitation, any instrumentality, division, agency, body or department
thereof.
"Prime Rate" shall mean the publicly announced prime rate of
LaSalle National Bank, Chicago, Illinois, in effect from time to time. The Prime
Rate is not intended to be the lowest or most favorable rate of LaSalle National
Bank in effect at any time.
"Seller" shall mean collectively: (a) Thomas E. Dooley, Jr. and
Gail E. Dooley, Trustees under the Thomas E. Dooley and Gail Dooley Revocable
Trust of 1988, dated 10/4/88; (b) Thomas E. Dooley as Custodian Under the
Uniform Gifts to Minors Act fbo Kim L. Dooley; (c) Thomas E. Dooley as Custodian
Under the Uniform Gifts to Minors Act fbo Shawn T. Dooley; (d) Thomas E. Dooley,
Jr. and Gail A. Dooley, Trustees under the Thomas E. Dooley and Gail Dooley
Revocable Trust of 1988, dated 10/4/88; (e) E. Louis Werner, Jr., Trustee, E.
Louis Werner, Jr., Revocable Intervivos Trust dated December 31, 1982; and (f)
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established separate
irrevocable Gift Trusts f/b/o the children of Thomas and Gail Dooley dated March
7, 1989.
"Seller Debt" shall mean the indebtedness of the Debtor and the
Borrower to the Seller in a maximum amount of Six Million Three Hundred
Seventy-Eight Thousand Dollars ($6,378,000.00).
"Subordinated Debt" shall mean collectively: (a) the Seller Debt;
(b) the Cruttenden Loan; and (c) the Imperial Loan.
"Subordination Agreements" shall mean collectively: (a) the
Subordination Agreement of even date herewith by and between the Seller,
Imperial, Cruttenden and LaSalle; (b) the
<PAGE>
Subordination Agreement of even date herewith between Imperial, Cruttenden and
LaSalle; (c) the Subordination Agreement of even date herewith between LaSalle
and Imperial; (d) the Subordination Agreement of even date herewith between
LaSalle, Imperial, Cruttenden, and Gerald K. Whitley; and (e) the Subordination
Agreement of even date herewith between LaSalle, Imperial, Cruttenden and Ronald
A. McPherson.
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Debtor or by any partnership or joint
venture of which more than fifty percent (50%) of the outstanding equity
interests are at the time, directly or indirectly, owned by Debtor.
(b) Accounting Terms And Definitions. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Debtor to LaSalle on or before the
Closing Date.
2. GRANT OF SECURITY INTEREST TO LASALLE.
As security for the payment and satisfaction of all of the
Obligations, Debtor hereby assigns to LaSalle and grants to LaSalle a continuing
security interest in the following property of Debtor, whether now or hereafter
owned, existing, acquired or arising and wherever now or hereafter located: (i)
all Accounts and all Goods whose sale, lease or other disposition by Debtor has
given rise to Accounts and have been returned to or repossessed or stopped in
transit by Debtor; (ii) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to
indemnification); (iii) all Inventory; (iv) all Goods (other than Inventory)
including, without limitation, Equipment, and fixtures; (v) all deposits and
cash and any other property of Debtor now or hereafter in the possession,
custody or control of LaSalle or any agent or any parent, affiliate or
subsidiary of LaSalle or any participant with LaSalle in the Loan for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); (vi) all Investment Property; and (vii) all
additions and accessions to, substitutions for, and replacements, products and
proceeds of the foregoing property, including, without limitation, proceeds of
all insurance policies
<PAGE>
insuring the foregoing property, and all of Debtor's books and records relating
to any of the foregoing and to Debtor's business. Notwithstanding the foregoing
provisions of this paragraph 2, such grant of a security interest shall not
extend to, and the term "Collateral" shall not include, any licenses which are
now or hereafter held by the Debtor as licensee, to the extent that (i) such
licenses are not assignable or capable of being encumbered as a matter of law or
under the terms of the license applicable thereto (but solely to the extent that
any such restriction shall be enforceable under applicable law), without the
consent of the licensor thereof and (ii) such consent has not been obtained;
provided, however, that the foregoing grant of security interest shall extend
to, and the term Collateral shall include, (A) any and all proceeds of such
licenses to the extent that the assignment or encumbering of such proceeds is
not so restricted and (B) upon any such licensor's consent with respect to any
such otherwise excluded license being obtained, thereafter such licenses as well
as any and all proceeds thereof that might theretofore have been excluded from
such grant of a security interest and the term Collateral. In addition, the
Debtor agrees that until all obligations are paid in full, the Debtor will cause
all of the obligations to be secured by a valid and enforceable lien and
security interest in all assets of the Debtor (except the Debtor's stock in
Antigua).
3. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Debtor shall, at LaSalle's request, at any time and from time to time, execute
and deliver to LaSalle such financing statements, documents and other agreements
and instruments (and pay the cost of filing or recording the same in all public
offices deemed reasonably necessary or desirable by LaSalle) and do such other
acts and things as LaSalle may deem necessary or desirable in order to establish
and maintain a valid, attached and perfected security interest in the Collateral
in favor of LaSalle (free and clear of all other liens, claims and rights of
third parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the obligations, and in order to
facilitate the collection of the Collateral. Debtor irrevocably hereby makes,
constitutes and appoints LaSalle (and all Persons designated by LaSalle for that
purpose) as Debtor's true and lawful attorney and agent-in-fact to execute such
financing statements, documents and other agreements and instruments and do such
other acts and things as may be necessary to preserve and perfect LaSalle's
security interest in the Collateral. Debtor further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement.
4. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default
has occurred, Debtor shall have the right, except as otherwise provided in this
Agreement, in the ordinary course of Debtor's business, to (a) sell, lease or
furnish under contracts of service any of Debtor's Inventory normally held by
Debtor for any such purpose, and (b) use and consume any raw materials, work in
<PAGE>
process or other materials normally held by Debtor for such purpose, provided,
however, that a sale in the ordinary course of business shall not include any
transfer or sale in satisfaction, partial or complete, of a debt owed by Debtor.
5. REPRESENTATIONS AND WARRANTIES. Debtor hereby makes the following
representations, warranties and covenants:
(a) the office where Debtor keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Debtor's principal place of business
and all of Debtor's other places of business, locations of Collateral and post
office boxes are as set forth in Schedule 5(a) attached hereto; Debtor shall
promptly (but in no event less than ten (10) days prior thereto) advise LaSalle
in writing of the proposed opening of any new place of business, the closing of
any existing place of business, any change in the location of Debtor's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Debtor;
(b) the Collateral, including without limitation the Equipment (except
any part thereof which prior to the date of this Agreement Debtor shall have
advised LaSalle in writing consists of Collateral normally used in more than one
state) is and shall be kept, or, in the case of vehicles, based, only at the
addresses set forth on Schedule 5(b) attached hereto, and at other locations
within the continental United States of which LaSalle has been advised by Debtor
in writing;
(c) Debtor shall immediately give written notice to LaSalle of any use
of any Goods in any state other than a state in which Debtor has previously
advised LaSalle Goods shall be used, and Goods shall not, unless LaSalle shall
otherwise consent in writing, be used outside of the continental United States;
(d) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral other than any
security agreement, financing statement or analogous instrument evidencing
Permitted Liens;
(e) Debtor is and shall at all times during the term of this Agreement
be the lawful owner of all Collateral now purportedly owned or hereafter
purportedly acquired by Debtor, free from all liens, claims, security interests
and encumbrances whatsoever, whether voluntarily or involuntarily created and
whether or not perfected, other than the Permitted Liens;
(f) Debtor has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Debtor's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
<PAGE>
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Debtor, and Debtor's execution, delivery and
performance of this Agreement and the Other Agreements shall not result in the
imposition of any lien or other encumbrance upon any of Debtor's property under
any existing indenture, mortgage, deed of trust, loan or credit agreement or
other agreement or instrument by which Debtor or any of its property may be
bound or affected;
(g) there are no actions or proceedings which are pending or, to the
best of Debtor's knowledge, threatened against Debtor which are reasonably
likely to have a Material Adverse Effect and Debtor shall, promptly upon
becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to LaSalle;
(h) to the best of the Debtor's knowledge, Debtor has obtained all
licenses, authorizations, approvals and permits, the lack of which would have a
material adverse effect on the operation of its business, and to the best of
Debtor's knowledge, Debtor is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statutes,
orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety or environmental matters), the
failure to comply with which would have a Material Adverse Effect;
(i) all written information now, heretofore or hereafter furnished by
Debtor to LaSalle is and shall be true and correct in all material respects as
of the date with respect to which such information was or is furnished (except
for financial projections, which have been prepared in good faith based upon
reasonable assumptions);
(j) Debtor is not conducting, permitting or suffering to be conducted,
nor shall it conduct, permit or suffer to be conducted, any activities pursuant
to or in connection with which any of the Collateral is now, or will (while any
obligations remain outstanding) be owned by any Affiliate;
(k) To the best of the Debtor's knowledge, during the five (5) years
prior to this Agreement, Debtor's name has always been as set forth on the first
page of this Agreement and Debtor has used no tradenames or division names in
the operation of its business, except as otherwise disclosed in writing to
LaSalle; Debtor shall notify LaSalle in writing within ten (10) days of the
change of its name or the use of any tradenames or division names not previously
disclosed to LaSalle in writing;
(l) with respect to Debtor's Equipment: (i) Debtor has good and
indefeasible and merchantable title to and ownership of
<PAGE>
all Equipment; (ii) Debtor shall keep and maintain the Equipment in good
operating condition and repair and shall make all reasonable necessary
replacements thereof and renewals thereto so that the value and operating
efficiency thereof shall at all times be preserved and maintained, ordinary wear
and tear excepted; (iii) Debtor shall not permit any such items to become a
fixture to real estate or an accession to other personal property unless LaSalle
will have a perfected first priority lien in such fixture or accession; (iv)
from time to time Debtor may sell, exchange or otherwise dispose of obsolete,
unused or worn out Equipment, but only to the extent the fair market value in
the aggregate, of all such Equipment sold or otherwise disposed of by the Debtor
during any twelve-month period is less than Ninety Thousand Dollars ($90,000.00)
and the fair market value of any such Equipment sold or otherwise disposed of in
any single transaction is less than Thirty Thousand Dollars ($30,000.00); and
(v) Debtor, immediately on demand by LaSalle, shall deliver to LaSalle any and
all evidence of ownership of, including, without limitation, certificates of
title and applications of title to, any of the Equipment;
(m) this Agreement and the Other Agreements to which Debtor is a party
are the legal, valid and binding obligations of Debtor and are enforceable
against Debtor in accordance with their respective terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights of creditors
generally;
(n) Debtor is solvent, is able to pay its debts as they become due and
has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(o) Debtor is not now obligated, whether directly or indirectly, for
any loans or other indebtedness for borrowed money other than (i) the
Obligations, (ii) indebtedness disclosed to LaSalle on Schedule 5(o) attached
hereto, (iii) unsecured indebtedness to trade creditors arising in the ordinary
course of Debtor's business, (iv) the Subordinated Debt, and (v) unsecured
indebtedness arising from the endorsement of drafts and other instruments for
collection, in the ordinary course of Debtor's business.
(p) Debtor is duly organized and in good standing in its state of
organization and Debtor is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary, except for such other states in
which the failure to so qualify would not have a Material Adverse Effect;
<PAGE>
(q) Debtor is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Debtor know
of any dispute regarding any contract, lease or commitment which is material to
the continued financial success and well-being of Debtor;
(r) There are no controversies pending or, to the best of the Debtor's
knowledge, threatened between Debtor and any of its employees, other than
employee grievances arising in the ordinary course of business which are not, in
the aggregate, material to the continued financial success and well-being of
Debtor, and to the best of the Debtor's knowledge, Debtor is in compliance in
all material respects with all federal and state laws respecting employment and
employment terms, conditions and practices, except where the failure to so
comply would not have a Material Adverse Effect;
(s) Debtor possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it; and
(t) The Purchase Agreement has been executed and delivered by each
party thereto, and the terms and conditions of the Purchase Agreement constitute
the valid and binding obligations of each party thereto, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights of creditors generally.
Debtor represents, warrants and covenants to LaSalle that all representations,
warranties and covenants of Debtor contained in this Agreement (whether
appearing in paragraphs 5 or 6 hereof or elsewhere) shall be true at the time of
Debtor's execution of this Agreement, shall survive the execution, delivery and
acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto, shall remain true until the repayment in
full of all of the obligations and termination of this Agreement.
6. COVENANTS. Until payment or satisfaction in full of all obligations and
termination of this Agreement, unless Debtor obtains LaSalle's prior written
consent waiving or modifying any of Debtor's covenants hereunder in any specific
instance, Debtor agrees as follows:
(a) Debtor shall at all times keep accurate and complete books,
records and accounts with respect to all of Debtor's business activities, in
accordance with sound accounting practices and GAAP, and shall keep such books,
records and accounts, and any copies thereof, only at the addresses indicated
for such purpose on Schedule 6(a) attached hereto;
<PAGE>
(b) LaSalle, or any Persons designated by it, shall have the right, at
any time, in the exercise of its commercially reasonable credit judgment, to
call at Debtor's places of business at any reasonable times, and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from Debtor's books, records, journals, orders, receipts and any
correspondence and other data relating to Debtor's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Debtor's business as LaSalle may consider
reasonable under the circumstances, provided that so long as there exists no
Default or Event of Default, the periodic filed examinations to be conducted at
Debtor's expense of Debtor and its financial records will not be conducted more
often than quarterly. Debtor shall furnish to LaSalle such information relevant
to LaSalle's rights under this Agreement as LaSalle shall at any time and from
time to time reasonably request. Debtor authorizes LaSalle to discuss the
affairs, finances and business of Debtor with any officers or directors of
Debtor or any Affiliate, or with those employees of Debtor with whom LaSalle has
determined in its commercially reasonable judgment to be necessary or desirable
to converse, and to discuss the financial condition of Debtor with Debtor's
independent public accountants. Any such discussions shall be without liability
to LaSalle or to such accountants. Debtor shall pay to or reimburse LaSalle for
all reasonable fees, costs, and out-of-pocket expenses incurred by LaSalle in
the exercise of its rights hereunder and all of such costs, fees and expenses
shall be payable on demand and, until paid, shall bear interest at the highest
rate then applicable to Loan;
(c) (i) Debtor shall: keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as are
customarily insured against by Persons engaged in businesses similar to that of
Debtor with such companies, in such amounts and under policies in such form as
shall be reasonably satisfactory to LaSalle. Originals or certified copies of
such policies of insurance have been or shall be delivered to LaSalle within
fifteen (15) days after the Closing Date, together with evidence of payment of
all premiums therefor, and shall contain an endorsement, in form and substance
acceptable to LaSalle, showing loss under such insurance policies payable to
LaSalle. Such endorsement, or an independent instrument furnished to LaSalle,
shall provide that the insurance company shall give LaSalle at least thirty (30)
days written notice before any such policy of insurance is altered or canceled
and that no act, whether willful or negligent, or default of Debtor or any other
Person shall affect the right of LaSalle to recover under such policy of
insurance in case of loss or damage. Subject to the terms of the Intercreditor
Agreement, Debtor hereby directs all insurers under such policies of insurance
to pay all proceeds payable thereunder directly to LaSalle. Debtor irrevocably
makes, constitutes and appoints LaSalle (and all officers, employees or agents
designated by LaSalle) as Debtor's true and lawful attorney (and agent-in-
<PAGE>
fact) for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Debtor on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance, provided, however, that LaSalle shall exercise such
rights only upon the occurrence of an Event of Default. The proceeds of any
insured loss shall be paid to LaSalle and shall be applied by LaSalle to the
obligations, in such order of application as determined by LaSalle, unless
LaSalle permits the use thereof to repair or replace damaged or destroyed
Collateral;
(ii) Debtor shall maintain, at its expense, such public liability
and third party property damage insurance as is customary for Persons engaged in
businesses similar to that of Debtor with such companies and in such amounts,
with such deductibles and under policies in such form as shall be reasonably
satisfactory to LaSalle and originals or certified copies of such policies have
been or shall be delivered to LaSalle within fifteen (15) days after the Closing
Date, together with evidence of payment of all premiums therefor; each such
policy shall contain an endorsement showing LaSalle as additional insured
thereunder and providing that the insurance company shall give LaSalle at least
thirty (30) days written notice before any such policy shall be altered or
canceled;
(iii) Debtor shall maintain, at its expense, such business
interruption insurance as is customary for Persons engaged in businesses similar
to that of Debtor with such companies and in such amounts, with such deductibles
and under policies in such form as shall be reasonably satisfactory to LaSalle
and originals or certified copies of such policies (or binders evidencing the
existence of coverage in compliance with this paragraph) have been or shall be
delivered to LaSalle on or before the Closing Date, together with evidence of
payment of all premiums therefor; each such policy shall contain an endorsement
showing LaSalle as additional insured and loss payee thereunder and providing
that the insurance company shall give LaSalle at least thirty (30) days written
notice before any such policy shall be altered or canceled; each such policy
shall be assigned to LaSalle pursuant to LaSalle's standard form of assignment;
and
(iv) If Debtor at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then LaSalle, without waiving or
releasing any obligation or default by Debtor hereunder, may (but shall be under
no obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as LaSalle deems
advisable. All sums disbursed by LaSalle in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall be due on the demand of LaSalle
<PAGE>
and, until paid, shall bear interest at the highest rate then applicable to the
Loan;
(d) Debtor shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; Debtor shall keep the Collateral in good condition, repair and
order, ordinary wear and tear excepted; Debtor shall not permit the Collateral,
or any part thereof, to be levied upon under execution, attachment, distraint or
other legal process; Debtor shall not sell, lease, grant a security interest in
or otherwise dispose of any of the Collateral except as expressly permitted by
this Agreement; and Debtor shall not secrete or abandon any of the Collateral,
or remove or permit removal of any of the Collateral from any of the locations
listed on Schedule 5(b) attached hereto or in any written notice to LaSalle
pursuant to paragraph 5(b) hereof, except for the removal of Inventory sold in
the ordinary course of Debtor's business as permitted herein;
(e) Debtor shall, at the request of LaSalle, indicate on its records
concerning the Collateral a notation, in form satisfactory to LaSalle, of the
security interest of LaSalle hereunder, and Debtor shall not maintain duplicates
or copies of such records at any address other than Obligor's principal place of
business set forth on the first page of this Agreement; provided, however, that
Debtor, in the ordinary course of its business, may furnish copies of such
records to its accountants, attorneys and other agents or advisors as it may
determine to be necessary or desirable, in the exercise of its commercially
reasonable judgment;
(f) Debtor shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Debtor shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Debtor's financial statements, (ii) the contesting of any
such payment does not give rise to a lien for taxes, (iii) upon the occurrence
of an Event of Default, Debtor keeps on deposit with LaSalle (such deposit to be
held without interest) an amount of money which, in the sole judgment of
LaSalle, is sufficient to pay such taxes and any interest or penalties that may
accrue thereon, and (iv) if Debtor fails to prosecute such contest with
reasonable diligence, LaSalle may apply the money so deposited in payment of
such taxes. If Debtor fails to pay any such taxes and in the absence of any such
contest by Debtor, LaSalle may (but shall be under no obligation to) advance and
pay any sums required to pay any such taxes and/or to secure the release of any
lien therefor, and any sums so advanced by LaSalle shall be payable by Debtor to
LaSalle on demand, and, until
<PAGE>
paid, shall bear interest at the highest rate then applicable to the Loan
hereunder;
(g) Debtor shall not (i) incur, create, assume or suffer to exist any
indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers, (C) the Subordinated Debt, and (D) indebtedness described on Schedule
5(o) attached hereto; or (ii) assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business;
(h) Debtor shall not: (i) except with the prior written consent of
LaSalle, enter into any merger or consolidation, issue any shares of, or
warrants or other rights to receive or purchase any shares of, any class of its
stock, redeem or repurchase any of its stock or have more than ten percent (10%)
of its stock sold or transferred in any manner; (ii) sell, lease or otherwise
dispose of all or substantially all of its assets; (iii) create any new
Subsidiary or Affiliate; (iv) sell or enter into any contract or agreement
providing for the sale of all or any part of the Collateral, except for the sale
of inventory in the ordinary course of Debtor's business; or (v) permit the
Collateral to be encumbered or charged with a lien or security interest of any
kind or nature, whether voluntary or involuntary, other than: (A) Permitted
Liens; (B) liens securing the Cruttenden Loan provided Cruttenden executes and
delivers to LaSalle an Intercreditor Agreement and Subordination Agreement in
forms acceptable to LaSalle; (C) liens securing obligations to the Seller under
the Seller Debt provided the Seller executes and delivers to LaSalle an
Intercreditor Agreement and Subordination Agreement in forms acceptable to
LaSalle; (D) liens securing the Imperial Loan provided Imperial executes and
delivers to LaSalle an Intercreditor Agreement and Subordination Agreement in
forms acceptable to LaSalle; and (E) liens arising out of the refinancing,
extension or renewal of any indebtedness secured by the liens described in (B),
(C), or (D) above, provided that (1) such indebtedness is not secured by
additional assets, (2) the amount of such indebtedness is not increased, (3) the
term of such indebtedness is not less than the term of the indebtedness being
refinanced, (4) the holder of the indebtedness executes and delivers to LaSalle
an Intercreditor Agreement and Subordination Agreement on substantially the same
terms as the Intercreditor Agreement and Subordination Agreement executed by the
holder of the indebtedness which was refinanced.
(i) Debtor shall not make any advance, loan, investment or material
acquisition of assets other than (i) advances made to employees in the ordinary
course of business so long as the aggregate amount of such advances do not
exceed Fifty Thousand Dollars ($50,000.00) in the aggregate outstanding at any
time; (ii) investments in marketable securities so long as the aggregate amount
of such investments do not exceed One Hundred Thousand
<PAGE>
Dollars ($100,000.00) at any time; (iii) investments in short-term direct
obligations of the United States government; (iv) investments in negotiable
certificates of deposit issued by a bank satisfactory to LaSalle, payable to the
order of Debtor or to bearer, (v) investments in commercial paper rated A-1 or
P-1; provided, that with respect to clauses (ii), (iii), (iv), and (v), Debtor
shall assign all such investments to LaSalle in form acceptable to LaSalle.
(j) Debtor shall not (i) except as permitted pursuant to paragraph
6(n) below, declare or pay any dividend or other distribution (whether in cash
or in kind) on, purchase, redeem or retire any shares of any class of its stock,
or make any payment on account of, or set apart assets for the repurchase,
redemption, defeasance or retirement of, any class of its stock; or (ii) except
for prepayments on the Subordinated Debt permitted by the Subordination
Agreements, make any optional payment or prepayment on or redemption (including
without limitation by making payments to a sinking fund or analogous fund) or
repurchase of any indebtedness for borrowed money other than indebtedness
pursuant to this Agreement;
(k) Debtor shall not amend its organizational documents or change its
fiscal year, except for a change to a calendar year fiscal period;
(l) Debtor shall reimburse LaSalle for all costs and expenses
including, without limitation, legal expenses and reasonable attorneys' fees
(both in-house and outside counsel), incurred by LaSalle in connection with the
documentation and consummation of this transaction and any other transactions
between Debtor and LaSalle, including, without limitation, Uniform Commercial
Code and other public record searches, lien filings, Federal Express or similar
express or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs, and in seeking to collect, protect or
enforce any rights in or to the Collateral or incurred by LaSalle in seeking to
collect any Obligations and to administer and enforce any of LaSalle's rights
under this Agreement. Debtor shall also pay all normal service charges with
respect to accounts maintained by LaSalle for the benefit of Debtor. All such
costs, expenses and charges shall be payable by Debtor to LaSalle on demand,
and, until paid, shall bear interest at the highest rate then applicable to the
Loan hereunder;
(m) Debtor shall not guaranty any aspect of the equity capital
investment to be provided to Guarantor in connection with the acquisition by
Guarantor of all of the outstanding stock of Debtor; and
(n) Following the Acquisition the only dividends which may be made by
the Debtor are dividends in an amount equal to the payments owed under the
Seller Debt, provided such payments are
<PAGE>
permitted to be made pursuant to the terms of the Subordination Agreements and
such dividends are used to make such payments.
7. DEFAULT. The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) the failure of the Debtor to pay any of the Obligations when due,
declared due, or demanded by LaSalle in accordance with the terms hereof and the
Guaranty and such failure is not cured within five (5) calendar days after
notice from LaSalle to the Debtor;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements, which failure continues for five
(5) calendar days after notice from LaSalle to Debtor, provided that a failure
by Debtor to perform any obligations under any of the following paragraphs of
this Agreement shall constitute an immediate Event of Default without Debtor
having any notice or cure rights: paragraphs 5(a), (b), (c), (d), (e), (f), (m)
and (n) and paragraphs 6(a), (b), (m), and (n).
(c) the making or furnishing by any Obligor to LaSalle of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and LaSalle, which is
untrue or misleading in any respect, or the failure of any Obligor to perform,
keep or observe any of the covenants, conditions, promises, agreement of such
Obligor under any other agreement with any Person if such failure has or is
reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any attempt
to create, any lien or other encumbrance upon any of the Collateral, other than
liens permitted pursuant to paragraph 6(h) and judgment liens which do not
constitute an Event of Default under paragraph 7(g) hereof, or the making or any
attempt to make any levy, seizure or attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or
against any Obligor, (ii) for the liquidation or reorganization of any Obligor,
(iii) alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor's debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default
<PAGE>
unless such proceedings are not dismissed within ninety (90) days after the
commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for any
of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within ninety (90) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of Fifty Thousand
Dollars ($50,000.00) against any Obligor which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution;
(h) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
the Borrower to LaSalle under or in connection with the Borrower Debt;
(i) the occurrence of an event of default under: (i) the Cruttenden
Loan; (ii) Seller Debt; (iii) the Imperial Loan; and (iv) any agreement or
instrument evidencing indebtedness for borrowed money in excess of Fifty
Thousand Dollars ($50,000.00) executed or delivered by the Debtor or the
Borrower or pursuant to which agreement or instrument the Debtor or the Borrower
or either of their properties is or may be bound; or
(j) the occurrence of any event or condition which has or is
reasonably likely to have a Material Adverse Effect.
8. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in paragraph
7(e) hereof, all of the Obligations shall immediately and automatically become
due and payable, without notice of any kind. Upon the occurrence of any other
Event of Default, all of the obligations may, at the option of LaSalle, and
without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, LaSalle may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
other Agreements and all of LaSalle's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by way
of limitation of the foregoing, LaSalle
<PAGE>
may, without notice, demand or legal process of any kind, take possession of any
or all of the Collateral (in addition to collateral of which it already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter into any of Debtor's premises where any
of the Collateral may be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or otherwise disposed
of, and LaSalle shall have the right to store the same at any of Debtor's
premises without cost to LaSalle. At LaSalle's request, Debtor shall, at
Debtor's expense, assemble the Collateral and make it available to LaSalle at
one or more places to be designated by LaSalle and reasonably convenient to
LaSalle and Debtor. Debtor recognizes that if Debtor fails to perform, observe
or discharge any of its obligations under this Agreement or the Other
Agreements, no remedy at law will provide adequate relief to LaSalle, and Debtor
agrees that LaSalle shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages. Any
notification of intended disposition of any of the Collateral required by law
will be deemed reasonably and properly given if given at least ten (10) calendar
days before such disposition. Any proceeds of any disposition by LaSalle of any
of the Collateral may be applied by LaSalle to the payment of expenses in
connection with the Collateral including, without limitation, legal expenses and
reasonable attorneys' fees (both in-house and outside counsel) and any balance
of such proceeds may be applied by LaSalle toward the payment of such of the
Obligations, and in such order of application, as LaSalle may from time to time
elect.
9. INDEMNIFICATION. Debtor agrees to defend (with counsel reasonably
satisfactory to LaSalle), protect, indemnify and hold harmless LaSalle, each
affiliate or subsidiary of LaSalle, and each of their respective officers,
directors, employees, attorneys and agents (each an "Indemnified Party) from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loan or the use or
intended use of the proceeds of the Loan; provided, however, that Debtor shall
not have any obligation hereunder to any Indemnified Party with respect to
matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnified
<PAGE>
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Debtor shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to the Loan hereunder from the date
incurred by each Indemnified Party until paid by Debtor, be added to the
Obligations of Debtor and be secured by the Collateral. The provisions of this
paragraph 9 shall survive the satisfaction and payment of the other Obligations
and the termination of this Agreement.
10. NOTICES. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in the
form and manner specified below, and shall be addressed to the party to the
following addresses or to such other address as each party designates to the
other by Notice in the manner herein prescribed:
If To LaSalle At:
LASALLE BUSINESS CREDIT, INC.
120 East Baltimore Street, Suite 1802
Baltimore, Maryland 21202
Attn.: Patrick E. Killpatrick,
Vice President
If To Debtor At:
SOUTHHAMPTON ENTERPRISES, INC.
9211 Diplomacy Row
Dallas, Texas 75247
Attn.: L. Stephen Haynes
Notice shall be deemed given hereunder if (i) delivered personally or otherwise
actually received, (ii) sent by overnight delivery service, (iii) mailed by
first-class United States mail, postage prepaid, registered or certified, with
return receipt requested, or (iv) sent via telecopy machine with a duplicate
signed copy sent on the same day as provided in clause (ii) above. Notice mailed
as provided in clause (iii) above shall be effective upon the expiration of
three (3) Business Days after its deposit in the United States mail, and notice
telecopied as provided in clause above shall be effective upon receipt of such
telecopy if the duplicate signed copy is sent under clause (iv) above. Notice
given in any other manner described in this paragraph shall be effective upon
receipt by the addressee thereof; provided, however, that if any notice is
tendered to an addressee and delivery thereof is refused by such addressee, such
notice shall be effective upon such tender unless expressly set forth in such
notice.
<PAGE>
11. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the Other
Agreements are submitted by Debtor to LaSalle for LaSalle's acceptance or
rejection at LaSalle's place of business in the State of Maryland, and shall not
be binding upon LaSalle or become effective until accepted by LaSalle, in
writing, at said place of business. If so accepted by LaSalle, this Agreement
and the Other Agreements shall be deemed to have been made at said place of
business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF MARYLAND AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, BUT
EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL, WHICH SHALL BE
GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION. If any
provision of this Agreement shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or remaining provisions of this Agreement.
12. FORUM SELECTION AND SERVICE OF PROCESS. To induce LaSalle to accept
this Agreement, Debtor irrevocably agrees that, subject to LaSalle's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE
COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF
MARYLAND. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURTS LOCATED WITHIN SAID STATE. DEBTOR HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST DEBTOR BY LASALLE IN ACCORDANCE WITH THIS PARAGRAPH.
13. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Debtor and LaSalle. Debtor may not sell, assign or transfer
this Agreement, or the Other Agreements or any portion thereof including,
without limitation, Debtor's rights, titles, interest, remedies, powers or
duties thereunder. Debtor hereby consents to LaSalle's sale, assignment,
transfer or other disposition, at any time and from time to time hereafter, of
this Agreement, or the Other Agreements, or of any portion thereof, or
participations therein including, without limitation, LaSalle's rights, titles,
interest, remedies, powers and/or duties thereunder. Debtor agrees that it shall
execute and deliver such documents as LaSalle may request in connection with any
such sale, assignment, transfer or other disposition.
14. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
<PAGE>
15. POWER OF ATTORNEY. Debtor acknowledges and agrees that its appointment
of LaSalle as its attorney and agent-in-fact for the purposes specified in this
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Obligations are paid in full and this Agreement is terminated.
16. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) LASALLE AND DEBTOR HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
ANY OF THE OTHER AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED
TORTIOUS CONDUCT OF DEBTOR OR LASALLE OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN DEBTOR AND
LASALLE. IN NO EVENT SHALL LASALLE BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL
OR CONSEQUENTIAL DAMAGES.
(b) DEBTOR HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY LASALLE OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
DEBTOR WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Debtor hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(d) LaSalle's failure, at any time or times hereafter, to require
strict performance by Debtor of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of LaSalle
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by LaSalle of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of LaSalle in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements,, warranties, covenants and
representations of Debtor contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by LaSalle
unless such suspension or waiver is in writing, signed by a duly authorized
officer of LaSalle and directed to Debtor specifying such suspension or waiver.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
under seal as of the 7th day of May, 1997.
WITNESS: LASALLE BUSINESS CREDIT, INC.
/s/ ILLEGIBLE By: /s/ Patrick E. Killpatrick (SEAL)
--------------------------
Patrick E. Killpatrick,
Vice President
SOUTHHAMPTON ENTERPRISES, INC.
/s/ ILLEGIBLE By: /s/ L. Steven Haynes, (SEAL)
--------------------------
L. Steven Haynes,
Secretary
ACKNOWLEDGMENTS
---------------
STATE OF ARIZONA, CITY/COUNTY OF MARICOPA TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, in personally appeared Patrick
E. Killpatrick, and acknowledged himself to be a Vice President of LASALLE
BUSINESS CREDIT, INC., a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained by signing the name of LASALLE BUSINESS CREDIT, INC.,
by himself as Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derkatz (SEAL)
-----------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31, 1997
- -----------------------------------
<PAGE>
STATE OF ARIZONA, CITY/COUNTY OF MARICOPA TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared L. Steven
Haynes, and acknowledged himself to be the Secretary of SOUTHHAMPTON
ENTERPRISES, INC., a Texas corporation, and that he, as such Secretary, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of SOUTHHAMPTON ENTERPRISES, CORP., by himself as
Secretary.
IN WITNESS MY Hand and Notarial Seal.
/s/ Melissa M. Derkatz (SEAL)
----------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires July 31. 1997
- -----------------------------------
<PAGE>
Schedule 5(o), Indebtedness
- ---------------------------
1. Note Payable Texas Commerce Bank $23,616
2. Note Payable Roger Testa $100,000
3. Note Payable Richard Someck $25,000
4. Judgment in No. 94-02989-M $10,000
5. Wilson Sporting Goods, Inc. $1,178.63
6. State of Texas Tax Lien $32,416.61
<PAGE>
Schedule l(a), Indebtedness
- ---------------------------
1. Note Payable Texas Commerce Bank $23,616
2. Note Payable Roger Testa $100,000
3. Note Payable Richard Someck $25,000
4. Judgment in No. 94-02989-M $10,000
5. Wilson Sporting Goods, Inc. $1,178.63
6. State of Texas Tax Lien $32,416.61
Exhibit 10.23
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is dated as of May 7, 1997,
by and between THE ANTIGUA GROUP, INC., a Nevada corporation ("Borrower"), with
its mailing address at 9314 N. 94th Way, Scottsdale, Maricopa County, Arizona
85258, and LASALLE BUSINESS CREDIT, INC., a Delaware corporation ("LaSalle"),
with its principal place of business at 120 E. Baltimore Street, Suite 1800,
Baltimore, Maryland 21202.
RECITALS
--------
The Borrower has applied to LaSalle for a term loan in the principal amount
of Three Million Five Hundred Thousand Dollars ($3,500,000.00) ("Loan"). LaSalle
has agreed to extend the loan to the Borrower, under the terms and conditions
set forth in a Loan And Security Agreement of even date herewith ("Loan
Agreement") by and between the Borrower and LaSalle, and various other
documents, instruments and agreements executed by or on behalf of the Borrower
in connection with the Loan (together with the Loan Agreement, collectively,
"Loan Documents").
In order to induce LaSalle to provide the Borrower with the Loan, the
Borrower, pursuant to the terms and conditions of the Loan Agreement, has agreed
to grant to LaSalle a lien and security interest in all trademark and service
mark rights owned by the Borrower, and also has granted to LaSalle a lien on and
security interest in all of the Borrower's assets, including but not limited to
those assets relating to products sold under the trademarks and services
rendered under the service marks, whereby LaSalle, upon the occurrence of an
Event of Default (as such term is defined in the Loan Agreement), shall have the
right to foreclose on the trademarks, service marks and other assets of the
Borrower, in order that LaSalle or its assignee may continue the sale of
products sold and services rendered under the trademarks and service marks.
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
adequacy of which are hereby acknowledged, the Borrower agrees with LaSalle as
follows:
Section 1. Grant Of Security Interest. The Borrower, as additional security
for the complete and timely payment, performance and satisfaction of all of the
obligations (as hereafter defined), hereby grants unto LaSalle, its successors
and assigns, upon the following terms and conditions, a continuing lien and
security interest in those certain trademarks and service marks registered with
the United States Patent and Trademark office in the name of the Borrower, and
described on Exhibit A attached hereto and made a part hereof, together with any
renewals thereof and the entire goodwill of the business in connection with
which such trademarks and service marks are used, and all claims for
<PAGE>
damages by reason of past infringement of such trademarks and service marks with
the right to sue for and collect the same, to LaSalle (collectively,
"Trademarks") and all license rights in the Trademarks. As used herein, the term
"Obligations" shall mean all duties of payment and performance, whether direct
or indirect, both now existing and arising from time to time, owed by the
Borrower to LaSalle under the Loan Agreement and the other Loan Documents. This
Agreement is delivered pursuant to and in confirmation of the terms and
conditions of the Loan Agreement, which terms and conditions are incorporated by
reference into this Agreement and made a part hereof as if fully set out herein.
Section 2. Additional Trademarks Or Service Marks. If, before the
Obligations shall have been satisfied in full, the Borrower shall obtain rights
to any new trademarks or service marks, the provisions of Section 1 shall
automatically apply thereto and the Borrower shall give prompt written notice
thereof to LaSalle. The Borrower irrevocably and unconditionally authorizes
LaSalle to modify this Agreement by amending Exhibit A to include any additional
or future trademarks, service marks and applications therefor owned or acquired
by the Borrower without any further assent or signature of the Borrower.
Section 3. Purpose. This Agreement has been executed and delivered by the
Borrower for the purpose of recording the grant of security interest herein with
the United States Patent and Trademark Office. The security interest granted
hereby has been granted as a supplement to, and not in limitation of, the
security interest granted to LaSalle under the Loan Agreement. The terms and
conditions of the Loan Agreement shall remain in full force and effect in
accordance with its terms, notwithstanding the execution, delivery and
recordation of this Agreement.
Section 4. Representations And Warranties. The Borrower represents and
warrants that:
a. The Trademarks are subsisting and have not been adjudged invalid or
unenforceable in whole or in part;
b. Each of the Trademarks is valid and enforceable;
c. No claim has been made that the use of any of the Trademarks does
or may violate the rights of any third person;
d. The Borrower is the sole and exclusive owner of the entire
unencumbered right, title and interest in and to each of the Trademarks, free
and clear of any liens, charges and encumbrances, including without limitation
pledges, assignments, licenses, registered user agreements and covenants by the
Borrower not to sue third persons, except for the prior lien in the Trademarks
in favor of LaSalle and the liens and security interests permitted pursuant to
the terms of the Loan Agreement;
e. The Borrower has the unqualified right to enter into
<PAGE>
this Agreement and to perform its terms;
f. The Borrower has used, and will continue to use for the duration of
this Agreement, proper statutory notice in connection with its use of the
Trademarks; and
g. The Borrower has used or required the use of, and will continue to
use or require the use of for the duration of this Agreement, consistent
standards of quality in the manufacture of products sold and services rendered
under the Trademarks.
Section 5. Maintenance of Trademarks; Prosecution Of Applications And
Proceedings. The Borrower shall: (a) maintain the registration of the
Trademarks; (b) take all actions necessary to maintain, preserve and continue
the validity and enforceability of the Trademarks, including but not limited to
the filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings, and
the payment of any and all application, renewal, extension or other fees; and
(c) through counsel acceptable to LaSalle, (i) prosecute diligently any
trademark applications of the Trademarks pending as of the date of this
Agreement or thereafter, (ii) make federal application on registrable but
unregistered Trademarks, (iii) file and prosecute opposition and cancellation
proceedings, and (iv) do any and all acts which are necessary or desirable to
preserve and maintain all rights in the Trademarks. The Borrower shall not,
without the prior written consent of LaSalle: (a) abandon any of the Trademarks,
or (b) bring any cancellation proceedings in connection with the Trademarks. Any
expenses incurred in connection with the Trademarks shall be borne by the
Borrower. In the event of any litigation involving the Trademarks, LaSalle may,
if necessary, be joined as a nominal party to such suit if LaSalle shall have
been satisfied that it is not thereby incurring any risk of liability because of
such joinder. The Borrower hereby agrees to reimburse and indemnify LaSalle for
all damages, costs and expenses, including attorney's fees, incurred by LaSalle
in the fulfillment of the provisions of this Section.
Section 6. Agreement to Assign Interest. Upon the occurrence of an Event of
Default, in addition to all other rights and remedies available to LaSalle under
the Loan Agreement or applicable law, the Borrower hereby agrees to execute any
and all documents, agreements and instruments considered necessary, appropriate
or convenient by LaSalle or its counsel to effectuate the assignment, transfer
and conveyance of the Trademarks to LaSalle or its assignee. The Borrower hereby
irrevocably and unconditionally authorizes and empowers LaSalle to make,
constitute and appoint any officer or agent of LaSalle as LaSalle may select, in
its exclusive discretion, as the Borrower's true and lawful attorney-in-fact,
with the power to endorse the Borrower's name on all such documents, agreements
and instruments, including without limitation assignments. The Borrower hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof.
<PAGE>
This power of attorney shall be irrevocable for the life of this Agreement, and
constitutes a power of attorney coupled with an interest. All of LaSalle's
rights and remedies with respect to the Trademarks, whether established by this
Agreement, by the Loan Agreement, by any other Loan Document, or by law shall be
cumulative and may be exercised singularly or concurrently.
Section 7. Patent And Trademark Office May Rely Upon This Agreement. If
LaSalle shall elect to exercise any of the rights hereunder, the United States
Patent and Trademark Office shall have the right to rely upon LaSalle's written
statement of LaSalle's right to sell, assign and transfer the Trademarks and the
Borrower hereby irrevocably and unconditionally authorizes the United States
Patent and Trademark Office to recognize such sale by LaSalle either in the
Borrower's name or in LaSalle's name without the necessity or obligation of the
United States Patent and Trademark Office to ascertain the existence of any
default by the Borrower under the Loan Agreement.
Section 8. Costs And Expenses. Any and all fees, costs and expenses, of
whatever kind or nature, including the reasonable attorney's fees and legal
expenses incurred by LaSalle in connection with the preparation of this
Agreement and all other documents relating hereto and the consummation of this
transaction, the filing or recording of any documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
counsel fees, maintenance fees, encumbrances or otherwise protecting,
maintaining or preserving the Trademarks, or in defending or prosecuting any
actions or proceedings arising out of or related to the Trademarks, shall be
borne and paid by the Borrower on demand by LaSalle and until so paid shall be
added to the principal amount of the Obligations and shall bear interest at the
highest rate prescribed in the Loan Agreement.
Section 9. Notices. Notices that are required or permitted to be delivered
hereunder shall be sufficient if in writing and sent to the addresses set forth
in the Loan Agreement, in the manner and within the time specified in the Loan
Agreement.
Section 10. No Assignment Or Further Lien. The Borrower shall not assign,
transfer or convey its interests in the Trademarks, nor shall the Borrower grant
any further lien or security interest in all or any of the Trademarks except as
permitted pursuant to the terms of the Loan Agreement.
Section 11. Further Assurances. The Borrower shall execute any further or
additional documents considered necessary, appropriate or proper by LaSalle to
effectuate the purposes and intent of this Agreement.
Section 12. Amendment. The terms and conditions of this Agreement may be
modified, altered, waived, or amended only by a writing executed by LaSalle
consenting to the modification, alteration, waiver, or amendment.
<PAGE>
Section 13. Severability. If any of the provisions of this Agreement are
judicially determined to be in conflict with any law of the State of Maryland or
otherwise judicially determined to be unenforceable for any reason whatsoever,
such provision shall be deemed null and void to the extent of such
unenforceability but shall be deemed separable from and shall not invalidate any
other provision of this Agreement.
Section 14. Successors And Assigns. The terms, covenants and conditions
contained in this Agreement shall inure to the benefit of LaSalle and its
successors and assigns, and shall be binding upon the Borrower and its
successors and assigns.
Section 15. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Agreement and the rights and obligations of the
parties hereto, including the validity, construction, interpretation, and
enforceability of this Agreement and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this Agreement or which occurred or were to occur as a direct or indirect
result of this Agreement having been executed.
Section 16. Consent To Jurisdiction; Agreement As To Venue. The Borrower
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court For The District Of
Maryland, if a basis for federal jurisdiction exists. The Borrower agrees that
venue shall be proper in any circuit court of the State of Maryland selected by
LaSalle or in the United States District Court For The District of Maryland if a
basis for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
Section 17. Waiver Of Jury Trial. The Borrower (by its execution hereof)
and LaSalle (by its acceptance of this Agreement) agree that any suit, action,
or proceeding, whether claim or counterclaim, brought or instituted by any party
hereto or any successor or assign of any party hereto, with respect to this
Agreement, the Loan Documents, or any other document or agreement which in any
way relates, directly or indirectly, to this Agreement, the Loan Documents, the
Obligations or any event, transaction or occurrence arising out of or in any way
connected with this Agreement, the Loan Documents, any of the obligations, or
the dealings of the parties with respect thereto, shall be tried only by a
court, and not by a jury. THE BORROWER AND LASALLE HEREBY EXPRESSLY WAIVE ANY
AND ALL RIGHTS TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING. The
Borrower acknowledges and agrees that this provision is a specific and material
aspect of the agreement between the parties hereto and that LaSalle would not
enter into the subject transactions if this provision were not part of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Agreement as of the date
first above written with the specific intention of creating an instrument under
seal.
WITNESS/ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
/s/ illegible By: /s/ Gerald K. Whitley (SEAL)
Gerald K. Whitley,
Vice President - Finance
ACKNOWLEDGEMENT
---------------
STATE OF ARIZONA, CITY/COUNTY OF Maricopa TO WIT:
I HEREBY CERTIFY that on this 7th day of May, 1997, before me, the
undersigned Notary Public of the State aforesaid, personally appeared Gerald K.
Whitley and acknowledged himself to be the Vice President of Finance of THE
ANTIGUA GROUP, INC., a Nevada corporation, and that he, as the Vice President,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained by signing the name of THE ANTIGUA GROUP, INC., by himself as
Vice President.
IN WITNESS MY Hand and Notarial Seal.
/s/ Vickie L. Stripp (SEAL)
NOTARY PUBLIC
My Commission Expires:
September 23, 1998
<PAGE>
EXHIBIT A
---------
TO TRADEMARK SECURITY AGREEMENT
-------------------------------
Schedule of Trademarks
----------------------
Trademark Reg. No. Reg. Date
- --------- -------- ---------
ANTIGUA 1,242,152 06/14/83
ANTIGUA 1,480,871 03/15/88
miscellaneous design 1,561,053 10/17/89
ANTECH 1,683,030 04/14/92
A II APPAREL 1,809,289 12/07/93
ANTIGUA SPORT AND DESIGN 1,940,578 12/12/95
<PAGE>
RECORDATION FORM COVER SHEET
TRADEMARKS ONLY
To the Honorable Commissioner of Patents and Trademarks: Please record the
attached original document or copy thereof.
1. Name of conveying party(ies):
THE ANTIGUA GROUP, INC.
Individual(s) Association
General Partnership Limited Partnership
x Corporation - State Nevada
Other __________________________________
Additional Name(s) of conveying party(ies) attached? Yes x No
2. Name and address of receiving party(ies):
Name: LaSalle Business Credit Inc., a Delaware corporation
Internal Address: _______________________________________
Street Address: 120 E. Baltimore Street, Suite 1800
City: Baltimore State: MD Zip: 21202
Individual(s) citizenship ________________________________
Association ______________________________________________
General Partnership ______________________________________
Limited Partnership ______________________________________
x Corporation - State Delaware
If assignee is not domiciled in the United States,
a domestic representative designation is attached: Yes No
(Designations must be a separate document from Assignment)
Additional name(s) and address(es) attached? Yes x No
3. Nature of conveyance:
Assignment Merger
x Security Agreement Change of Name
Other _______________________________________________
Execution Date: May 7, 1997
4. Application number(s) or registration number(s):
A. Trademark Application No.(s)
74/528,972
B. Trademark Registration No.(s)
1,242,152, 1,480,871, 1,561,053, 1,683,030, 1,809,289 and
1,940,578
Additional numbers attached? Yes x No
5. Name and Address of party to whom correspondence
concerning document should be mailed:
Name Streich Lang
Internal Address: Attn: Ronald M. Stoll, Esq.
Street Address: Renaissance One
Two North Central Avenue
City: Phoenix State: AZ Zip: 85004-2391
6. Total number of applications and
registrations involved: Seven
7. Total fee (37 CFR 3.41) $190.00
x Enclosed
x Deficiency only authorized to be charged to deposit
account
8. Deposit account number:
194663
DO NOT USE THIS SPACE
9. Statement and signature.
To the best of my knowledge and belief, the foregoing information is true
and correct and the attached copy is a true copy of the original document.
David A. Grieme /s/ David A. Grieme June 25, 1997
Name of Person Signing Signature Date
Total number of pages including cover sheet, attachments, and documents: 7
================================================================================
Exhibit 10.24
CREDIT AGREEMENT
by and between
THE ANTIGUA GROUP, INC.
SOUTHHAMPTON ENTERPRISES, INC.
SOUTHHAMPTON ENTERPRISES CORP.
and
IMPERIAL BANK
Dated as of
May 7, 1997
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
RECITALS..........................................................................................................1
ARTICLE 1 DEFINITION OF TERMS.............................................................................1
1.1 Definitions.....................................................................................1
1.2 References.....................................................................................10
1.3 Accounting Terms...............................................................................10
ARTICLE 2 THE TERM LOAN..................................................................................10
2.1 Term Loan Commitment...........................................................................10
2.2 Term Loan......................................................................................10
2.3 Interest Rate..................................................................................10
2.4 Principal Payments.............................................................................11
2.5 Principal Prepayments..........................................................................13
2.6 Method of Payment..............................................................................13
2.7 Conditions.....................................................................................13
2.8 Assignment.....................................................................................13
2.9 Lender's Right to Extend Originally Scheduled Term Maturity Date ..............................14
ARTICLE 3 SECURITY; RELEASE; GUARANTEE...................................................................14
3.1 Security.......................................................................................14
3.2 Security Documents.............................................................................15
3.3 Guarantee......................................................................................15
3.4 Subordination..................................................................................15
3.5 Intercreditor Agreement........................................................................15
ARTICLE 4 CONDITIONS PRECEDENT...........................................................................15
4.1 Term Loan Advance..............................................................................15
4.2 No Event of Default or Default.................................................................18
4.3 No Material Adverse Change.....................................................................18
4.4 Representations and Warranties.................................................................18
4.5 Deferral or Waiver of Conditions Precedent.....................................................19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.................................................................19
5.1 Recitals.......................................................................................19
5.2 Organization and Good Standing.................................................................19
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
5.3 Authorization and Power........................................................................19
5.4 Security Documents.............................................................................19
5.5 No Conflicts or Consents.......................................................................19
5.6 No Litigation..................................................................................20
5.7 Financial Condition............................................................................20
5.8 Taxes..........................................................................................20
5.9 No Stock Purchase..............................................................................20
5.10 Advances.......................................................................................20
5.11 Enforceable Obligations........................................................................20
5.12 No Default.....................................................................................21
5.13 Significant Debt Agreements and other Material Agreements......................................21
5.14 ERISA..........................................................................................21
5.15 Compliance with Law............................................................................21
5.16 Solvent........................................................................................21
5.17 Investment Company Act.........................................................................21
5.18 Title..........................................................................................21
5.19 Permits and Licenses...........................................................................22
5.20 Transactions with Affiliates...................................................................22
5.21 Indebtedness...................................................................................22
5.22 Subsidiaries; Capital Structure................................................................22
5.23 Employee Controversies.........................................................................22
5.24 Proprietary Rights.............................................................................22
5.25 Business.......................................................................................23
ARTICLE 6 AFFIRMATIVE COVENANTS..........................................................................23
6.1 Financial Statements, Reports and Documents....................................................23
6.2 Maintenance of Existence and Rights; Conduct of Business; Management...........................24
6.3 Operations and Properties......................................................................25
6.4 Authorizations and Approvals...................................................................25
6.5 Compliance with Law............................................................................25
6.6 Payment of Taxes and Other Indebtedness........................................................25
6.7 Compliance with Significant Debt Agreements and Other Material
Agreements.....................................................................................25
6.8 Compliance with Credit Documents...............................................................25
6.9 Notice of Default..............................................................................25
6.10 Other Notices..................................................................................26
6.11 Books and Records; Access......................................................................26
6.12 ERISA Compliance...............................................................................26
6.13 Further Assurances.............................................................................26
6.14 Insurance......................................................................................26
6.15 Proprietary Rights.............................................................................27
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE 7 NEGATIVE COVENANTS.............................................................................27
7.1 Existence; Issuance of Stock; Change of Control; Sales of
Substantially All of Assets....................................................................28
7.2 Amendments to Organizational Documents.........................................................28
7.3 Margin Stock...................................................................................28
7.4 Fiscal Year....................................................................................28
7.5 Liens..........................................................................................28
7.6 Transfer Collateral............................................................................28
7.7 Financial Covenants............................................................................28
7.8 Other Indebtedness.............................................................................29
7.9 Investments....................................................................................29
7.10 Dividends and Distributions....................................................................30
7.11 Compensation...................................................................................30
7.12 Capital Expenditures...........................................................................30
7.13 Transactions with Affiliates...................................................................30
7.14 Changes in Business............................................................................30
7.15 Other Creditors' Documents.....................................................................30
ARTICLE 8 EVENTS OF DEFAULT..............................................................................31
8.1 Events of Default..............................................................................31
8.2 Remedies Upon Event of Default.................................................................34
8.3 Performance by Lender..........................................................................35
8.4 Receiver.......................................................................................35
ARTICLE 9 MISCELLANEOUS..................................................................................36
9.1 Modification...................................................................................36
9.2 Waiver.........................................................................................36
9.3 Payment of Expenses............................................................................36
9.4 Notices........................................................................................37
9.5 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.......................................38
9.6 Reference Provision............................................................................38
9.7 Invalid Provisions.............................................................................39
9.8 Binding Effect.................................................................................40
9.9 Entirety.......................................................................................40
9.10 Headings.......................................................................................40
9.11 Survival.......................................................................................40
9.12 No Third Party Beneficiary.....................................................................40
9.13 Time...........................................................................................40
9.14 Indemnity......................................................................................40
9.15 Schedules and Exhibits Incorporated............................................................40
9.16 Counterparts...................................................................................41
</TABLE>
-iii-
<PAGE>
Schedule 1.1 (Permitted Liens)
Schedule 4.1 (Closing List)
Schedule 5.21 (Existing Indebtedness)
Schedule 5.22 (Subsidiaries and Divisions)
Schedule 5.25 (Description of Business)
Schedule 7.8 (Permitted Indebtedness)
Schedule 7.11 (Compensation)
Exhibit 6.1(e) (Compliance Certificate)
-iv-
<PAGE>
CREDIT AGREEMENT
BY THIS CREDIT AGREEMENT (together with any amendments or
modifications, the "Credit Agreement"), entered into as of this 7th day of May,
1997 by and between THE ANTIGUA GROUP, INC., a Nevada corporation ("Borrower"),
SOUTHHAMPTON ENTERPRISES INC., a Texas corporation ("SEI"), SOUTHHAMPTON
ENTERPRISES CORP., a British Columbia (Canada) corporation ("SE Corp"), and
IMPERIAL BANK, a California banking corporation ("Lender"), in consideration of
the mutual promises herein contained and for other valuable consideration, the
parties hereto do hereby agree as follows:
RECITALS
A. Borrower has applied to Lender for a term loan ("Term Loan") in the
principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($2,500,000.00) to be used to pay dividends to SEI, which SEI will use to
acquire Borrower's stock. SEI is a wholly-owned subsidiary of SE Corp.
B. As a condition for extending such financial accommodations, Lender
has required that Borrower, SEI and SE Corp enter into this Credit Agreement
establishing the terms and conditions thereof.
ARTICLE 1
DEFINITION OF TERMS
1.1 Definitions. For the purposes of this Credit Agreement, unless the
context otherwise requires, the following terms will have the respective
meanings assigned to them in this Article 1 or in the Section hereof referred to
below:
"Acquisition" means the acquisition by SEI of all of the
issued and outstanding stock in Borrower pursuant to terms and conditions
acceptable to Lender.
"Advance" means a disbursement of a Loan.
"Affiliate" of any Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, will mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Articles of Organization" of any Person means the charter,
articles, operating agreement, joint venture agreement, partnership agreement,
trust agreement, by-laws and any other written documents evidencing the
formation, organization, governance and continuing existence of such Person.
<PAGE>
"Authorized Officer" of any Person means one or more of the
officers, partners, members, managers, trustees or other representatives of such
Person duly authorized (and so certified to Lender by the corporate secretary,
general partners, members, managers, trustees or other Person or Persons having
the authority to do so, as the case may be) of such Person pursuant to a
certificate of authority and incumbency from time to time satisfactory to Lender
in the exercise of Lender's reasonable discretion), acting alone, to execute and
deliver documents, instruments, agreements, reports, statements and certificates
in connection herewith on behalf of such Person and, in the case of Borrower, to
request the Term Loan Advance.
"Banking Day" means a day of the year on which banks are not
required or authorized to close in Inglewood, California.
"Borrower": See the Preamble hereto.
"Capital Expenditures" of any Person means, with respect to
any period, the aggregate of all expenditures (whether paid in cash or accrued
as liabilities and including expenditures for capitalized lease obligations) by
such Person during such period that are required by GAAP to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
(or in intangible accounts subject to amortization) in the balance sheet of such
Person.
"Cash Flow" of any Person means, with respect to any period,
its net income after taxes for such period [excluding any after-tax gains or
losses on the sale of assets (other than the sale of inventory in the ordinary
course of business) and excluding other after-tax extraordinary gains or
losses], plus its deferred taxes, plus its depreciation and amortization
deducted in determining net income for such period, minus Capital Expenditures
for such period not financed, minus its cash dividends paid or accrued and cash
withdrawals paid or accrued to its shareholders or other Affiliates for such
period which were not calculated in determining net income after taxes, and plus
the after tax increase in its LIFO reserves or minus the after tax decrease in
its LIFO reserves.
"Change in Control" means the occurrence or existence of
either of the following events or conditions without the prior written consent
of Lender, if different than the state of affairs as of the Closing Date (after
giving effect to the Acquisition):
(a) the acquisition by any Person or two or more
Persons acting in concert of "beneficial ownership" (within
the meaning of Rule 13d-3 promulgated by the SEC under the
Exchange Act or as otherwise specified under the provisions of
this Credit Agreement) of securities of Borrower or SEI having
more than 50% of the ordinary voting power for the election of
directors; or
(b) the acquisition by any Person or two or more
Persons acting in concert of Control of Borrower or SEI.
"Closing Date" means the date the Term Loan Advance is
disbursed, whether
<PAGE>
directly or into an escrow in which proceeds of the Term Loan will be held and
not delivered to Borrower until the conditions established in such escrow are
satisfied (or if those conditions are not satisfied, the proceeds of the Term
Loan will be returned to Lender).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property of any Person subject to the
Security Documents.
"Control" when used with respect to any Person means the
power, directly or indirectly, to direct the management policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Controlled Group" means, severally and collectively, the
members of the group controlling, controlled by and/or in common control of
Borrower, within the meaning of Section 4001(b) of ERISA.
"Credit Agreement": See the Preamble hereto.
"Credit Documents" means this Credit Agreement, the Term Note
(including any renewals, extensions and refundings thereof), the Security
Agreements, the Pledge Agreements, any other Security Documents, the
Subordination Agreements, the Intercreditor Agreement, the Warrant and any
written agreements, certificates or documents (and with respect to this Credit
Agreement and such other written agreements and documents, any amendments or
supplements thereto or modifications thereof) executed or delivered pursuant to
the terms of this Credit Agreement.
"Cruttenden" means The Cruttenden Roth Bridge Fund, LLC, a
California limited liability company.
"Cruttenden Loan" means a loan or note purchase in the
principal amount of One Million Twenty Thousand Dollars ($1,020,000.00) from
Cruttenden to Borrower pursuant to terms acceptable to Lender.
"Debt Service" of any Person means, with respect to any
period, current principal maturities of its long term debt and capitalized
leases paid or scheduled to be paid during such period, plus any prepayments on
indebtedness owed by it to any other Person (except trade payables and revolving
loans) and paid during such period.
"Debt Service Coverage Ratio" of a Person means, with respect
to any period, the ratio of (a) its Cash Flow to (b) its Debt Service.
"Default" will mean any event, condition or default which with
the giving of notice, the lapse of time or both would be an Event of Default.
"Default Rate" means at any time five percent (5%) in excess
of the per annum
<PAGE>
interest rate otherwise applicable pursuant to Section 2.3(a).
"Dollars" and the sign "$" mean lawful currency of the United
States of America.
"EBITDA" of a Person will mean, with respect to any period,
its net income after taxes for such period (excluding any after-tax gains or
losses on the sale of assets and excluding other after-tax extraordinary gains
or losses) plus its interest expense, income tax expense, depreciation and
amortization for such period, less its gains and losses attributable to any
fixed asset sales made during such period, minus any distributions or dividends
permitted to be paid by it pursuant to the terms hereof, plus or minus any other
of its non-cash charges or gains which have been subtracted or added in
calculating net income after taxes for such period.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all final and permanent regulations issued
pursuant thereto. References herein to sections and subsections of ERISA are
deemed to refer to any successor or substitute provisions therefor.
"ESOP" means any Employee Stock Ownership Plan, as it may be
amended from time to time, adopted by Borrower.
"Event of Default": See Article 8.
"Exchange Act" means the Securities Exchange Act of 1934.
"Financial Covenants": See Section 7.7.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, and the
results of operations and changes in the financial position, of Obligors,
including without limitation accounting rules promulgated pursuant to
Regulations SX and SK, except that any accounting principle or practice required
to be changed by such Accounting Principles Board or Financial Accounting
Standards Board (or other appropriate board or committee of such Boards) in
order to continue as a generally accepted accounting principle or practice may
be so changed.
"Governmental Authority" means, with respect to any Person,
any government (or any political subdivision or jurisdiction thereof), court,
bureau, agency or other governmental authority having jurisdiction over such
Person or any of its business, operations or properties.
"Guarantors" means SEI and SE Corp.
"Indebtedness" of any Person means all of its monetary
obligations and liabilities.
Interest Coverage Ratios" of any person means, for any Period,
the ratio of (a)
<PAGE>
its EBITDA for such period to (b) interest expense for such period.
"Intercreditor Agreement": See Section 3.5.
"LaSalle" means LaSalle Business Credit, Inc., a Delaware
corporation.
"LaSalle Loans" means collectively the following loans from
LaSalle to Borrower: (A) a revolving line of credit loan in the maximum
principal amount of Twelve Million Dollars ($12,000,000.00) made pursuant to
that Loan and Security Agreement between LaSalle and Borrower, dated as of
January 21, 1997, and modified by that Modification Agreement dated as of May 7,
1997 ("1/97 LaSalle Agreement"); (b) a term loan in the principal amount of
Seven Hundred Seventy-Five Thousand Dollars ($775,000.00) made pursuant to the
1/97 LaSalle Agreement; and (c) a term loan in the principal amount of Three
Million Five Hundred Thousand Dollars ($3,500,000.00) made pursuant to that Loan
and Security Agreement between LaSalle and Borrower and dated as of May 7, 1997.
"Lender": See the Preamble hereto.
"Liabilities" of a Person means at any date all liabilities
required under GAAP to be recorded on a balance sheet of such Person as of such
date.
"Liabilities to TNW Ratio" of a Person means the ratio of (a)
its Liabilities (other than the Seller Debt) to (b) its Tangible Net Worth.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other encumbrance on property whether arising by agreement or under any statute
or law, or otherwise.
"Loan" or "Loans" means the Term Loan.
"Material Adverse Effect" means any circumstance or event
which (i) has any material adverse effect upon the validity or enforceability of
any Credit Document, (ii) materially impairs the ability of any Obligor to
fulfill its obligations under the Credit Documents, or (iii) causes an Event of
Default or any event which, with notice or lapse of time or both, would become
an Event of Default.
"Net Worth" of a Person means its shareholders' equity as
determined in accordance with GAAP, consistently applied.
"Note" or "Notes" means the Term Note.
"Obligation" means all present and future indebtedness,
obligations and liabilities of Borrower to Lender, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this Credit
Agreement or represented by the Notes, including without limitation the Loans
and all interest accruing thereon, and attorneys' fees incurred in the
enforcement or collection thereof, regardless of whether such indebtedness,
obligations and liabilities are direct,
<PAGE>
indirect, fixed, contingent, joint, several or joint and several; together with
all indebtedness, obligations and liabilities of Borrower evidenced or arising
pursuant to any of the other Credit Documents, and all renewals and extensions
thereof, or part thereof.
"Obligor" means Borrower and Guarantors.
"Originally Scheduled Term Maturity Date" means the date 364
days after the Closing Date.
"Other Creditors' Documents" means the documents now or
hereafter executed in connection with the LaSalle Loans and/or any portion of
the Subordinated Debt.
"Payment Date" with respect to the Term Loan means the first
day of each month, commencing the first day of the first month after the Term
Advance will have been made, provided that if any such day is not a Banking Day,
then such Payment Date will be the next successive Banking Day.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"Permitted Liens" with respect to the property of any Person
means: (a) statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen or suppliers incurred in the ordinary course of business and
securing amounts not yet due or declared to be due by the claimant thereunder;
(b) Liens in favor of Lender; (c) zoning restrictions and easements, rights of
way, licenses, covenants and other restrictions affecting the use of real
property that do not individually or in the aggregate have a Material Adverse
Effect on such Person's ability to use such real property for its intended
purpose in connection with such Person's business; (d) Liens securing the
payment of taxes or other governmental charges not yet delinquent or being
contested in good faith and by appropriate proceedings, in accordance with the
terms of the Credit Documents; (e) Liens incurred or deposits made in the
ordinary course of such Person's business in connection with capitalized leases
or purchase money security interests for purchase of, and applying only to,
equipment included in the permitted borrowings under Section 7.8 or permitted as
Capital Expenditures under Section 7.12, the documents relating to such liens to
be in form and substance acceptable to Lender; (f) Liens securing Indebtedness
owing by any Subsidiary to such Person or to any other Subsidiary of such
Person, to the extent such Indebtedness is permitted under Section 7.8; (g)
deposits to secure performance of bids, trade contracts, leases and statutory
obligations (to the extent not excepted elsewhere herein); (h) Liens
specifically set forth on Schedule 1.1; (i) any Lien securing a Permitted
Refinancing of Indebtedness secured by a Lien permitted by any of the foregoing
subsections (a) through (h) inclusive provided that the Permitted Refinancing is
not secured by a Lien on any additional property; (j) pledges or deposits in
connection with worker's compensation, unemployment insurance and other social
security legislation; (k) grants of security and rights of setoff in deposit
accounts, securities and other properties held at banks or financial
institutions to secure the payment or reimbursement under overdraft, acceptance
and other facilities; and (l) rights of setoff, banker's lien and other similar
rights arising solely by operation of law.
<PAGE>
"Permitted Refinancing" with respect to any Indebtedness
("Refinanced Indebtedness") means Indebtedness ("Refinancing") resulting from or
remaining after an immediate or subsequent refinancing, extension, renewal or
refunding of the Refinanced Indebtedness so long as: (a) the amount of the
Refinancing is not greater than the unpaid balance of the Refinanced
Indebtedness and, if no Event of Default exists and the Refinanced Indebtedness
is a revolver loan, the committed and undisbursed portion of a revolver loan;
(b) the interest rate applicable to the Permitted Refinancing does not exceed
the greater of (i) the interest rate applicable to the Refinanced Indebtedness
or (ii) an interest rate approved by Lender in its sole and absolute discretion;
(c) the amortization schedule of the Refinancing is not shorter than the
amortization schedule of the Refinanced Indebtedness; (d) circumstances
(including notice and cure periods) permitting or causing acceleration of the
Refinancing to a date earlier than the maturity of the Refinanced Indebtedness
are identical in all material respects to those applicable to the Refinanced
Indebtedness; (e) in connection with a Refinancing of the LaSalle Loans or the
Subordinated Debt, the holder of the Refinancing has entered into subordination
and intercreditor agreements with Lender identical in all material respects to
the Subordination Agreement and Intercreditor Agreement entered into with
respect to the Refinanced Indebtedness with the holder thereof; and (f) in
connection with a Refinancing of the LaSalle Loans, any Refinancing of a
revolver loan shall not increase loan-to-value ratios limiting borrowings
against Collateral.
"Person" includes an individual, a corporation, a joint
venture, a partnership, a trust, a limited liability company, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" means, with respect to any Person, an employee defined
benefit plan or other plan maintained by such Person for employees of such
Person and covered by Title IV of ERISA, or subject to the minimum funding
standards under Section 412 of the Code.
"Pledge Agreement": See Section 3.1.
"Purchase Agreement" means the Stock Purchase Agreement dated
April 21, 1997 among Guarantors, Borrower and Seller, as amended, pursuant to
which the Guarantors have agreed to acquire all of the issued and outstanding
stock of Borrower.
"Regulation U" means Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by such Board to replace the prior Regulation U
and having substantially the same function.
"Regulatory Change" means any change effective after the date
of this Credit Agreement in United States federal, state, or foreign law,
regulations, or rules or the adoption or making after such date of any
interpretation, directive, or request applying to a class of banks including
Lender, of or under any United States federal, state, or foreign law, regulation
or rule (whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Reportable Event" means any "reportable event" as described
in Section 4043(b)
<PAGE>
of ERISA with respect to which the thirty (30) day notice requirement has not
been waived by the PBGC.
"Resolution" means a duly adopted resolution of a corporation
certified as true and correct by an authorized officer of such corporation, a
partnership certificate signed by all of the general partners of such
partnership and such other partners whose approval is required with respect to
the matters set forth therein, or a certificate signed by the manager (if any)
of a limited liability company and such members whose approval is required with
respect to the matters set forth therein.
"SEC" means the Securities and Exchange Commission.
"SE Corp": See the Preamble hereto.
"SEI": See the Preamble hereto.
"Securities Offering" will mean any equity securities offering
of the stock of SE Corp.
"Security Agreement": See Section 3.1.
"Security Documents": See Section 3.2.
"Seller" means collectively: (a) Thomas E. Dooley, Jr. and
Gail E. Dooley, Trustees under the Thomas E. Dooley and Gail Dooley Revocable
Trust of 1988, dated 10/4/88; (b) Thomas E. Dooley as Custodian Under the
Uniform Gifts to Minors Act fbo Kim L. Dooley; (c) Thomas E. Dooley as Custodian
Under the Uniform Gifts to Minors Act fbo Shawn T. Dooley; (d) E. Louis Werner,
Jr., Trustee, E. Louis Werner, Jr., Revocable Intervivos Trust dated December
31, 1982; and (e) Peter J. Dooley, Trustee under the 1989 Trust Agreement
established separate irrevocable Gift Trusts f/b/o the children of Thomas and
Gail Dooley dated March 7, 1989.
"Seller Debt" means the indebtedness of SE Corp to Seller in a
maximum amount of Six Million Three Hundred Seventy-Eight Thousand Dollars
($6,378,000.00) which is incurred in connection with the Acquisition.
"Significant Debt Agreement" means the Other Creditors'
Documents and all documents, instruments and agreements executed by an Obligor,
evidencing, securing or ensuring any Indebtedness of such Obligor or any
guaranty in excess of $50,000 in outstanding principal (or principal equivalent)
amount.
"Subordinated Debt" means collectively: (a) the Seller Debt;
(b) the Cruttenden Loan; (c) the indebtedness under the Second Amended And
Restated NonNegotiable Note dated January 1, 1993 in the principal amount of
Three Hundred Thirty-Four Thousand Six Hundred Nineteen Dollars ($334,619.00)
from the Borrower to Ronald A. McPherson, as amended; and (d) the indebtedness
under the Second Amended And Restated NonNegotiable Note dated
<PAGE>
January 1, 1993 in the principal amount of Three Hundred Thirty-Four Thousand
Six Hundred Nineteen Dollars ($334,619.00) from the Borrower to Gerald K.
Whitley, as amended.
"Subordination Agreement": See Section 4.1.
"Subsidiary" of a Person means any business association
directly or indirectly controlled by such Person.
"Tangible Net Worth" of a Person means its shareholders,
equity (including retained earnings) less the book value of all intangible
assets including but not limited to advances to Affiliates, determined by Lender
on a consistent basis, plus the amount of any of its debt subordinated to Lender
on terms and conditions acceptable to Lender in its sole judgment, plus its
pre-tax LIFO reserves, all as determined in accordance with GAAP, consistently
applied.
"Term Advance" means the disbursement of the proceeds of the
Term Loan.
"Term Amortization Payment" means an amount of principal to be
paid each month equal to the outstanding principal balance of the Term Loan on
the Original Term Maturity Date, divided by thirty-six (36).
"Term Loan" means that Term Loan made available by Lender to
Borrower pursuant to Article 2 hereof.
"Term Loan Commitment" means Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000.00).
"Term Maturity Date" means the Originally Scheduled Term
Maturity Date or such later date to which the maturity of the Term Loan may be
extended pursuant to Section 2.9.
"Term Note" means that Promissory Note of even date herewith
in the amount of the Term Loan executed by Borrower and delivered pursuant to
the terms of this Credit Agreement, together with any renewals, extensions,
modifications or replacements thereof.
"Warrant" means a warrant granting Imperial Bancorp a right to
acquire ten percent (10.0%) of the common stock of SE Corp, on a fully diluted
basis containing usual and customary provisions to the satisfaction of Lender,
as well as a mandatory redemption right.
1.2 References. Capitalized terms will be equally applicable to both
the singular and the plural forms of the terms therein defined. References to
"Credit Agreement," "this Agreement," "herein," "hereof," "hereunder," or other
like words mean this Credit Agreement as amended, supplemented, restated or
otherwise modified and in effect from time to time.
1.3 Accounting Terms. Except as expressly provided to the contrary
herein, all accounting terms will be interpreted and all accounting
determinations will be made in accordance with GAAP, except as otherwise
specifically provided for herein. To the extent any
<PAGE>
change in GAAP affects any computation or determination required to be made
pursuant to this Credit Agreement, such computation or determination will be
made as if such change in GAAP had not occurred unless Borrower and Lender agree
in writing on an adjustment to such computation or determination to account for
such change in GAAP.
ARTICLE 2
THE TERM LOAN
2.1 Term Loan Commitment. Lender agrees to loan to or at the direction
of Borrower, and Borrower agrees to draw upon and borrow, in the manner and upon
the terms and conditions contained in this Credit Agreement, amounts that in the
aggregate at any time outstanding will not exceed the Term Loan Commitment.
2.2 Term Loan.
(a) Subject to the terms and conditions set forth in this
Credit Agreement, Lender will advance the proceeds of the Term Loan to Borrower
in a single advance upon full satisfaction of the conditions precedent set forth
below.
(b) The Term Loan will be evidenced by the Term Note.
(c) A Term Advance will be made by Lender to Borrower upon
written notice from an Authorized Officer.
(d) The Term Advance will be made by Lender to Borrower only
for the purpose of paying dividends to SEI, which SEI will use to acquire
Borrower's stock.
2.3 Interest Rate.
(a) Subject to the provisions of Section 2.3(d), interest
shall accrue on the Term Loan at thirteen percent (13%) per annum until Lender
has received the Required Cash Pledge [as defined in Section 2.4(c)] and at
eleven percent (11%) per annum thereafter.
(b) All interest accrued on the Term Loan shall be due and
payable on the Payment Date.
(c) If any payment of interest and/or principal is not
received by Lender when such payment is due, then in addition to the remedies
conferred upon Lender under the Credit Documents, a late charge of five percent
(5%) of the amount of the installment due and unpaid shall be added to the
delinquent amount to compensate Lender for the expense of handling the
delinquency for any payment past due in excess of ten (10) days, regardless of
any notice and cure period.
(d) Upon the occurrence of an Event of Default and after
maturity, including maturity upon acceleration, the unpaid principal balance,
all accrued and unpaid interest and all
<PAGE>
other amounts payable hereunder shall bear interest at the Default Rate.
(e) All interest payable under the Credit Documents shall be
calculated on a daily basis (based upon a 360-day year).
(f) If the proceeds of the Term Loan are disbursed into an
escrow, interest shall accrue on such proceeds from the date of such
disbursement whether or not Borrower has use of the proceeds of the Term Loan
held in the escrow or the Borrower's use of those proceeds is subject to the
satisfaction of conditions precedent.
2.4 Principal Payments.
(a) If the maturity of the Term Loan is extended pursuant to
Section 2.9, principal payments with respect to the Term Loan shall be due and
payable on the first Payment Date after the Originally Scheduled Term Maturity
Date in an amount equal to the Term Amortization Payment.
(b) If the maturity of the Term Loan is extended pursuant to
Section 2.9, Borrower will also make annual mandatory prepayments on the Term
Loan during the first one hundred twenty (120) days of each fiscal year, each
such payment in an amount equal to twelve and fifty-hundredths percent (12.50%)
of the sum which is equal to: (i) Borrower's Cash Flow for the preceding fiscal
year minus (ii) one hundred percent (100%) of the amount of Borrower's Cash Flow
which the Borrower needed to have for such fiscal year in order to satisfy (but
not exceed) the Borrower's Debt Service Coverage Ratio covenant for such fiscal
year as set forth in Section 7.7.
(c) In the event of one or more Securities Offerings
("Securities Offering Prepayment Event") raising in the aggregate more than Five
Million Dollars net of expenses, Borrower will make to Lender, within ten (10)
days after a demand made by Lender within two (2) years after the occurrence of
the Securities Offering Prepayment Event, which Lender may (but will have no
obligation to) exercise in its sole and absolute discretion, make a payment in
the amount demanded by Lender (not to exceed the unpaid principal balance of the
Term Loan Note, all accrued and unpaid interest and all other amounts payable
under the Credit Documents); and any such additional partial principal
prepayment will be applied in the inverse order of scheduled maturities. If a
Securities Offering Prepayment Event has occurred and Lender has not demanded
payment of the full amount for which it is entitled to make demand pursuant to
the preceding sentence, Borrower shall upon demand by Lender deliver and pledge
to Lender, as security for the Obligation, cash in an amount equal to the
maximum amount for which Lender could have made a prepayment demand but did not
("Required Cash Pledge"). The Required Cash Pledge shall be held by Bank and may
be commingled with its general funds. The Required Cash Pledge (or such much
thereof as is held by Lender from time to time) shall accrue interest for the
benefit of Borrower initially at the per annum rate at which interest is
publicly quoted to accrue on twelve (12) month certificates of deposit issued by
Lender in the amount of the Required Stock Pledge on the date the pledge is
made, and such interest rate shall be adjusted annually on each anniversary of
the date the Required Stock Pledge was made to that per annum rate at which
interest is publicly quoted to accrue on twelve (12) month certificates
<PAGE>
of deposit issued by Lender in the amount of the Required Cash Deposit (or as
much thereof as is held by Lender) on such anniversary date. Interest on the
Required Stock Pledge shall be calculated on the basis of a 365/366 day year and
the actual number of days elapsed. If no Event of Default exists, Lender will
remit to Borrower not later than the 10th day of each January interest accrued
on the Required Cash Deposit during the preceding calendar year and not
previously remitted to Borrower or applied to the Obligation. Notwithstanding
this Section 2.4(c) to the contrary, Borrower may substitute from time to time
for any deposits then held by Lender as part of the Required Stock Pledge or
other property previously substituted pursuant to this sentence, investments of
the type which Borrower is permitted to make pursuant to subsection 7.9(iii)-(v)
and such other property which Lender approves in writing in its sole and
absolute discretion. Borrower hereby acknowledges that pursuant to the Security
Agreement executed by Borrower, Lender has a security interest in the Required
Cash Pledge and the proceeds (including interest) thereof; provided, however,
that Borrower will execute such additional documents and take such further
actions as Lender may deem necessary or desirable in its sole and absolute
discretion to perfect such security interest. Lender may at any time apply the
Required Cash Pledge (and interest accrued thereon) to the Obligation, whether
or not then due; and shall apply any cash then being held by Lender as part of
the Required Cash Pledge to payments of principal on the Term Note as and when
they become due.
(d) If Lender has determined that the adoption of any law,
rule or regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by Lender with any request
or directive regarding capital adequacy (whether or not having the force of law)
from any central bank or governmental authority enacted after the Closing Date,
does or will have the effect of reducing the rate of return on Lender's capital
as a consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender's policies with respect to capital adequacy) by a material
amount, then from time to time, after submission by Lender to Borrower of a
written demand therefor ("Capital Adequacy Demand") together with the
certificate described below, Borrower will pay to Lender such additional amount
or amounts ("Capital Adequacy Charge") as will compensate Lender for such
reduction, such Capital Adequacy Demand to be made with reasonable promptness
following such determination. A certificate of Lender claiming entitlement to
payment as set forth above will be conclusive in the absence of manifest error.
Such certificate will set forth the nature of the occurrence giving rise to such
reduction, the amount of the Capital Adequacy Charge to be paid to Lender, and
the method by which such amount was determined. In determining such amount,
Lender may use any reasonable averaging and attribution method, applied on a
nondiscriminatory basis.
(e) The unpaid principal balance, all accrued and unpaid
interest and all other amounts payable hereunder with respect to the Term Loan
will be due and payable in full on the Term Maturity Date.
2.5 Principal Prepayments. Borrower may not prepay the Term Loan in
whole or in part except as expressly permitted pursuant to the Credit Agreement.
2.6 Method of Payment. All payments of principal of, and interest on,
the Term Note
<PAGE>
will be made to Lender before 2:00 p.m. (Inglewood, California local time), in
immediately available funds. All payments made on the Term Note will be
credited, to the extent of the amount thereof, in the following manner: (i)
first, to the payment of costs, fees or other charges incurred in connection
with the Term Loan; (ii) second, to the payment of accrued interest on the Term
Loan; and (iii) third, to the reduction of the principal balance of the Term
Loan, in the inverse order of maturity.
2.7 Conditions. Lender shall have no obligation to make any Advance
unless and until all of the conditions and requirements of this Credit Agreement
are fully satisfied. However, Lender in its sole and absolute discretion may
elect to make an Advance prior to full satisfaction of one or more such
conditions and/or requirements. Notwithstanding that an Advance is made, such
unsatisfied conditions and/or requirements will not be waived or released
thereby. Borrower will be and continue to be obligated to fully satisfy such
conditions and requirements.
2.8 Assignment. Borrower shall have no right to any Advance other than
to have the same disbursed by Lender in accordance with the disbursement
provisions contained in this Credit Agreement. Any assignment or transfer,
voluntary or involuntary, of this Credit Agreement or any right hereunder will
not be binding upon or in any way affect Lender without its written consent; and
Lender may make Advances under the disbursement provisions herein,
notwithstanding any such assignment or transfer.
2.9 Lender's Right to Extend Originally Scheduled Term Maturity Date.
Lender may at its option (but without obligation to do so and exercisable in its
sole and absolute discretion) extend the Term Maturity Date from the Originally
Scheduled Term Maturity Date to the date thirty-six (36) months after the
Originally Scheduled Term Maturity Date.
ARTICLE 3
SECURITY; RELEASE; GUARANTEE
3.1 Security.
(a) So long as any Loan is outstanding: (i) Borrower will
cause such Loan and Borrower's obligations under the Credit Documents to be
secured at all times by a valid and effective security agreement ("Borrower
Security Agreement"), duly executed and delivered by or on behalf of Borrower,
granting Lender a valid and enforceable lien and security interest in all assets
of Borrower, subject to no Liens other than the Permitted Liens; (ii) SEI will
cause such Loan and the Obligor's obligations under the Credit Documents to be
secured at all times by a valid and effective security agreement ("SEI Security
Agreement"), duly executed and delivered by or on behalf of SEI granting to
Lender a valid and enforceable lien and security interest in all assets of SEI,
subject to no Liens other than the Permitted Liens; and (iii) SE Corp will cause
such Loan and Obligor's obligations under the Credit Documents to be secured at
all times by a valid and effective security agreement ("SE Corp Security
Agreement"), duly executed and delivered by or on behalf of SE Corp, granting
Lender a valid and enforceable lien and security interest in all assets of SE
Corp, subject to no liens other than the Permitted Liens.
<PAGE>
The Borrower Security Agreement, the SEI Security Agreement and the SE Corp
Security Agreement are each herein referred to as a "Security Agreement." Each
Security Agreement may consist of one or more security documents (including
mortgages and assignments).
(b) So long as any Loan is outstanding, Borrower will cause
such Loan and Borrower's obligations under this Credit Agreement to be secured
at all times by a valid and effective pledge and irrevocable proxy security
agreement ("SEI Pledge Agreement"), duly executed and delivered by or on behalf
of SEI, granting Lender a valid and enforceable security interest in all issued
and outstanding stock of Borrower now owned or hereafter acquired by SEI; and a
valid and effective pledge and irrevocable proxy security agreement ("SE Corp
Pledge Agreement"), duly executed and delivered by or on behalf of SE Corp,
granting Lender a valid and enforceable security interest in all issued and
outstanding stock of SEI now owned or hereafter acquired by SE Corp. The SEI
Pledge Agreement and the SE Corp Pledge Agreement are each herein referred to as
a "Pledge Agreement."
3.2 Security Documents. All of the documents required by this Article 3
will be in form satisfactory to Lender and Lender's counsel, and, together with
any Financing Statements for filing and/or recording, and any other items
required by Lender to fully perfect and effectuate the liens and security
interests of Lender contemplated by the Security Agreements, the Pledge
Agreements and this Credit Agreement, may heretofore or herein be referred to as
the "Security Documents." There is no intention to delay the time of attachment
of any lien or security created by a Security Document (including, without
limitation, any Security Agreement or Pledge Agreement). Obligor acknowledges
that value has been given for the Security Documents required to be delivered to
Lender pursuant to the terms of this Credit Agreement, and each such lien and
security interest shall attach at the earliest time permissible under the laws
governing such Security Document.
3.3 Guarantee. So long as any Loan is outstanding, Borrower will cause
such Loan and Borrower's obligations under this Credit Agreement to be
guaranteed under a Continuing Guarantee and Subordination Agreement from the
Guarantors. Each such Continuing Guarantee and Subordination Agreement is herein
referred to as a "Guarantee." Guarantors will subordinate all Indebtedness owed
to them by Borrower to the Obligation of Borrower to Lender upon terms
satisfactory to Lender.
3.4 Subordination. Borrower will cause the Subordinated Debt, and the
Liens securing the Subordinated Debt to be subordinate at all times to the
Obligation and to the Security Documents pursuant to a written agreement or
agreements satisfactory to Lender in its sole and absolute discretion. Each such
agreement is referred to herein as a "Subordination Agreement."
3.5 Intercreditor Agreement. Borrower will cause LaSalle, Cruttenden
and Seller to enter into a written intercreditor agreement ("Intercreditor
Agreement") satisfactory to Lender in its sole and absolute discretion
prioritizing their Liens with respect to the Security Documents as contemplated
by Schedule 1.1.
ARTICLE 4
<PAGE>
CONDITIONS PRECEDENT
The obligation of Lender to make any Loan and to make any Advance
hereunder is subject to the full prior satisfaction at each such time of each of
the following conditions precedent:
4.1 Term Loan Advance. Lender will have received the following, each in
form and substance satisfactory to Lender:
(a) The Credit Documents. The Credit Documents set forth on
the closing list attached hereto as Schedule 4.1 (including, without limitation,
this Credit Agreement, the Term Note, the Security Agreements, the Pledge
Agreements, the Guaranties, the Subordination Agreement, the Intercreditor
Agreement and the Warrant).
(b) Opinions of Counsel. Opinions from counsel to Borrower,
Guarantors and Seller, which counsel must be satisfactory to Lender, with
respect to such matters as Lender may require.
(c) Organizational Documents. A copy of the current Articles
of Organization of Borrower and each Guarantor required to be filed in the state
of such Person's organization, including all amendments thereto, certified as
current and complete by the appropriate authority of the state of such Person's
organization; a copy of the other Articles of Organization for each such Person,
certified by the corporate secretary, the general partners, the members, the
managers, the trustees or other authorized Person or Persons as true and
complete evidence of such Person's good standing in such Person's state of
organization and in every other state in which it is doing business or the
conduct of such Person's business requires such standing for the enforcement of
material contracts.
(d) Resolutions. The Resolutions and incumbency certificates
listed in Schedule 4.1 authorizing the Acquisition, the Term Loan, the
execution, delivery, and performance of the Credit Documents, and all advances
of credit hereunder, and setting forth therein the names, current official
titles, and signatures of the Authorized Officers.
(e) Financial Statements. Audited financial statements of
Borrower and Guarantors for their most recently ended fiscal years and unaudited
financial statements (certified by the chief financial officer of such Person)
for their recently ended fiscal quarter, together with pro-forma financial
statements of Borrower and projections of Borrower indicating that after the
Closing Date and after giving effect to the Acquisition, Borrower will remain
solvent and retain sufficient capital to carry on its business.
(f) Title. Evidence that Obligors have good, marketable and
legal title to their assets and that Obligors will be entitled at all times to
the use and quiet enjoyment of their respective assets.
(g) Searches. Results of UCC, lien, litigation, judgment and
bankruptcy searches for Borrower and Guarantors.
<PAGE>
(h) Releases and Lien Waivers. All documents necessary to
release or (in the case of landlord's liens) waive any and all Liens, other than
the Permitted Liens, on the Collateral.
(i) Licenses, Leases and Contracts. Copies of all existing
material licenses, leases and other contracts, certified as true and complete by
an Authorized Officer of Borrower.
(j) Third-Party Consents. Copies of consents to the
Acquisition from the Vancouver Stock Exchange, licensors under material licenses
(including, without limitation, Major League Baseball, National Basketball
Association, National Football League and National Hockey League), lessors under
material leases and Obligors under other material contracts, to the extent
required under the terms of such licenses, leases and other contracts, certified
as true and complete by an Authorized Officer of each Obligor.
(k) Insurance. Evidence that all insurance coverage required
pursuant to Section 6.14 is in place.
(l) Employment Agreements. A copy of all material agreements
between Borrower and its key employees.
(m) Share Certificates. Certificates evidencing all of the
issued and outstanding stock of Borrower and SEI.
(n) Acquisition Documents. A copy of the Purchase Agreement,
the consulting agreement for Thomas E. Dooley, Jr., and of all other documents
related to SEI's acquisition of the stock of Borrower, certified by an
Authorized Officer of SEI.
(o) LaSalle Loan Documents. A copy of all documents executed
in connection with the LaSalle Loans, certified by an Authorized Officer of
Borrower.
(p) Subordinated Debt Documents. A copy of all documents
executed or to be executed in connection with the Subordinated Debt and not part
of the documents delivered pursuant to Section 4.1(n).
(q) SE Corp Acquisition Capital Documents. A copy of all
documents executed or to be executed in connection with investments (whether
Indebtedness or equity) made in Obligors (other than the Term Loan, the LaSalle
Loans or the Subordinated Debt) in connection with the Acquisition, certified by
an Authorized Officer of SE Corp.
(r) Subordinate Financing. Evidence that financing which is
subordinate to the Term Loan and is in an amount not less than Seventeen Million
Six Hundred Thousand Dollars ($17,600,000.00) has been used to consummate the
Acquisition, to which there may be applied the Seller Debt up to a maximum of
Six Million Three Hundred Seventy-Eight Thousand Dollars ($6,378,000.00) and the
Cruttenden Loan.
(s) Funding of LaSalle Loans. Evidence satisfactory to Lender
that the
<PAGE>
LaSalle Loan which is a Term Loan in the amount of Three Million Five Hundred
Thousand Dollars ($3,500,000.00) has been funded to Borrower and that no default
exists under the LaSalle Loans.
(t) Acquisition. Evidence satisfactory to Lender that the
Acquisition has closed in accordance with the terms of the Purchase Agreement.
(u) Lender's Fees and Costs. Payment of a Term Loan fee in the
amount of One Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00) plus
Lender's other fees and costs, against which Lender will apply the deposit of
Twenty-Five Thousand and No/100 Dollars ($25,000.00) previously paid by Borrower
to Lender; and payment of Lender's expenses (including, without limitation,
attorneys' fees and costs and any brokers' fees payable in connection with the
Term Loan pursuant to Section 9.3).
(v) Equipment Appraisal. A copy of the June 1996 appraisal
prepared by Daley Hodkins with respect to Borrower's equipment, certified by an
Authorized Officer of Borrower.
(w) Shareholder Agreements. A copy of any and all shareholder
agreements affecting the stock of SE Corp issuable pursuant to the Warrant,
certified by an Authorized Officer of SE Corp.
(x) Kaufman Bros. Claim. Unless waived in writing, evidence
that claims made by Kaufman Bros. for fees have been settled in a manner
satisfactory to Lender in its sole and absolute discretion.
(y) Additional Information. Such other information and
documents as may reasonably be required by Lender or Lender's counsel.
4.2 No Event of Default or Default. No Event of Default or Default will
have occurred and be continuing, or result from Lender's making of any Loan.
4.3 No Material Adverse Change. Since the date of the most recent
financial statements provided to Lender by an Obligor, no change will have
occurred in the business or financial condition of Obligor that could have a
Material Adverse Effect.
4.4 Representations and Warranties. The representations and warranties
contained in Article 5 hereof will be true and correct in all material respects,
with the same force and effect as though made on and as of the Closing Date
(other than those of such representations which by their express terms speak to
a date prior to that date, which representations will, in all material respects,
be true and correct as of such respective date).
4.5 Deferral or Waiver of Conditions Precedent. The conditions
precedent to the making of the Loans set forth in this Agreement are solely for
the benefit of Lender. Although Lender shall have no obligation to do so, Lender
may make an Advance even though all conditions precedent thereto have not been
satisfied, without waiving (unless expressly agreed
<PAGE>
otherwise in writing by Lender) Borrower's obligation to satisfy conditions
precedent which were not satisfied at the time of the Advance.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans, each Obligor represents and
warrants to Lender that:
5.1 Recitals. The recitals and statements of intent appearing in this
Credit Agreement are true and correct.
5.2 Organization and Good Standing. It is duly organized, validly
existing and in good standing in the state of its organization and in all states
in which the nature of its business and property makes such qualifications
necessary or appropriate. It has the legal power and authority to own its
properties and assets and to transact the business in which it is engaged and is
or will be qualified in those states wherein the nature of its proposed business
and property will make such qualifications necessary or appropriate in the
future.
5.3 Authorization and Power. It has the power and requisite authority
to execute, deliver and perform the Credit Documents to be executed by it; it is
duly authorized to, and has taken all action, corporate or otherwise, necessary
to authorize it to, execute, deliver and perform the Credit Documents to be
executed by it and is and will continue to be duly authorized to perform its
obligations under the Credit Documents.
5.4 Security Documents. The liens, security interests and assignments
created by the Security Documents will, when granted, be valid, effective and
enforceable liens, security interests and assignments, except to the extent (if
any) otherwise agreed in writing by Lender.
5.5 No Conflicts or Consents. Neither the execution and delivery of any
Credit Document to which it is a party, nor the consummation of the Acquisition
or of any of the transactions in the Credit Documents, nor its compliance with
the terms and provisions of the Credit Documents (a) will materially contravene
or conflict with: (i) any provision of law, statute or regulation to which it is
subject, (ii) any judgment, license, order or permit applicable to it, (iii) any
indenture, credit agreement, mortgage, deed of trust, or other agreement or
instrument to which it is a party or by which it may be bound, or to which it
may be subject, or (b) will violate any provision of its Articles of
Organization. No consent, approval, authorization or order of any court or
Governmental Authority or other Person is required in connection with the
execution and delivery by it of the Credit Documents or to consummate the
Acquisition or the transactions contemplated by the Credit Documents, or if
required, such consent, approval, authorization or order will have been
obtained.
5.6 No Litigation. There are no actions, suits or legal, equitable,
arbitration or administrative proceedings pending, or to its actual knowledge
overtly threatened, against such Obligor that would, if adversely determined,
have a Material Adverse Effect.
<PAGE>
5.7 Financial Condition. It has delivered to Lender copies of its most
recent financial statements. Such financial statements, in all material
respects, fairly and accurately present its financial position of as of such
date, have been prepared in accordance with GAAP and neither contain any untrue
statement of a material fact nor fail to state a material fact required in order
to make such financial statement not misleading. Since the date thereof, it has
not discovered any obligations, liabilities or indebtedness (including
contingent and indirect liabilities and obligations or unusual forward or
long-term commitments) which in the aggregate are material and adverse to its
financial position or business that should have been but were not reflected in
such financial statements. No changes having a Material Adverse Effect have
occurred in its financial condition or business since the date of such financial
statements.
5.8 Taxes. It has filed or caused to be filed all returns and reports
which are required to be filed by any jurisdiction, and has paid or made
provision for the payment of all taxes, assessments, fees or other governmental
charges imposed upon its properties, income or franchises, as to which the
failure to file or pay would have a Material Adverse Effect, except such
assessments or taxes, if any, which are being contested in good faith by
appropriate proceedings.
5.9 No Stock Purchase. No part of the proceeds of any financial
accommodation made by Lender in connection with this Credit Agreement will be
used to purchase or carry "margin stock," as that term is defined in Regulation
U, or to extend credit to others for the purpose of purchasing or carrying such
margin stock.
5.10 Advances. The request for an Advance or for the extension of any
financial accommodation by Lender whatsoever will constitute an affirmation that
the representations and warranties contained herein are, true and correct as of
the time of such request. All representations and warranties made herein will
survive the execution of this Credit Agreement, all advances of proceeds of the
Loans and the execution and delivery of all other documents and instruments in
connection with the Loans and/or this Credit Agreement, so long as Lender has
any commitment to lend hereunder and until the Loans have been paid in full and
all of Borrower's obligations under this Credit Agreement, the Notes and all
Security Documents have been fully discharged.
5.11 Enforceable Obligations. This Credit Agreement, the Notes and the
other Credit Documents are its legal, valid and binding obligations, enforceable
against it in accordance with their respective terms, except as limited by
bankruptcy, insolvency or other laws or equitable principles of general
application relating to the enforcement of creditors' rights.
5.12 No Default. No event or condition has occurred and is continuing
that constitutes an Event of Default.
5.13 Significant Debt Agreements and other Material Agreements. All
licenses, leases and other contracts which are necessary to conduct its business
in materially the same manner as now conducted and to prevent the occurrence of
a Material Adverse Effect are in full force and effect. Neither it nor any of
its Subsidiaries is in default under any Significant Debt Agreement or any
material license, lease or other contract to which it is a party or by which it
<PAGE>
is bound, nor does it know of any dispute regarding any material license, lease
or other contract.
5.14 ERISA. (a) No Reportable Event has occurred and is continuing with
respect to any Plan; (b) PBGC has not instituted proceedings to terminate any
Plan; (c) neither it, any member of the Controlled Group, nor any duly-appointed
administrator of a Plan (i) has incurred any liability to PBGC with respect to
any Plan other than for premiums not yet due or payable or (ii) has instituted
or intends to institute proceedings to terminate any Plan under Section 4041 or
4041A of ERISA; and (d) each of its Plans has been maintained and funded in all
material respects in accordance with its terms and in all material respects in
accordance with all provisions of ERISA applicable thereto. Neither it nor any
of its Subsidiaries participates in, or is required to make contributions to,
any Multi-employer Plan (as that term is defined in Section 3(37) of ERISA).
5.15 Compliance with Law. It and its Subsidiaries are in substantial
compliance with all laws, rules, regulations, orders and decrees that are
applicable to them, or their respective properties, except for such
noncompliance which would not have a Material Adverse Effect.
5.16 Solvent. It (both before and after giving effect to the Loans
contemplated hereby) and its Subsidiaries are solvent, have assets having a fair
value in excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured, and have, and will have,
access to adequate capital for the conduct of their respective businesses and
the ability to pay their respective debts from time to time incurred in
connection therewith as such debts mature. The Acquisition and the transactions
contemplated hereby will not constitute a fraudulent transfer or a fraudulent
conveyance.
5.17 Investment Company Act. It is not, and is not directly or
indirectly controlled by, or acting on behalf of, any person which is, an
"Investment Company" within the meaning of the Investment Company Act of 1940,
as amended.
5.18 Title. It and its Subsidiaries have their respective good and
marketable fee title to their respective real property, and good and marketable
title to and rights in their respective other property and assets. None of the
assets or property the value of which is reflected in the latest balance sheets
received by Lender is held by it or any of its Subsidiaries as lessee under any
lease (excluding capitalized lease obligations) or as conditional vendee under
any conditional sales contract or other title retention agreement. It and its
Subsidiaries enjoy peaceful and undisturbed possession under all of the leases
under which they are operating, none of which contains any unusual or burdensome
provisions that will materially impair or adversely affect the operations of it
or its Subsidiaries. All of such leases are valid, subsisting and in full force
and effect.
5.19 Permits and Licenses. To the best of the Obligor's knowledge, it
and its Subsidiaries have obtained all licenses, authorizations, approvals and
permits, the lack of which would have a material adverse effect on the operation
of their respective businesses, and to the best of Obligor's knowledge, it and
its Subsidiaries will remain in compliance in all material respects with all
applicable federal, state, local and foreign statutes, orders, regulations,
rules and ordinances (including, without limitation, statutes, orders,
regulations, rules and ordinances
<PAGE>
relating to taxes, employer and employee contributions and similar items,
securities, employee retirement and welfare benefits, employee health and safety
or environmental matters), the failure to comply with which would have a
Material Adverse Effect;
5.20 Transactions with Affiliates. It is not conducting or permitting
to be conducted any activities pursuant to or in connection with which any of
the Collateral is now, or will (while the Obligations remain outstanding), be
owned by an Affiliate;
5.21 Indebtedness. Neither it nor any of its Subsidiaries is now
obligated, whether directly or indirectly, for any Indebtedness for borrowed
money other than (a) the Obligation, (b) Indebtedness disclosed on Schedule 5.21
hereto, (c) unsecured Indebtedness to trade creditors arising in the ordinary
course of its business, (d) the LaSalle Loans, (e) the Subordinated Debt, and
(f) unsecured Indebtedness arising from the endorsement of drafts and other
instruments for collection, in the ordinary course of its business;
5.22 Subsidiaries; Capital Structure. Except as otherwise disclosed in
this Section or on Schedule 5.22 (Subsidiaries and Divisions), it has no
Subsidiaries or divisions, nor is it engaged in any joint venture or partnership
with any other Person. SEI is a wholly-owned Subsidiary of SE Corp. Following
the Acquisition, Borrower will be a wholly-owned subsidiary of SEI. Schedule
5.22 (Capitalization) sets forth a complete description of its capitalization.
All of its stock is validly issued, fully paid and non-assessable, and has been
issued in compliance with all applicable federal and state securities laws,
rules and regulations. All of the shares of its stock are owned beneficially and
of record by its shareholders, free and clear of all Liens.
5.23 Employee Controversies. There are no controversies pending or, to
the best of the its knowledge, threatened between it and any of its employees,
other than employee grievances arising in the ordinary course of business which
are not, in the aggregate, material to the continued financial success and
well-being, and to the best of the its knowledge, it is in compliance in all
material respects with all federal and state laws respecting employment and
employment terms, conditions and practices, except where the failure to so
comply would not have a Material Adverse Effect.
5.24 Proprietary Rights. It possesses adequate licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames to continue to conduct its business as
heretofore conducted by it.
5.25 Business. A description of its business as currently conducted and
intended to be conducted is set forth in Schedule 5.25.
ARTICLE 6
AFFIRMATIVE COVENANTS
Until payment in full of the Loans and the complete performance of the
Obligation, each Obligor agrees that:
<PAGE>
6.1 Financial Statements, Reports and Documents. It will deliver, or
cause to be delivered, to Lender each of the following:
(a) Annual Statements. As soon as available and in any event
within ninety (90) days after the close of each of its fiscal years, audited
financial statements of such Obligor (consolidated in the case of SE Corp),
including its balance sheet as of the close of such fiscal year, statements of
income of such Obligor for such fiscal year and statements of cash flow for such
fiscal year, in each case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail, and accompanied by an
unqualified opinion thereon of independent public accountants of recognized
national standing selected by such Obligor and acceptable to Lender, to the
effect that such financial statements have been prepared in accordance with
GAAP.
(b) Quarterly Statements. As soon as available, and in any
event within thirty (30) days after the end of each calendar quarter, copies of
the balance sheet of such Obligor (consolidated in the case of SE Corp) as of
the end of such quarter, statements of income and of cash flow of such Obligor
for that quarter and for the portion of the fiscal year ending with such
quarter, in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable detail, and
prepared by such Obligor in accordance with GAAP.
(c) Monthly Statements. As soon as available, and in any event
within twenty-five (25) days after the end of each calendar month, copies of the
balance sheet of such Obligor (consolidated in the case of SE Corp) as of the
end of such month, and statements of income and of cash flow of such Obligor for
that month and for the portion of the fiscal year ending with such month, in
each case setting forth in comparative form the figures for the corresponding
period of the preceding fiscal year, all in reasonable detail, and prepared by
such Obligor in accordance with GAAP.
(d) Advance Bookings and Sales Reports. Within twenty-five
(25) days after the end of each calendar month, a report showing advance sales
for such month and for the portion of the fiscal year ending with such month,
together with comparisons for the same periods during the preceding year, and
such other sales reports as may be reasonably requested by Lender.
(e) Compliance Certificate of Borrower. At the same time
financial statements for a fiscal period or calendar month of such Obligor are
required to be submitted pursuant to Sections 6.1(a)-6.1(c), a certificate
signed by the chief financial officer of such Obligor, substantially in the form
of Exhibit 6.1(e) attached hereto, certifying that after a review of the
activities of such Obligor during such period made under his supervision: (i)
such Obligor has observed, performed and fulfilled each and every obligation and
covenant contained herein and no Event of Default exists under any of the same
or, if any Event of Default will have occurred, specifying the nature and status
thereof; (ii) all representations and warranties set forth in the Credit
Documents remain true and complete in all material respects as if made on and as
of the date of the compliance certificate, except for changes as may have
resulted from any circumstance or event which has not had a Material Adverse
Effect; and (iii) all financial
<PAGE>
statements of such Obligor delivered to Lender during the respective period
pursuant to Sections 6.1(a) and 6.1(c) hereof, to his/her knowledge, fairly
present in all material respects the financial position of such Obligor and the
results of its operations at the dates and for the periods indicated, and have
been prepared in accordance with GAAP, together with a calculation of the
Financial Covenants.
(e) Reports to Security Holders, SEC and Other Creditors.
Within seven (7) days after becoming available, copies of (i) all financial
statements, reports, notice and proxy statements, sent or made available
generally to its security holders, (ii) all regular and period reports and
registration statements and prospectuses filed by it with any securities
exchange, to SEC or any similar governmental agencies, and (iii) all reports and
information required to be given to the holder of the LaSalle Loans or the
Cruttenden Loan.
(f) Other Information. Such other information concerning the
business, properties or financial condition of such Obligor as Lender will
reasonably request, including, without limitation, the information required
pursuant to Section 6.10.
6.2 Maintenance of Existence and Rights; Conduct of Business;
Management. It will preserve and maintain, and will cause each Subsidiary to
preserve and maintain, its existence and all of its rights, privileges,
licenses, permits, franchises and other rights necessary or desirable in the
normal conduct of its business, conduct its business in an orderly and efficient
manner consistent with good business practices and maintain professional
management of its business.
6.3 Operations and Properties. It will keep, and will cause each
Subsidiary to keep, in good working order and condition, ordinary wear and tear
excepted, all of their respective assets and properties which are necessary to
the conduct of its business.
6.4 Authorizations and Approvals. It will promptly obtain, and will
cause each Subsidiary to promptly obtain, from time to time at its own expense,
all such governmental licenses, authorizations, consents, permits and approvals
as may be required to enable such Obligor to comply with its obligations
hereunder and under the other Credit Documents and such Obligor and its
Subsidiaries to operate their respective businesses as presently or hereafter
duly conducted.
6.5 Compliance with Law. It will comply, and will cause each Subsidiary
to comply, with all applicable laws, rules, regulations, and all final,
nonappealable orders of any Governmental Authority applicable to them or any of
their respective property, business operations or transactions, including
without limitation, any environmental laws applicable to them, a breach of which
could result in a Material Adverse Effect.
6.6 Payment of Taxes and Other Indebtedness. It will pay and discharge,
and will cause each Subsidiary to pay and discharge, (a) all income taxes and
payroll taxes, (b) all taxes, assessments, fees and other governmental charges
imposed upon them or upon their respective income or profits, or upon any of
their respective property, before delinquent, which become due and payable, (c)
all lawful claims (including claims for labor, materials and supplies),
<PAGE>
which, if unpaid, might become a Lien upon any of their respective property and
(d) all of their respective Indebtedness as it becomes due and payable, except
as prohibited hereunder; provided, however, that they will not be required to
pay any such tax, assessment, charge, levy, claims or Indebtedness if and so
long as the amount, applicability or validity thereof will currently be
contested in good faith by appropriate actions and appropriate accruals and
reserves therefor have been established in accordance with GAAP.
6.7 Compliance with Significant Debt Agreements and Other Material
Agreements. It will maintain, and will cause each Subsidiary to maintain, all
licenses, leases and other contracts which are necessary to conduct its business
in materially the same manner as now conducted and to prevent the occurrence of
a Material Adverse Effect are in full force and effect. It will comply, and will
cause each Subsidiary to comply, in all material respects with (a) all
Significant Debt Agreements, and (b) all licenses, leases and other contracts to
which they are a party and a breach of which could result in a Material Adverse
Effect.
6.8 Compliance with Credit Documents. It will comply, and will cause
each Subsidiary to comply, with any and all covenants and provisions of the
Credit Documents.
6.9. Notice of Default. It will furnish to Lender immediately upon
becoming actually aware of the existence of any event or condition that
constitutes an Event of Default, a written notice specifying the nature and
period of existence thereof and the action which it is taking or proposes to
take with respect thereto.
6.10 Other Notices. It will promptly notify Lender of (a) any Material
Adverse Effect, (b) any waiver, release or default under any Significant Debt
Agreement or other licenses, leases and other contracts to which it or a
Subsidiary is a party and a breach of which could result in a Material Adverse
Effect, (c) any modification of a Significant Debt Agreement, (d) any claim not
covered by insurance against it or any its properties, and (e) the commencement
of, and any material determination in, any litigation with any third party or
any proceeding before any Governmental Authority affecting it or any Subsidiary,
except litigation or proceedings which, if adversely determined, would not have
a Material Adverse Effect. As promptly as possible, but not less fourteen (14)
days prior to the acquisition of such property, it will notify Lender of its
intention to acquire any property with respect to which Lender must take some
additional action in order to perfect its lien thereon and the intended date of
acquisition. SE Corp will notify Lender of each Securities Offering not later
than ten (10) days prior to the closing of such Securities Offering.
6.11 Books and Records; Access. It will give, and will cause each
Subsidiary to give, any authorized representative of Lender access during normal
business hours to, and permit such representative to examine, copy or make
excerpts from, any and all books, records and documents in its possession of and
relating to the Loans, and to inspect any of their respective properties. It
will maintain, and will cause each Subsidiary to maintain, complete and accurate
books and records of their respective transactions in accordance with good
accounting practices.
6.12 ERISA Compliance. With respect to its Plans, it will (a) at all
times comply with the minimum funding standards set forth in Section 302 of
ERISA and Section 412 of the Code
<PAGE>
or will have duly obtained a formal waiver of such compliance from the proper
authority; (b) at Lender's request, within thirty (30) days after the filing
thereof, furnish to Lender copies of each annual report/return (Form 5500
Series), as well as all schedules and attachments required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA, in
connection with each of its Plans for each year of the plan; (c) notify Lender
within a reasonable time of any fact, including, but not limited to, any
Reportable Event arising in connection with any of its Plans, which constitutes
grounds for termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such Plan,
together with a statement, if requested by Lender, as to the reason therefor and
the action, if any, proposed to be taken with respect thereto; and (d) furnish
to Lender within a reasonable time, upon Lender's request, such additional
information concerning any of its Plans as may be reasonably requested.
6.13 Further Assurances. It will make, execute or endorse, and
acknowledge and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements, undertakings or other assurances, and
take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper to fully evidence the Loan.
6.14 Insurance. It will maintain, and will cause each Subsidiary to
maintain, in full force and effect at all times all insurance coverages required
under the terms of the Credit Documents to which it or such Subsidiary is a
party. In addition, it will maintain, and will cause each Subsidiary to
maintain, in full force and effect at all times:
(a) Policies of all risk coverage insurance covering all
tangible property of such Person in which Lender has been granted or obtained a
security interest to secure the Obligation, in coverage amounts not less than,
from time to time, the fair market value thereof.
(b) Policies of insurance evidencing personal liability and
property damage liability coverages in amounts (combined single limit for bodily
injury and property damage) not less than $2,000,000.00 for Borrower and
$1,000,000.00 for each of the other Obligors, and an umbrella excess liability
coverage in an amount not less than $4,000,000.00 for Borrower and $2,000,000.00
for each of the other Obligors.
(c) Policies of workers' compensation insurance in amounts and
with coverages as legally required.
Without limitation of the foregoing, it will at all times maintain insurance
coverages (including, without limitation, business interruption coverage) in
scope and amount not less than, and not less extensive than, the scope and
amount of insurance coverages customary in the trades or businesses in which it
is from time to time engaged. All of the aforesaid insurance coverages will be
issued by insurers reasonably acceptable to Lender. Copies of all policies of
insurance evidencing such coverages in effect from time to time will be
delivered to Lender prior to the Term Loan Advance and upon reasonable notice
upon issuance of new policies thereafter. From time to time, promptly upon
Lender's request, it will provide evidence satisfactory to Lender (i) that
required coverage in required amounts is in effect, and (ii) that Lender is
shown as an additional loss payee with respect to all such coverages, as
Lender's interest may appear, by
<PAGE>
standard (non-attribution) loss payable endorsement, additional insured
endorsement, insurer's certificate or other means acceptable to Lender in its
reasonable discretion. At Lender's option, it will deliver to Lender certified
copies of all such policies of insurance in effect from time to time, to be
retained by Lender so long as Lender will have any commitment to lend hereunder
and/or any portion of the Obligation will be outstanding or unsatisfied. All
such insurance policies will provide for at least thirty (30) days prior written
notice of the cancellation or modification thereof to Lender.
6.15 Proprietary Rights. It will possess, and cause each of its
Subsidiaries to possess, adequate licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, tradestyles and
tradenames to continue to conduct its business as heretofore conducted by it.
ARTICLE 7
NEGATIVE COVENANTS
Until payment in full of the Loans and the performance of the
Obligation without receiving the prior express written consent of Lender:
7.1 Existence; Issuance of Stock; Change of Control; Sales of
Substantially All of Assets. Obligors will not, and will not permit any of their
respective Subsidiaries: (a) to dissolve or liquidate, or merge or consolidate
with or into any other Person, or turn over the management or operation of their
respective property, assets or business to any other Person; (b) except pursuant
to public offerings of its stock by SE Corp registered under the Securities Act
of 1933 and in connection with which SE Corp has performed its obligations under
the Warrant, issue any shares of, or warrants or other rights to receive or
purchase any shares of, any class of their stock, redeem or repurchase any of
their stock; (c) have more than the percentage of their issued and outstanding
stock sold or transferred which would result in a Change of Control; (d) acquire
directly or indirectly all or substantially all of the capital stock of another
Person or create any new Subsidiary or Affiliate, except as resulting from the
Acquisition; or (e) sell, lease or otherwise dispose of all or substantially all
of its assets.
7.2 Amendments to Organizational Documents. Obligors will not, and will
not permit any of their respective Subsidiaries, to amend their organizational
documents if the result thereof could result in the occurrence directly or
indirectly of a Material Adverse Effect.
7.3 Margin Stock. Borrower will not, and will not permit any of its
Subsidiaries, to use any proceeds of the Loans, or any proceeds of any other or
future financial accommodation from Lender for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any "margin stock" as that
term is defined in Regulation U or to reduce or retire any indebtedness
undertaken for such purposes within the meaning of said Regulation U, and will
not use such proceeds in a manner that would involve Borrower in a violation of
Regulation U or of any other Regulation of the Board of Governors of its Federal
Reserve System, nor use such proceeds for any purpose not permitted by Section 7
of the Exchange Act, or any of the rules or regulations respecting the
extensions of credit promulgated thereunder.
<PAGE>
7.4 Fiscal Year. Obligor will not, and will not permit any of their
respective Subsidiaries, to change the times of commencement or termination of
their fiscal year or other accounting periods; or change its methods of
accounting other than to conform to GAAP applied on a consistent basis. After
any such changes, its method of accounting will conform to GAAP.
7.5 Liens. Obligors will not, and on and after the date hereof, to
create or suffer to exist Liens upon any of their respective property except
Liens, if any, for the benefit of Lender and Permitted Liens.
7.6 Transfer Collateral. Obligors will not assign, transfer or convey
any of its right, title and interest in the Collateral (whether real or
personal), except in connection with sales of inventory in the ordinary course
of business.
7.7 Financial Covenants. Borrower will not permit:
(a) Its Interest Coverage Ratio to be less than 1.50 to 1.0 as
of the dates, and calculated in the manner, specified below;
(b) Its Debt Service Coverage Ratio to be less than 1.25 to
1.0 as of the dates, and calculated in the manner, specified below;
(c) Its Liabilities to TNW Ratio to be more than 3.0 to 1.0 as
of the dates, and calculated in the manner, specified below; and
(d) Its Tangible Net Worth to be at any time less than the sum
of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) plus an
amount equal to fifty percent (50%) the net income of such Person between May 1,
1997 and the date of determination, as determined in accordance with GAAP.
The Interest Coverage Ratio, the Debt Service Coverage Ratio or the Liabilities
to TNW Ratio for SEI and Borrower will be calculated quarterly as of the last
day of each fiscal quarter of such Person, for the fiscal periods of such Person
beginning January 1, 1997 and ending June 30, 1997, September 30, 1997, and
December 31, 1997; and beginning January 31, 1998, thereafter calculated as of
the end of each month on a twelve-month rolling basis.
7.8 Other Indebtedness. SEI and Borrower will not, and will not permit
any of their respective Subsidiaries to do the following: (a) incur, create,
assume or suffer to exist any indebtedness other than (i) Indebtedness arising
under this Credit Agreement, (ii) unsecured Indebtedness owing in the ordinary
course of business to trade suppliers, (iii) the LaSalle Loans, (iv) the
Subordinated Debt, (v) Indebtedness described on Schedule 7.8 attached hereto,
and (vi) Permitted Refinancings of the Indebtedness described in subsections
(a)(iii)-(a)(v); or (b) assume, guarantee or endorse, or otherwise become liable
in connection with, the obligations of any Person, except by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business and for guaranties by SE Corp and SEI of the LaSalle Loans,
the Subordinated Debt and Permitted Refinancings of the LaSalle Loans or the
Subordinated Debt;
<PAGE>
7.9 Investments. Obligors will not, and will not permit any of their
respective Subsidiaries to, make any advance, loan, investment or material
acquisition of assets (other than Capital Expenditures permitted pursuant to
Section 7.12) other than (i) advances made to employees in the ordinary course
of business so long as the aggregate amount of such advances do not exceed Fifty
Thousand Dollars ($50,000.00) in the aggregate outstanding at any time; (ii)
investments in marketable securities so long as the aggregate amount of such
investments do not exceed One Hundred Thousand Dollars ($100,000.00) at any
time; (iii) investments in short-term direct obligations of the United States
government; (iv) investments in negotiable certificates of deposit issued by a
bank satisfactory to Lender, payable to the order of such Person or to bearer;
(v) investments in commercial paper rated A-l or P-1; provided, that with
respect to clauses (ii), (iii), (iv), and (v), Obligors will assign all such
investments to Lender in form acceptable to Lender;
7.10 Dividends and Distributions. Obligors will not, and will not
permit any of its Subsidiaries, to (i) except as permitted pursuant to the
following sentence, declare or pay any dividend or other distribution (whether
in cash or in kind) on, purchase, redeem or retire any shares of any class of
its stock, or make any payment on account of, or set apart assets for the
repurchase, redemption, defeasance or retirement of, any class of their
respective stock; or (ii) except for required prepayments on the LaSalle Loans
or payments on the Subordinated Debt permitted by the Subordination Agreements
or pursuant to the following sentence, make any optional payment or prepayment
on or redemption (including without limitation by making payments to a sinking
fund or analogous fund) or repurchase of any Indebtedness for borrowed money
other than Indebtedness incurred pursuant to this Credit Agreement. Following
the Acquisition, dividends may be made quarterly by Borrower when no Event of
Default exists in an amount equal to the regularly scheduled payments due under
the Seller Debt but not to exceed One Hundred Thousand Dollars ($100,000.00)
quarterly, provided such payments are permitted then to be made pursuant to the
terms of the Subordination Agreement between the Seller, LaSalle, Cruttenden and
Lender and such dividends are used to make such payments.
7.11 Compensation. Antigua will not, and will not permit any of its
Subsidiaries to, pay compensation during any fiscal year of such Person,
including, without limitation, salaries, bonuses and consulting fees to its five
(5) most highly compensated employees in excess of the base compensation and
other compensation permitted pursuant to Schedule 7.11; and except as provided
in the preceding sentence, Obligors will not, and will not permit any of their
Subsidiaries to pay any compensation to their employees, officers and directors
which is not reasonable under the circumstances.
7.12 Capital Expenditures. Borrower will not make: (A) Capital
Expenditures of an aggregate amount of more than Five Hundred Thousand Dollars
($500,000.00) during any fiscal year (pro-rated for the fiscal year ending
December 31, 1997); or (B) Capital Expenditures in the form of expenditures for
capital lease obligations of an aggregate amount of more than Five Hundred
Thousand Dollars ($500,000.00) during any fiscal year (pro-rated for the fiscal
year ending December 31, 1997).
7.13 Transactions with Affiliates. Obligors will not do, and will not
permit any of its Subsidiaries to do any of the following: conduct any
activities pursuant to or in connection with
<PAGE>
which any of the Collateral is now, or will (while the Obligation remains
outstanding), be owned by any Affiliate; or engage in any transaction with any
Affiliate except for fair consideration and upon terms at least as favorable as
would be obtained as the result of an "arms length" transaction with a Person
not an Affiliate.
7.14 Changes in Business. Obligors will not, and will not permit their
Subsidiaries to, engage in any business other than their respective business as
currently conducted or materially change the nature of such business.
7.15 Other Creditors' Documents. Obligors will not amend or waive any
provision of the Other Creditors' Documents which would:
(a) Increase the interest rate or charges (including
prepayment premiums) applicable to the Indebtedness arising thereunder;
(b) Change the amortization schedule (including maturity date)
of the Indebtedness arising thereunder;
(c) Shorten cure periods, eliminate notices required to be
given prior to an event of default, or add additional circumstances which would
cause an event of default with respect to the Indebtedness arising thereunder;
or
(d) Increase loan-to-value ratios limiting borrowings against
Collateral.
ARTICLE 8
EVENTS OF DEFAULT
8.1 Events of Default. An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
(a) Any failure by Borrower to pay any principal of, or
interest on, any Note when the same will become due or payable; or any failure
of any Obligor to pay any other amount owed by it to Lender under the Credit
Documents when due, declared due or demanded by Lender in accordance with the
terms of the Credit Documents and the failure to make such payment is not cured
within five (5) days after notice from Lender to the defaulting Obligor.
(b) Any failure or neglect to perform or observe any of the
covenants, conditions, provisions or agreements of Obligor contained herein, or
in any of the other Credit Documents, which failure continues for five (5)
calendar days after notice to the defaulting Obligor, provided that a failure by
Borrower to perform any obligation under any of the following Sections of the
Credit Documents shall constitute an immediate Event of Default without any
Obligor having any notice or cure rights: Sections 6.1, 6.11, 6.14 and 7.1-7.15
of this Credit Agreement; and each covenant or agreement of an Obligor set forth
in the Security Documents.
<PAGE>
(c) Any warranty, representation or statement contained in
this Credit Agreement or any of the other Credit Documents, or which is
contained in any certificate or statement furnished or made to Lender pursuant
hereto or in connection herewith or with the Loans, which is false when made or
furnished.
(d) The occurrence of any material "event of default" or
"default" by an Obligor under any other Credit Document, or any agreement, now
or hereafter existing and relating to the Obligation, to which such Obligor is a
party.
(e) (i) An Obligor fails to pay any of its Indebtedness (other
than the Notes) due under any Significant Debt Agreement, or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) or within any applicable grace period; (ii)
an Obligor fails to perform or observe any term, covenant, or condition on its
part to be performed or observed under any agreement or instrument relating to
Indebtedness under any Significant Debt Agreement, within any applicable grace
period when required to be performed or observed, if the effect of such failure
to perform or observe is to accelerate the maturity of such Indebtedness, (iii)
any Indebtedness under any Significant Debt Agreements is declared to be due and
payable, or is required to be prepaid (other than by a regularly scheduled
prepayment), prior to the stated maturity thereof, (iv) an Obligor allows the
occurrence of any material event of default with respect to Indebtedness, or (v)
an Obligor fails to perform, keep or observe any of its covenants, conditions,
promises or agreements under any other agreement with such person if such
failure has or is reasonably likely to have a Material Adverse Effect.
(f) Any one or more of the Credit Documents is determined to
be invalid or unenforceable against an Obligor executing the same in accordance
with the respective terms thereof, or is in any way terminated or becomes or is
declared ineffective or inoperative, so as to deny Lender the substantial
benefits contemplated by such Credit Document or Credit Documents.
(g) Borrower or a Guarantor (i) applies for or consents to the
appointment of a receiver, custodian, trustee, intervenor or liquidator of
itself or of all or a substantial part of its assets, (ii) files a voluntary
petition in bankruptcy or admits in writing that it is unable to pay its debts
as they become due, (iii) makes a general assignment for the benefit of
creditors, (iv) files a petition or answer seeking reorganization of an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, (v) files an answer admitting the material allegations of, or consent to,
or default in answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or (vi) takes corporate action for the
purpose of effecting any of the foregoing.
(h) An involuntary petition or complaint is filed against
Borrower or a Guarantor, seeking bankruptcy or reorganization of Borrower or
such Guarantor, or the appointment of a receiver, custodian, trustee, intervenor
or liquidator of Borrower or a Guarantor, or all or substantially all of its
assets, and such petition or complaint is not dismissed within sixty (60) days
of the filing thereof; or an order, order for relief, judgment or decree is
entered by any court of competent jurisdiction or other competent authority
approving a petition
<PAGE>
or complaint seeking reorganization of Borrower or a Guarantor, appointing a
receiver, custodian, trustee, intervenor or liquidator of Borrower or a
Guarantor, or all or substantially all of its assets, and such order, judgment
or decree will continue unstayed and in effect for a period of ninety (90) days.
(i) Any final judgment(s) (excluding those the enforcement of
which is suspended pending appeal) for the payment of money in excess of the sum
of $50,000.00 in the aggregate (other than any judgment covered by insurance
where coverage has been acknowledged by the insurer) is rendered against
Borrower or a Guarantor, and such judgment or judgments is not satisfied,
settled, bonded or discharged at least ten (10) days prior to the date on which
any of its assets could be lawfully sold to satisfy such judgment.
(j) Either (i) proceedings are instituted to terminate, or a
notice of termination is filed with respect to, any Plans (other than a
Multi-Employer Pension Plan as that term is defined in Section 4001(a)(3) of
ERISA) by Borrower or a Guarantor, any member of the Controlled Group, PBGC or
any representative of any thereof, or any such Plan will be terminated, in each
case under Section 4041 or 4042 of ERISA, and such termination will give rise to
a liability of such Person or the Controlled Group to the PBGC or the Plan under
ERISA having an effect in excess of $50,000.00 or (ii) a Reportable Event, the
occurrence of which would cause the imposition of a lien in excess of $50,000.00
under Section 4062 of ERISA, occurs with respect to any Plan (other than a
Multi-Employer Pension Plan as that term is defined in Section 4001(a)(3) of
ERISA) of Borrower or a Guarantor and be continuing for a period of sixty (60)
days.
(k) Any of the following events occurs with respect to any
Multi- Employer Pension Plan (as that term is defined in Section 4001(a)(3) of
ERISA) to which Borrower contributes or contributed on behalf of its employees
and Lender determines in good faith that the aggregate liability likely to be
incurred by Borrower, as a result of any of the events specified in Subsections
(i), (ii) and (iii) below, will have an effect in excess of $50,000.00; (i)
Borrower or a Guarantor incurs a withdrawal liability under Section 4201 of
ERISA; (ii) any such plan is "in reorganization" as that term is defined in
Section 4241 of ERISA; or (iii) any such Plan is terminated under Section 4041A
of ERISA.
(l) If the same is not bonded or released within fifteen (15)
days after the occurrence of such event, any levy or execution upon, or
attachment, garnishment or judicial seizure of, or the existence or filing of
any Lien against (i) any property of an Obligor that has a fair market value in
excess of $50,000.00 or (ii) any Collateral.
(m) Any abandonment of any portion of the Collateral.
(n) The loss, theft or destruction of, or any substantial
damage to, any portion of the Collateral, that is not adequately covered by
insurance.
(o) The death of a Guarantor.
(p) The occurrence of any event or condition which has or is
reasonably likely
<PAGE>
to have a Material Adverse Effect.
8.2 Remedies Upon Event of Default. If an Event of Default will have
occurred and be continuing, then Lender may, at its sole option, exercise any
one or more of the following rights and remedies, and any other remedies
provided in any of the Credit Documents, as Lender in its sole discretion may
deem necessary or appropriate, all of which remedies will be deemed cumulative,
and not alternative:
(i) cease making the Term Loan Advance and any other
Advances or extensions of financial accommodations in any form to or for the
benefit of Borrower and declare the principal of, and all interest then accrued
on, the Notes and any other liabilities hereunder to be forthwith due and
payable, whereupon the same will become immediately due and payable without
presentment, demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind all of which Borrower hereby
expressly waives, anything contained herein or in the Notes to the contrary
notwithstanding;
(ii) reduce any claim to judgment;
(iii) immediately cause to be recorded on all
certificates of title held by Lender evidence of Lender's lien with the proper
Governmental Authority;
(iv) appoint by instrument; and or have appointed by
a court of competent jurisdiction a receiver, receiver and manager, or
receiver-manager ("Receiver") of the Collateral, with or without bond, as the
Lender may determine, and from time to time in its sole and absolute discretion,
remove such Receiver and appoint another in its stead; and/or
(v) without notice of default or demand, pursue and
enforce any of Lender' rights and remedies under the Credit Documents, or
otherwise provided under or pursuant to any applicable law or agreement;
provided, however, that if any Event of Default specified in Sections 8.1(g) and
8.1(h) will occur, the principal of, and all interest on, the Notes and other
liabilities hereunder will thereupon become due and payable concurrently
therewith, without any further action by Lender and without presentment, demand,
protest, notice of default, notice of acceleration or of intention to accelerate
or other notice of any kind, all of which each Obligor hereby expressly waives.
Upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized at any time and from time to time, without notice to
any Obligor (any such notice being expressly waived by each Obligor), to set off
and apply any and all moneys, securities or other property of Obligors and the
proceeds therefrom, now or hereafter held or received by or in transit to Lender
or its agents, from or for the account of Obligor, whether for safe keeping,
custody, pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of Obligors, and any and all
claims of Obligors against Lender at any time existing. Lender agrees promptly
to notify the Obligors whose property is affected by a set-off and/or
application after any such setoff and application, provided that the failure to
give such notice will not affect the validity of such setoff and application.
The rights of Lender under this Section 8.2 are in addition to other rights and
remedies (including,
<PAGE>
without limitation, other rights of setoff) which Lender may have.
8.3 Performance by Lender. Should an Obligor fail to perform any
covenant, duty or agreement with respect to the payment of taxes, obtaining
licenses or permits, or any other requirement contained in any of the Credit
Documents within the period provided therein, if any, for correction of such
failure, Lender may, at its option, perform or attempt to perform such covenant,
duty or agreement on behalf of such Obligor. Should there occur any default in
any payment or performance of any obligation under the Other Creditors'
Documents, then Lender, without notice to or demand upon any Obligor and without
releasing any Obligor from any obligation, may pay or perform such obligation in
such manner and to such extent as it may deem necessary; and Lender is hereby
authorized to enter upon Obligors' property for such purposes. In addition, upon
the occurrence of any Event of Default and at any time while such Event of
Default is continuing, Lender, at any time and from time to time, may prepay the
obligations under the Other Creditors' Documents in whole or in part together
with all premiums, penalties or other payments required in connection with any
such prepayment. The exercise of any right or authority herein granted shall not
cure or waive any Event of Default nor invalidate any act done hereunder because
of any Event of Default. In such event, Obligors will, at the request of Lender,
promptly pay any amount expended by Lender in such performance or attempted
performance to Lender at its office in Inglewood, California, together with
interest thereon at the Default Rate, from the date of such expenditure until
paid. Notwithstanding the foregoing, it is expressly understood that Lender does
not assume any liability or responsibility for the performance of any duties of
any Obligor hereunder or under any of the Credit Documents or other control over
the management and affairs of any Obligor.
8.4 Receiver. A Receiver appointed under this Credit Agreement and
having powers over any Collateral shall be the agent of the Obligor who has
rights in such Collateral and not of the Lender, and Lender shall not be in any
way responsible for any misconduct, negligence or nonfeasance on the part of any
Receiver, its servants, agents, or employees. A Receiver having powers over any
Collateral shall, to the extent permitted by law or to such lesser extent
permitted by its appointment, have all the powers of Lender under the Security
Documents, and in addition shall have power to carry on the business of the
Obligor who has rights in such Collateral and for such purpose to enter upon,
use, and occupy all premises owned or occupied by such Obligor in which such
Collateral may be situate, maintain such Collateral upon such premises, use
Collateral directly or indirectly in carrying on such Obligor's business, and
from time to time borrow money either unsecured or secured by a security
interest in any of such Collateral. All costs incident to the appointment of a
Receiver or the exercise by the Receiver of its powers and sums borrowed by the
Receiver shall be deemed expenses of the disposition of the Collateral for which
the Receiver has been appointed and payable from the proceeds of the disposition
of the Collateral in such order and manner as Lender may determine.
ARTICLE 9
MISCELLANEOUS
9.1 Modification. All modifications, consents, amendments or waivers of
any provision of any Credit Document, or consent to any departure by an Obligor
therefrom, will
<PAGE>
be effective only if the same will be in writing and accepted by Lender.
9.2 Waiver. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder will operate as a waiver thereof, nor will
any single or partial exercise thereof preclude any other further exercise
thereof or the exercise of any other right. The rights of Lender hereunder and
under the Credit Documents will be in addition to all other rights provided by
law. No modification or waiver of any provision of any Credit Document, nor
consent to departure therefrom, will be effective unless in writing and no such
consent or waiver will extend beyond the particular case and purpose involved.
No notice or demand given in any case will constitute a waiver of the right to
take other action in the same, similar or other instances without such notice or
demand.
9.3 Payment of Expenses. Obligors will pay all costs and expenses of
Lender (including, without limitation, the attorneys' fees of Lender's legal
counsel and brokers' fees) incurred by Lender in connection with the
documentation of the Loans, and the preservation and enforcement of Lender's
rights under the Credit Documents; provided, however, that notwithstanding the
aforesaid, with respect to any legal action between the parties hereto that is
pursued to judgment the prevailing party only will be reimbursed by the other
party for all costs and expenses (including, without limitation, brokers' fees
and reasonable attorneys' fees and costs) incurred in connection with the
preservation and enforcement of its rights under the Credit Documents. Without
limiting the generality of the foregoing, Lender will, to the extent not already
provided for herein, be entitled to recover, and Obligors will be obligated to
pay, Lender's attorneys' fees and costs incurred in connection with: (i) any
determination of the applicability of the bankruptcy laws to the terms of the
Credit Documents or Lender's rights thereunder; (ii) any attempt by Lender to
enforce or preserve its rights under the bankruptcy laws, or to prevent Obligors
from seeking to deny Lender its rights thereunder; (iii) any effort by Lender to
protect, preserve or enforce its rights against any collateral for the Credit
Documents, or seeking authority to modify the automatic stay of 11 USC Section
362 or otherwise seeking to engage in such protection, preservation or
enforcement; or (iv) any proceeding(s) arising under the bankruptcy laws, or
arising in or related to a case under the bankruptcy laws. In addition, Obligors
will pay all costs and expenses of Lender in connection with the negotiation,
preparation, execution and delivery of any and all amendments, modifications and
supplements of or to the Credit Documents.
9.4 Notices. Except for telephonic notices (if any) permitted herein or
as may be expressly required by the terms of any other Credit Document, any
notices or other communications required or permitted to be given by this Credit
Agreement or any other documents and instruments referred to herein must be (i)
given in writing and personally delivered or mailed by prepaid certified or
registered mail, or (ii) made by telefacsimile delivered or transmitted, (but
confirmed on the date the telefacsimile is transmitted by one of the other
methods of giving of notice provided in this Section) to the party to whom such
notice or communication is directed, to the address of such party as follows:
Borrower: The Antigua Group, Inc.
9319 North 94th Way
Scottsdale, Arizona 85258
<PAGE>
Attn: L. Steven Haynes and Gerald K. Whitley
Telecopier: (602) 860-9609
SEI: Southhampton Enterprises Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
SE Corp: Southhampton Enterprises Corp.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Lender: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which will not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed. Any such notice or other communication will be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice to Lender will be deemed given
only if given to Lender at both notice addresses. Any party may change its
address for purposes of this Credit Agreement by giving notice of such change to
the other parties pursuant to this Section.
9.5 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The
Credit Documents will be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of California, except
to the extent Lender has greater rights or remedies under Federal law, whether
as a national bank or otherwise, in which case such choice of California law
will not be deemed to deprive Lender of any such rights and remedies as may be
available under Federal law. Subject to the provisions of Section 9.6, each
party consents to the personal jurisdiction and venue of the state courts
located in Los Angeles, State of
<PAGE>
California in connection with any controversy related to any Loan or any of the
Credit Documents, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in connection
with any of the Credit Documents will be venued in the Superior Court of Los
Angeles County, California. The parties waive any right to trial by jury in any
action or proceeding based on or pertaining to the Credit Documents.
9.6 Reference Provision.
(a) Each controversy, dispute or claim ("Claim") between the
parties arising out of or relating to this Credit Agreement and/or any of the
Credit Documents, which is not settled in writing within ten days after the
"Claim Date" (defined as the date on which a party gives written notice to all
other parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in Los Angeles, California, in accordance with the
provisions of Section 638, et seq., of the California Code of Civil Procedure,
or their successor section ("CCP"), which will constitute the exclusive remedy
for the settlement of any Claim, including whether such Claim is subject to the
reference proceeding and the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than the
Superior Court of Los Angeles (the "Court"). The referee will be a retired Judge
selected by mutual agreement of the parties, and if they cannot so agree with in
thirty days (30) after the Claim Date, the referee will be selected by the
Presiding Judge of the Court. The referee will be appointed to sit as a
temporary judge, as authorized by law. The referee will (a) be requested to set
the matter for hearing within sixty (60) days after the Claim Date and (b) try
any and all issues of law or fact and report a statement of decision upon them,
if possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment will be entered
pursuant to CCP 644 in the Court. All discovery permitted by the Credit
Documents will be completed no later than fifteen (15) days before the first
hearing date established by the referee. The referee may extend such period in
the event of a party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No party
will be entitled to "priority" in conducing discovery. Depositions may be taken
by either party upon seven (7) days written notice, and, request for production
of inspection of documents will be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties will be submitted to the referee whose decision will be final and
binding upon the parties.
(b) The referee will be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee will
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee will issue a single judgment at the close
of the reference proceeding which will dispose of all of the claims of the
parties that are the subject to the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties expressly
reserve the right to findings of fact, conclusions of law, a written statement
of decision, and the right to move for a new trial or a different judgment,
which new trial, if granted, is also to be a
<PAGE>
reference proceeding under this provision.
(c) No provision of Paragraphs (a) or (b) of this Section 9.6,
however, will limit the right of Lender to bring action for possession of any
collateral in any jurisdiction, wherever located, in accordance with the
provisions of the Security Documents.
9.7 Invalid Provisions. If any provision of any Credit Document is held
to be illegal, invalid or unenforceable under present or future laws during the
term of this Credit Agreement, such provision will be fully severable; such
Credit Document will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Credit Document; and
the remaining provisions of such Credit Document will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Credit Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there will be added as
part of such Credit Document a provision mutually agreeable to Obligors and
Lender as similar in terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
9.8 Binding Effect. The Credit Documents will be binding upon and inure
to the benefit of Obligors and Lender and their respective successors, assigns
and legal representatives; provided, however, that Obligors may not, without the
prior written consent of Lender, assign any rights, powers, duties or
obligations thereunder.
9.9 Entirety. The Credit Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof and thereof.
9.10 Headings. Section headings are for convenience of reference only
and will in no way affect the interpretation of this Credit Agreement.
9.11 Survival. All representations and warranties made by Obligors
herein will survive delivery of the Notes and the making of the Loans.
9.12 No Third Party Beneficiary. The parties do not intend the benefits
of this Credit Agreement to inure to any third party, nor will this Credit
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by an Obligor, or for debts or claims accruing to any such persons against an
Obligor. Notwithstanding anything contained herein or in the Notes, or in any
other Credit Document, or any conduct or course of conduct by any or all of the
parties hereto, before or after signing this Credit Agreement or any of the
other Credit Documents, neither this Credit Agreement nor any other Credit
Document will be construed as creating any right, claim or cause of action
against Lender, or any of its officers, directors, agents or employees, in favor
of any materialman, supplier, contractor, subcontractor, purchaser or lessee of
any property owned by an Obligor, nor to any other person or entity other than
Borrower.
9.13 Time. Time is of the essence hereof.
<PAGE>
9.14 Indemnity. Borrower agrees to and will indemnify, hold harmless
and defend Lender from any liability, claims or losses resulting from the
disbursement of the proceeds of the Loans or which may be asserted against
Lender in connection with the Loans or the administration thereof, the
Collateral or Lender's status under the Credit Documents, except when resulting
from Lender's gross negligence or willful misconduct as determined by a final,
non-appealable judgment issued by a court of competent jurisdiction or, if
applicable, the reference proceedings set forth in Section 9.6. This provision
will survive repayment of the Loans and will continue in full force and effect
so long as the possibility of such liability, claims or losses exists.
9.15 Schedules and Exhibits Incorporated. All schedules and exhibits
attached hereto, if any, are hereby incorporated into this Credit Agreement by
each reference thereto as if fully set forth at each such reference.
9.16 Counterparts. This Credit Agreement may be executed in multiple
counterparts, each of which, when so executed, will be deemed an original but
all such counterparts will constitute but one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Credit Agreement
as of the day and year first above written.
THE ANTIGUA GROUP, INC., a Nevada
corporation
Witness as to Borrower:
By:
Print Name: Type/Print Name: Gerald K. Whitley
Title: Vice President-Finance
Federal Tax Id No. 86-0415087
SOUTHHAMPTON ENTERPRISES INC., a Texas
corporation
Witness as to SEI:
By:
Print Name: Type/Print Name: L. Steven Haynes
Title: Secretary
Federal Tax Id No. 75-2290165
SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia (Canada) corporation
Witness as to SE Corp:
<PAGE>
By:
Print Name: Type/Print Name: L. Steven Haynes
Title: President
Federal Tax Id No. 101729416
IMPERIAL BANK, a California banking corporation
By:
Type/Print Name: Edmund Ozorio
Title: Vice President
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this _____ day of
May, 1997, by Gerald K. Whitley, the Vice President-Finance of THE ANTIGUA
GROUP, INC., a Nevada corporation on behalf of such corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires:
- ----------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this _____ day of
May, 1997, by L. Steven Haynes, the Secretary of SOUTHHAMPTON ENTERPRISES INC.,
a Texas corporation, on behalf of such corporation.
<PAGE>
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires:
- ----------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this _____ day of
May, 1997, by L. Steven Haynes, the President of SOUTHHAMPTON ENTERPRISES CORP.,
a British Columbia (Canada) corporation, on behalf of such corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires:
- ----------------------
SCHEDULE 1.1
(PERMITTED LIENS)
1. A senior security interest in favor of LaSalle and securing: (a) the
LaSalle Loans and (b) payment and performance of obligations incidental to such
loans.
2. A junior security interest in favor of Cruttenden and securing (a)
the Cruttenden Loan and (b) payment and performance of obligations incidental to
the Cruttenden Loan.
3. A junior security interest in favor of Seller and securing (a)
repayment of the Seller Debt and (b) payment and performance of obligations
incidental to such indebtedness.
<PAGE>
4. Liens encumbering the property of Borrower only and evidenced by the
following financing statements filed with the Arizona Secretary of State:
(a) File No. 84251 (Secured Party - IBM Corporation);
(b) File No. 839610 (Secured Party - American Business Credit
Corp.); and
(c) File No. 836137 (Secured Party - El Camino Resources,
Inc.).
5. Judgment Lien in favor of Texas Commerce Bank against property of
SEI having an approximate balance of $10,000.
6. Judgment Lien in favor of Wilson Sporting Goods, Inc. against
property of SEI having an approximate balance of $1,178.63.
7. Tax Lien in favor of State of Texas against property of SEI having
an approximate balance of $32,416.61.
8. Lien in favor of St. Clair Group against property of SE Corp
securing indebtedness having an approximate balance of $189,000 (CDN).
SCHEDULE 4.1
(CLOSING LIST)
A. CREDIT DOCUMENTS
1. Credit Agreement by and between The Antigua Group, Inc. and Imperial
Bank.
2. Promissory Note to be executed by The Antigua Group, Inc.
3. Continuing Guarantee and Subordination Agreement (SEC) to be executed
by Southhampton Enterprises Corp.
4. Continuing Guarantee and Subordination Agreement (SEI) to be executed
by Southhampton Enterprises, Inc.
5. Security Agreement to be executed by The Antigua Group, Inc.
6. Security Agreement to be executed by Southhampton Enterprises, Inc.
7. Security Agreement to be executed by Southhampton Enterprises Corp.
8. Trademark Security Agreement to be executed by The Antigua Group, Inc.
<PAGE>
9. Pledge and Irrevocable Proxy Security Agreement (SEI) to be executed by
Southhampton Enterprises, Inc.
10. Pledge and Irrevocable Proxy Security Agreement (SEC) to be executed by
Southhampton Enterprises Corp.
11. Assignment Separate from Certificate to be executed by Southhampton
Enterprises Corp.
12. Assignment Separate from Certificate to be executed by SEI.
13. Uniform Commercial Code Financing Statement (UCC-1) to be executed by
The Antigua Group, Inc. and Imperial Bank.
a. Arizona
b. Maricopa County, Arizona
c. Nevada
14. Uniform Commercial Code Financing Statement (UCC-1) to be executed by
Southhampton Enterprises Corp. and Imperial Bank.
a. Texas
b. Dallas County, Texas
c. Ontario
d. British Columbia
15. Uniform Commercial Code Financing Statement (UCC-1) to be executed by
Southhampton Enterprises, Inc. and Imperial Bank.
a. Texas
b. Dallas County, Texas
c. Ontario
d. British Columbia
16. Waiver/Release of Lien Rights - Borrower Leases.
17. Waiver/Release of Lien Rights - SEI Leases.
18. Waiver/Release of Lien Rights - Southhampton Enterprises Corp., Leases
(Unless waived by Lender).
19. Warrant executed by Southhampton Enterprises Corp.
20. Corporate Borrowing Resolution to be executed by officers of The
Antigua Group, Inc.
21. Corporate Resolution (Guarantee and Pledge) to be executed by the
officers of Southhampton Enterprises, Inc.
<PAGE>
22. Corporate Resolution (Guarantee and Pledge) to be executed by the
officers of Southhampton Enterprises Corp.
23. Intercreditor Agreement.
24. Subordination Agreements.
a. Seller
b. Cruttenden
c. Whitley
d. McPherson
25. Escrow Agreement.
SCHEDULE 5.21
(EXISTING INDEBTEDNESS)
A. BORROWER INDEBTEDNESS
1. Promissory Note in the original principal amount of $334,619 dated
January 1, 1993 payable to Ronald A. McPherson. Current outstanding balance is
$250,964.25.
2. Promissory Note in the original principal amount of $334,619 dated
January 1, 1993 payable to Gerald K. Whitley. Current outstanding balance is
$250,964.25.
3. Various loans to employees, current or prior, with various maturity
dates with outstanding principal balances not in excess of $19,565.32 in the
aggregate.
4. Loan relating to one auto show van with an outstanding principal
balance totaling $14,889.00.
5. Note payable to IBM related to an AS400 upgrade. Current outstanding
balance is $68,393.00.
B. SEI INDEBTEDNESS
Creditor Approximate Balance
1. Note Payable--Texas Commerce Bank $ 23,616.00
2. Note Payable--Roger Tests $100,000.00
3. Note Payable--Richard Someck $ 25,000.00
4. Judgment in No. 94-02989-M $ 10,000.00
<PAGE>
5. Wilson Sporting Goods, Inc. $ 1,178.63
6. State of Texas Tax Lien $ 32,416.61
C. SE CORP INDEBTEDNESS
Creditor Approximate Balance
1. Note--David Olson $ 28,000 USD
2. Note--St. Claire Group (Secured by inventory) $189,000 CDN
3. Note Payable to Director--L. Lloyd $327,108 USD
4. Notes Payable to Director--L. S. Haynes $113,723 USD
5. Notes Payable to Director--J.W. Wood $ 85,500 USD
SCHEDULE 5.22
(SUBSIDIARIES AND DIVISIONS)
A. BORROWER - None
B. SEI - None
C. SE CORP - None
SCHEDULE 5.22
(CAPITALIZATION)
A. BORROWER Five Million (5,000,000) shares of common stock authorized;
and 2,074,600 shares of common stock issued and outstanding.
B. SEI 10,000 shares of common stock authorized; and 1,000 shares of
common stock issued and outstanding.
C. SE CORP See page 2 of this Schedule.
<PAGE>
D. Except as set forth on page 2 of this Schedule with respect to SE
Corp., each Obligor represents and warrants that: it has no unissued stock
reserved for any purpose other than for issuance upon exercise of the Warrant,
and it has not issued or agreed to issue any stock purchase rights or
convertible securities other than the Warrant. Furthermore, each Obligor
represents and warrants that there are no preemptive rights in effect with
respect to the issuance of any shares of stock.
SCHEDULE 5.25
(BUSINESS OF OBLIGORS)
A. BORROWER: Designs, sources and contracts for the manufacture of
sportswear and casual wear.
B. SEI: Screen printing and embroidery of casual wear.
C. SE CORP: Holding company for SEI.
SCHEDULE 7.8
(PERMITTED INDEBTEDNESS)
BORROWER
1. Promissory Note in the original principal amount of $334,619 dated
January 1, 1993 payable to Ronald A. McPherson. Current outstanding balance is
$250,964.25.
2. Promissory Note in the original principal amount of $334,619 dated
January 1, 1993 payable to Gerald K. Whitley. Current outstanding balance is
$250,964.25.
3. Various loans to employees, current or prior, with various maturity
dates with outstanding principal balances not in excess of $19,565.32 in the
aggregate.
4. Loan relating to one auto show van with an outstanding principal
balance totaling $14,889.00.
5. Note payable to IBM related to an AS400 upgrade. Current outstanding
balance is $68,393.00.
B. SEI
<PAGE>
1. Promissory Note in the original principal amount of $334,619 dated
January 1, 1993 payable to Ronald A. McPherson. Current outstanding balance is
$250,964.25.
2. Promissory Note in the original principal amount of $334,619 dated
January 1, 1993 payable to Gerald K. Whitley. Current outstanding balance is
$250,964.25.
3. Various loans to employees, current or prior, with various maturity
dates with outstanding principal balances not in excess of $19,565.32 in the
aggregate.
4. Loan relating to one auto show van with an outstanding principal
balance totaling $14,889.00.
5. Note payable to IBM related to an AS400 upgrade. Current outstanding
balance is $68,393.00.
6. The indebtedness listed below.
Creditor Approximate Balance
1. Note Payable--Texas Commerce Bank $ 23,616.00
2. Note Payable--Roger Testa $100,000.00
3. Note Payable--Richard Someck $ 25,000.00
4. Judgment in No. 94-02989-M $ 10,000.00
5. Wilson Sporting Goods, Inc. $ 1,178.63
6. State of Texas Tax Lien $ 32,416.61
C. SE CORP
Creditor Approximate Balance
1. Note--David Olson $ 28,000 USD
2. Note--St. Claire Group (Secured by inventory) $189,000 CDN
3. Note Payable to Director--L. Lloyd $327,108 USD
4. Notes Payable to Director--L. S. Haynes $113,723 USD
5. Notes Payable to Director--J.W. Wood $ 85,500 USD
In addition to the above-listed Indebtedness, convertible promissory notes in a
principal amount not to exceed U.S. $4,650,000.
SCHEDULE 7.11
(COMPENSATION)
<PAGE>
A. BASE COMPENSATION.
The current base annual compensation of the five (5) highest paid
employees, officers and/or directors of Borrower:
Employee Amount
L. Steven Haynes $175,000
Ron McPherson $114,000
Brett Moore $100,000
Kevin O'Niel $100,000
Gerald K. Whitley $89,440
Such compensation shall be subject to periods adjustments as are
reasonable under the circumstances.
B. ADDITIONAL COMPENSATION.
The five (5) highest paid employees of Borrower shall be entitled to
participate in bonuses and incentive plans as currently adopted by the board of
directors and are administered in good faith.
EXHIBIT "6.1(e)"
COMPLIANCE CERTIFICATE
FOR FISCAL QUARTER ENDING
------------------
("Reporting Period")
Imperial Bank
9920 South La Cienega Boulevard
Lending Services
Inglewood, California 90301
Telecopier: (310) 417-5695
With a copy to:
Imperial Bank
4343 East Camelback Road
Suite 444
Phoenix, Arizona 85018
Attention: Edmund Ozorio
<PAGE>
Telecopier: (602) 952-8643 Date: _____________(1)
Dear Ladies and Gentlemen:
This Compliance Certificate refers to the Credit Agreement dated as of
_______________, 1997 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), between The Antigua Group,
Inc., a Nevada corporation, Southhampton Enterprises, Inc., a Texas corporation,
and Southhampton Enterprises Corp., a British Columbia (Canada) corporation and
Imperial Bank. Capitalized terms used and not otherwise defined herein will have
the meanings assigned to such terms in the Credit Agreement.
Pursuant to Section 6.1 of the Credit Agreement, the undersigned,
hereby certifies that:
1. To the best of the undersigned's knowledge, [name of Obligor]
("Obligor") has observed, performed and fulfilled each and every obligation and
covenant contained in the Credit Agreement and no Event of Default exists [or if
so, specifying the nature and extent thereof and any corrective actions taken or
to be taken].
2. All representations and warranties set forth in the Credit Documents
remain true and complete in all material respects as if made on and as of the
date of the compliance certificate, except for changes as may have resulted from
any circumstance or event which has not had a Material Adverse Effect.
3. All financial statements of Obligor delivered to Lender during the
Reporting Period, to the undersigned's knowledge fairly present in all material
respect the financial position of the Obligor and the results of its operations
at the dates and for the periods indicated and have been prepared in accordance
with GAAP.
4. As of the last day of the Reporting Period, the computations
attached hereto with respect to compliance contained in the covenants set forth
in Section 7.7 of the Credit Agreement are true and correct.
[Appropriate Signature
Block for Obligor]
- --------
(1) To be submitted within the time period specified in Section 6.1 of the
Credit Agreement.
Exhibit 10.25
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AND
INDEMNIFICATION AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT AND INDEMNIFICATION AGREEMENT
("Agreement") is made as of the 30 day of May, 1997 by and between SOUTHHAMPTON
ENTERPRISES CORP., a British Columbia corporation ("SEC"), and SOUTHHAMPTON
ENTERPRISES INC., a Texas corporation ("SEI"; and SEC and SEI collectively,
"SOUTHHAMPTON"), THE ANTIGUA GROUP, INC. ("ANTIGUA") and IMPERIAL BANK
("IMPERIAL").
RECITALS
Through letters dated April 25, 1997 and May 2, 1997 from counsel to
Kaufman Bros., L.P. ("KAUFMAN") to counsel for IMPERIAL, IMPERIAL has been
notified by KAUFMAN that: (a) KAUFMAN and SOUTHHAMPTON entered into a Placement
Agent Agreement dated September 24, 1996 ("PLACEMENT AGREEMENT"); (b) KAUFMAN
has demanded that SOUTHHAMPTON pay to KAUFMAN certain monies which KAUFMAN
claims are due pursuant to the terms of the PLACEMENT AGREEMENT; (c) KAUFMAN
claims that it is entitled to receive payment directly from funds being provided
to SOUTHHAMPTON or ANTIGUA in connection with the financing being provided
regarding the acquisition of the stock of ANTIGUA by SEI ("ACQUISITION"); and
(d) KAUFMAN has taken the position that any distribution of funds at the closing
of the financing for the ACQUISITION without the payment of the sums claimed to
be owed to KAUFMAN shall be a breach of the PLACEMENT AGREEMENT and KAUFMAN will
attempt to hold any party which it deems to have acted in concert with
SOUTHHAMPTON in not paying the sums claimed to be owed to KAUFMAN liable to
KAUFMAN.
SOUTHHAMPTON has informed IMPERIAL that SOUTHHAMPTON has no liability to
KAUFMAN under the PLACEMENT AGREEMENT and owes no sums to KAUFMAN in connection
with the financing being provided for the ACQUISITION. IMPERIAL has required
that the execution of a final settlement agreement binding upon KAUFMAN and
satisfactory to IMPERIAL ("FINAL SETTLEMENT") is a condition to IMPERIAL
providing ANTIGUA with a term loan ("LOAN") pursuant to a Credit Agreement dated
as of May 7, 1997 ("CREDIT AGREEMENT"), and to be used in connection with the
ACQUISITION. SOUTHHAMPTON has informed IMPERIAL that SEC and KAUFMAN have agreed
in principle to a settlement of the KAUFMAN claim as provided in the letter from
John M. Welch to Hugh Ross and dated May 28, 1997, a copy of which is attached
hereto as Exhibit A ("INTENDED SETTLEMENT"), but that the FINAL SETTLEMENT may
not be executed by the date by which SOUTHHAMPTON must close the ACQUISITION.
<PAGE>
IMPERIAL is willing to waive the FINAL SETTLEMENT as a condition to the
funding of the LOAN, but only on the condition that ANTIGUA and SOUTHHAMPTON
provide IMPERIAL with certain indemnifications as more particularly set forth
herein and that the Credit Agreement be modified to provide that failure to
deliver the FINAL SETTLEMENT by June 30, 1997 will be an Event of Default under
the CREDIT AGREEMENT.
SOUTHHAMPTON is willing to provide IMPERIAL with the indemnifications set
forth herein and to amend the CREDIT AGREEMENT in order to enable ANTIGUA to
obtain the proposed term loan.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged: (1) ANTIGUA and SOUTHHAMPTON hereby agree to indemnify and hold
IMPERIAL harmless from all losses, claims, expenses, actions and costs
(including attorneys' fees) which IMPERIAL might incur as a result of any claim
made by KAUFMAN against IMPERIAL in connection with any obligations or
liabilities, or claimed obligations or liabilities, which either of the entities
described herein as SOUTHHAMPTON might now or hereafter have to KAUFMAN; and (2)
if the FINAL SETTLEMENT is not executed by KAUFMAN prior to June 30, 1997, upon
substantially the same or more favorable terms as the INTENDED SETTLEMENT, then
such event shall be deemed an Event of Default under the CREDIT AGREEMENT. For
purposes of the preceding sentence, the FINAL SETTLEMENT shall be deemed not to
be upon substantially the same or more favorable terms than the INTENDED
SETTLEMENT if it provides for a cash settlement payment in excess of $350,000.
IN WITNESS WHEREOF, SOUTHHAMPTON has executed this Agreement with the
specific intention of creating a document under seal as of the day and year
first above written.
WITNESS/ATTEST: SOUTHHAMPTON ENTERPRISES CORP.,
A British of Columbia Corporation
/s/ Melissa M. Crosbie By: /s/ L. Steven Haynes
L. Steven Haynes
Chief Executive Officer
Date: May 30, 1997
<PAGE>
WITNESS/ATTEST: SOUTHHAMPTON ENTERPRISES, INC.,
A Texas Corporation
/s/ Melissa M. Crosbie By: /s/ L. Steven Haynes
L. Steven Haynes
Chief Executive Officer
Date: May 30, 1997
WITNESS/ATTEST: THE ANTIGUA GROUP, INC.,
A Nevada Corporation
/s/ Mark K. Briggs By: /s/ Gerald K. Whitley
Type/Print Name: Gerald K. Whitley
Title: VP - Finance
Date: May 30, 1997
[SEE SEPARATE SIGNATURE PAGE FOR IMPERIAL]
<PAGE>
IMPERIAL BANK, a California banking
corporation
By: /s/ Edmund Ozorio
Name: Edmund Ozorio
Title: Vice President
Exhibit 10.26
THE INDEBTEDNESS UNDER THIS PROMISSORY NOTE IS SUBORDINATE TO CERTAIN OTHER
INDEBTEDNESS OF MAKER AS PROVIDED IN THAT SUBORDINATION AGREEMENT DATED MAY 7,
1997 BY AND AMONG LASALLE BUSINESS CREDIT, INC. AND PAYEE
PROMISSORY NOTE
$2,500,000.00 Phoenix, Arizona
May 7, 1997
FOR VALUE RECEIVED, the undersigned THE ANTIGUA GROUP, INC., a Nevada
corporation (hereinafter called "Maker"), promises to pay to the order of
IMPERIAL BANK, a California banking corporation (the "Payee"; Payee and each
subsequent transferee and/or owner of this Note, whether taking by endorsement
or otherwise, are herein successively called "Holder"), at 9920 South La Cienega
Boulevard, Lending Services, Inglewood, California 90301, or at such other place
as Holder may from time to time designate in writing, the principal sum of TWO
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) or so much
thereof as Holder may advance to or for the benefit of Maker plus interest
calculated on a daily basis (based on a 360-day year) from the date hereof on
the principal balance from time to time outstanding as hereinafter provided,
principal, interest and all other sums payable hereunder to be paid in lawful
money of the United States of America at the rates of interest per annum and at
the times specified in that Credit Agreement of even date herewith between the
Maker and Payee (the "Credit Agreement"). Principal hereof shall be payable in
the amounts and at the times set forth in the Credit Agreement.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
This Note is issued pursuant to the Credit Agreement and is secured by
the Security Documents, as defined in the Credit Agreement.
Time is of the essence of this Note.
Maker shall pay all costs and expenses, including reasonable attorneys'
fees and court costs, incurred in the collection or enforcement of all or any
part of this Note. All such costs and expenses shall be secured by the Security
Documents.
Failure of Holder to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event
<PAGE>
of any subsequent default or in the event of continuance of any existing default
after demand for strict performance hereof.
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (severally each
hereinafter called a "Surety") each: (a) agree that the liability under this
Note of all parties hereto is joint and several; (b) severally waive any and all
formalities in connection with this Note to the maximum extent allowed by law,
including (but not limited to) demand, diligence, presentment for payment,
protest and demand, and notice of extension, dishonor, protest, demand and
nonpayment of this Note; and (c) consent that Holder may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt evidenced by this Note, at the request of any other person liable hereon,
and such consent shall not alter nor diminish the liability of any person
hereon.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee, and any subsequent holders of this
Note, and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Credit Agreement for the
giving of notices.
If any payment of interest and/or principal is not received by the
Holder hereof when such payment is due, then in addition to the remedies
conferred upon the Holder hereof and the other loan documents, a late charge of
five percent (5%) of the amount of the installment due and unpaid will be added
to the delinquent amount to compensate the Holder hereof for the expense of
handling the delinquency for any payment past due in excess of ten (10) days,
regardless of any notice and cure period.
In any action brought under or arising out of this Note, each obligor,
including successor(s) or assign(s), hereby consents to the application of
California law, with the exception of provisions on conflicts of laws, to the
jurisdiction of any competent court within the State of California, and to
service of process by any means authorized by California law.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
THE ANTIGUA GROUP, INC., a Nevada
corporation
By: /s/ Gerald K. Whitley
---------------------------------
Type/Print Name: Gerald K. Whitley
Title: Vice President-Finance
MAKER
Exhibit 10.27
THE INDEBTEDNESS UNDER THIS CONTINUING GUARANTEE AND SUBORDINATION AGREEMENT IS
SUBORDINATE TO CERTAIN OTHER INDEBTEDNESS OF GUARANTOR AS PROVIDED IN THAT
SUBORDINATION AGREEMENT DATED MAY 7, 1997, BY AND AMONG LASALLE BUSINESS CREDIT,
INC. AND LENDER
CONTINUING GUARANTEE AND SUBORDINATION AGREEMENT
(SEC)
TO: IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
1. For valuable consideration, the undersigned (hereinafter called
"Guarantor"), whose address is set forth after Guarantor's signature below,
jointly and severally, and unconditionally, guarantees and promises to pay to
IMPERIAL BANK, a California banking corporation (hereinafter called "Lender"),
or order, on demand, in lawful money of the United States, any and all
indebtedness of THE ANTIGUA GROUP, INC., a Nevada corporation (hereinafter
called "Borrower"), to Lender. If more than one Borrower is named herein, or if
this Guarantee is executed by more than one Guarantor, the word "Borrower" and
the word "Guarantor" respectively shall mean all and any one or more of them,
severally and collectively. The word "indebtedness" is used in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of Borrower heretofore, now or hereafter made, incurred or created,
with or without notice to Guarantor, whether voluntary or involuntary and
however arising, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower is liable
individually or jointly with others, or whether recovery upon such indebtedness
may be or hereafter become barred by any statute of limitations, or whether such
indebtedness may be or hereafter become otherwise unenforceable, exclusive,
however, of any indebtedness of Borrower to Lender presently covered by existing
guaranties executed by Guarantor, but without derogation to such existing
guaranties, if any, which are hereby ratified and reaffirmed.
2. The liability of Guarantor hereunder shall include all principal,
plus all interest thereon and all attorneys' fees and other costs and expenses
incurred by Lender in collecting, compromising or enforcing the indebtedness or
in protecting or preserving any security for the indebtedness. Lender may permit
the indebtedness of Borrower to exceed such maximum liability without impairing
the obligation of Guarantor hereunder. Any payment by Guarantor shall not reduce
Guarantor's maximum obligation hereunder, unless written notice to that effect
is actually received by Lender at or prior to the time of such payment. Any
payment by or recovery from Borrower, any other guarantor or any security shall
be credited first to that portion of the indebtedness which exceeds the maximum
obligation of Guarantor hereunder.
<PAGE>
3. This is a continuing guarantee that shall remain in full force and
effect and includes all indebtedness arising under future transactions or under
successive transactions which either continue then existing indebtedness or from
time to time renew it after it has been satisfied, but shall not apply to any
indebtedness created after actual receipt by Lender of written notice of the
revocation of this Guarantee as to future transactions. Any such revocation of
this Guarantee at any time by any Guarantor as to future transactions shall not
affect the liability of any other guarantor for indebtedness of Borrower and
shall not affect the liability of that Guarantor or any other guarantor for
indebtedness incurred or credit committed by Lender to Borrower prior to the
effective time of that revocation; this Guarantee shall remain in full force and
effect as to all such indebtedness. The death of any Guarantor shall not operate
as a revocation of liability hereunder of the estate of that Guarantor for
indebtedness created or incurred or credit committed by Lender to Borrower
subsequent to such death until actual receipt by Lender of written notice of the
death of that Guarantor. Guarantor waives notice of revocation given by any
other guarantor.
4. Guarantor is providing this Guarantee at the instance and request of
Borrower to induce Lender to extend or continue financial accommodations to
Borrower. Guarantor hereby represents and warrants that Guarantor is and will
continue to be fully informed about all aspects of the financial condition and
business affairs of Borrower that Guarantor deems relevant to the obligations of
Guarantor hereunder and hereby waives and fully discharges Lender from any and
all obligations to communicate to Guarantor any information whatsoever regarding
Borrower or Borrower's financial condition or business affairs.
5. Guarantor authorizes Lender, without notice or demand and without
affecting Guarantor's liability hereunder, from time to time, to: (a) renew,
modify, compromise, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the indebtedness or any part thereof,
including increasing or decreasing the rate of interest thereon; (b) release,
substitute or add any one or more endorsers, Guarantor or other guarantors; (c)
take and hold security for the payment of this Guarantee or the indebtedness,
and enforce, exchange, substitute, subordinate, waive or release any such
security; (d) proceed against such security and direct the order or manner of
sale of such security as Lender in its discretion may determine; and (e) apply
any and all payments from Borrower, Guarantor or any other guarantor, or
recoveries from such security, in such order or manner as Lender in its
discretion may determine.
6. Guarantor waives and agrees not to assert: (a) any right to require
Lender to proceed against Borrower or any other guarantor, to proceed against or
exhaust any security for the indebtedness, to pursue any other remedy available
to Lender, or to
2
<PAGE>
pursue any remedy in any particular order or manner; (b) the benefit of any
statute of limitations affecting Guarantor's liability hereunder or the
enforcement thereof; (c) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand, nonpayment and
acceptance of this Guarantee; (d) notice of the existence, creation or incurring
of new or additional indebtedness of Borrower to Lender; (e) the benefits of any
statutory provision limiting the liability of a surety; (f) any defense arising
by reason of any disability or other defense of Borrower or by reason of the
cessation from any cause whatsoever (other than payment in full) of the
liability of Borrower for the indebtedness; and (g) the benefits of any
statutory provision limiting the right of Lender to recover a deficiency
judgment, or to otherwise proceed against any person or entity obligated for
payment of the indebtedness, after any foreclosure or trustee's sale of any
security for the indebtedness. Guarantor shall have no right of subrogation and
hereby waives any right to enforce any remedy which Lender now has, or may
hereafter have, against Borrower, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Lender. Without limiting
the generality of the foregoing, Guarantor waives all right and defenses that
Guarantor may have because Borrower's debt is at any time secured by real
property. This means, among other things: (a) Lender may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged by
Borrower; and (b) if Lender forecloses on any real property collateral pledged
by Borrower: (i) the amount of the debt may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price; and (ii) Lender may collect from Guarantor even
if Lender, by foreclosing on the real property collateral, has destroyed any
right Guarantor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Guarantor may have because
Borrower's debt is secured by real property. These rights and defenses include,
but are not limited to, any rights or defenses based upon Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure ("CCP"). Furthermore,
Guarantor waives all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against the principal by the
operation of Section 580d of the CCP or otherwise.
7. All existing and future indebtedness of Borrower to Guarantor is
hereby subordinated to the indebtedness of Borrower to Lender and such
indebtedness of Borrower to Guarantor, if Lender so requests, shall be
collected, enforced and received by Guarantor as trustee for Lender and shall be
paid over to Lender on account of the indebtedness of Borrower to Lender, but
without reducing or affecting in any manner the liability of Guarantor under the
other provisions of this Guarantee.
3
<PAGE>
8. In addition to all liens upon, and rights of setoff against, the
monies, securities or other property of Guarantor given to Lender by law, Lender
shall have a lien and a right of setoff against, and Guarantor hereby grants to
Lender a security interest in, all monies, securities and other property of
Guarantor now and hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, or for safekeeping or
otherwise; every such lien and right of setoff may be exercised without demand
upon or notice to Guarantor. No lien or right of setoff shall be deemed to have
been waived by any act or conduct on the part of Lender, by any neglect to
exercise such right of setoff or to enforce such lien, or by any delay in so
doing.
9. It is not necessary for Lender to inquire into the powers of
Borrower or the officers, directors, partners or agents acting or purporting to
act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
10. Guarantor agrees to pay all attorneys' fees and all other costs and
expenses which may be incurred by Lender in enforcing this Guarantee. In the
event of the commencement of a bankruptcy proceeding by or against Guarantor or
otherwise involving any collateral for this Guarantee, Lender shall, to the
extent not already provided for herein, be entitled to recover, and Guarantor
shall be obligated to pay, Lender's attorneys' fees and costs incurred in
connection with: (i) any determination of the applicability of the bankruptcy
laws to the terms of this Guarantee or Lender's rights thereunder; (ii) any
attempt by Lender to enforce or preserve its rights under the bankruptcy laws,
or to prevent Guarantor from seeking to deny Lender its rights thereunder; (iii)
any effort by Lender to protect, preserve or enforce its rights against any
collateral for this Guarantee, or seeking authority to modify the automatic stay
of 11 USC Section 362 or otherwise seeking to engage in such protection,
preservation or enforcement; or (iv) any proceeding(s) arising under the
bankruptcy laws, or arising in or related to a case under the bankruptcy laws.
11. The obligations of Guarantor hereunder are joint and several if
Guarantor is more than one person or entity, are separate and independent of the
obligations of Borrower and of any other guarantor, and a separate action or
actions may be brought and prosecuted against Guarantor whether action is
brought against Borrower or any other guarantor or whether Borrower or any other
guarantor is joined in any action or actions. The obligations of Guarantor
hereunder shall survive and continue in full force and effect until payment in
full of the indebtedness is actually received by Lender, notwithstanding any
release or termination of Borrower's liability by express or implied agreement
with Lender or by operation of law and notwithstanding that the indebtedness or
4
<PAGE>
any part thereof is deemed to have been paid or discharged by operation of law
or by some act or agreement of Lender. For purposes of this Guarantee, the
indebtedness shall be deemed to be paid only to the extent that Lender actually
receives immediately available funds and to the extent of any credit bid by
Lender at any foreclosure or trustee's sale of any security for the
indebtedness.
12. Guarantor shall deliver to Lender financial statements of Guarantor
and other information pertaining to Guarantor as required under the terms of the
Credit Agreement among Borrower, Guarantor, Southhampton Enterprises, Inc., and
Lender dated as of even date herewith. Guarantor shall also promptly deliver to
Lender, in writing, such further information as Lender may reasonably request
relating to Guarantor.
13. Guarantor agrees that to the extent Borrower or Guarantor makes any
payment to Lender in connection with the indebtedness, and all or any part of
such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by Lender or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then this Guarantee shall continue to be effective or shall be
reinstated, as the case may be, and, to the extent of such payment or repayment
by Lender, the indebtedness or part thereof intended to be satisfied by such
Preferential Payment shall be revived and continued in full force and effect as
if said Preferential Payment had not been made.
14. This Guarantee sets forth the entire agreement of Guarantor and
Lender with respect to the subject matter hereof and supersedes all prior oral
and written agreements and representations by Lender to Guarantor with respect
to the subject matter hereof. No modification or waiver of any provision of this
Guarantee or any right of Lender hereunder and no release of Guarantor from any
obligation hereunder shall be effective unless in a writing executed by an
authorized officer of Lender.
15. This Guarantee shall inure to the benefit of Lender and its
successors and assigns and shall be binding upon Guarantor and its heirs,
personal representatives, successors and assigns. Lender may assign this
Guarantee in whole or in part without notice.
16. Reference Provision.
(a) Each controversy, dispute or claim ("Claim") between the
parties arising out of or relating to this Guarantee which is not
settled in writing within ten days after the "Claim Date" (defined as
the date on which a party gives written notice to all other parties
that a
5
<PAGE>
controversy, dispute or claim exists), will be settled by a reference
proceeding in Los Angeles, California, in accordance with the
provisions of Section 638 et seq. of the CCP, or their successor
sections, which shall constitute the exclusive remedy for the
settlement of any Claim, including whether such Claim is subject to the
reference proceeding and the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other
than the Superior Court of Los Angeles (the "Court"). The referee shall
be a retired Judge selected by mutual agreement of the parties, and if
they cannot so agree with in thirty days (30) after the Claim Date, the
referee shall be selected by the Presiding Judge of the Court. The
referee shall be appointed to sit as a temporary judge, as authorized
by law. The referee shall (a) be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (b) try any and
all issues of law or fact and report a statement of decision upon them,
if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP 644 in the Court. All
discovery permitted by this Guarantee shall be completed no later than
fifteen (15) days before the first hearing date established by the
referee. The referee may extend such period in the event of a party's
refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery.
Depositions may be taken by either party upon seven (7) days written
notice, and, request for production of inspection of documents shall be
responded to within ten (10) days after service. All disputes relating
to discovery which cannot be resolved by the parties shall be submitted
to the referee whose decision shall be final and binding upon the
parties.
(b) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law
in the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that
are the subject to the reference. The parties hereto expressly reserve
the right to contest or appeal from the final judgment or any
appealable order or appealable
6
<PAGE>
judgment entered by the referee. The parties expressly reserve the
right to findings of fact, conclusions of law, a written statement of
decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
17. Notwithstanding any waiver of or references to Arizona Revised
Statutes contained in Paragraph 6 hereof, this Guarantee shall be governed by
and construed in accordance with the substantive laws (other than conflict laws)
of the State of California, except to the extent Lender has greater rights or
remedies under Federal law, whether as a national bank or otherwise, in which
case such choice of California law shall not be deemed to deprive Lender of any
such rights and remedies as may be available under Federal law. Subject to the
provisions of Section 16 hereof, each party consents to the personal
jurisdiction and venue of the state courts located in Los Angeles, State of
California in connection with any controversy related to this Guarantee, waives
any argument that venue in any such forum is not convenient and agrees that any
litigation initiated by any of them in connection with this Guarantee shall be
venued in the Superior Court of Los Angeles County, California. The parties
waive any right to trial by jury in any action or proceeding based on or
pertaining to this Guarantee.
18. Except for telephonic notices (if any) permitted herein, any
notices or other communications required or permitted to be given by this
Guarantee to Guarantor or Lender must be (i) given in writing and personally
delivered or mailed by prepaid certified or registered mail, or (ii) made by
telefacsimile delivered or transmitted, (but confirmed on the date the
telefacsimile is transmitted by one of the other methods of giving of notice
provided in this Section) to the person to whom such notice or communication is
directed, to the address of such person as follows:
Borrower: The Antigua Group, Inc.
9319 North 94th Way
Scottsdale, Arizona 85258
Attn: Thomas E. Dooley, Jr.
Telecopier: (602) 860-9609
SEI: Southhampton Enterprises, Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
7
<PAGE>
Guarantor: Southhampton Enterprises, Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Lender: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice to Lender shall be deemed given
only if given to Lender at both notice addresses. Any party may change its
address for purposes of this Agreement by giving notice of such change to the
other parties pursuant to this Section.
IN WITNESS WHEREOF, these presents are executed as of the 7th day of
May, 1997.
WITNESS: GUARANTOR:
SOUTHHAMPTON ENTERPRISES CORP.,
a British Columbia (Canada)
corporation
/s/ Louis B. Lloyd
Type/Print Name: Louis B. Lloyd
By: /s/ L. Steven Haynes
Type/Print Name: L. Steven
Haynes
Title: President
8
Exhibit 10.28
THE INDEBTEDNESS UNDER THIS CONTINUING GUARANTEE AND SUBORDINATION AGREEMENT IS
SUBORDINATE TO CERTAIN OTHER INDEBTEDNESS OF GUARANTOR AS PROVIDED IN THAT
SUBORDINATION AGREEMENT DATED MAY 7, 1997, BY AND AMONG LASALLE BUSINESS CREDIT,
INC. AND LENDER
CONTINUING GUARANTEE AND SUBORDINATION AGREEMENT
(SEI)
TO: IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
1. For valuable consideration, the undersigned (hereinafter called
"Guarantor"), whose address is set forth after Guarantor's signature below,
jointly and severally, and unconditionally, guarantees and promises to pay to
IMPERIAL BANK, a California banking corporation (hereinafter called "Lender"),
or order, on demand, in lawful money of the United States, any and all
indebtedness of THE ANTIGUA GROUP, INC., a Nevada corporation (hereinafter
called "Borrower"), to Lender. If more than one Borrower is named herein, or if
this Guarantee is executed by more than one Guarantor, the word "Borrower" and
the word "Guarantor" respectively shall mean all and any one or more of them,
severally and collectively. The word "indebtedness" is used in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of Borrower heretofore, now or hereafter made, incurred or created,
with or without notice to Guarantor, whether voluntary or involuntary and
however arising, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower is liable
individually or jointly with others, or whether recovery upon such indebtedness
may be or hereafter become barred by any statute of limitations, or whether such
indebtedness may be or hereafter become otherwise unenforceable, exclusive,
however, of any indebtedness of Borrower to Lender presently covered by existing
guaranties executed by Guarantor, but without derogation to such existing
guaranties, if any, which are hereby ratified and reaffirmed.
2. The liability of Guarantor hereunder shall include all principal,
plus all interest thereon and all attorneys' fees and other costs and expenses
incurred by Lender in collecting, compromising or enforcing the indebtedness or
in protecting or preserving any security for the indebtedness. Lender may permit
the indebtedness of Borrower to exceed such maximum liability without impairing
the obligation of Guarantor hereunder. Any payment by Guarantor shall not reduce
Guarantor's maximum obligation hereunder, unless written notice to that effect
is actually received by Lender at or prior to the time of such payment. Any
payment by or recovery from Borrower, any other guarantor or any security shall
be credited first to that portion of the indebtedness which exceeds the maximum
obligation of Guarantor hereunder.
<PAGE>
3. This is a continuing guarantee that shall remain in full force and
effect and includes all indebtedness arising under future transactions or under
successive transactions which either continue then existing indebtedness or from
time to time renew it after it has been satisfied, but shall not apply to any
indebtedness created after actual receipt by Lender of written notice of the
revocation of this Guarantee as to future transactions. Any such revocation of
this Guarantee at any time by any Guarantor as to future transactions shall not
affect the liability of any other guarantor for indebtedness of Borrower and
shall not affect the liability of that Guarantor or any other guarantor for
indebtedness incurred or credit committed by Lender to Borrower prior to the
effective time of that revocation; this Guarantee shall remain in full force and
effect as to all such indebtedness. The death of any Guarantor shall not operate
as a revocation of liability hereunder of the estate of that Guarantor for
indebtedness created or incurred or credit committed by Lender to Borrower
subsequent to such death until actual receipt by Lender of written notice of the
death of that Guarantor. Guarantor waives notice of revocation given by any
other guarantor.
4. Guarantor is providing this Guarantee at the instance and request of
Borrower to induce Lender to extend or continue financial accommodations to
Borrower. Guarantor hereby represents and warrants that Guarantor is and will
continue to be fully informed about all aspects of the financial condition and
business affairs of Borrower that Guarantor deems relevant to the obligations of
Guarantor hereunder and hereby waives and fully discharges Lender from any and
all obligations to communicate to Guarantor any information whatsoever regarding
Borrower or Borrower's financial condition or business affairs.
5. Guarantor authorizes Lender, without notice or demand and without
affecting Guarantor's liability hereunder, from time to time, to: (a) renew,
modify, compromise, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the indebtedness or any part thereof,
including increasing or decreasing the rate of interest thereon; (b) release,
substitute or add any one or more endorsers, Guarantor or other guarantors; (c)
take and hold security for the payment of this Guarantee or the indebtedness,
and enforce, exchange, substitute, subordinate, waive or release any such
security; (d) proceed against such security and direct the order or manner of
sale of such security as Lender in its discretion may determine; and (e) apply
any and all payments from Borrower, Guarantor or any other guarantor, or
recoveries from such security, in such order or manner as Lender in its
discretion may determine.
6. Guarantor waives and agrees not to assert: (a) any right to require
Lender to proceed against Borrower or any other guarantor, to proceed against or
exhaust any security for the indebtedness, to pursue any other remedy available
to Lender, or to
2
<PAGE>
pursue any remedy in any particular order or manner; (b) the benefit of any
statute of limitations affecting Guarantor's liability hereunder or the
enforcement thereof; (c) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand, nonpayment and
acceptance of this Guarantee; (d) notice of the existence, creation or incurring
of new or additional indebtedness of Borrower to Lender; (e) the benefits of any
statutory provision limiting the liability of a surety; (f) any defense arising
by reason of any disability or other defense of Borrower or by reason of the
cessation from any cause whatsoever (other than payment in full) of the
liability of Borrower for the indebtedness; and (g) the benefits of any
statutory provision limiting the right of Lender to recover a deficiency
judgment, or to otherwise proceed against any person or entity obligated for
payment of the indebtedness, after any foreclosure or trustee's sale of any
security for the indebtedness. Guarantor shall have no right of subrogation and
hereby waives any right to enforce any remedy which Lender now has, or may
hereafter have, against Borrower, and waives any benefit of, and any right to
participate in, any security now or hereafter held by Lender. Without limiting
the generality of the foregoing, Guarantor waives all right and defenses that
Guarantor may have because Borrower's debt is at any time secured by real
property. This means, among other things: (a) Lender may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged by
Borrower; and (b) if Lender forecloses on any real property collateral pledged
by Borrower: (i) the amount of the debt may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price; and (ii) Lender may collect from Guarantor even
if Lender, by foreclosing on the real property collateral, has destroyed any
right Guarantor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Guarantor may have because
Borrower's debt is secured by real property. These rights and defenses include,
but are not limited to, any rights or defenses based upon Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure ("CCP"). Furthermore,
Guarantor waives all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against the principal by the
operation of Section 580d of the CCP or otherwise.
7. All existing and future indebtedness of Borrower to Guarantor is
hereby subordinated to the indebtedness of Borrower to Lender and such
indebtedness of Borrower to Guarantor, if Lender so requests, shall be
collected, enforced and received by Guarantor as trustee for Lender and shall be
paid over to Lender on account of the indebtedness of Borrower to Lender, but
without reducing or affecting in any manner the liability of Guarantor under the
other provisions of this Guarantee.
3
<PAGE>
8. In addition to all liens upon, and rights of setoff against, the
monies, securities or other property of Guarantor given to Lender by law, Lender
shall have a lien and a right of setoff against, and Guarantor hereby grants to
Lender a security interest in, all monies, securities and other property of
Guarantor now and hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, or for safekeeping or
otherwise; every such lien and right of setoff may be exercised without demand
upon or notice to Guarantor. No lien or right of setoff shall be deemed to have
been waived by any act or conduct on the part of Lender, by any neglect to
exercise such right of setoff or to enforce such lien, or by any delay in so
doing.
9. It is not necessary for Lender to inquire into the powers of
Borrower or the officers, directors, partners or agents acting or purporting to
act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
10. Guarantor agrees to pay all attorneys' fees and all other costs and
expenses which may be incurred by Lender in enforcing this Guarantee. In the
event of the commencement of a bankruptcy proceeding by or against Guarantor or
otherwise involving any collateral for this Guarantee, Lender shall, to the
extent not already provided for herein, be entitled to recover, and Guarantor
shall be obligated to pay, Lender's attorneys' fees and costs incurred in
connection with: (i) any determination of the applicability of the bankruptcy
laws to the terms of this Guarantee or Lender's rights thereunder; (ii) any
attempt by Lender to enforce or preserve its rights under the bankruptcy laws,
or to prevent Guarantor from seeking to deny Lender its rights thereunder; (iii)
any effort by Lender to protect, preserve or enforce its rights against any
collateral for this Guarantee, or seeking authority to modify the automatic stay
of 11 USC Section 362 or otherwise seeking to engage in such protection,
preservation or enforcement; or (iv) any proceeding(s) arising under the
bankruptcy laws, or arising in or related to a case under the bankruptcy laws.
11. The obligations of Guarantor hereunder are joint and several if
Guarantor is more than one person or entity, are separate and independent of the
obligations of Borrower and of any other guarantor, and a separate action or
actions may be brought and prosecuted against Guarantor whether action is
brought against Borrower or any other guarantor or whether Borrower or any other
guarantor is joined in any action or actions. The obligations of Guarantor
hereunder shall survive and continue in full force and effect until payment in
full of the indebtedness is actually received by Lender, notwithstanding any
release or termination of Borrower's liability by express or implied agreement
with Lender or by operation of law and notwithstanding that the indebtedness or
4
<PAGE>
any part thereof is deemed to have been paid or discharged by operation of law
or by some act or agreement of Lender. For purposes of this Guarantee, the
indebtedness shall be deemed to be paid only to the extent that Lender actually
receives immediately available funds and to the extent of any credit bid by
Lender at any foreclosure or trustee's sale of any security for the
indebtedness.
12. Guarantor shall deliver to Lender financial statements of Guarantor
and other information pertaining to Guarantor as required under the terms of the
Credit Agreement among Borrower, Guarantor, Southhampton Enterprises Corp. and
Lender dated as of even date herewith. Guarantor shall also promptly deliver to
Lender, in writing, such further information as Lender may reasonably request
relating to Guarantor.
13. Guarantor agrees that to the extent Borrower or Guarantor makes any
payment to Lender in connection with the indebtedness, and all or any part of
such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by Lender or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then this Guarantee shall continue to be effective or shall be
reinstated, as the case may be, and, to the extent of such payment or repayment
by Lender, the indebtedness or part thereof intended to be satisfied by such
Preferential Payment shall be revived and continued in full force and effect as
if said Preferential Payment had not been made.
14. This Guarantee sets forth the entire agreement of Guarantor and
Lender with respect to the subject matter hereof and supersedes all prior oral
and written agreements and representations by Lender to Guarantor with respect
to the subject matter hereof. No modification or waiver of any provision of this
Guarantee or any right of Lender hereunder and no release of Guarantor from any
obligation hereunder shall be effective unless in a writing executed by an
authorized officer of Lender.
15. This Guarantee shall inure to the benefit of Lender and its
successors and assigns and shall be binding upon Guarantor and its heirs,
personal representatives, successors and assigns. Lender may assign this
Guarantee in whole or in part without notice.
16. Reference Provision.
(a) Each controversy, dispute or claim ("Claim") between the
parties arising out of or relating to this Guarantee which is not
settled in writing within ten days after the "Claim Date" (defined as
the date on which a party gives written notice to all other parties
that a controversy, dispute or
5
<PAGE>
claim exists), will be settled by a reference proceeding in Los
Angeles, California, in accordance with the provisions of Section 638
et seq. of the CCP, or their successor sections, which shall constitute
the exclusive remedy for the settlement of any Claim, including whether
such Claim is subject to the reference proceeding and the parties waive
their rights to initiate any legal proceedings against each other in
any court or jurisdiction other than the Superior Court of Los Angeles
(the "Court"). The referee shall be a retired Judge selected by mutual
agreement of the parties, and if they cannot so agree with in thirty
days (30) after the Claim Date, the referee shall be selected by the
Presiding Judge of the Court. The referee shall be appointed to sit as
a temporary judge, as authorized by law. The referee shall (a) be
requested to set the matter for hearing within sixty (60) days after
the Claim Date and (b) try any and all issues of law or fact and report
a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP
644 in the Court. All discovery permitted by this Guarantee shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the
event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections
raised to such discovery or unavailability of a witness due to absence
or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days
written notice, and, request for production of inspection of documents
shall be responded to within ten (10) days after service. All disputes
relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding upon
the parties.
(b) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law
in the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that
are the subject to the reference. The parties hereto expressly reserve
the right to contest or appeal from the final judgment or any
appealable order or appealable judgment entered by the referee. The
parties expressly reserve the right to findings of fact, conclusions of
law, a written statement of decision, and the right to move for a new
trial or a different judgment, which new trial, if
6
<PAGE>
granted, is also to be a reference proceeding under this provision.
17. This Guarantee shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of California,
except to the extent Lender has greater rights or remedies under Federal law,
whether as a national bank or otherwise, in which case such choice of California
law shall not be deemed to deprive Lender of any such rights and remedies as may
be available under Federal law. Subject to the provisions of Section 16 hereof,
each party consents to the personal jurisdiction and venue of the state courts
located in Los Angeles, State of California in connection with any controversy
related to this Guarantee, waives any argument that venue in any such forum is
not convenient and agrees that any litigation initiated by any of them in
connection with this Guarantee shall be venued in the Superior Court of Los
Angeles County, California. The parties waive any right to trial by jury in any
action or proceeding based on or pertaining to this Guarantee.
18. Except for telephonic notices (if any) permitted herein, any
notices or other communications required or permitted to be given by this
Guarantee to Guarantor or Lender must be (i) given in writing and personally
delivered or mailed by prepaid certified or registered mail, or (ii) made by
telefacsimile delivered or transmitted (but confirmed on the date the
telefacsimile is transmitted by one of the other methods of giving of notice
provided in this Section) to the person to whom such notice or communication is
directed, to the address of such person as follows:
Guarantor: Southhampton Enterprises Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Lender: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
7
<PAGE>
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice to Lender shall be deemed given
only if given to Lender at both notice addresses. Guarantor or Lender may change
its address for purposes of this Guarantee by giving notice of such change to
the other parties pursuant to this Section.
IN WITNESS WHEREOF, these presents are executed as of the 7th day of
May, 1997.
WITNESS: GUARANTOR:
SOUTHHAMPTON ENTERPRISES INC., a
/s/ Louis B. Lloyd Texas corporation
Type/Print Name:
Louis B. Lloyd
By: /s/ L. Steven Haynes
Type/Print Name: L. Steven Haynes
Title: Secretary
8
Exhibit 10.29
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as
of the 7th day of May, 1997, by SOUTHHAMPTON ENTERPRISES CORP., a British
Columbia (Canada) corporation (hereinafter called "Debtor"), whose chief
executive office is located at 9211 Diplomacy Row, Dallas, Texas 75247, in favor
of IMPERIAL BANK, a California banking corporation, and its successors and
assigns (hereinafter called "Secured Party"), whose address is 9920 South La
Cienega Boulevard, Lending Services, Inglewood, California 90301.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the property (the "Collateral") described on Schedule 1 attached hereto
and by this reference incorporated herein.
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $2,500,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note dated
of even date herewith, made by The Antigua Group, Inc., a Nevada
corporation ("Borrower"), payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
(c) Payment, performance and observance by Debtor,
Southhampton Enterprises, Inc., a Texas corporation ("SEI") and
Borrower of each covenant, condition, provision and agreement contained
in that Credit Agreement dated of even date herewith, by and between
Debtor, SEI, Borrower and Secured Party (hereinafter called the "Credit
Agreement") and in any other document or instrument related to the
indebtedness described in subparagraph (a) above and of all monies
expended or advanced by Secured Party pursuant to the terms thereof or
to preserve any right of Secured Party
<PAGE>
thereunder; and
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor, SEI and/or Borrower to Secured
Party of every kind and character, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
whether such indebtedness is from time to time reduced and thereafter
increased or entirely extinguished and thereafter reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for
business purposes.
3.2 Except for certain inventory located at the addresses set forth in
Schedule 3.1, the Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Except for the security interests described in Schedule 4.1
attached hereto and Permitted Liens (as defined in the Credit Agreement) and
financing statements described in Schedule 4.1 attached hereto and by this
reference incorporated herein, Debtor is the owner of the Collateral free of all
security interests or other encumbrances except the Security Interest and no
financing statement covering the Collateral is filed or recorded in any public
office.
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor for use primarily for business purposes. The address of
Debtor set forth at the beginning of this Agreement is the chief executive
office of Debtor.
4.3 Each lease, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each document, instrument and chattel paper included in the
Collateral is complete and regular on its face and free from evidence of forgery
or alteration.
<PAGE>
4.4 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions or constitute a
default under any agreement or instrument under which Debtor is a party or is
obligated. Debtor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest, the security interests described in Schedule 4.1 and the
Permitted Liens. Although proceeds of Collateral are covered by this Agreement,
this shall not be construed to mean that Secured Party consents to any sale of
the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, shall cause the Security Interest to be shown as a valid lien on the
Certificate of Title for all titled vehicles subject only to the LaSalle Lien
(as defined in Schedule 4.1) and shall deliver lien filing receipts to Secured
Party as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase
<PAGE>
orders, contracts or other items related to the Collateral. Debtor shall notify
Secured Party immediately of any default by any Obligor in the payment or
performance of its obligations with respect to any Collateral. Debtor, without
Secured Party's prior written consent, shall not make or agree to make any
alteration, modification or cancellation of, or substitution for, or credit,
adjustment or allowance on, any Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, unless waived in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and shall deliver to Secured Party confirming specific assignments
of all accounts, instruments, documents and chattel paper included in the
Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except for the LaSalle Lien.
Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments,
<PAGE>
expenses or charges, to keep all of the Collateral free from other security
interests, encumbrances or claims excepting the security interests described in
Schedule 4.1, to keep the Collateral in good condition and repair, to procure
and maintain insurance thereon, or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same, to accomplish
such repairs, to procure and maintain such insurance or to so perform; Secured
Party is hereby authorized to enter upon any property in the possession or
control of Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL
BY DEBTOR
6.1 Secured Party, before or after the occurrence of any Event of
Default, defined below, and without notice to Debtor, may notify any or all
Obligors of the existence of the Security Interest and may direct the Obligors
to make all payments on the Collateral to Secured Party. Until Secured Party has
notified the Obligors to remit payments directly to it, Debtor, at Debtor's own
cost and expense, shall collect or cause to be collected the accounts and monies
due under the accounts, documents, instruments and general intangibles or
pursuant to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor may be applied to the Obligation in such order and manner and at
such time as Secured Party, in its sole discretion, shall
<PAGE>
determine. In addition, Debtor shall promptly notify Secured Party of the return
to or possession by Debtor of goods underlying any Collateral; Debtor shall hold
the same in trust for Secured Party and shall dispose of the same as Secured
Party directs.
6.2 Before or after the occurrence of an Event of Default and without
notice to Debtor, Secured Party may, either in Debtor's name or in Secured
Party's name, endorse Debtor's name on any instruments, documents, or chattel
paper included in or pertaining to the Collateral. When an Event of Default
exists and without notice to Debtor, Secured Party may, either in Debtor's name
or in Secured Party's name, demand and sue on the Collateral and enforce,
compromise, settle or discharge the Collateral. Any Receiver (as that term is
defined in the Credit Agreement) shall also have following an Event of Default
the powers given to Secured Party in this Section 6.2. Debtor hereby irrevocably
appoints Secured Party and/or any Receiver its attorney in fact, with full power
of substitution, for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; and lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 As used herein the term "Event of Default" shall have the meaning
given to it in the Credit Agreement.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall
<PAGE>
have the following rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Exercise any or all of its rights, powers and privileges
hereunder.
(e) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
(f) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
<PAGE>
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least five (5) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any
<PAGE>
person for payment or performance of the Obligation, and without affecting the
Security Interest or the priority thereof, Secured Party, from time to time,
may: (i) extend the time for payment of all or any part of the Obligation,
accept a renewal note therefor, reduce the payments thereon, release any person
liable for all or any part thereof, or otherwise change the terms of all or any
part of the Obligation; (ii) take and hold other security for the payment or
performance of the Obligation and enforce, exchange, substitute, subordinate,
waive or release any such security; (iii) join in any extension or subordination
agreement; or (iv) release any part of the Collateral from the Security
Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of California, except to the extent Secured
Party has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be void or invalid, the same shall not affect the
remainder hereof which shall be effective as though the void or invalid
provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the
<PAGE>
future have against Secured Party shall relieve Debtor from paying or performing
the Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
9.9 Except for telephonic notices (if any) permitted herein, any
notices or other communications required or permitted to be given by this
Agreement to Debtor or Secured Party must be (i) given in writing and personally
delivered or mailed by prepaid certified or registered mail, or (ii) made by
telefacsimile delivered or transmitted (but confirmed on the date the
telefacsimile is transmitted by one of the other methods of giving of notice
provided in this Section), to the person to whom such notice or communication is
directed, to the address of such person as follows:
Debtor: Southhampton Enterprises Corp.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Secured Party: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as
<PAGE>
aforesaid; or, if mailed, on the third day after it is mailed as aforesaid; or,
if transmitted by telefacsimile, on the day that such notice is transmitted and
confirmed as aforesaid; provided that notice to Secured Party shall be deemed
given only if given to Secured Party at both notice addresses. Debtor or Secured
Party may change its address for purposes of this Credit Agreement by giving
notice of such change to the other parties pursuant to this Section.
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
10. NON-DEBTOR BORROWER PROVISIONS
10.1 All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of Borrower or SE Corp or the officers,
directors, partners or agents acting or purporting to act on its behalf. Debtor
is and shall continue to be fully informed as to all aspects of the business
affairs of Borrower that it deems relevant to the risks it is assuming and
hereby waives and fully discharges Secured Party from any and all obligations to
communicate to Debtor any facts of any nature whatsoever regarding Borrower, SE
Corp and the business affairs of Borrower and SE Corp.
10.2 Debtor authorizes Secured Party, without notice or demand, without
affecting the obligations of Debtor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the lien created hereby, from time to time, at the
request of any person primarily obligated therefor, to renew, compromise,
extend, accelerate or otherwise change the time for payment or performance of,
or otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Debtor waives and agrees not
to assert: (i) any right to require Debtor to proceed against Borrower or SE
Corp; (ii) the benefits of any statutory provision limiting the liability of a
surety; and (iii) any defense arising by reason of any disability or other
defense of Borrower or by reason of the cessation from any cause whatsoever of
the liability of Borrower or SE Corp. Debtor shall have no right of subrogation
and hereby waives any right to enforce any remedy which Secured Party now has,
or may hereafter have, against Borrower and/or SE Corp.
10.3 Nothing contained herein shall affect or limit the right of
Secured Party to proceed against any person or entity, including Debtor or any
partner in Debtor, with respect to the enforcement of any guarantee or other
similar rights.
10.4 Debtor waives all right and defenses that Debtor may have because
a principal's liability for the Obligation may be secured by real property. This
means, among other things: (1) Secured
<PAGE>
Party may pursue its remedies against Debtor without first foreclosing on any
real or personal property collateral pledged by Borrower; and (2) if Secured
Party forecloses on any real property collateral pledged by Borrower: (A) the
amount of the debt may be reduced only by the price for which that collateral is
sold at the foreclosure sale, even if the collateral is worth more than the sale
price; and (B) Secured Party may pursue its remedies against Debtor even if
Secured Party, by foreclosing on the real property collateral, has destroyed any
right Debtor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Debtor may have because a
principal's liability for the Obligation is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure. Furthermore, Debtor waives all rights and defenses arising out of an
election of remedies by Secured Party, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a secured
obligation, has destroyed Debtor's rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia (Canada) corporation
Witness (Other Than Notary):
/s/ Louis B. Lloyd By: /s/ L. Steven Haynes
Type/Print Name:Louis B. Lloyd Type/Print Name: L. Steven Haynes
Title: President
DEBTOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 7th day of
May, 1997, by L. Steven Haynes, the President of SOUTHHAMPTON ENTERPRISES CORP.,
a British Columbia (Canada) corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Melissa M. Derkaz
Notary Public
My commission expires:
My Commission Expires July 31, 1997
<PAGE>
SCHEDULE 1
COLLATERAL
All of Debtor's right, title or interest, whether present, future, or
contingent, in and to property of any kind, whether now or hereafter existing
and wherever located (the "Collateral"), including, without limitation:
(a) All bank accounts, certificates of deposit,
accounts, general intangibles, instruments, documents and
chattel paper (including all accounts receivable, notes,
drafts, franchise fees, royalties receivable, lease agreements
and security agreements), patents, patent applications,
trademarks, service members, trademark and service mark
applications, tradenames, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer books, tax refund
claims, claims against third parties, and increase to and
profits from all such property;
(b) All inventory, including all goods held for sale
or lease in Debtor's business, as now or hereafter conducted,
and all materials, work in process and finished goods used or
to be consumed in Debtor's business (whether or not the
inventory is represented by warehouse receipts or bills of
lading or has been or may be placed in transit or delivered to
a public warehouse);
(c) All fixtures, equipment and other goods which are
not inventory, including all furniture, fixtures, furnishings,
vehicles (whether titled or non-titled), machinery, materials
and supplies, wherever located, including but not limited to
such items described on the collateral schedule (if any)
attached hereto and by this reference made a part hereof,
together with all parts, accessories, attachments, additions
thereto or replacements therefor;
(d) All investment property not referred to above,
including, without limitation, all issued and outstanding stock
in The Antigua Group, Inc., a Nevada corporation ("Antigua"),
now owned or hereafter acquired by Debtor, including, without
limitation 2,074,600 shares of common stock evidenced by
Certificate No. _________, together with all earnings thereon,
<PAGE>
all additions thereto, all proceeds thereof from sale or
otherwise, all substitutions therefor, and all securities
issued with respect thereto as a result of any stock dividend,
stock split, warrants or other rights, reclassification,
readjustment or other change in the capital structure of
Antigua, and the securities of any corporation or other
properties received upon the conversion or exchange thereof
pursuant to any merger, consolidation, reorganization, sale of
assets or other agreement or received upon any liquidation of
Antigua or such other corporation.
together with (i) all policies or certificates of insurance covering any of the
foregoing property, and all awards, loss payments, proceeds and premium refunds
that may become payable with respect to such policies; (ii) all property of
Debtor that is now or may hereafter be in the possession or control of Secured
Party in any capacity, including without limitation all monies owed or that
become owed by Secured Party to Debtor; and (iii) all proceeds of any of the
foregoing property, whether due or to become due from any sale, exchange or
other disposition thereof, whether cash or non-cash in nature, and whether
represented by checks, drafts, notes or other instruments for the payment of
money, including, without limitation, all property, whether cash or non-cash in
nature, derived from tort, contractual or other claims arising in connection
with any of the foregoing property.
<PAGE>
SCHEDULE 3.1
OTHER COLLATERAL LOCATIONS
1. 2105 Midland Avenue, Scarborough, Ontario.
<PAGE>
SCHEDULE 4.1
PERMITTED SECURITY INTERESTS AND FINANCIAL STATEMENTS
A. SECURITY INTERESTS
1. A senior security interest ("LaSalle Lien") in favor of LaSalle
Business Credit, Inc., and securing: (a) repayment of (i) revolving line of
credit to Borrower in the maximum principal amount of $12,000,000, (ii) a term
loan to Borrower in the principal amount of $775,000, and (iii) a term loan to
Borrower in the principal amount of $3,500,000; and (b) payment and performance
of obligations incidental to such loans.
2. A junior security interest in favor of the Cruttenden Roth Bridge
Fund, LLC, and securing (a) repayment of a note made by Borrower in the
principal amount of $1,020,000 and (b) payment and performance of obligations
incidental to the indebtedness evidenced by such note.
3. A junior security interest in favor of Thomas E. Dooley, as agent
for the entities described in Schedule 4.1A, and securing (a) repayment of
indebtedness owed by Debtor in the aggregate principal amount of approximately
$6,378,000 and (b) payment and performance of obligations incidental to such
indebtedness.
4. A security interest granted in connection with a refinancing of the
indebtedness described in items A.1-A.3 above, but only if such Security
Interest is a Permitted Lien (as defined in the Credit Agreement).
B. FINANCING STATEMENTS
1. Financing statements filed to perfect the security interests
described in items A.1- A.3 above.
2. A financing statement filed in favor of St. Claire Group covering
inventory and pertaining to indebtedness in the approximate amount of $189,000
CDN.
3. A financing statement in favor of Guiness Import Company (Canada)
Limited covering certain Collateral and filed only as a protective filing with
respect to inventory of such entity held by Debtor.
<PAGE>
SCHEDULE 4.1A
Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley.
E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable
Intervivos Trust dated December 31, 1982.
Peter J. Dooley, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989.
Exhibit 10.30
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as
of the 7th day of May, 1997, by SOUTHHAMPTON ENTERPRISES INC., a Texas
corporation (hereinafter called "Debtor"), whose chief executive office is
located at 9211 Diplomacy Row, Dallas, Texas 75247, in favor of IMPERIAL BANK, a
California banking corporation, and its successors and assigns (hereinafter
called "Secured Party"), whose address is 9920 South La Cienega Boulevard,
Lending Services, Inglewood, California 90301.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the property (the "Collateral") described on Schedule 1 attached hereto
and by this reference incorporated herein.
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $2,500,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note dated
of even date herewith, made by The Antigua Group, Inc., a Nevada
corporation ("Borrower"), payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
(c) Payment, performance and observance by Debtor,
Southhampton Enterprises Corp., a British Columbia (Canada) corporation
("SE Corp"), and Borrower of each covenant, condition, provision and
agreement contained in that Credit Agreement dated of even date
herewith, by and between Debtor, SE Corp, Borrower and Secured Party
(hereinafter called the "Credit Agreement") and in any other document
or instrument related to the indebtedness described in subparagraph (a)
above and of all monies expended or advanced by Secured Party pursuant
to the terms thereof or to preserve any right of Secured Party
thereunder; and
<PAGE>
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor, SE Corp and/or Borrower to
Secured Party of every kind and character, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
incurred, whether such indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter
reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for
business purposes.
3.2 Except for certain inventory located at the addresses set forth in
Schedule 3.1, the Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Except for the security interests described in Schedule 4.1
attached hereto and Permitted Liens (as defined in the Credit Agreement) and for
financing statements described in Schedule 4.1 attached hereto and by this
reference incorporated herein, Debtor is the owner of the Collateral free of all
security interests or other encumbrances except the Security Interest and no
financing statement covering the Collateral is filed or recorded in any public
office.
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor for use primarily for business purposes. The address of
Debtor set forth at the beginning of this Agreement is the chief executive
office of Debtor.
4.3 Each lease, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each document, instrument and chattel paper included in the
Collateral is complete and regular on its face and free from evidence of forgery
or alteration.
4.4 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and
<PAGE>
performance by Debtor of this Agreement and all other documents and instruments
relating to the Obligation will not result in any breach of the terms and
conditions or constitute a default under any agreement or instrument under which
Debtor is a party or is obligated. Debtor is not in default in the performance
or observance of any covenants, conditions or provisions of any such agreement
or instrument.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest, the security interests described in Schedule 4.1 and the
Permitted Liens. Although proceeds of Collateral are covered by this Agreement,
this shall not be construed to mean that Secured Party consents to any sale of
the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, shall cause the Security Interest to be shown as a valid lien on the
Certificate of Title for all titled vehicles subject only to the LaSalle Lien
(as defined in Schedule 4.1) and shall deliver lien filing receipts to Secured
Party as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase orders, contracts or other
items related to the Collateral. Debtor shall notify Secured Party immediately
of any default by any Obligor in the payment or performance of its obligations
with
<PAGE>
respect to any Collateral. Debtor, without Secured Party's prior written
consent, shall not make or agree to make any alteration, modification or
cancellation of, or substitution for, or credit, adjustment or allowance on, any
Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, unless waived in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and shall deliver to Secured Party confirming specific assignments
of all accounts, instruments, documents and chattel paper included in the
Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except for the LaSalle Lien.
Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims excepting the security interests described in Schedule
4.1, to keep the Collateral in good
<PAGE>
condition and repair, to procure and maintain insurance thereon, or to perform
otherwise as required herein, Secured Party may advance the monies necessary to
pay the same, to accomplish such repairs, to procure and maintain such insurance
or to so perform; Secured Party is hereby authorized to enter upon any property
in the possession or control of Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL
BY DEBTOR
6.1 Secured Party, before or after the occurrence of any Event of
Default, defined below, and without notice to Debtor, may notify any or all
Obligors of the existence of the Security Interest and may direct the Obligors
to make all payments on the Collateral to Secured Party. Until Secured Party has
notified the Obligors to remit payments directly to it, Debtor, at Debtor's own
cost and expense, shall collect or cause to be collected the accounts and monies
due under the accounts, documents, instruments and general intangibles or
pursuant to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor may be applied to the Obligation in such order and manner and at
such time as Secured Party, in its sole discretion, shall determine. In
addition, Debtor shall promptly notify Secured Party of the return to or
possession by Debtor of goods underlying any Collateral; Debtor shall hold the
same in trust for Secured Party
<PAGE>
and shall dispose of the same as Secured Party directs.
6.2 Before or after the occurrence of an Event of Default and without
notice to Debtor, Secured Party may, either in Debtor's name or in Secured
Party's name, endorse Debtor's name on any instruments, documents, or chattel
paper included in or pertaining to the Collateral. When an Event of Default
exists and without notice to Debtor, Secured Party may, either in Debtor's name
or in Secured Party's name, demand and sue on the Collateral and enforce,
compromise, settle or discharge the Collateral. Any Receiver (as that term is
defined in the Credit Agreement) shall also have following an Event of Default
the powers given to Secured Party in this Section 6.2. Debtor hereby irrevocably
appoints Secured Party and/or any Receiver its attorney in fact, with full power
of substitution, for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; and lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 As used herein the term "Event of Default" shall have the meaning
given to it in the Credit Agreement.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
<PAGE>
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Exercise any or all of its rights, powers and privileges
hereunder.
(e) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
(f) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
8.3. Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least five (5) days prior to such
sale, disposition or other intended action, in the manner provided
<PAGE>
herein for the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part
<PAGE>
of the Obligation; (ii) take and hold other security for the payment or
performance of the Obligation and enforce, exchange, substitute, subordinate,
waive or release any such security; (iii) join in any extension or subordination
agreement; or (iv) release any part of the Collateral from the Security
Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of California, except to the extent Secured
Party has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be void or invalid, the same shall not affect the
remainder hereof which shall be effective as though the void or invalid
provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder
<PAGE>
shall be joint and several. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their heirs, personal
representatives, successors and assigns. The term "Secured Party" shall include
not only the original Secured Party hereunder but also any future owner and
holder, including pledgees, of note or notes evidencing the Obligation. The
provisions hereof shall apply to the parties according to the context thereof
and without regard to the number or gender of words or expressions used.
9.9 Except for telephonic notices(if any) permitted herein, any notices
or other communications required or permitted to be given by this Agreement to
Debtor or Secured Party must be (i) given in writing and personally delivered or
mailed by prepaid certified or registered mail, or (ii) made by telefacsimile
delivered or transmitted (but confirmed on the date the facsimile is transmitted
by one of the other methods of giving of notice provided in this Section), to
the person to whom such notice or communication is directed, to the address of
such person as follows:
Debtor: Southhampton Enterprises Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Secured Party: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice to Secured Party shall be
deemed given only if given to Secured Party at both notice addresses. Debtor or
Secured Party may change its address for purposes of this Agreement by giving
<PAGE>
notice of such change to the other parties pursuant to this Section.
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
10. NON-DEBTOR BORROWER PROVISIONS
10.1 All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of Borrower or SE Corp or the officers,
directors, partners or agents acting or purporting to act on its behalf. Debtor
is and shall continue to be fully informed as to all aspects of the business
affairs of Borrower that it deems relevant to the risks it is assuming and
hereby waives and fully discharges Secured Party from any and all obligations to
communicate to Debtor any facts of any nature whatsoever regarding Borrower, SE
Corp and the business affairs of Borrower and SE Corp.
10.2 Debtor authorizes Secured Party, without notice or demand, without
affecting the obligations of Debtor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the lien created hereby, from time to time, at the
request of any person primarily obligated therefor, to renew, compromise,
extend, accelerate or otherwise change the time for payment or performance of,
or otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Debtor waives and agrees not
to assert: (i) any right to require Debtor to proceed against Borrower or SE
Corp; (ii) the benefits of any statutory provision limiting the liability of a
surety; and (iii) any defense arising by reason of any disability or other
defense of Borrower or by reason of the cessation from any cause whatsoever of
the liability of Borrower or SE Corp. Debtor shall have no right of subrogation
and hereby waives any right to enforce any remedy which Secured Party now has,
or may hereafter have, against Borrower and/or SE Corp.
10.3 Nothing contained herein shall affect or limit the right of
Secured Party to proceed against any person or entity, including Debtor or any
partner in Debtor, with respect to the enforcement of any guarantee or other
similar rights.
10.4 Debtor waives all right and defenses that Debtor may have because
a principal's liability for the Obligation may be secured by real property. This
means, among other things: (1) Secured Party may pursue its remedies against
Debtor without first foreclosing on any real or personal property collateral
pledged by Borrower; and (2) if Secured Party forecloses on any real property
collateral pledged by Borrower: (A) the amount of the debt may be reduced only
by the price for which that collateral is sold at the foreclosure sale, even if
the collateral is worth more than the
<PAGE>
sale price; and (B) Secured Party may pursue its remedies against Debtor even if
Secured Party, by foreclosing on the real property collateral, has destroyed any
right Debtor may have to collect from Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses Debtor may have because a
principal's liability for the Obligation is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure. Furthermore, Debtor waives all rights and defenses arising out of an
election of remedies by Secured Party, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a secured
obligation, has destroyed Debtor's rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES INC.,
a Texas corporation
Witness (Other Than Notary):
/s/ Louis B. Lloyd By: /s/ L. Steven Haynes
Type/Print Name: Louis B. Lloyd Type/Print Name:
L. Steven Haynes
Title: Secretary
DEBTOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 7th day of
May, 1997, by L. Steven Haynes, the Secretary of SOUTHHAMPTON ENTERPRISES INC.,
a Texas corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Melissa M. Crosbie
Notary Public
My commission expires:
My Commission Expires July 31, 1997
<PAGE>
SCHEDULE 1
COLLATERAL
All of Debtor's right, title or interest, whether present, future, or
contingent, in and to property of any kind, whether now or hereafter existing
and wherever located (the "Collateral"), including, without limitation:
(a) All bank accounts, certificates of deposit, accounts, general
intangibles, instruments, documents and chattel paper (including all accounts
receivable, notes, drafts, franchise fees, royalties receivable, lease
agreements and security agreements), patents, patent applications, trademarks,
service members, trademark and service mark applications, tradenames, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
books, tax refund claims, claims against third parties, and increase to and
profits from all such property;
(b) All inventory, including all goods held for sale or lease in
Debtor's business, as now or hereafter conducted, and all materials, work in
process and finished goods used or to be consumed in Debtor's business (whether
or not the inventory is represented by warehouse receipts or bills of lading or
has been or may be placed in transit or delivered to a public warehouse);
(c) All fixtures, equipment and other goods which are not inventory,
including all furniture, fixtures, furnishings, vehicles (whether titled or
non-titled), machinery, materials and supplies, wherever located, including but
not limited to such items described on the collateral schedule (if any) attached
hereto and by this reference made a part hereof, together with all parts,
accessories, attachments, additions thereto or replacements therefor;
(d) All investment property not referred to above, including, without
limitation, all issued and outstanding stock in The Antigua Group, Inc., a
Nevada corporation ("Antigua"), now owned or hereafter acquired by Debtor,
including, without limitation 2,074,600 shares of common stock evidenced by
Certificate No. _________, together with all earnings thereon, all additions
thereto, all proceeds thereof from sale or otherwise, all substitutions
therefor, and all securities issued with respect thereto as a result of any
stock dividend, stock split, warrants or other rights, reclassification,
readjustment or other change in the capital structure of Antigua, and the
securities of any corporation or other properties received upon the conversion
or exchange thereof pursuant to any merger, consolidation, reorganization, sale
of assets or other agreement or received upon any liquidation of Antigua or such
other corporation.
together with (i) all policies or certificates of insurance covering any of the
foregoing property, and all awards, loss payments, proceeds and premium refunds
that may become payable with
<PAGE>
respect to such policies; (ii) all property of Debtor that is now or may
hereafter be in the possession or control of Secured Party in any capacity,
including without limitation all monies owed or that become owed by Secured
Party to Debtor; and (iii) all proceeds of any of the foregoing property,
whether due or to become due from any sale, exchange or other disposition
thereof, whether cash or non-cash in nature, and whether represented by checks,
drafts, notes or other instruments for the payment of money, including, without
limitation, all property, whether cash or non-cash in nature, derived from tort,
contractual or other claims arising in connection with any of the foregoing
property.
<PAGE>
SCHEDULE 3.1
OTHER COLLATERAL LOCATIONS
1. 2105 Midland Avenue, Scarborough, Ontario.
<PAGE>
SCHEDULE 4.1
PERMITTED SECURITY INTERESTS AND FINANCIAL STATEMENTS
A. SECURITY INTERESTS
1. A senior security interest ("LaSalle Lien") in favor of LaSalle
Business Credit, Inc., and securing: (a) repayment of (i) revolving line of
credit to Borrower in the maximum principal amount of $12,000,000, (ii) a term
loan to Borrower in the principal amount of $775,000, and (iii) a term loan to
Borrower in the principal amount of $3,500,000; and (b) payment and performance
of obligations incidental to such loans.
2. A junior security interest in favor of the Cruttenden Roth Bridge
Fund, LLC, and securing (a) repayment of a note made by Borrower in the
principal amount of $1,020,000 and (b) payment and performance of obligations
incidental to the indebtedness evidenced by such note.
3. A junior security interest in favor of Thomas E. Dooley, as agent
for the entities described in Schedule 4.1A, and securing (a) repayment of
indebtedness owed by SE Corp in the aggregate principal amount of approximately
$6,378,000 and (b) payment and performance of obligations incidental to such
indebtedness.
4. A security interest granted in connection with a refinancing of the
indebtedness described in items A.1-A.3 above, but only if such Security
Interest is a Permitted Lien (as defined in the Credit Agreement).
B. FINANCING STATEMENTS
Financing statements filed to perfect the security interests described
in items A.1-A.3 above.
<PAGE>
SCHEDULE 4.1A
Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley.
E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable
Intervivos Trust dated December 31, 1982.
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989.
Exhibit 10.31
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as
of the 7th day of May, 1997, by THE ANTIGUA GROUP, INC., a Nevada corporation
(hereinafter called "Debtor"), whose chief executive office is located at 9319
North 94th Way, Scottsdale, Arizona 85258, in favor of IMPERIAL BANK, a
California banking corporation, and its successors and assigns (hereinafter
called "Secured Party"), whose address is 9920 South La Cienega Boulevard,
Lending Services, Inglewood, California 90301.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the property (the "Collateral") described on Schedule 1 attached hereto
and by this reference incorporated herein.
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $2,500,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note dated
of even date herewith, made by Debtor, payable to the order of Secured
Party, and all extensions, modifications, renewals or replacements
thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
(c) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained in that Credit
Agreement dated of even date herewith, by and between Debtor and
Secured Party (hereinafter called the "Credit Agreement") and in any
other document or instrument related to the indebtedness described in
subparagraph (a) above and of all monies expended or advanced by
Secured Party pursuant to the terms thereof or to preserve any right of
Secured Party thereunder; and
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor to Secured
<PAGE>
Party of every kind and character, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
whether such indebtedness is from time to time reduced and thereafter
increased or entirely extinguished and thereafter reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for
business purposes.
3.2 Except for Collateral kept at the addresses set forth in Schedule
3.1 attached hereto, the Collateral will be kept at Debtor's address set forth
at the beginning of this Agreement.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Except for the security interests described in Schedule 4.1
attached hereto and Permitted Liens (as defined in the Credit Agreement) and for
financing statements described in Schedule 4.1 attached hereto and by this
reference incorporated herein, Debtor is the owner of the Collateral free of all
security interests or other encumbrances except the Security Interest and no
financing statement covering the Collateral is filed or recorded in any public
office.
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor for use primarily for business purposes. The address of
Debtor set forth at the beginning of this Agreement is the chief executive
office of Debtor.
4.3 Each lease, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each document, instrument and chattel paper included in the
Collateral is complete and regular on its face and free from evidence of forgery
or alteration.
4.4 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any
<PAGE>
breach of the terms and conditions or constitute a default under any agreement
or instrument under which Debtor is a party or is obligated. Debtor is not in
default in the performance or observance of any covenants, conditions or
provisions of any such agreement or instrument.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest, the security interests described in Schedule 4.1 and the
Permitted Liens. Although proceeds of Collateral are covered by this Agreement,
this shall not be construed to mean that Secured Party consents to any sale of
the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, shall cause the Security Interest to be shown as a valid lien on the
Certificate of Title for all titled vehicles subject only to the LaSalle Lien
(as defined in Schedule 4.1) and shall deliver lien filing receipts to Secured
Party as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase orders, contracts or other
items related to the Collateral. Debtor shall notify Secured Party immediately
of any default by any Obligor in the payment or performance of its obligations
with respect to any Collateral. Debtor, without Secured Party's prior written
consent, shall not make or agree to make any alteration,
<PAGE>
modification or cancellation of, or substitution for, or credit, adjustment or
allowance on, any Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, unless waived in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and shall deliver to Secured Party confirming specific assignments
of all accounts, instruments, documents and chattel paper included in the
Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except for the LaSalle Lien.
Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims excepting the security interests described in Schedule
4.1, to keep the Collateral in good condition and repair, to procure and
maintain insurance thereon, or to perform otherwise as required herein, Secured
Party may advance
<PAGE>
the monies necessary to pay the same, to accomplish such repairs, to procure and
maintain such insurance or to so perform; Secured Party is hereby authorized to
enter upon any property in the possession or control of Debtor for such
purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL
BY DEBTOR
6.1 Secured Party, before or after the occurrence of any Event of
Default, defined below, and without notice to Debtor, may notify any or all
Obligors of the existence of the Security Interest and may direct the Obligors
to make all payments on the Collateral to Secured Party. Until Secured Party has
notified the Obligors to remit payments directly to it, Debtor, at Debtor's own
cost and expense, shall collect or cause to be collected the accounts and monies
due under the accounts, documents, instruments and general intangibles or
pursuant to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor may be applied to the Obligation in such order and manner and at
such time as Secured Party, in its sole discretion, shall determine. In
addition, if an Event of Default exists, Debtor shall promptly notify Secured
Party of the return to or possession by Debtor of goods underlying any
Collateral; Debtor shall hold the same in trust for Secured Party and shall
dispose of the same as Secured Party directs.
<PAGE>
6.2 Before or after the occurrence of an Event of Default and without
notice to Debtor, Secured Party may, either in Debtor's name or in Secured
Party's name, endorse Debtor's name on any instruments, documents, or chattel
paper included in or pertaining to the Collateral. When an Event of Default
exists and without notice to Debtor, Secured Party may, either in Debtor's name
or in Secured Party's name, demand and sue on the Collateral and enforce,
compromise, settle or discharge the Collateral. Any Receiver (as that terms is
defined in the Credit Agreement) shall also have following an Event of Default
the powers given to Secured Party in this Section 6.2. Debtor hereby irrevocably
appoints Secured Party and/or any Receiver its attorney in fact, with full power
of substitution, for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; and lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 As used herein the term "Event of Default" shall have the meaning
given to it in the Credit Agreement.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and
<PAGE>
charges, shall be collectible thereupon by action at law.
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Exercise any or all of its rights, powers and privileges
hereunder.
(e) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
(f) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least five (5) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
<PAGE>
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange,
<PAGE>
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Collateral
from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of California, except to the extent Secured
Party has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be void or invalid, the same shall not affect the
remainder hereof which shall be effective as though the void or invalid
provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their
<PAGE>
heirs, personal representatives, successors and assigns. The term "Secured
Party" shall include not only the original Secured Party hereunder but also any
future owner and holder, including pledgees, of note or notes evidencing the
Obligation. The provisions hereof shall apply to the parties according to the
context thereof and without regard to the number or gender of words or
expressions used.
9.9 Except for telephonic notices(if any) permitted herein, any notices
or other communications required or permitted to be given by this Agreement to
Debtor or Secured Party must be (i) given in writing and personally delivered or
mailed by prepaid certified or registered mail, or (ii) made by telefacsimile
delivered or transmitted (but confirmed on the date the telefacsimile is
transmitted by one of the other methods of giving of notice provided in this
Section), to the person to whom such notice or communication is directed, to the
address of such person as follows:
Debtor: The Antigua Group, Inc.
9319 North 94th Way
Scottsdale, Arizona 85258
Attn: Thomas E. Dooley, Jr.
Telecopier: (602) 860-9609
Secured Party: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy to: Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice shall be deemed given to
Secured Party only if given to Secured Party at both notice addresses. Debtor or
Secured Party may change its address for purposes of this Agreement by giving
notice of such change to the other parties pursuant to this Section.
9.10 A carbon, photographic or other reproduced copy of this
<PAGE>
Agreement and/or any financing statement relating hereto shall be sufficient for
filing and/or recording as a financing statement.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
THE ANTIGUA GROUP, INC., a Nevada
corporation
Witness (Other Than Notary):
____________________________ By:
Type/Print Name: Kevin Blazer Type/Print Name: Gerald K. Whitley
Title: Vice President - Finance
DEBTOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
May, 1997, by Gerald K. Whitley, the Vice President Finance of THE ANTIGUA
GROUP, INC., a Nevada corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires:
- ----------------------
<PAGE>
SCHEDULE 1
COLLATERAL
All of Debtor's right, title or interest, whether present, future, or
contingent, in and to property of any kind, whether now or hereafter existing
and wherever located (the "Collateral"), including, without limitation:
(A) All bank accounts, certificates of deposit,
investment property, accounts, general intangibles,
instruments, documents and chattel paper (including all
accounts receivable, notes, drafts, franchise fees, royalties
receivable, lease agreements and security agreements),
patents, patent applications, trademarks, service members,
trademark and service mark applications, tradenames, trade
secrets, goodwill, copyrights, registrations licenses,
franchises, customer books, tax refund claims, claims against
third parties, and increase to and profits from all such
property;
(B) All inventory, including all goods held for sale
or lease in Debtor's business, as now or hereafter conducted,
and all materials, work in process and finished goods used or
to be consumed in Debtor's business (whether or not the
inventory is represented by warehouse receipts or bills of
lading or has been or may be placed in transit or delivered to
a public warehouse);
(C) All fixtures, equipment and other goods which are
not inventory, including all furniture, fixtures, furnishings,
vehicles (whether titled or non-titled), machinery, materials
and supplies, wherever located, including but not limited to
such items described on the collateral schedule (if any)
attached hereto and by this reference made a part hereof,
together with all parts, accessories, attachments, additions
thereto or replacements therefor;
together with (i) all policies or certificates of insurance covering any of the
foregoing property, and all awards, loss payments, proceeds and premium refunds
that may become payable with respect to such policies; (ii) all property of
Debtor that is now or may hereafter be in the possession or control of Secured
Party in any capacity, including without limitation all monies owed or that
become owed by Secured Party to Debtor; and (iii) all proceeds of any of the
foregoing property, whether due or to become due from any sale, exchange or
other disposition thereof, whether cash or non-cash in nature, and whether
represented by checks, drafts,
<PAGE>
notes or other instruments for the payment of money, including, without
limitation, all property, whether cash or non-cash in nature, derived from tort,
contractual or other claims arising in connection with any of the foregoing
property.
<PAGE>
SCHEDULE 3.1
OTHER COLLATERAL LOCATIONS
1. 9319 North 94th Way, Maricopa County, Arizona.
<PAGE>
SCHEDULE 4.1
PERMITTED SECURITY INTERESTS AND FINANCIAL STATEMENTS
A. SECURITY INTERESTS
1. A senior security interest ("LaSalle Lien") in favor of LaSalle
Business Credit, Inc., and securing: (a) repayment of (i) revolving line of
credit to Borrower in the maximum principal amount of $12,000,000, (ii) a term
loan to Borrower in the principal amount of $775,000, and (iii) a term loan to
Borrower in the principal amount of $3,500,000; and (b) payment and performance
of obligations incidental to such loans.
2. A junior security interest in favor of the Cruttenden Roth Bridge
Fund, LLC, and securing (a) repayment of a note made by Borrower in the
principal amount of $1,020,000 and (b) payment and performance of obligations
incidental to the indebtedness evidenced by such note.
3. A junior security interest in favor of Thomas E. Dooley, as agent
for the entities described in Schedule 4.1A, and securing (a) repayment of
indebtedness owed by Southhampton Enterprises Corp. in the aggregate principal
amount of approximately $6,378,000 and (b) payment and performance of
obligations incidental to such indebtedness.
4. A security interest granted in connection with a refinancing of the
indebtedness described in items A.1-A.3 above, but only if such Security
Interest is a Permitted Lien (as defined in the Credit Agreement).
B. FINANCING STATEMENTS
1. Financing statements filed to perfect the security interests
described in items A.1- A.3 above.
2. A financing statement filed in favor of Fook-Loy, Inc. which
Debtor is unconditionally entitled to have terminated.
<PAGE>
SCHEDULE 4.1A
. Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the
Thomas E. Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
. Thomas E. Dooley as Custodian Under the Uniform Gifts to
Minors Act fbo Kim L. Dooley.
. Thomas E. Dooley as Custodian Under the Uniform Gifts to
Minors Act fbo Shawn T. Dooley.
. E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable
Intervivos Trust dated December 31, 1982.
. Bobbi D. Hunter, Trustee under the 1989 Trust Agreement
established separate irrevocable Gift Trusts f/b/o the children of Thomas and
Gail Dooley dated March 7, 1989.
Exhibit 10.32
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") is made and entered
into as of the 7th day of May, 1997, by THE ANTIGUA GROUP, INC., a Nevada
corporation (hereinafter called "Debtor"), whose chief executive office is
located at 9319 North 94th Way, Scottsdale, Arizona 85258, in favor of IMPERIAL
BANK, a California banking corporation, and its successors and assigns
(hereinafter called "Secured Party"), whose address is 9920 South La Cienega
Boulevard, Lending Services, Inglewood, California 90301.
1.. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the following ("Collateral"): those certain trademarks and service marks
registered with the United States Patent and Trademark Office in the name of
Debtor, and described on Schedule 1 attached hereto and made a part hereof,
together with any renewals thereof, and the entire goodwill of the business in
connection with which such trademarks and service marks are used, and all claims
for damages by reason of past infringement of such trademarks and service marks
with the right to sue for and collect the same (collectively, "Trademarks") and
all license rights in the Trademarks. If, before the Obligation shall have been
satisfied in full, the Debtor shall obtain rights to any new trademarks or
service marks, the provisions of Section 1 shall automatically apply thereto and
Debtor shall give prompt written notice thereof to Secured Party. Debtor
irrevocably and unconditionally authorizes Secured Party to modify this
Agreement by amending Schedule 1 to include any additional or future trademarks,
service marks and applications therefor owned or acquired by Debtor without any
further assent or signature of Debtor.
2.. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $2,500,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note dated
of even date herewith, made by Debtor, payable to the order of Secured
Party, and all extensions, modifications, renewals or replacements
thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party
<PAGE>
pursuant to the terms hereof, or to preserve any right of Secured Party
hereunder, or to protect or preserve the Collateral or any part
thereof;
(c) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained in that Credit
Agreement dated of even date herewith, by and between Debtor and
Secured Party (hereinafter called the "Credit Agreement") and in any
other document or instrument related to the indebtedness described in
subparagraph (a) above and of all monies expended or advanced by
Secured Party pursuant to the terms thereof or to preserve any right of
Secured Party thereunder; and
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor to Secured Party of every kind
and character, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, whether such
indebtedness is from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for
business purposes.
3.2 The Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Except for the security interests described in Schedule 4.1 and
Permitted Liens (as defined in the Credit Agreement) and for financing
statements described in Schedule 4.1 attached hereto and by this reference
incorporated herein, Debtor is the owner of the Collateral free of all security
interests or other encumbrances except the Security Interest and no financing
statement covering the Collateral is filed or recorded in any public office.
4.2 The Trademarks are subsisting and have not been adjudged invalid or
unenforceable in whole or in part; each of the Trademarks is valid and
enforceable; and no claim has been made that the use of any of the Trademarks
does or may violate the rights of any third person. Debtor has used proper
statutory notice in connection with its use of the Trademarks; and Debtor has
<PAGE>
used or required the use of for the duration of this Agreement, consistent
standards of quality in the manufacture of products sold and services rendered
under the Trademarks.
4.3 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions or constitute a
default under any agreement or instrument under which Debtor is a party or is
obligated. Debtor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest, the security interests described in Schedule 4.1 and the
Permitted Liens Although proceeds of Collateral are covered by this Agreement,
this shall not be construed to mean that Secured Party consents to any sale of
the Collateral.
5.2 Debtor shall: (a) maintain the registration of the Trademarks; (b)
take all actions necessary to maintain, preserve and continue the validity and
enforceability of the Trademarks, including but not limited to the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings, and the payment of any
and all application, renewal, extension or other fees; (c) use proper statutory
notice in connection with the use of its Trademarks; (d) use consistent
standards of quality in the manufacture of products sold and services rendered
under the Trademarks; and (e) through counsel acceptable to Lender, (i)
prosecute diligently any trademark applications of the Trademarks pending as of
the date of this Agreement or thereafter, (ii) make federal application on
registrable but unregistered Trademarks, (iii) file and prosecute opposition and
cancellation proceedings, and (iv) do any and all acts which are necessary or
desirable to preserve and maintain all rights in the Trademarks. Debtor shall
not, without the prior written consent of Lender: (a) abandon any of the
Trademarks, or (b) bring any cancellation proceedings in connection with the
Trademarks. Any expenses incurred in connection with the Trademarks shall be
borne by Debtor. In the event of any litigation involving the Trademarks, Lender
may, if necessary, be joined as a nominal party to such suit if Lender shall
have been satisfied that it is not thereby incurring any risk of liability
because of such joinder. Debtor hereby agrees to reimburse and indemnify Lender
for all damages, costs and expenses,
<PAGE>
including attorneys' fees, incurred by Lender in the fulfillment of the
provisions of this Section.
5.3 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.4 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office or (ii) Debtor's
records concerning the Collateral.
5.5 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except for the LaSalle Lien.
Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.6 If Debtor shall fail to perform any of its obligations hereunder,
Secured Party may advance monies to perform such obligation.
5.7 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. AGREEMENT TO ASSIGN INTEREST
6.1 Upon the occurrence of an Event of Default, in addition to all
other rights and remedies available to Lender under the Credit Agreement or
applicable law, Debtor hereby agrees to execute any and all documents,
agreements and instruments considered necessary, appropriate or convenient by
Lender or its counsel to effectuate the assignment, transfer and conveyance of
the trademarks to Lender or its assignee. Debtor hereby irrevocably and
unconditionally authorizes and empowers Lender as Lender may
<PAGE>
select, in its exclusive discretion, as Debtor's true and lawful
attorney-in-fact, with the power to endorse the Borrower's name on all such
documents, agreements and instruments, including without limitation assignments.
The Borrower hereby ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney shall be irrevocable for the
lief of this Agreement, and constitutes a power of attorney coupled with an
interest. All of Lender's right and remedies with respect to the Trademarks,
whether established by this Agreement, by the Credit Agreement, by any other
document executed in connection with the obligation, or by law shall be
cumulative and may be exercised singularly or concurrently.
7. RIGHT OF PATENT AND TRADEMARK OFFICE TO RELY UPON LENDER'S STATEMENT
AND TO RECOGNIZE SALE
7.1 If Lender shall elect to exercise any of the rights hereunder, the
United States Patent and Trademark Office shall have the right to rely upon
Lender's written statement of Lender's right to sell, assign and transfer the
trademarks and the Debtor hereby irrevocably and unconditionally authorizes the
United States Patent and Trademark Office to recognize such sale by Lender
either in Debtor's name or in Lender's name without the necessity or obligation
of the United States Patent and Trademark Office to ascertain the existence of
any default by the Debtor under the Credit Agreement.
8. EVENTS OF DEFAULT; REMEDIES
8.1 As used herein the term "Event of Default" shall have the meaning
given to it in the Credit Agreement.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law;
(b) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it; and
(c) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
<PAGE>
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least five (5) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
<PAGE>
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange, substitute, subordinate, waive or release
any such security; (iii) join in any extension or subordination agreement; or
(iv) release any part of the Collateral from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of California, except to the extent Secured
Party has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be void or invalid, the same shall not affect the
remainder hereof which shall be effective as though the void or invalid
provision had not been contained herein.
<PAGE>
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
9.9 Except for telephonic notices (if any) permitted herein, any
notices or other communications required or permitted to be given by this
Agreement to Debtor or Secured Party must be (i) given in writing and personally
delivered or mailed by prepaid certified or registered mail, or (ii) made by
telefacsimile delivered or transmitted (but confirmed on the date the
telefacsimile is transmitted by one of the other methods of giving of notice
provided in this Section) to the person to whom such notice or communication is
directed, to the address of such person as follows:
Debtor: The Antigua Group, Inc.
9319 North 94th Way
Attn: Thomas E. Dooley, Jr.
Scottsdale, Arizona 85258
Telecopier: (602) 860-9609
Secured Party: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
<PAGE>
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice given to Secured Party shall be
deemed given only if given to both notice addresses. Debtor or Secured Party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to this Section.
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
THE ANTIGUA GROUP, INC., a
Nevada corporation
Witness (Other Than Notary):
/s/ Kevin Blazer By: Gerald K. Whitley
Type/Print Name: KEVIN BLAZER Type/Print Name:Gerald K. Whitley
Title: Vice President-Finance
DEBTOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 8 day of May,
1997, by Gerald K. Whitley, the Vice President-Finance of THE ANTIGUA GROUP,
INC., a Nevada corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Vickie L. Stripp
Notary Public
<PAGE>
My commission expires:
(Seal)
September 23, 1998
<PAGE>
SCHEDULE 1
MARKS
-----
Trademark Reg. No. Reg. Date
- --------- -------- ---------
ANTIGUA 1,242,152 06/14/83
ANTIGUA 1,480,871 03/15/88
miscellaneous design 1,561,053 10/17/89
ANTECH 1,683,030 04/14/92
A II APPAREL 1,809,289 12/07/93
ANTIGUA SPORT AND DESIGN 1,940,578 12/12/95
Trademark Applications Serial No. Filed
- ---------------------- ---------- -----
WHEN THE SPORT IS EVERYTHING 74/528,972 05/24/94
<PAGE>
SCHEDULE 4.4
PERMITTED SECURITY INTERESTS AND FINANCIAL STATEMENTS
A. SECURITY INTERESTS
1. A senior security interest ("LaSalle Lien") in favor of LaSalle
Business Credit, Inc., and securing: (a) repayment of (i) revolving line of
credit to Borrower in the maximum principal amount of $12,000,000, (ii) a term
loan to Borrower in the principal amount of $775,000, and (iii) a term loan to
Borrower in the principal amount of $3,500,000; and (b) payment and performance
of obligations incidental to such loans.
2. A junior security interest in favor of the Cruttenden Roth Bridge
Fund, LLC, and securing (a) repayment of a note made by Borrower in the
principal amount of $1,020,000 and (b) payment and performance of obligations
incidental to the indebtedness evidenced by such note.
3. A junior security interest in favor of Thomas E. Dooley, as agent
for the entities described in Schedule 4.4A, and securing (a) repayment of
indebtedness owed by Southhampton Enterprises Corp. in the aggregate principal
amount of approximately $6,378,000 and (b) payment and performance of
obligations incidental to such indebtedness.
4. A security interest granted in connection with a refinancing of the
indebtedness described in items A.1-A.3 above, but only if such security
interest is a Permitted Lien (as defined in the Credit Agreement).
B. FINANCING STATEMENTS
Financing statements filed to perfect the security interests described
in items A.1-A.3 above.
<PAGE>
SCHEDULE 4.4A
Sellers
- -------
Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley.
E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable
Intervivos Trust dated December 31, 1982.
Peter J. Dooley, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989.
Exhibit 10.33
PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT
(SEC)
THIS PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT ("Agreement") is
made and entered into as of the 7th day of May, 1997, by SOUTHHAMPTON
ENTERPRISES CORP., a British Columbia (Canada) corporation (hereinafter called
"Pledgor"), whose chief executive office is located at 9211 Diplomacy Row,
Dallas, Texas 75247, in favor of IMPERIAL BANK, a California banking
corporation, and its successors and assigns (hereinafter called "Secured
Party"), whose address is 9920 South La Cienega Boulevard, Lending Services,
Inglewood, California 90301.
1. RECITALS
1.1 Secured Party has agreed to make certain financial accommodations
to THE ANTIGUA GROUP, INC., a Nevada corporation (hereinafter when referred to
in this capacity called "Borrower").
1.2 Secured Party's agreement to make financial accommodations to
Borrower is conditioned upon Secured Party's receiving a pledge and security
interest in all stock and securities issued by SOUTHHAMPTON ENTERPRISES, INC. a
Texas corporation (hereinafter when referred to in this capacity called the
"Company"), now owned or hereafter acquired by Pledgor.
1.3 Pledgor is the owner of all of the shares of the capital stock of
the Company, and Pledgor desires to pledge to Secured Party such shares in
connection with Secured Party's financial accommodations to Borrower.
2. PLEDGE OF STOCK
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
stock in the Company now owned or hereafter acquired by Pledgor, including
without limitation the stock described on Schedule 2.1 attached hereto and by
this reference made a part hereof, together with all earnings thereon, all
additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split, warrants or other rights,
reclassification, readjustment or other change in the capital structure of the
Company, and the securities of any corporation or other properties received upon
the conversion or exchange thereof pursuant to any merger, consolidation,
reorganization, sale of assets or other agreement or received upon any
liquidation of the Company or such other corporation (all hereinafter called the
"Pledged Securities").
<PAGE>
2.2 Upon the execution of this Agreement, Pledgor shall deliver to
Secured Party certificates for the Pledged Securities, together with appropriate
stock transfer powers therefor duly executed by Pledgor in blank. Immediately
upon receipt, Pledgor shall deliver to Secured Party all certificates and other
evidences of the Pledged Securities that come into the possession, custody or
control of Pledgor, together with appropriate stock transfer powers therefor
duly executed by Pledgor in blank, and any other property constituting part of
the Pledged Securities, free and clear of any prior lien, claim, charge or
encumbrance.
2.3 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof and of the Credit Agreement (defined below) until the Obligation (defined
below) has been discharged in full. Secured Party is hereby authorized and
empowered to take any and all action with respect to such property as authorized
under this Agreement. In its discretion and without notice to Pledgor, Secured
Party may take any one or more of the following actions if an Event of Default
has occurred and is continuing, without liability except to account for property
actually received by it:
(a) transfer to or register in its name or the name of its
nominee any of the Pledged Securities, with or without indication of
the security interest herein created and/or the proxy granted to it in
Section 5.1; and whether or not the Pledged Securities are so
transferred or registered, receive the income, dividends and other
distributions thereon except for cash dividends permitted to be paid
under the terms of the Credit Agreement and hold them or apply them to
the Obligation in any order of priority;
(b) exchange any of the Pledged Securities for other property
upon a reorganization, recapitalization or other readjustment and, in
connection therewith, deposit any of the Pledged Securities with any
committee or depositary upon such terms as the Secured Party may
determine; and
(c) in its name, or in the name of Pledgor, demand, sue for,
collect or receive any money or property (except for cash dividends
permitted to be paid under the terms of the Credit Agreement) at any
time payable or receivable on account of, or in exchange for, any of
the Pledged Securities and, in connection therewith, endorse notes,
checks, drafts, money orders, documents of title or other evidences of
payment, shipment or storage in the name of Pledgor.
Secured Party shall be under no duty to exercise, or to withhold the exercise
of, any of the rights, powers, privileges and options expressly or implicitly
granted to Secured Party in this Agreement, and shall not be responsible for any
failure to do so or delay in so doing.
<PAGE>
3. OBLIGATION SECURED
This Agreement shall secure, in such order of priority as Secured Party
may elect:
(a) Payment of the sum of $2,500,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note dated
of even date herewith, made by Borrower, payable to the order of
Secured Party, and all extensions, modifications, renewals or
replacements thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Pledgor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Pledged Securities or any part thereof;
(c) Payment, performance and observance by Pledgor, Company
and Borrower of each covenant, condition, provision and agreement
contained in that Credit Agreement dated of even date herewith, by and
between Pledgor, Company, Borrower and Secured Party (hereinafter
called the "Credit Agreement") and in any other document or instrument
related to the indebtedness hereby secured and of all monies expended
or advanced by Secured Party pursuant to the terms thereof or to
preserve any right of Secured Party thereunder; and
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Pledgor, Company and/or Borrower to
Secured Party of every kind and character, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
incurred, whether such indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter
reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
4.1 If Pledgor is a corporation, partnership or trust, it (i) is duly
organized, validly existing and in good standing under the laws of the state in
which it is organized; (ii) is qualified to do business and is in good standing
under the laws of each state in which it is doing business; (iii) has full power
and authority to own its properties and assets and to carry on its business as
now conducted; and (iv) is fully authorized and permitted to execute and deliver
this Agreement. The execution, delivery and performance by Pledgor of this
Agreement and all other documents
<PAGE>
and instruments relating to the Obligation will not result in any breach of the
terms and conditions of, nor constitute a default under, any agreement or
instrument under which Pledgor is a party or is obligated. Pledgor is not in
default in the performance or observance of any covenants, conditions or
provisions of any such agreement or instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement
is the chief executive office of Pledgor (or Pledgor's residence if Pledgor is
an individual without an office).
4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or the Company, and
Pledgor shall defend the right, title, lien and security interest of Secured
Party in and to the Pledged Securities against the claims and demands of all
persons and other entities whatsoever. The stock identified in Schedule 2.1 is
all of the issued and outstanding capital stock of the Company.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever
other than as imposed hereby or as set forth, if at all, on Schedule 4.4
attached hereto.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether
or not the Pledged Securities have been transferred into the name of Secured
Party or its nominee, as Pledgor's proxy with full power, in the same manner, to
the same extent and with the same effect as if Pledgor were to do the same, in
the sole discretion of Secured Party:
(a) To call a meeting of the stockholders of the Company and
to vote the Pledged Securities, to seek the consent of such
stockholders, to remove the directors of the Company, or any of them,
and to elect new directors of the Company, who thereafter shall manage
the affairs of the Company, operate its properties and carry on its
business, and otherwise take any action with respect to the business,
properties and affairs of the Company that such new directors shall
deem necessary or appropriate, including, but not limited to, the
maintenance, repair, renewal or alteration of any or all of the
properties of the Company, the leasing, subleasing, sale or other
disposition of any or all of such properties, the borrowing of money on
the credit of the Company (whether from Secured Party or others) that
in the judgment of such new directors shall be necessary to preserve
any of such properties or to discharge the obligations of the Company,
and the employment of any or all agents, attorneys, counsel, or
<PAGE>
other employees as deemed by such new directors to be necessary for the
proper operation or conduct of the business, properties and affairs of
the Company;
(b) To consent to any and all actions by or with respect to
the Company for which consent of the stockholders of the Company is or
may be necessary or appropriate; and
(c) Without limitation, to do all things that Pledgor can do
or could do as stockholder of the Company, giving Secured Party full
power of substitution and revocation;
provided, however, that (i) the foregoing irrevocable proxy shall not be
exercisable by Secured Party, and Pledgor alone shall have the foregoing powers,
so long as there is no Event of Default hereunder, and (ii) this irrevocable
proxy shall terminate at such time as this Agreement is no longer in full force
and effect. The foregoing proxy is coupled with an interest sufficient in law to
support an irrevocable power and shall be irrevocable and shall survive the
death or incapacity of Pledgor. Pledgor hereby revokes any proxy or proxies
heretofore given to any person or persons and agrees not to give any other
proxies in derogation hereof until such time as this Agreement is no longer in
full force and effect.
6. COVENANTS OF PLEDGOR
6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of
any of the Pledged Securities or any interest therein without obtaining the
prior written consent of Secured Party and shall keep the Pledged Securities
free of all security interests or other encumbrances except the lien and
security interests granted herein and the security interests set forth on
Schedule 4.4 attached hereto.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and
other charges which may be levied or assessed against the Pledged Securities.
6.3 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location of
Pledgor's residence.
6.4 Pledgor, at its cost and expense, shall protect and defend the
Pledged Securities, this Agreement and all of the rights of Secured Party
hereunder against all claims and demands of other parties. Pledgor shall pay all
claims and charges that in the opinion of Secured Party might prejudice, imperil
or otherwise affect the Pledged Securities. Pledgor shall promptly notify
Secured Party of any levy, distraint or other seizure, by legal process or
otherwise, of all or any part of the Pledged Securities and of any threatened or
filed claims or proceedings that might in any way affect or impair the terms of
this Agreement.
6.5 If Pledgor shall fail to pay any taxes, assessments,
<PAGE>
expenses or charges, to keep all of the Pledged Securities free from other
security interests, encumbrances or claims excepting the security interests set
forth on Schedule 4.4 attached hereto, or to perform otherwise as required
herein, Secured Party may advance the monies necessary to pay the same or to so
perform.
6.6 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.7 Secured Party shall use such reasonable care in handling,
preserving and protecting the Pledged Securities in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Pledged
Securities unless there is affirmative proof of a lack of due care; and lack of
due care shall not be implied solely by virtue of any loss, destruction or
disappearance. Secured Party shall not be required to take any steps necessary
to preserve any rights in the Pledged Securities against prior parties or to
protect, perfect, preserve or maintain any security interest given to secure the
Pledged Securities.
6.8 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 As used herein the term "Event of Default" shall have the meaning
given to it in the Credit Agreement.
7.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall
<PAGE>
have the following rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law;
(b) Transfer the Pledged Securities or any part thereof into
its own name or that of its nominee so that Secured Party or its
nominee may appear of record as the sole owner thereof;
(c) Vote any or all of the Pledged Securities and give all
consents, waivers and ratifications in respect thereof and otherwise
acting with respect thereto as though it were the absolute owner
thereof;
(d) Exercise any and all rights of conversion, exchange,
subscription, or any other rights, privileges or options pertaining to
any of the Pledged Securities including, but not limited to, the right
to exchange, at its discretion, any or all of the Pledged Securities
upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the Company or upon the exercise by Pledgor or
Secured Party of any right, privilege or option pertaining to any of
the shares of the Pledged Securities, and in connection therewith to
deposit and deliver such shares of Pledged Securities with any
committee, depository, transfer agent, registrar or any other agency
upon such terms as Secured Party may determine without liability except
to account for the property actually received by it;
(e) Receive and retain any dividend or other distribution on
account of the Pledged Securities;
(f) Sell any or all of the Pledged Securities in accordance
with the provisions hereof;
(g) Insure any of the Pledged Securities;
(h) In its name, or in the name of Pledgor, make any
compromise or settlement deemed advisable with respect to any of the
Pledged Securities; and
(i) Exercise any or all of its other rights, power and
privileges hereunder or available at law or in equity;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the
<PAGE>
manner provided in Subparagraph 7.3(c) below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
(a) (i) Secured Party shall have the right at any time and from
time to time to sell, resell, assign and deliver, in its discretion,
all or any part of the Pledged Securities in one or more units, at the
same or different times, and all right, title and interest, claim and
demand therein, and right of redemption thereof, at private sale, or at
public sale to the highest bidder for cash, upon credit or for future
delivery, Pledgor hereby waiving and releasing to the fullest extent
permitted by law any and all equity or right of redemption. If any of
the Pledged Securities are sold by Secured Party upon credit or for
future delivery, Secured Party shall not be liable for the failure of
the purchaser to purchase or pay for same, and, in the event of any
such failure, Secured Party may resell such Pledged Securities. In no
event shall Pledgor be credited with any part of the proceeds of the
sale of any Pledged Securities until cash payment thereof has actually
been received by Secured Party.
(ii) No demand, advertisement or notice, all of which are
hereby expressly waived, shall be required in connection with any sale
or other disposition of all or any part of the Pledged Securities that
threatens to decline speedily in value or that is of a type customarily
sold on a recognized market; otherwise Secured Party shall give Pledgor
at least five (5) days' prior notice of the time and place of any
public sale or of the time after which any private sale or other
dispositions are to be made, which Pledgor agrees is reasonable, all
other demands, advertisements and notices being hereby waived. Upon any
sale, whether under this Agreement or by virtue of judicial
proceedings, Secured Party may bid for and purchase any or all of the
Pledged Securities and, upon compliance with the terms of the sale, may
hold, retain, possess and dispose of such items in its own absolute
right without further accountability, and as purchaser at such sale, in
paying the purchase price, may turn in any note or notes held by
Secured Party in lieu of cash up to the amount that would, upon
distribution of the net proceeds of such sale in accordance with
Subparagraph 7.3(c) hereof, be payable to Secured Party. In case the
amount so payable thereon shall be less than the amount due thereon,
the note or notes turned in (in lieu of cash) shall be returned to the
holder thereof after being properly stamped to show the partial payment
effected by such purchase.
(b) Pledgor recognizes that Secured Party may be unable to
effect a sale to the public of all or a part of the Pledged Securities
by reason of prohibitions contained in applicable securities laws, but
may be compelled to resort to one or more
<PAGE>
sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such Pledged Securities for their own
account, for investment and not with a view to the distribution or
resale thereof. Pledgor agrees that sales so made may be at prices and
other terms less favorable to the seller than if such Pledged
Securities were sold to the public, and that Secured Party has no
obligation to delay sale of any such Pledged Securities for the period
of time necessary to permit the issuer of such Pledged Securities to
register the same for sale to the public under applicable securities
laws. Pledgor agrees that negotiated sales made under the foregoing
circumstances shall be deemed to have been made in a commercially
reasonable manner.
(c) In all sales of Pledged Securities, public or private,
Secured Party shall apply the proceeds of sale as follows:
(i) First, to the payment of all costs and expenses
incurred hereunder or for the sale, transfer, or delivery,
including broker's and attorneys' fees;
(ii) Next to the payment of the Obligation; and
(iii) The balance, if any, to Pledgor or to the
person or persons entitled thereto upon proper demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without
limitation court costs and reasonable attorneys' fees, incurred by Secured Party
in enforcing payment and performance of the Obligation or in exercising the
rights and remedies of Secured Party hereunder. All such costs and expenses
shall be secured by this Agreement and by all other lien and security documents
securing the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other
<PAGE>
or subsequent Event of Default. No delay on the part of Secured Party in
exercising any such rights shall be construed to preclude it from the exercise
thereof at any time while that Event of Default is continuing. Secured Party may
enforce any one or more rights or remedies hereunder successively or
concurrently. By accepting payment or performance of any of the Obligation after
its due date, Secured Party shall not thereby waive the agreement contained
herein that time is of the essence, nor shall Secured Party waive either its
right to require prompt payment or performance when due of the remainder of the
Obligation or its right to consider the failure to so pay or perform an Event of
Default.
8. MISCELLANEOUS PROVISIONS
8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or performance of the
Obligation, to its several securities therefor in such order and manner as it
may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted herein, Secured Party,
from time to time, may: (i) extend the time for payment of all or any part of
the Obligation, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Pledged
Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
<PAGE>
8.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of California, except to the extent Secured
Party has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be void or invalid, the same shall not affect the
remainder hereof which shall be effective as though the void or invalid
provision had not been contained herein.
8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Pledgor and a duly authorized officer of Secured Party.
8.6 This is a continuing agreement, which shall remain in full force
and effect until actual receipt by Secured Party of written notice of its
revocation as to future transactions and shall remain in full force and effect
thereafter until all of the Obligation incurred before the receipt of such
notice, and all of the Obligation incurred thereafter under commitments extended
by Secured Party before the receipt of such notice, shall have been paid and
performed in full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. If more than one Pledgor is named
herein, the word Pledgor shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of the note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
8.9 Except for telephonic notices (if any) permitted herein, any
notices or other communications required or permitted to be given by this
Agreement to Pledgor or Secured Party must be (i) given in writing and
personally delivered or mailed by prepaid certified or registered mail, or (ii)
made by telefacsimile delivered or transmitted (but confirmed on the date the
telefacsimile is transmitted by one of the other methods of giving of notice
provided in this Section), to the person to whom such notice or communication is
directed, to the address of such person
<PAGE>
as follows:
Pledgor: Southhampton Enterprises Corp.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Secured Party: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice to Secured Party shall be
deemed given only if given to Secured Party at both notice addresses. Pledgor or
Secured Party may change its address for purposes of this Agreement by giving
notice of such change to the other parties pursuant to this Section.
8.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
9. NON-PLEDGOR BORROWER PROVISIONS
9.1 All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of Borrower or the officers, directors,
partners or agents acting or purporting to act on its behalf. Pledgor is and
shall continue to be fully informed as to all aspects of the business affairs of
Borrower that it deems relevant to the risks it is assuming and hereby waives
and fully discharges Secured Party from any and all obligations to communicate
to Pledgor any facts of any nature whatsoever regarding Borrower and Borrower's
business affairs.
<PAGE>
9.2 Pledgor authorizes Secured Party, without notice or demand, without
affecting the obligations of Pledgor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the lien created hereby, from time to time, at the
request of any person primarily obligated therefor, to renew, compromise,
extend, accelerate or otherwise change the time for payment or performance of,
or otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Pledgor waives and agrees not
to assert: (i) any right to require Secured Party to proceed against Borrower;
(ii) the benefits of any statutory provision limiting the liability of a surety;
and (iii) any defense arising by reason of any disability or other defense of
Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower. Pledgor shall have no right of subrogation and hereby
waives any right to enforce any remedy which Secured Party now has, or may
hereafter have, against Borrower.
9.3 Nothing contained herein shall affect or limit the right of Secured
Party to proceed against any person or entity, including Pledgor or any partner
in Pledgor, with respect to the enforcement of any guarantee or other similar
rights.
9.4 Pledgor waives all right and defenses that Pledgor may have because
a principal's liability for the Obligation is at any time secured by real
property. This means, among other things: (1) Secured Party may pursue its
remedies against Pledgor without first foreclosing on any real or personal
property collateral pledged by Borrower; and (2) if Secured Party forecloses on
any real property collateral pledged by Borrower: (A) the amount of the debt may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price; and
(B) Secured Party may pursue its remedies against Pledgor even if Secured Party,
by foreclosing on the real property collateral, has destroyed any right Pledgor
may have to collect from Borrower. This is an unconditional and irrevocable
waiver of any rights and defenses Pledgor may have because a principal's
liability for the Obligation is at any time secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure. Furthermore, Pledgor waives all rights and defenses arising out of an
election of remedies by Secured Party, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a secured
obligation, has destroyed Pledgor's rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES CORP., a
<PAGE>
British Columbia (Canada)
corporation
Witness By: /s/ L. Steven Haynes
(Other than Notary Public) Type/Print Name: L. Steven Haynes
Title: President
/s/ Louis B. Lloyd
Typed/Print Name: Louis B. Lloyd
PLEDGOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 7th day of
May, 1997, by L. Steven Haynes, the President of SOUTHHAMPTON ENTERPRISES CORP.,
a British Columbia (Canada) corporation, on behalf of such corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Melissa M. Durkaz
Notary Public
My commission expires:
My Commission Expires July 31, 1997
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SCHEDULE 2.1
All issued and outstanding shares of stock in Southhampton Enterprises
Inc., a Texas corporation, now or hereafter owned by Pledgor, which as of the
date hereof consists of 1,000 shares of common stock as evidenced by Certificate
Nos. 2, 3 and 4.
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SCHEDULE 4.4
PERMITTED SECURITY INTEREST
1. A junior security interest in favor of The Cruttenden Roth Bridge
Fund, LLC, and securing (a) repayment of a loan to Borrower in the principal
amount of $1,020,000 and (b) payment and performance of obligations incidental
to such loan.
2. A junior security interest in favor of Thomas E. Dooley, as agent
for the entities described in Schedule 4.4A, and securing (a) repayment of
indebtedness in the aggregate principal amount of approximately $6,378,000 and
(b) payment and performance of obligations incidental to such indebtedness.
3. A security interest granted in connection with a refinancing of the
indebtedness described in items 1 and 2 above, but only if such security
interest is a Permitted Lien (as defined in the Credit Agreement).
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SCHEDULE 4.4A
SELLER
Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the Thomas E. Dooley
and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim L.
Dooley.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Shawn T.
Dooley.
E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable Intervivos Trust
dated December 31, 1982.
Peter J. Dooley, Trustee under the 1989 Trust Agreement established separate
irrevocable Gift Trusts f/b/o the children of Thomas and Gail Dooley dated March
7, 1989.
Exhibit 10.34
PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT
(SEI)
THIS PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT ("Agreement") is
made and entered into as of the 7th day of May, 1997, by SOUTHHAMPTON
ENTERPRISES INC., a Texas corporation (hereinafter called "Pledgor"), whose
chief executive office is located at 9211 Diplomacy Row, Dallas, Texas 75247, in
favor of IMPERIAL BANK, a California banking corporation, and its successors and
assigns (hereinafter called "Secured Party"), whose address is 9920 South La
Cienega Boulevard, Lending Services, Inglewood, California 90301.
1. RECITALS
1.1 Secured Party has agreed to make certain financial accommodations
to THE ANTIGUA GROUP, INC., a Nevada corporation (hereinafter when referred to
in this capacity called "Borrower").
1.2 Secured Party's agreement to make financial accommodations to
Borrower is conditioned upon Secured Party's receiving a pledge and security
interest in all stock and securities issued by THE ANTIGUA GROUP, INC., a Nevada
corporation (hereinafter when referred to in this capacity called the
"Company"), now owned or hereafter acquired by Pledgor.
1.3 Pledgor is the owner of all of the shares of the capital stock of
the Company, and Pledgor desires to pledge to Secured Party such shares in
connection with Secured Party's financial accommodations to Borrower.
2. PLEDGE OF STOCK
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
stock in the Company now owned or hereafter acquired by Pledgor, including
without limitation the stock described on Schedule 2.1 attached hereto and by
this reference made a part hereof, together with all earnings thereon, all
additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split, warrants or other rights,
reclassification, readjustment or other change in the capital structure of the
Company, and the securities of any corporation or other properties received upon
the conversion or exchange thereof pursuant to any merger, consolidation,
reorganization, sale of assets or other agreement or received upon any
liquidation of the Company or such other corporation (all hereinafter called the
"Pledged Securities").
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2.2 Upon the execution of this Agreement, Pledgor shall deliver to
Secured Party certificates for the Pledged Securities, together with appropriate
stock transfer powers therefor duly executed by Pledgor in blank. Immediately
upon receipt, Pledgor shall deliver to Secured Party all certificates and other
evidences of the Pledged Securities that come into the possession, custody or
control of Pledgor, together with appropriate stock transfer powers therefor
duly executed by Pledgor in blank, and any other property constituting part of
the Pledged Securities, free and clear of any prior lien, claim, charge or
encumbrance.
2.3 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof and of the Credit Agreement (defined below) until the Obligation (defined
below) has been discharged in full. Secured Party is hereby authorized and
empowered to take any and all action with respect to such property as authorized
under this Agreement. In its discretion and without notice to Pledgor, Secured
Party may take any one or more of the following actions if an Event of Default
has occurred and is continuing, without liability except to account for property
actually received by it:
(a) transfer to or register in its name or the name of its
nominee any of the Pledged Securities, with or without indication of
the security interest herein created, and/or the proxy granted to it in
Section 5.1; and whether or not the Pledged Securities are so
transferred or registered, receive the income, dividends and other
distributions thereon except for cash dividends permitted to be paid
under the terms of the Credit Agreement and hold them or apply them to
the Obligation in any order of priority;
(b) exchange any of the Pledged Securities for other property
upon a reorganization, recapitalization or other readjustment and, in
connection therewith, deposit any of the Pledged Securities with any
committee or depositary upon such terms as the Secured Party may
determine; and
(c) in its name, or in the name of Pledgor, demand, sue for,
collect or receive any money or property (except for cash dividends
permitted to be paid under the terms of the Credit Agreement) at any
time payable or receivable on account of, or in exchange for, any of
the Pledged Securities and, in connection therewith, endorse notes,
checks, drafts, money orders, documents of title or other evidences of
payment, shipment or storage in the name of Pledgor.
Secured Party shall be under no duty to exercise, or to withhold the exercise
of, any of the rights, powers, privileges and options expressly or implicitly
granted to Secured Party in this Agreement,
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and shall not be responsible for any failure to do so or delay in so doing.
3. OBLIGATION SECURED
This Agreement shall secure, in such order of priority as Secured Party
may elect:
(a) Payment of the sum of $2,500,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note dated
of even date herewith, made by Borrower, payable to the order of
Secured Party, and all extensions, modifications, renewals or
replacements thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Pledgor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Pledged Securities or any part thereof;
(c) Payment, performance and observance by Pledgor,
Southhampton Enterprises Corp., a British Columbia (Canada) corporation
("SE Corp."), and Borrower of each covenant, condition, provision and
agreement contained in that Credit Agreement dated of even date
herewith, by and between Pledgor, SE Corp., Borrower and Secured Party
(hereinafter called the "Credit Agreement") and in any other document
or instrument related to the indebtedness hereby secured and of all
monies expended or advanced by Secured Party pursuant to the terms
thereof or to preserve any right of Secured Party thereunder; and
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Pledgor, SE Corp and/or Borrower to
Secured Party of every kind and character, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
incurred, whether such indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter
reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
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4.1 If Pledgor is a corporation, partnership or trust, it (i) is duly
organized, validly existing and in good standing under the laws of the state in
which it is organized; (ii) is qualified to do business and is in good standing
under the laws of each state in which it is doing business; (iii) has full power
and authority to own its properties and assets and to carry on its business as
now conducted; and (iv) is fully authorized and permitted to execute and deliver
this Agreement. The execution, delivery and performance by Pledgor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions of, nor constitute a
default under, any agreement or instrument under which Pledgor is a party or is
obligated. Pledgor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement
is the chief executive office of Pledgor (or Pledgor's residence if Pledgor is
an individual without an office).
4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or the Company, and
Pledgor shall defend the right, title, lien and security interest of Secured
Party in and to the Pledged Securities against the claims and demands of all
persons and other entities whatsoever. The stock identified on Schedule 2.1 is
all of the issued and outstanding capital stock of the Company.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever
other than as imposed hereby or as set forth, if at all, on Schedule 4.4
attached hereto.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether
or not the Pledged Securities have been transferred into the name of Secured
Party or its nominee, as Pledgor's proxy with full power, in the same manner, to
the same extent and with the same effect as if Pledgor were to do the same, in
the sole discretion of Secured Party:
(a) To call a meeting of the stockholders of the
Company and to vote the Pledged Securities, to seek the consent
of such stockholders, to remove the directors of the Company,
or any of them, and to elect new directors of the Company, who
thereafter shall manage the affairs of the Company, operate its
properties and carry on its
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business, and otherwise take any action with respect to the
business, properties and affairs of the Company that such new
directors shall deem necessary or appropriate, including, but
not limited to, the maintenance, repair, renewal or alteration
of any or all of the properties of the Company, the leasing,
subleasing, sale or other disposition of any or all of such
properties, the borrowing of money on the credit of the Company
(whether from Secured Party or others) that in the judgment of
such new directors shall be necessary to preserve any of such
properties or to discharge the obligations of the Company, and
the employment of any or all agents, attorneys, counsel, or
other employees as deemed by such new directors to be necessary
for the proper operation or conduct of the business, properties
and affairs of the Company;
(b) To consent to any and all actions by or with
respect to the Company for which consent of the stockholders of
the Company is or may be necessary or appropriate; and
(c) Without limitation, to do all things that Pledgor
can do or could do as stockholder of the Company, giving
Secured Party full power of substitution and revocation;
provided, however, that (i) the foregoing irrevocable proxy shall not be
exercisable by Secured Party, and Pledgor alone shall have the foregoing powers,
so long as there is no Event of Default hereunder, and (ii) this irrevocable
proxy shall terminate at such time as this Agreement is no longer in full force
and effect. The foregoing proxy is coupled with an interest sufficient in law to
support an irrevocable power and shall be irrevocable and shall survive the
death or incapacity of Pledgor. Pledgor hereby revokes any proxy or proxies
heretofore given to any person or persons and agrees not to give any other
proxies in derogation hereof until such time as this Agreement is no longer in
full force and effect.
6. COVENANTS OF PLEDGOR
6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of
any of the Pledged Securities or any interest therein without obtaining the
prior written consent of Secured Party and shall keep the Pledged Securities
free of all security interests or other encumbrances except the lien and
security interests granted herein and the security interests set forth on
Schedule 4.4 attached hereto.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and
other charges which may be levied or assessed against the Pledged Securities.
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6.3 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location of
Pledgor's residence.
6.4 Pledgor, at its cost and expense, shall protect and defend the
Pledged Securities, this Agreement and all of the rights of Secured Party
hereunder against all claims and demands of other parties. Pledgor shall pay all
claims and charges that in the opinion of Secured Party might prejudice, imperil
or otherwise affect the Pledged Securities. Pledgor shall promptly notify
Secured Party of any levy, distraint or other seizure, by legal process or
otherwise, of all or any part of the Pledged Securities and of any threatened or
filed claims or proceedings that might in any way affect or impair the terms of
this Agreement.
6.5 If Pledgor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Pledged Securities free from other security
interests, encumbrances or claims excepting the security interests set forth on
Schedule 4.4 attached hereto , or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same or to so perform.
6.6 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.7 Secured Party shall use such reasonable care in handling,
preserving and protecting the Pledged Securities in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Pledged
Securities unless there is affirmative proof of a lack of due care; and lack of
due care shall not be implied solely by virtue of any loss, destruction or
disappearance. Secured Party shall not be required to take any steps necessary
to preserve any rights in the Pledged Securities against prior parties or to
protect, perfect, preserve or maintain any security interest given to secure the
Pledged Securities.
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6.8 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 As used herein the term "Event of Default" shall have the meaning
given to it in the Credit Agreement.
7.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and
charges, shall be collectible thereupon by action at law;
(b) Transfer the Pledged Securities or any part
thereof into its own name or that of its nominee so that
Secured Party or its nominee may appear of record as the sole
owner thereof;
(c) Vote any or all of the Pledged Securities and give
all consents, waivers and ratifications in respect thereof and
otherwise acting with respect thereto as though it were the
absolute owner thereof;
(d) Exercise any and all rights of conversion,
exchange, subscription, or any other rights, privileges or
options pertaining to any of the Pledged Securities including,
but not limited to, the right to exchange, at its discretion,
any or all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other
readjustment of the Company or upon the exercise by Pledgor or
Secured Party of any right, privilege or option pertaining to
any of the shares of the Pledged Securities, and in connection
therewith to deposit and deliver such shares of Pledged
Securities with any committee, depository, transfer agent,
registrar or any other agency upon such terms as Secured Party
may determine without liability except to account for the
property actually received by it;
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(e) Receive and retain any dividend or other
distribution on account of the Pledged Securities;
(f) Sell any or all of the Pledged Securities in
accordance with the provisions hereof;
(g) Insure any of the Pledged Securities;
(h) In its name, or in the name of Pledgor, make any
compromise or settlement deemed advisable with respect to any
of the Pledged Securities; and
(i) Exercise any or all of its other rights, power and
privileges hereunder or available at law or in equity;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the manner provided in Subparagraph 7.3(c) below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
(a) (i) Secured Party shall have the right at any time
and from time to time to sell, resell, assign and deliver, in
its discretion, all or any part of the Pledged Securities in
one or more units, at the same or different times, and all
right, title and interest, claim and demand therein, and right
of redemption thereof, at private sale, or at public sale to
the highest bidder for cash, upon credit or for future
delivery, Pledgor hereby waiving and releasing to the fullest
extent permitted by law any and all equity or right of
redemption. If any of the Pledged Securities are sold by
Secured Party upon credit or for future delivery, Secured Party
shall not be liable for the failure of the purchaser to
purchase or pay for same, and, in the event of any such
failure, Secured Party may resell such Pledged Securities. In
no event shall Pledgor be credited with any part of the
proceeds of the sale of any Pledged Securities until cash
payment thereof has actually been received by Secured Party.
(ii) No demand, advertisement or notice, all
of which are hereby expressly waived, shall be required in
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connection with any sale or other disposition of all or any
part of the Pledged Securities that threatens to decline
speedily in value or that is of a type customarily sold on a
recognized market; otherwise Secured Party shall give Pledgor
at least five (5) days' prior notice of the time and place of
any public sale or of the time after which any private sale or
other dispositions are to be made, which Pledgor agrees is
reasonable, all other demands, advertisements and notices being
hereby waived. Upon any sale, whether under this Agreement or
by virtue of judicial proceedings, Secured Party may bid for
and purchase any or all of the Pledged Securities and, upon
compliance with the terms of the sale, may hold, retain,
possess and dispose of such items in its own absolute right
without further accountability, and as purchaser at such sale,
in paying the purchase price, may turn in any note or notes
held by Secured Party in lieu of cash up to the amount that
would, upon distribution of the net proceeds of such sale in
accordance with Subparagraph 7.3(c) hereof, be payable to
Secured Party. In case the amount so payable thereon shall be
less than the amount due thereon, the note or notes turned in
(in lieu of cash) shall be returned to the holder thereof after
being properly stamped to show the partial payment effected by
such purchase.
(b) Pledgor recognizes that Secured Party may be
unable to effect a sale to the public of all or a part of the
Pledged Securities by reason of prohibitions contained in
applicable securities laws, but may be compelled to resort to
one or more sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such
Pledged Securities for their own account, for investment and
not with a view to the distribution or resale thereof. Pledgor
agrees that sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Securities were
sold to the public, and that Secured Party has no obligation to
delay sale of any such Pledged Securities for the period of
time necessary to permit the issuer of such Pledged Securities
to register the same for sale to the public under applicable
securities laws. Pledgor agrees that negotiated sales made
under the foregoing circumstances shall be deemed to have been
made in a commercially reasonable manner.
(c) In all sales of Pledged Securities, public or
private, Secured Party shall apply the proceeds of sale as
follows:
(i) First, to the payment of all costs and
expenses incurred hereunder or for
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the sale, transfer, or delivery, including broker's
and attorneys' fees;
(ii) Next to the payment of the Obligation;
and
(iii) The balance, if any, to Pledgor or to
the person or persons entitled thereto upon proper
demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without
limitation court costs and reasonable attorneys' fees, incurred by Secured Party
in enforcing payment and performance of the Obligation or in exercising the
rights and remedies of Secured Party hereunder. All such costs and expenses
shall be secured by this Agreement and by all other lien and security documents
securing the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
8. MISCELLANEOUS PROVISIONS
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8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or performance of the
Obligation, to its several securities therefor in such order and manner as it
may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted herein, Secured Party,
from time to time, may: (i) extend the time for payment of all or any part of
the Obligation, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Pledged
Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
8.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of California, except to the extent Secured
Party has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be void or invalid, the same shall not affect the
remainder hereof which shall be effective as though the void or invalid
provision had not been contained herein.
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8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Pledgor and a duly authorized officer of Secured Party.
8.6 This is a continuing agreement, which shall remain in full force
and effect until actual receipt by Secured Party of written notice of its
revocation as to future transactions and shall remain in full force and effect
thereafter until all of the Obligation incurred before the receipt of such
notice, and all of the Obligation incurred thereafter under commitments extended
by Secured Party before the receipt of such notice, shall have been paid and
performed in full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. If more than one Pledgor is named
herein, the word Pledgor shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of the note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
8.9 Except for telephonic notices (if any) permitted herein, any
notices or other communications required or permitted to be given by this
Agreement to Pledgor or Secured Party must be (i) given in writing and
personally delivered or mailed by prepaid certified or registered mail, or (ii)
made by telefacsimile delivered or transmitted (but confirmed on the date the
telefacsimile is transmitted by one of the other methods of giving of notice
provided in this Section), to the person to whom such notice or communication is
directed, to the address of such person as follows:
Pledgor: Southhampton Enterprises Inc.
9211 Diplomacy Row
Dallas, Texas 75247
Attn: L. Steven Haynes
Telecopier: (214) 631-7297
Secured Party: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
12
<PAGE>
Attention: General Counsel
Telecopier: (310) 417-5695
With a copy (which shall not constitute notice) to:
Imperial Bank
One Arizona Center
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 952-8643
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed as aforesaid; provided that notice to Secured Party shall be
deemed effective only if given to Secured Party at both notice addresses.
Pledgor or Secured Party may change its address for purposes of this Agreement
by giving notice of such change to the other parties pursuant to this Section.
8.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
9. NON-PLEDGOR BORROWER PROVISIONS
9.1 All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of Borrower or the officers, directors,
partners or agents acting or purporting to act on its behalf. Pledgor is and
shall continue to be fully informed as to all aspects of the business affairs of
Borrower that it deems relevant to the risks it is assuming and hereby waives
and fully discharges Secured Party from any and all obligations to communicate
to Pledgor any facts of any nature whatsoever regarding Borrower and Borrower's
business affairs.
9.2 Pledgor authorizes Secured Party, without notice or demand, without
affecting the obligations of Pledgor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the lien created hereby, from time to time, at the
request of any person primarily obligated therefor, to renew, compromise,
extend, accelerate or otherwise change the time for payment or performance of,
or otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest
13
<PAGE>
thereon. Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against Borrower; (ii) the benefits of any statutory
provision limiting the liability of a surety; and (iii) any defense arising by
reason of any disability or other defense of Borrower or by reason of the
cessation from any cause whatsoever of the liability of Borrower. Pledgor shall
have no right of subrogation and hereby waives any right to enforce any remedy
which Secured Party now has, or may hereafter have, against Borrower.
9.3 Nothing contained herein shall affect or limit the right of Secured
Party to proceed against any person or entity, including Pledgor or any partner
in Pledgor, with respect to the enforcement of any guarantee or other similar
rights.
9.4 Pledgor waives all right and defenses that Pledgor may have because
a principal's liability for the Obligation is at any time secured by real
property. This means, among other things: (1) Secured Party may pursue its
remedies against Pledgor without first foreclosing on any real or personal
property collateral pledged by Borrower; and (2) if Secured Party forecloses on
any real property collateral pledged by Borrower: (A) the amount of the debt may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price; and
(B) Secured Party may pursue its remedies against Pledgor even if Secured Party,
by foreclosing on the real property collateral, has destroyed any right Pledgor
may have to collect from Borrower. This is an unconditional and irrevocable
waiver of any rights and defenses Pledgor may have because a principal's
liability for the Obligation is at any time secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure. Furthermore, Pledgor waives all rights and defenses arising out of an
election of remedies by Secured Party, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a secured
obligation, has destroyed Pledgor's rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES INC.,
a Texas corporation
Witness (Other than Notary
Public)
14
<PAGE>
By: /s/ L. Steven Haynes
Type/Print Name: L. Steven Haynes
Title: Secretary
/s/ Louis B. Lloyd
Type/Print Name: Louis B. Lloyd
PLEDGOR
15
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 7th day of
May, 1997, by L. Steven Haynes, the Secretary of SOUTHHAMPTON ENTERPRISES INC.,
a Texas corporation, on behalf of such corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Melissa M. Derkaz
Notary Public
My commission expires:
My Commission Expires July 31, 1997
16
<PAGE>
SCHEDULE 2.1
All issued and outstanding shares of stock in The Antigua Group, Inc.,
a Nevada corporation, now or hereafter owned by Pledgor, which as of the date
hereof consists of 2,074,600 shares of common stock as evidenced by Certificate
Nos.
----------------------.
17
<PAGE>
SCHEDULE 4.4
PERMITTED SECURITY INTEREST
1. A junior security interest in favor of The Cruttenden Roth Bridge
Fund, LLC, and securing (a) repayment of a loan to Borrower in the principal
amount of $1,020,000 and (b) payment and performance of obligations incidental
to such loan.
2. A junior security interest in favor of Thomas E. Dooley, as agent
for the entities described in Schedule 4.4A, and securing (a) repayment of
indebtedness in the aggregate principal amount of approximately $6,378,000 and
(b) payment and performance of obligations incidental to such indebtedness.
3. A security interest granted in connection with a refinancing of the
indebtedness described in items 1 and 2 above, but only if such security
interest is a Permitted Lien (as defined in the Credit Agreement).
18
<PAGE>
SCHEDULE 4.4A
SELLER
Thomas E. Dooley, Jr. and Gail E. Dooley, Trustees under the Thomas E. Dooley
and Gail Dooley Revocable Trust of 1988, dated 10/4/88.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim L.
Dooley.
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Shawn T.
Dooley.
E. Louis Werner, Jr., Trustee, E. Louis Werner, Jr., Revocable Intervivos Trust
dated December 31, 1982.
Peter J. Dooley, Trustee under the 1989 Trust Agreement established separate
irrevocable Gift Trusts f/b/o the children of Thomas and Gail Dooley dated March
7, 1989.
19
Exhibit 10.35
SECURITIES PURCHASE AGREEMENT
by and among
SOUTHHAMPTON ENTERPRISES CORP.
SOUTHHAMPTON ENTERPRISES, INC.
THE ANTIGUA GROUP, INC.
and
THE CRUTTENDEN ROTH BRIDGE FUND, LLC
Dated as of May 7, 1997
Senior Subordinated Secured Note
Warrants to Purchase Common Stock
CRUTTENDEN ROTH, INC.
Placement Agent
<PAGE>
1. ISSUANCE OF SECURITIES. ........................................... 1
1.1 Authorization ..................................................... 1
1.2 Purchase and Sale of Securities; the Closing ...................... 2
1.3 Representations of the Purchaser .................................. 2
2. REPRESENTATIONS OF ANTIGUA ........................................ 3
2.1 Organization and Authority ........................................ 3
2.2 Financial and Other Information ................................... 3
2.3 Capital Stock; Subsidiaries ....................................... 4
2.4 Litigation, etc ................................................... 4
2.5 Application of Proceeds ........................................... 4
2.6 Outstanding Indebtedness .......................................... 4
2.7 Title to Collateral; Leases ....................................... 5
2.8 Taxes ............................................................. 5
2.9 Compliance with Other Instruments ................................. 5
2.10 Governmental Authorizations, etc .................................. 5
2.11 Licenses, Permits, etc ............................................ 6
2.12 Compliance with ERISA ............................................. 6
2.13 Margin Regulations ................................................ 6
2.14 Investment Company Act ............................................ 6
2.15 Compliance with Law ............................................... 6
2.16 Environmental ..................................................... 6
2.17 Maintenance of Insurance .......................................... 6
2.18 Proprietary Information ........................................... 7
2.19 Security Interest; Priority and Intercreditor Agreement ........... 7
2.20 Related-Party Transactions ........................................ 7
2.21 Manufacturing and Marketing Rights ................................ 7
2.22 Stock Purchase Agreement .......................................... 7
2.23 Disclosure ........................................................ 8
3. REPRESENTATIONS OF SOUTHHAMPTON ................................... 8
3.1 Organization and Authority ........................................ 8
3.2 Financial and Other Information ................................... 8
3.3 Capital Stock; Subsidiaries ....................................... 9
3.4 Litigation, etc ................................................... 10
3.5 Application of Proceeds ........................................... 10
3.6 Outstanding Indebtedness .......................................... 10
3.7 Title to Collateral; Leases ....................................... 10
3.8 Taxes ............................................................. 10
3.9 Compliance with Other Instruments ................................. 11
3.10 Governmental Authorizations, etc .................................. 11
3.11 Licenses, Permits, etc ............................................ 11
3.12 Compliance with ERISA ............................................. 11
3.13 Margin Regulations ................................................ 11
3.14 Investment Company Act ............................................ 11
3.15 Compliance with Law ............................................... 12
3.16 Environmental ..................................................... 12
3.17 Maintenance of Insurance .......................................... 12
3.18 Proprietary Information ........................................... 12
3.19 Security Interest; Priority and Intercreditor Agreement ........... 12
3.20 Related-Party Transactions ........................................ 12
<PAGE>
3.21 Manufacturing and Marketing Rights ................................ 13
3.22 Stock Purchase Agreement .......................................... 13
3.23 Disclosure ........................................................ 13
3.24 Commission Filings ................................................ 13
4. REPRESENTATIONS OF SEI ............................................ 14
4.1 Organization and Authority ........................................ 14
4.2 Financial and Other Information ................................... 14
4.3 Capital Stock; Subsidiaries ....................................... 15
4.4 Litigation, etc ................................................... 15
4.5 Application of Proceeds ........................................... 15
4.6 Outstanding Indebtedness .......................................... 15
4.7 Title to Collateral; Leases ....................................... 16
4.8 Taxes ............................................................. 16
4.9 Compliance with Other Instruments ................................. 16
4.10 Governmental Authorizations, etc .................................. 16
4.11 Licenses, Permits, etc ............................................ 16
4.12 Compliance with ERISA ............................................. 17
4.13 Margin Regulations ................................................ 17
4.14 Investment Company Act ............................................ 17
4.15 Compliance with Law ............................................... 17
4.16 Environmental ..................................................... 17
4.17 Maintenance of Insurance .......................................... 17
4.18 Proprietary Information ........................................... 17
4.19 Security Interest; Priority and Intercreditor Agreement ........... 18
4.20 Related-Party Transactions ........................................ 18
4.21 Manufacturing and Marketing Rights ................................ 18
4.22 Stock Purchase Agreement .......................................... 18
4.23 Disclosure ........................................................ 18
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER .............. 19
5.1 Securities and Security Documents ................................. 19
5.2 Proceedings Satisfactory .......................................... 19
5.3 Other Securities and Related Transactions; Intercreditor
Agreement ......................................................... 19
5.4 Security Agreements ............................................... 19
5.5 Stock Purchase Agreement; Capital Investment ...................... 19
5.6 Representations True, etc.; Compliance Certificate ................ 19
5.7 Opinion of Counsel ................................................ 20
5.8 Approval of VSE ................................................... 20
5.9 Commitment for Public Offering .................................... 20
6. PREPAYMENT AND SUBORDINATION OF THE NOTE .......................... 20
6.1 Prepayment ........................................................ 20
6.2 Subordination ..................................................... 20
7. FINANCIAL INFORMATION; COMPLIANCE CERTIFICATES;
MAINTENANCE OF RECORDS ............................................ 21
8. INSPECTION ........................................................ 21
8.1 Inspection ........................................................ 21
9. COVENANTS ......................................................... 22
9.1 Payment of Note ................................................... 22
9.2 Guaranty of Payment ............................................... 22
9.3 Limitations on Distributions and Investments ...................... 22
9.4 Limitation on Indebtedness ........................................ 22
9.5 Limitations on Liens .............................................. 23
<PAGE>
9.6 Observance of Statutes, Regulations and Orders .................... 23
9.7 Corporate Existence ............................................... 23
9.8 Taxes ............................................................. 23
9.9 Limitations on Transactions with Affiliates ....................... 23
9.10 Investment Company Act ............................................ 23
9.11 Maintenance of Properties ......................................... 23
9.12 Books and Records ................................................. 24
9.13 Maintenance of Insurance .......................................... 24
9.14 Accounting Changes ................................................ 25
9.15 Merger, Consolidation or Sale ..................................... 25
9.16 Change of Control ................................................. 25
9.17 Compliance with ERISA ............................................. 26
9.18 Employee Stock Option Plans ....................................... 26
9.19 Sale of Assets .................................................... 26
9.20 Restriction on Creation and Ownership of Subsidiaries;
Restriction on Transfer of Subsidiary Interest .................... 26
9.21 Disclosure of Environmental Claims ................................ 26
9.22 Consolidated Capital Expenditures ................................. 26
9.23 Restricted Payments ............................................... 26
9.24 Preservation of Collateral ........................................ 27
9.25 Board Seat ........................................................ 27
9.26 Issuance of Additional Shares ..................................... 27
10. DEFINITIONS ....................................................... 27
10.1 Definitions ....................................................... 27
10.2 Accounting Terms .................................................. 28
11. EVENTS OF DEFAULT; REMEDIES ....................................... 28
11.1 Events of Default Defined; Acceleration of Maturity ............... 28
11.2 Suits for Enforcement ............................................. 30
11.3 Remedies Cumulative; Remedies Not Waived .......................... 30
11.4 Security Documents ................................................ 31
12. REGISTRATION, TRANSFER AND EXCHANGE OF NOTE; LOST, ETC., NOTES .... 31
13. AMENDMENT AND WAIVER .............................................. 31
13.1 Amendment and Waiver .............................................. 31
13.2 Effect of Amendment or Waiver ..................................... 31
14. TAXES ............................................................. 31
15. MISCELLANEOUS ..................................................... 32
15.1 Fees and Expenses ................................................. 32
15.2 Reliance on and Survival of Representations ....................... 32
15.3 Successors and Assigns ............................................ 32
15.4 Indemnification ................................................... 32
15.5 Notices ........................................................... 33
15.6 Counterparts ...................................................... 34
15.7 Governing Law ..................................................... 34
15.8 Arbitration ....................................................... 34
15.9 Waiver of Jury Trial .............................................. 34
15.10 Attorneys' Fees ................................................... 35
15.11 No Commissions .................................................... 35
15.12 Invalidity ........................................................ 35
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is entered into as
of May 7, 1997 by and among Southhampton Enterprises Corp., a British Columbia,
Canada corporation ("Southhampton"), Southhampton Enterprises, Inc., a Texas
corporation ("SEI"), The Antigua Group, Inc., a Nevada corporation ("Antigua"),
and The Cruttenden Roth Bridge Fund, LLC, a California limited liability company
("Purchaser"). Southhampton and Antigua are hereinafter sometimes collectively
referred to as the "Issuers". Southhampton, SEI and Antigua are hereinafter
sometimes collectively referred to as the "Loan Parties." In consideration of
the mutual promises, representations, warranties, covenants and conditions set
forth below, the parties agree as follows:
1. ISSUANCE OF SECURITIES.
1.1 Authorization. Antigua has duly authorized the issue of Antigua's
Senior Subordinated Secured Note (the "Note") in the aggregate principal amount
of $1,020,000, such Note to be in the form of Exhibit A, and Southhampton has
duly authorized the issue of (i) a warrant (the "Warrant") in the form of
Exhibit B to purchase an aggregate of 10% of that number of shares of
Southhampton's Common Stock, no par value ("Southhampton Common Stock"), which
will be outstanding immediately following consummation of the transactions
contemplated by the Other Securities Documents (as defined below), on a
fully-diluted basis, at an exercise price as provided in the Warrant, subject to
adjustments set forth therein, and (ii) the Southhampton Common Stock issuable
upon exercise of the Warrant. The Note shall mature, bear interest, be payable
and otherwise be substantially in the manner provided herein and in Exhibit A.
SEI and Southhampton shall each execute and deliver to Purchaser a guaranty
agreement in substantially the form of Exhibit C pursuant to which Southhampton
and SEI shall directly, primarily, absolutely and unconditionally guarantee the
payment of the Note. Antigua shall execute and deliver to Purchaser a Security
Agreement in substantially the form of Exhibit D, and Southhampton and SEI shall
each execute and deliver to Purchaser a Security and Pledge Agreement in
substantially the form of Exhibit E and Exhibit F, respectively, evidencing
Purchaser's security interest in substantially all of the assets of Antigua,
Southhampton and SEI ("Collateral"), including a security interest in all of the
rights of SEI under the Stock Purchase Agreement dated May 7, 1997 (the "Stock
Purchase Agreement"), pursuant to which SEI agreed to acquire all of the issued
and outstanding stock of Antigua, together with UCC-1 Financing Statements
evidencing the security interest in the Collateral (collectively the "Security
Documents"). The Note and
<PAGE>
Warrant, and the certificates and other instruments from time to time evidencing
the Note and the Warrant, are herein sometimes collectively called the
"Securities."
In addition to the Note and Warrant which are being purchased by
Purchaser pursuant to this Agreement, the Issuers and SEI have collectively
authorized several other transactions and issuances of other securities
(hereinafter, the "Other Securities"), relating to capital investments to be
made to SEI and Antigua in connection with the Stock Purchase Agreement. The
documents and agreements constituting the Other Securities are herein sometimes
collectively the "Other Securities Documents".
1.2 Purchase and Sale of Securities; the Closing. Antigua shall sell to
Purchaser and, subject to the terms and conditions hereof, Purchaser shall
purchase from Antigua, the Note at a price equal to 100% of the principal amount
thereof, which shall be issued together with the Warrant, at an aggregate
combined purchase price equal to $1,020,000, less amounts withheld in accordance
with Section 15.1.
The closing (the "Closing") of such purchase of the Securities and the
closing of the purchase of the Other Securities shall take place concurrently at
such other time as the parties hereto and thereto may mutually agree; provided,
however, that if the Closing Date shall not have occurred within ten (10)
Business Days after the date hereof, Purchaser's obligation to purchase and pay
for the Note and Warrant, and the Issuers' respective obligations to sell the
Note and Warrant hereunder, shall be terminated and Purchaser and the Issuers
shall have no liability or further obligations hereunder.
On the Closing Date, the Issuers will deliver to Purchaser at the
offices of Stradling, Yocca, Carlson & Rauth in Newport Beach, California, the
Note and Warrant, in the name of Purchaser or its nominee, duly executed and
dated the Closing Date, against Purchaser's delivery to Antigua of immediately
available funds in the amount of the purchase price.
1.3 Representations of the Purchaser. Purchaser hereby represents and
warrants to the Issuers that:
(a) The Purchaser is acquiring the Securities for its own
account, not as a nominee or agent, for the purpose of investment, and not with
a view to or for sale in connection with any distribution thereof in violation
of the Securities Act of 1933 (the "Securities Act").
(b) The Purchaser has no present intention of selling,
granting any participation in or otherwise distributing the Securities and
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant a participation to such person or to any
third person, with respect to any of the Securities.
<PAGE>
(c) Purchaser understands that the Securities at the time of
issuance will not be registered under the Securities Act on the ground that the
sale provided for in this Agreement and the issuance of securities hereunder is
exempt from registration under the Securities Act and that the Issuers' reliance
on such exemption is predicated in part on Purchaser's representations set forth
herein.
(d) Purchaser represents that Purchaser is experienced in
evaluating and investing in companies in the development stage, Purchaser is
able to fend for itself, Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of Purchaser's investment in the Securities, and Purchaser has the ability
to bear the economic risks of such investment.
(e) Purchaser understands that the Securities may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the Securities Act, the Securities may need to be held
indefinitely.
(f) Purchaser is a commercial finance lender duly licensed as
such pursuant to Sections 22000 et seq. of the California Financial Code.
(g) The Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission, as presently in effect.
2. REPRESENTATIONS OF ANTIGUA.
Antigua represents and warrants to Purchaser as of the date hereof and
as of the Closing Date that:
2.1 Organization and Authority. Antigua is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Nevada, and has all requisite power and authority to own or hold under lease the
property it purports to own or hold under lease and to transact the business it
transacts and proposes to transact. Antigua has all requisite corporate power
and authority to execute and deliver this Agreement, the Securities and the
Security Documents and any other documents or agreements contemplated hereby and
thereby, including the Other Securities and the Other Security Documents, to
which Antigua is a party, to perform the obligations hereunder and thereunder
and to consummate the transactions contemplated hereunder and thereunder.
Antigua is duly qualified as a foreign corporation and is in good standing in
each jurisdiction in which the character of the properties owned or held under
lease by it or the nature of the business transacted by it requires such
qualification except in such jurisdictions, if any, in which the failure to be
so qualified
<PAGE>
or in good standing will not have a material adverse effect upon Antigua.
The execution, delivery and performance of this Agreement, the
Securities and the Security Documents, the Other Securities and the Other
Security Documents and any other documents or agreements to which Antigua is a
party contemplated hereby and thereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized and approved by the
Board of Directors of Antigua. Each of this Agreement, the Securities and the
Security Documents, the Other Securities and the Other Security Documents and
any other document or agreement to which Antigua is a party contemplated hereby
or thereby has been (or on the Closing Date will have been) duly authorized,
executed and delivered by, and each is (or, when duly executed and delivered on
the Closing Date, will be) the valid and binding obligation of, Antigua,
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws or by
legal or equitable principles relating to or limiting creditors' rights
generally.
2.2 Financial and Other Information. Antigua has delivered to Purchaser
copies of Antigua's balance sheets and related statements of operation,
stockholders, equity and cash flows (including in each case the related
schedules and notes) for the period ended December 31, 1996, (collectively, the
"Antigua Financial Statements") attached hereto as Exhibit G.
The Antigua Financial Statements fairly present the consolidated
financial position of Antigua as of the respective dates of such balance sheet
and the consolidated results of Antigua's operations for the period or periods
covered by such statements of operations, consolidated stockholders' equity and
cash flows, and have been prepared in accordance with the books and records of
Antigua. Except as disclosed on Schedule 2.2, there are no material differences
between the consolidated results of operations and consolidated financial
position of Antigua as reflected in the Antigua Financial Statements and what
the consolidated results of operations and consolidated financial position of
Antigua would be were such Antigua Financial Statements prepared in accordance
with generally accepted accounting principles.
Since December 31, 1996, there have been no changes in the assets,
liabilities, contingent or otherwise, or financial position of Antigua from that
set forth in such balance sheet as of such date, other than changes in the
ordinary course of business which have not, either individually or in the
aggregate, been materially adverse to Antigua.
As of their respective dates, none of the Antigua Financial Statements,
this Agreement or any other document, certificate or written statement furnished
to Purchaser by or on behalf of Antigua in connection with the transactions
contemplated hereby contain any
<PAGE>
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements not misleading in light of the circumstances
under which they were made.
2.3 Capital Stock; Subsidiaries. The authorized capital stock of
Antigua consists of 5,000,000 shares of Common Stock, $.0005 par value (the
"Antigua Common Stock"). On the Closing Date, 2,074,600 shares of Antigua Common
Stock, all of which will be directly and beneficially owned by SEI will be
validly issued and outstanding and fully paid and nonassessable; and no shares
of Antigua Common Stock will be outstanding or authorized for issuance pursuant
to the exercise of stock options or warrants or otherwise.
Antigua (i) does not own, beneficially or of record, any shares or
capital stock of, or hold any other equity interest in, any Person, (ii) is not
committed to purchase or acquire any such interest, and (iii) is not a
participant in any joint venture, partnership or similar arrangement.
Antigua does not have outstanding: (i) any capital stock or other
securities convertible into or exchangeable for any of its capital stock or any
rights to subscribe for or to purchase, or any options for the purchase of, or
any agreements (contingent or otherwise) providing for the issuance of, or any
calls, commitments or claims of any character relating to, any of its capital
stock or any securities convertible into or exchangeable for any of its capital
stock; or (ii) any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any of its capital stock or obligation evidencing
the rights of the holders thereof to purchase any of its capital stock. There is
not in effect on the date of this Agreement any agreement by Antigua pursuant to
which any holders of securities of Antigua have a right to cause Antigua to
register such securities under the Securities Act.
2.4 Litigation, etc. Except as set forth on Schedule 2.4, there is no
action, suit, proceeding or investigation pending or, to the knowledge of
Antigua, currently threatened against Antigua which challenges the validity of
this Agreement or the right of Antigua to enter into it, or to consummate the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse changes in the assets, condition,
affairs or prospects of Antigua, financially or otherwise, or any change in the
current equity ownership of Antigua.
2.5 Application of Proceeds. Antigua, SEI and Southhampton will apply
the net proceeds of the sale of the Securities (after the payment of fees and
expenses associated with the transaction) to fund a portion of the purchase
price payable under the Stock Purchase Agreement.
2.6 Outstanding Indebtedness. Schedule 2.6A sets forth a correct and
complete list of all indebtedness of Antigua outstanding or existing on the date
hereof and to be existing or
<PAGE>
outstanding on the Closing Date (the "Antigua Indebtedness") other than the
Antigua Indebtedness created under or evidenced by the Note, this Agreement and
the Security Documents, but including the indebtedness of Antigua under the
Other Securities Documents, if any. With respect to each item of Antigua
Indebtedness listed in Schedule 2.6A, Antigua has made available to Purchaser a
true and complete copy of each instrument or agreement evidencing such Antigua
Indebtedness or pursuant to which such Indebtedness was issued or secured
(including each amendment, consent, waiver or similar instrument in respect
thereof), as the same is in effect on the date hereof. Except as disclosed on
Schedule 2.6B, Antigua is not in monetary or other material default in the
performance or observance of any of the terms, covenants or conditions contained
in any instrument or agreement evidencing the Antigua Indebtedness listed in
Schedule 2.6A or pursuant to which such Antigua Indebtedness was issued or
secured and has not requested any waiver in respect of any default and no event
has occurred and is continuing which, with notice or the lapse of time or both,
would constitute such a default.
2.7 Title to Collateral; Leases. Except as reflected in Schedule 2.7A
and the Antigua Financial Statements (defined in Section 2.2), and except (i)
for liens for current taxes not yet delinquent, (ii) for liens imposed by law
and incurred in the ordinary course of business for obligations not past due to
carriers, warehousemen, laborers, materialmen and the like, and (iii) for liens
in respect of pledges or deposits under workers' compensation laws or similar
legislation (collectively, "Permitted Liens"), Antigua has good and marketable
title to the Collateral and to all of its other property and assets, free and
clear of all mortgages, liens, claims, and encumbrances. Antigua enjoys full and
undisturbed possession under all leases necessary in any material respect for
the operation of its business, which leases are listed on Schedule 2.7B (the
"Leases"). None of the Leases contains any unusual or burdensome provisions
that, individually or in the aggregate, are likely to materially impair the
operation of the business of Antigua. The Leases are valid and subsisting and
are in full force and effect. Antigua has delivered to Purchaser a true and
complete copy of each of the Leases.
2.8 Taxes. Except as disclosed on Schedule 2.8, Antigua has filed all
tax returns which are required to have been filed by Antigua in any jurisdiction
and have paid all taxes shown to be due and payable on such returns and other
taxes and assessments payable by Antigua to the extent the same have become due
and payable. Antigua knows of no proposed material tax assessment against
Antigua and in the opinion of Antigua, all tax liabilities are adequately
provided for on the books of Antigua.
2.9 Compliance with Other Instruments. The consummation of the
transactions contemplated by this Agreement and the execution, delivery and
performance of the terms and provisions of this Agreement, the Securities and
the Security Documents, the Other Securities and the Other Securities Documents,
the Stock Purchase
<PAGE>
Agreement, the Intercreditor Agreement executed concurrently herewith by and
among LaSalle Business Credit, Inc., Thomas E. Dooley (as agent for the Antigua
shareholders), Imperial Bank Arizona, Antigua and Purchaser (the "Intercreditor
Agreement") or any other document or agreement contemplated hereby or thereby
will not contravene, result in any breach of, constitute a default or require a
consent under, or result in the creation of any lien (other than as contemplated
in the Security Documents or the Other Securities Documents) in respect of any
property of Antigua under, any material indenture, mortgage, deed of trust, bank
loan or credit agreement, corporate charter, by-laws or other agreement or
instrument to which Antigua is a party or by which Antigua or any of its
properties may be bound or affected.
2.10 Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
body is required for the validity of the execution and delivery, or for the
performance by Antigua, of this Agreement, the Securities and the Security
Documents, the Other Securities and the Other Securities Documents, the Stock
Purchase Agreement, the Intercreditor Agreement or any other document or
agreement or instrument contemplated hereby or thereby other than the (i) filing
and recording of certain of the Security Documents and Other Securities
Documents, (ii) forms required to be filed by the Securities and Exchange
Commission pursuant to Regulation D, (iii) forms required by Section 25102(f) of
the California Corporations Code or (iv) other "Blue Sky" filings.
2.11 Licenses, Permits, etc. Antigua possesses all licenses, permits,
franchises, authorizations, and similar authority required to conduct its
business substantially as now conducted and as currently proposed to be
conducted, without known conflict with the rights of others, and Antigua
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as presently planned to be conducted.
2.12 Compliance with ERISA. Except as disclosed on Schedule 2.12A, all
employee benefit plans maintained or contributed to by Antigua, or under which
Antigua has any obligation or liability, are in substantial compliance with
respect to both their terms and operation with the Internal Revenue Code of
1954, as amended, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and any and all other applicable laws. Except as disclosed in
Schedule 2.12B, Antigua does not have any pension, retirement or similar plans
or obligations, whether of a legally binding nature or in the nature of an
informal understanding.
2.13 Margin Regulations. No part of the proceeds from the sale of the
Securities or the Other Securities hereunder or thereunder will be used,
directly or indirectly, for the purpose of buying or carrying any "margin stock"
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve
<PAGE>
Antigua in a violation of Regulation X of said Board (12 CFR 224) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
The assets of Antigua do not include any margin stock, and Antigua does not have
any present intention of acquiring any margin stock.
2.14 Investment Company Act. Antigua is not an investment company or a
person directly or indirectly controlled by or acting on behalf of an investment
company within the meaning of the Investment Company Act of 1940, as amended.
2.15 Compliance with Law. To the best of its knowledge, Antigua has
been, and on the Closing Date will continue to be, in compliance with all
applicable laws (including duties imposed by common law), rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities
(federal, state, local and foreign) and all requirements imposed under building,
zoning, occupational safety and health, pension, environmental control, toxic
waste, fair employment, equal opportunity or similar laws, rules, regulations
and ordinances.
2.16 Environmental. To the best knowledge of Antigua, Antigua has
obtained all licenses and permits which are required under applicable
environmental laws in connection with all real estate owned or leased by them
and the conduct of their respective business and operations. Each of such
licenses and permits is in full force and effect and Antigua is in compliance in
all material respects with the terms and conditions of all such licenses and
permits and with any applicable environmental law.
2.17 Maintenance of Insurance. Antigua maintains policies of insurance
issued by responsible and reputable insurance companies or associations in such
amounts and to cover such risks as are usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which Antigua operates.
2.18 Proprietary Information. To the best of its knowledge, Antigua
owns or possesses sufficient legal rights to all trade or service marks,
copyrights, patents, processes, operation manuals, techniques, trade secrets and
similar proprietary property and rights necessary for its business as now
conducted and as proposed to be conducted, without any known conflict or
infringement of the rights of others. To the extent applicable, set forth on
Schedule 2.18A are the permits, licenses and registrations to use the foregoing
proprietary information. Except as set forth on Schedule 2.18B, Antigua has not
received any communications alleging that it has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, or other proprietary rights of any other person or entity
nor does Antigua have reason to believe that it has violated or, by conducting
its business as proposed, would violate any of the patents, trademarks, service
marks, trade names, or other proprietary rights of any other person or entity.
<PAGE>
2.19 Security Interest; Priority and Intercreditor Agreement. Upon the
due filing or recording in all places necessary to perfect and maintain the
liens purported to be created by the Security Documents and the Other Securities
Documents, the liens of the Security Documents and Other Securities Documents
shall constitute fully perfected security interests in all right, title and
interest of Antigua in and to the property described therein, in the order of
priority set forth in the Intercreditor Agreement, prior to all other consensual
security interests against such property or interests therein other than
Permitted Liens.
2.20 Related-Party Transactions. Except as set forth on Schedule 2.20,
no employee, officer, stockholder or director of Antigua or member of his or her
immediate family is indebted to Antigua, nor is Antigua indebted (or committed
to make loans or extend or guarantee credit) to any of them, other than (i) for
payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of Antigua, and (iii) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of Antigua). To the best knowledge of Antigua, none of such persons
has any direct or indirect ownership interest in any firm or corporation with
which Antigua is affiliated or with which Antigua has a business relationship,
or any firm or corporation that competes with Antigua, except that employees,
stockholders, officers, or directors of Antigua and members of their immediate
families may own stock in publicly traded companies that may compete with
Antigua. To the best knowledge of Antigua, no officer, director, or stockholder
or any member of their immediate families is, directly or indirectly, interested
in any material contract with Antigua (other than as set forth on Schedule
2.20).
2.21 Manufacturing and Marketing Rights. Set forth on Schedule 2.21
attached hereto is a list of the material license agreements to which Antigua is
a party. As used herein, "material license agreement" shall mean one or more
license agreements which individually or in the aggregate generate five percent
(5%) or more of the revenues of Antigua.
2.22 Stock Purchase Agreement. Antigua has executed a form of the Stock
Purchase Agreement and delivered it to each other party thereto, and the Stock
Purchase Agreement constitutes the valid and binding obligations of Antigua,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights of creditors generally.
2.23 Disclosure. Neither this Agreement nor any Schedule hereto nor any
certificate or other document referenced herein or therein and furnished to the
Purchaser by Antigua contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein or herein, in light of the circumstances under which they were made,
<PAGE>
not misleading. There is no material fact known to Antigua, or to the reasonable
belief of Antigua, relating to the business, properties, affairs, operations,
condition (financial or otherwise) or prospects of Antigua that materially
adversely affects the same or materially adversely affects the ability of
Antigua to perform its obligations under this Agreement, the Securities, the
Security Agreement or any other document or agreement contemplated hereby or
thereby that has not been disclosed to the Purchaser by Antigua. No claim made
by the Purchaser that is based on an alleged breach of the representation and
warranty contained in the preceding sentence shall result in liability of
Antigua to the Purchaser if Antigua proves that the Purchaser had actual
knowledge of the same material fact prior to the Closing under this Agreement,
the burden of proof of such knowledge being on Antigua.
3. REPRESENTATIONS OF SOUTHHAMPTON.
Southhampton represents and warrants to Purchaser as of the date hereof
and as of the Closing Date that:
3.1 Organization and Authority. Southhampton is a corporation duly
organized, validly existing and in good standing under the laws of the province
of British Columbia, Canada and has all requisite power and authority to own or
hold under lease the property it purports to own or hold under lease and to
transact the business it transacts and proposes to transact. Southhampton has
all requisite corporate power and authority to execute and deliver this
Agreement, the Securities and the Security Documents and any other documents or
agreements contemplated hereby and thereby, including the Other Securities and
the Other Security Documents, to which Southhampton is a party, to perform the
obligations hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. Southhampton is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it requires such qualification except in such
jurisdictions, if any, in which the failure to be so qualified or in good
standing will not have a material adverse effect upon Southhampton.
The execution, delivery and performance of this Agreement, the
Securities and the Security Documents, the Other Securities and the Other
Security Documents and any other documents or agreements to which Southhampton
is a party contemplated hereby and thereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized and
approved by the Board of Directors of Southhampton. Each of this Agreement, the
Securities and the Security Documents, the Other Securities and the Other
Security Documents and any other document or agreement to which the Southhampton
is a party contemplated hereby or thereby has been (or on the Closing Date will
have been) duly authorized, executed and delivered by, and each is (or, when
duly executed and delivered on the Closing Date, will be) the valid and binding
obligation of, Southhampton, enforceable in accordance with its terms, except as
<PAGE>
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws or by legal or equitable principles relating to or
limiting creditors' rights generally.
3.2 Financial and Other Information. Southhampton delivered to
Purchaser copies of the Southhampton's balance sheets and related statements of
operations, stockholders, equity and cash flows (including in each case the
related schedules and notes) for the period ended December 31, 1996
(collectively, the "Southhampton Financial Statements") attached hereto as
Exhibit H.
The Southhampton Financial Statements fairly present the consolidated
financial position of Southhampton as of the respective dates of such balance
sheet and the consolidated results of Southhampton's operations for the period
or periods covered by such statements of operations, consolidated stockholders'
equity and cash flows, and have been prepared in accordance with the books and
records of Southhampton. Except as disclosed on Schedule 3.2, there are no
material differences between the consolidated results of operations and
consolidated financial position of Southhampton as reflected in the Southhampton
Financial Statements and what the consolidated results of operations and
consolidated financial position of Southhampton would be were such Southhampton
Financial Statements prepared in accordance with generally accepted accounting
principles.
Since December 31, 1996, there have been no changes in the assets,
liabilities, contingent or otherwise, or financial position of Southhampton from
that set forth in such balance sheet as of such date, other than changes in the
ordinary course of business which have not, either individually or in the
aggregate, been materially adverse to Southhampton and SEI, taken as a whole.
As of their respective dates, none of the Southhampton Financial
Statements, this Agreement or any other document, certificate or written
statement furnished to Purchaser by or on behalf of Southhampton in connection
with the transactions contemplated hereby contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements not misleading in light of the circumstances under which they were
made.
3.3 Capital Stock; Subsidiaries. The authorized capital stock of
Southhampton consists of 100,000,000 shares of Southhampton Common Stock, no par
value (the "Southhampton Common Stock"), and 30,000,000 shares of Preferred
Stock, no par value (the "Southhampton Preferred Stock"). On the date hereof and
on the Closing Date, only __________ shares of Southhampton Common Stock, and
5,250,000 shares of Southhampton Preferred Stock will be issued and outstanding
on a fully-diluted basis, all of which shares have been duly and validly issued
and are fully paid and nonassessable; and, except for the Warrant and except as
set forth on Schedule 3.3A hereto, no shares of Southhampton Common Stock are
<PAGE>
or will be authorized for issuance pursuant to the exercise of the stock options
and warrants or otherwise.
Except for all of the issued or outstanding shares of SEI Common Stock
(as defined in Section 4.3 below) and as otherwise set forth on Schedule 3.3B,
Southhampton (i) does not own, beneficially or of record, any shares or capital
stock of, or hold any other equity interest in, any Person, (ii) is not
committed to purchase or acquire any such interest, or (iii) is not a
participant in any joint venture, partnership or similar arrangement.
Except as otherwise set forth on Schedule 3.3A, Southhampton does not
have outstanding: (i) any capital stock or other securities convertible into or
exchangeable for any of its capital stock or any rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements (contingent or
otherwise) providing for the issuance of, or any calls, commitments or claims of
any character relating to, any of its capital stock or any securities
convertible into or exchangeable for any of its capital stock; or (ii) any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any of its capital stock or obligation evidencing the rights of the
holders thereof to purchase any of its capital stock. Except as set forth in
Schedule 3.3C, there is not in effect on the date of this Agreement any
agreement by Southhampton pursuant to which any holders of securities of
Southhampton have a right to cause Southhampton to register such securities
under the Securities Act.
3.4 Litigation, etc. Except as set forth on Schedule 3.4, there is no
action, suit, proceeding or investigation pending or, to the knowledge of
Southhampton, currently threatened against Southhampton which challenges the
validity of this Agreement or the right of Southhampton to enter into it, or to
consummate the transactions contemplated hereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of Southhampton, financially or otherwise, or
any change in the current equity ownership of Southhampton.
3.5 Application of Proceeds. Southhampton, SEI and Antigua will apply
the net proceeds of the sale of the Securities (after the payment of fees and
expenses associated with the transaction) to fund a portion of the purchase
price payable under the Stock Purchase Agreement.
3.6 Outstanding Indebtedness. Schedule 3.6A sets forth a correct and
complete list of all indebtedness of Southhampton outstanding or existing on the
date hereof and to be existing or outstanding on the Closing Date (the
"Southhampton Indebtedness") other than Southhampton Indebtedness created under
or evidenced by this Agreement and the Security Documents, but including the
indebtedness of Southhampton under the Other Securities Documents, if any. With
respect to each item of Southhampton Indebtedness listed in Schedule 3.6A,
Southhampton has made available to
<PAGE>
Purchaser a true and complete copy of each instrument or agreement evidencing
such Southhampton Indebtedness or pursuant to which such Southhampton
Indebtedness was issued or secured (including each amendment, consent, waiver or
similar instrument in respect thereof), as the same is in effect on the date
hereof. Except as disclosed on Schedule 3.6B, Southhampton is not in monetary or
other material default in the performance or observance of any of the terms,
covenants or conditions contained in any instrument or agreement evidencing
Southhampton Indebtedness listed in Schedule 3.6A or pursuant to which such
Southhampton Indebtedness was issued or secured and has not requested any waiver
in respect of any default and no event has occurred and is continuing which,
with notice or the lapse of time or both, would constitute such a default.
3.7 Title to Collateral; Leases. Except (i) as reflected in Schedule
3.7A, (ii) as reflected in the Southhampton Financial Statements (defined in
Section 2.2), and (iii) for Permitted Liens, Southhampton has good and
marketable title to the Collateral and to all of its other property and assets,
free and clear of all mortgages, liens, claims, and encumbrances. Southhampton
enjoys full and undisturbed possession under all leases necessary in any
material respect for the operation of its business, which leases are listed on
Schedule 3.7B (the "Leases"). None of the Leases contains any unusual or
burdensome provisions that, individually or in the aggregate, are likely to
materially impair the operation of the business of Southhampton. The Leases are
valid and subsisting and are in full force and effect. Southhampton has
delivered to Purchaser a true and complete copy of each of the Leases.
3.8 Taxes. Except as disclosed on Schedule 3.8, Southhampton has filed
all tax returns which are required to have been filed by Southhampton in any
jurisdiction and has paid all taxes shown to be due and payable on such returns
and other taxes and assessments payable by Southhampton to the extent the same
have become due and payable. Southhampton knows of no proposed material tax
assessment against Southhampton and in the opinion of Southhampton all tax
liabilities are adequately provided for on the books of Southhampton.
3.9 Compliance with Other Instruments. The consummation of the
transactions contemplated by this Agreement and the execution, delivery and
performance of the terms and provisions of this Agreement, the Securities and
the Security Documents, the Other Securities and the Other Securities Documents,
the Stock Purchase Agreement, the Intercreditor Agreement or any other document
or agreement contemplated hereby or thereby will not contravene, result in any
material breach of, constitute a material default or require a consent under, or
result in the creation of any material lien (other than as contemplated in the
Security Documents or the Other Securities Documents) in respect of any property
of Southhampton under, any material indenture, mortgage, deed of trust, bank
loan or credit agreement, corporate charter, by-laws or other agreement or
instrument to which Southhampton is a party or
<PAGE>
by which Southhampton or any of its properties may be bound or affected.
3.10 Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
body is required for the validity of the execution and delivery, or for the
performance by Southhampton, of this Agreement, the Securities and the Security
Documents, the Other Securities and the Other Securities Documents, the Stock
Purchase Agreement, or any other document or agreement or instrument
contemplated hereby or thereby other than the (i) filing and recording of
certain of the Security Documents and Other Securities Documents, (ii) forms
required to be filed by the Securities and Exchange Commission pursuant to
Regulation D, (iii) forms required by Section 25102(f) of the California
Corporations Code, (iv) other "Blue Sky" filings or (v) forms required to be
filed with, or approvals to be received from, the Vancouver Stock Exchange
("VSE").
3.11 Licenses, Permits, etc. Southhampton possesses all licenses,
permits, franchises, authorizations, and similar authority required to conduct
its business substantially as now conducted and as currently proposed to be
conducted, without known conflict with the rights of others, and each believes
it can obtain, without undue burden or expense, any similar authority for the
conduct of its business as presently planned to be conducted.
3.12 Compliance with ERISA. Except as disclosed on Schedule 3.12A, all
employee benefit plans maintained or contributed to by Southhampton, or under
which Southhampton has any obligation or liability, are in substantial
compliance with respect to both their terms and operation with the Internal
Revenue Code of 1954, as amended, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and any and all other applicable laws. Except as
disclosed in Schedule 3.12B, Southhampton does not have any pension, retirement
or similar plans or obligations, whether of a legally binding nature or in the
nature of an informal understanding.
3.13 Margin Regulations. No part of the proceeds from the sale of the
Securities or the Other Securities hereunder or thereunder will be used,
directly or indirectly, for the purpose of buying or carrying any "margin stock"
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve Southhampton in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of Regulation T of said Board (12 CFR 220). The assets of
Southhampton do not include any margin stock, and Southhampton does not have any
present intention of acquiring any margin stock.
3.14 Investment Company Act. Southhampton is not an investment company
or a person directly or indirectly controlled by
<PAGE>
or acting on behalf of an investment company within the meaning of the
Investment Company Act of 1940, as amended.
3.15 Compliance with Law. Except as set forth on Schedule 3.15, to the
best of its knowledge, Southhampton has been, and on the Closing Date will
continue to be, in compliance with all applicable laws (including duties imposed
by common law), rules, regulations, orders, ordinances, judgments and decrees of
all governmental authorities (federal, state, local and foreign) and all
requirements imposed under building, zoning, occupational safety and health,
pension, environmental control, toxic waste, fair employment, equal opportunity
or similar laws, rules, regulations and ordinances.
3.16 Environmental. To the best knowledge of Southhampton, Southhampton
has obtained all licenses and permits which are required under applicable
environmental laws in connection with all real estate owned or leased by them
and the conduct of their respective business and operations. Each of such
licenses and permits is in full force and effect and Southhampton is in
compliance in all material respects with the terms and conditions of all such
licenses and permits and with any applicable environmental law.
3.17 Maintenance of Insurance. Southhampton maintains policies of
insurance issued by responsible and reputable insurance companies or
associations in such amounts and to cover such risks as are usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which Southhampton operates.
3.18 Proprietary Information. To the best of its knowledge,
Southhampton owns or possesses sufficient legal rights to all trade or service
marks, copyrights, patents, processes, operation manuals, techniques, trade
secrets and similar proprietary property and rights necessary for its business
as now conducted and as proposed to be conducted, without any known conflict or
infringement of the rights of others. To the extent applicable, set forth on
Schedule 3.18A are the permits, licenses and registrations to use the foregoing
proprietary information. Except as set forth on Schedule 3.18B, Southhampton has
not received any communications alleging that it has violated or, by conducting
its business as proposed, would violate any of the patents, trademarks, service
marks, trade names, or other proprietary rights of any other person or entity
nor does Southhampton have reason to believe that it has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, or other proprietary rights of any other
person or entity.
3.19 Security Interest; Priority and Intercreditor Agreement. Upon the
due filing or recording in all places necessary to perfect and maintain the
liens purported to be created by the Security Documents and the Other Securities
Documents, the liens of the Security Documents and Other Securities Documents
shall constitute
<PAGE>
fully perfected security interests in all right, title and interest of
Southhampton in and to the property described therein, in the order of priority
set forth in the Intercreditor Agreement, prior to all other consensual security
interests against such property or interests therein other than Permitted Liens.
3.20 Related-Party Transactions. Except as set forth on Schedule 3.20,
no employee, officer, stockholder or director of Southhampton or member of his
or her immediate family is indebted to Southhampton, nor is Southhampton
indebted (or committed to make loans or extend or guarantee credit) to any of
them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of Southhampton, and
(iii) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of Southhampton). To the best knowledge
of Southhampton, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which Southhampton is affiliated or
with which Southhampton has a business relationship, or any firm or corporation
that competes with Southhampton, except that employees, stockholders, officers,
or directors of Southhampton and members of their immediate families may own
stock in publicly traded companies that may compete with Southhampton. To the
best knowledge of Southhampton, no officer, director, or stockholder or any
member of their immediate families is, directly or indirectly, interested in any
material contract with Southhampton (other than as set forth on Schedule 3.20).
3.21 Manufacturing and Marketing Rights. Set forth in Schedule 3.21
attached hereto is a list of the material license agreements to which
Southhampton is a party. As used herein, "material license agreement" shall mean
one or more license agreements which individually or in the aggregate generate
five percent (5%) or more of the revenues of Southhampton.
3.22 Stock Purchase Agreement. Southhampton has executed a form of the
Stock Purchase Agreement and delivered it to each other party thereto, and the
Stock Purchase Agreement constitutes the valid and binding obligations of
Southhampton, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights of creditors
generally.
3.23 Disclosure. Neither this Agreement nor any Schedule hereto nor any
certificate or other document referenced herein or therein and furnished to the
Purchaser by Southhampton contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained therein or herein, in light of the circumstances under which they were
made, not misleading. There is no material fact known to Southhampton, or to the
reasonable belief of Southhampton, relating to the business, properties,
affairs, operations, condition (financial or
<PAGE>
otherwise) or prospects of Southhampton that materially adversely affects the
same or materially adversely affects the ability of Southhampton to perform its
obligations under this Agreement, the Securities, the Security Agreement or any
other document or agreement contemplated hereby or thereby that has not been
disclosed to the Purchaser by Southhampton. No claim made by the Purchaser that
is based on an alleged breach of the representation and warranty contained in
the preceding sentence shall result in liability of Southhampton to the
Purchaser if Southhampton proves that the Purchaser had actual knowledge of the
same material fact prior to the Closing under this Agreement, the burden of
proof of such knowledge being on Southhampton.
3.24 Commission Filings. Southhampton has previously delivered to
Purchaser copies of all reports filed by Southhampton with the VSE since January
1, 1994, which constitute all reports required to be filed by Southhampton with
the VSE since such date. Southhampton has not received any written request from
the VSE to modify or supplement any such report. As of their respective dates,
the documents and reports referred to above did not contain any untrue statement
of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Southhampton
included in such documents and reports were prepared in accordance with Canadian
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
fairly present in all material respects according to Canadian generally accepted
accounting principles the financial position of Southhampton as of the date
thereof and results of its operations and its cash flows for the periods then
ended, in the case of the unaudited interim financial statements subject to
normal year-end audit adjustments and the absence of complete footnote
disclosures.
4. REPRESENTATIONS OF SEI.
SEI represents and warrants to Purchaser as of the date hereof and as
of the Closing Date that:
4.1 Organization and Authority. SEI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all requisite power and authority to own or hold under lease the property it
purports to own or hold under lease and to transact the business it transacts
and proposes to transact. SEI has all requisite corporate power and authority to
execute and deliver this Agreement, the Securities and the Security Documents
and any other documents or agreements contemplated hereby and thereby, including
the Other Securities and the Other Security Documents, to which SEI is a party,
to perform the obligations hereunder and thereunder and to consummate the
transactions contemplated hereunder and thereunder. SEI is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the properties owned or held under lease by
<PAGE>
it or the nature of the business transacted by it requires such qualification
except in such jurisdictions, if any, in which the failure to be so qualified or
in good standing will not have a material adverse effect upon SEI.
The execution, delivery and performance of this Agreement, the
Securities and the Security Documents, the Other Securities and the Other
Security Documents and any other documents or agreements to which SEI is a party
contemplated hereby and thereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized and approved by the
Board of Directors of SEI. Each of this Agreement, the Securities and the
Security Documents, the Other Securities and the Other Security Documents and
any other document or agreement to which the SEI is a party contemplated hereby
or thereby has been (or on the Closing Date will have been) duly authorized,
executed and delivered by, and each is (or, when duly executed and delivered on
the Closing Date, will be) the valid and binding obligation of, SEI, enforceable
in accordance with its terms, except as may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or by legal or
equitable principles relating to or limiting creditors' rights generally.
4.2 Financial and Other Information. SEI has delivered to Purchaser
copies of the SEI's balance sheets and related statements of operation,
stockholders, equity and cash flows (including in each case the related
schedules and notes) for the period ended December 31, 1996 (collectively, the
"SEI Financial Statements") attached hereto as Exhibit I.
The SEI Financial Statements fairly present the consolidated financial
position of SEI as of the respective dates of such balance sheet and the
consolidated results of the SEI's operations for the period or periods covered
by such statements of operations, consolidated stockholders' equity and cash
flows, and have been prepared in accordance with the books and records of SEI.
Except as disclosed on Schedule 4.2, there are no material differences between
the consolidated results of operations and consolidated financial position of
SEI as reflected in the SEI Financial Statements and what the consolidated
results of operations and consolidated financial position of SEI would be were
such SEI Financial Statements prepared in accordance with generally accepted
accounting principles.
Since December 31, 1996, there have been no changes in the assets,
liabilities, contingent or otherwise, or financial position of SEI from that set
forth in such balance sheet as of such date, other than changes in the ordinary
course of business which have not, either individually or in the aggregate, been
materially adverse to SEI.
As of their respective dates, none of the SEI Financial Statements,
this Agreement or any other document, certificate or written statement furnished
to Purchaser by or on behalf of SEI in
<PAGE>
connection with the transactions contemplated hereby contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements not misleading in light of the circumstances under which
they were made.
4.3 Capital Stock; Subsidiaries. The authorized capital stock of SEI
consists of 10,000 shares of SEI Common Stock, no par value (the "SEI Common
Stock"). On the date hereof and on the Closing Date, 1,000 shares of SEI Common
Stock, all of which will be directly and beneficially owned by Southhampton,
will be issued and outstanding on a fully-diluted basis, all of which shares
have been duly and validly issued and are fully paid and nonassessable; and no
shares of SEI Common Stock are or will be authorized for issuance pursuant to
the exercise of the stock options and warrants or otherwise.
Except for all of the issued or outstanding shares of Antigua Common
Stock and as otherwise set forth on Schedule 4.3, SEI (i) does not own,
beneficially or of record, any shares or capital stock of, or hold any other
equity interest in, any Person, (ii) is not committed to purchase or acquire any
such interest, or (iii) is not a participant in any joint venture, partnership
or similar arrangement.
SEI does not have outstanding: (i) any capital stock or other
securities convertible into or exchangeable for any of its capital stock or any
rights to subscribe for or to purchase, or any options for the purchase of, or
any agreements (contingent or otherwise) providing for the issuance of, or any
calls, commitments or claims of any character relating to, any of its capital
stock or any securities convertible into or exchangeable for any of its capital
stock; or (ii) any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any of its capital stock or obligation evidencing
the rights of the holders thereof to purchase any of its capital stock. There is
not in effect on the date of this Agreement any agreement by SEI pursuant to
which any holders of securities of SEI have a right to cause SEI to register
such securities under the Securities Act.
4.4 Litigation, etc. Except as set forth on Schedule 4.4, there is no
action, suit, proceeding or investigation pending or, to the knowledge of SEI,
currently threatened against SEI which challenges the validity of this Agreement
or the right of SEI to enter into it, or to consummate the transactions
contemplated hereby, or which might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of Southhampton, financially or otherwise, or any change in the
current equity ownership of SEI.
4.5 Application of Proceeds. SEI, Southhampton and Antigua will apply
the net proceeds of the sale of the Securities (after the payment of fees and
expenses associated with the transaction) to fund a portion of the purchase
price payable under the Stock Purchase Agreement.
<PAGE>
4.6 Outstanding Indebtedness. Schedule 4.6A sets forth a correct and
complete list of all indebtedness of SEI outstanding or existing on the date
hereof and to be existing or outstanding on the Closing Date (the "SEI
Indebtedness") other than Southhampton Indebtedness created under or evidenced
by this Agreement and the Security Documents, but including the indebtedness of
SEI under the Other Securities Documents, if any. With respect to each item of
Southhampton Indebtedness listed in Schedule 4.6A, SEI has made available to
Purchaser a true and complete copy of each instrument or agreement evidencing
such SEI Indebtedness or pursuant to which such SEI Indebtedness was issued or
secured (including each amendment, consent, waiver or similar instrument in
respect thereof), as the same is in effect on the date hereof. Except as
disclosed on Schedule 4.6B, SEI is not in monetary or other material default in
the performance or observance of any of the terms, covenants or conditions
contained in any instrument or agreement evidencing SEI Indebtedness listed in
Schedule 4.6A or pursuant to which such SEI Indebtedness was issued or secured
and has not requested any waiver in respect of any default and no event has
occurred and is continuing which, with notice or the lapse of time or both,
would constitute such a default.
4.7 Title to Collateral; Leases. Except (i) as reflected in Schedule
4.7A, (ii) as reflected in the SEI Financial Statements (defined in Section
2.2), and (iii) for Permitted Liens, SEI has good and marketable title to the
Collateral and to all of its other property and assets, free and clear of all
mortgages, liens, claims, and encumbrances. SEI enjoys full and undisturbed
possession under all leases necessary in any material respect for the operation
of its business, which leases are listed on Schedule 4.7B (the "Leases"). None
of the Leases contains any unusual or burdensome provisions that, individually
or in the aggregate, are likely to materially impair the operation of the
business of SEI. The Leases are valid and subsisting and are in full force and
effect. SEI has delivered to Purchaser a true and complete copy of each of the
Leases.
4.8 Taxes. Except as disclosed on Schedule 4.8, SEI has filed all tax
returns which are required to have been filed by SEI in any jurisdiction and
have paid all taxes shown to be due and payable on such returns and other taxes
and assessments payable by SEI to the extent the same have become due and
payable. SEI knows of no proposed material tax assessment against SEI and in the
opinion of SEI all tax liabilities are adequately provided for on the books of
SEI.
4.9 Compliance with Other Instruments. The consummation of the
transactions contemplated by this Agreement and the execution, delivery and
performance of the terms and provisions of this Agreement, the Securities and
the Security Documents, the Other Securities and the Other Securities Documents,
the Stock Purchase Agreement, the Intercreditor Agreement or any other document
or agreement contemplated hereby or thereby will not contravene,
<PAGE>
result in any breach of, constitute a default or require a consent under, or
result in the creation of any lien (other than as contemplated in the Security
Documents or the Other Securities Documents) in respect of any property of SEI
under, any material indenture, mortgage, deed of trust, bank loan or credit
agreement, corporate charter, by-laws or other agreement or instrument to which
SEI is a party or by which SEI or any of its properties may be bound or
affected.
4.10 Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
body is required for the validity of the execution and delivery, or for the
performance by SEI, of this Agreement, the Securities and the Security
Documents, the Other Securities and the Other Securities Documents, the Stock
Purchase Agreement, or any other document or agreement or instrument
contemplated hereby or thereby other than the (i) filing and recording of
certain of the Security Documents and Other Securities Documents, (ii) forms
required to be filed by the Securities and Exchange Commission pursuant to
Regulation D, (iii) forms required by Section 25102(f) of the California
Corporations Code, or (iv) other "Blue Sky" filings.
4.11 Licenses, Permits, etc. SEI possesses all licenses, permits,
franchises, authorizations, and similar authority required to conduct its
business substantially as now conducted and as currently proposed to be
conducted, without known conflict with the rights of others, and each believes
it can obtain, without undue burden or expense, any similar authority for the
conduct of its business as presently planned to be conducted.
4.12 Compliance with ERISA. Except as disclosed on Schedule 4.12A, all
employee benefit plans maintained or contributed to by SEI, or under which SEI
has any obligation or liability, are in substantial compliance with respect to
both their terms and operation with the Internal Revenue Code of 1954, as
amended, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any and all other applicable laws. Except as disclosed in
Schedule 4.12B, SEI does not have any pension, retirement or similar plans or
obligations, whether of a legally binding nature or in the nature of an informal
understanding.
4.13 Margin Regulations. No part of the proceeds from the sale of the
Securities or the Other Securities hereunder or thereunder will be used,
directly or indirectly, for the purpose of buying or carrying any "margin stock"
within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve SEI in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). The assets of SEI do not
include any margin stock, and SEI does not have any present intention of
acquiring any margin stock.
<PAGE>
4.14 Investment Company Act. SEI is not an investment company or a
person directly or indirectly controlled by or acting on behalf of an investment
company within the meaning of the Investment Company Act of 1940, as amended.
4.15 Compliance with Law. Except as set forth on Schedule 4.15, to the
best of its knowledge, SEI has been, and on the Closing Date will continue to
be, in compliance with all applicable laws (including duties imposed by common
law), rules, regulations, orders, ordinances, judgments and decrees of all
governmental authorities (federal, state, local and foreign) and all
requirements imposed under building, zoning, occupational safety and health,
pension, environmental control, toxic waste, fair employment, equal opportunity
or similar laws, rules, regulations and ordinances.
4.16 Environmental. To the best knowledge of SEI, SEI has obtained all
licenses and permits which are required under applicable environmental laws in
connection with all real estate owned or leased by them and the conduct of their
respective business and operations. Each of such licenses and permits is in full
force and effect and SEI is in compliance in all material respects with the
terms and conditions of all such licenses and permits and with any applicable
environmental law.
4.17 Maintenance of Insurance. SEI maintains policies of insurance
issued by responsible and reputable insurance companies or associations in such
amounts and to cover such risks as are usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which SEI operates.
4.18 Proprietary Information. To the best of its knowledge, SEI owns or
possesses sufficient legal rights to all trade or service marks, copyrights,
patents, processes, operation manuals, techniques, trade secrets and similar
proprietary property and rights necessary for its business as now conducted and
as proposed to be conducted, without any known conflict or infringement of the
rights of others. To the extent applicable, set forth on Schedule 4.18A are the
permits, licenses and registrations to use the foregoing proprietary
information. Except as set forth on Schedule 4.18B, SEI has not received any
communications alleging that it has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, or other proprietary rights of any other person or entity nor does SEI
have reason to believe that it has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, or other proprietary rights of any other person or entity.
4.19 Security Interest; Priority and Intercreditor Agreement. Upon the
due filing or recording in all places necessary to perfect and maintain the
liens purported to be created by the Security Documents and the Other Securities
Documents, the liens of the
<PAGE>
Security Documents and Other Securities Documents shall constitute fully
perfected security interests in all right, title and interest of SEI in and to
the property described therein, in the order of priority set forth in the
Intercreditor Agreement, prior to all other consensual security interests
against such property or interests therein other than Permitted Liens.
4.20 Related-Party Transactions. Except as set forth on Schedule 4.20,
no employee, officer, stockholder or director of SEI or member of his or her
immediate family is indebted to SEI, nor is SEI indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than (i) for payment
of salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of SEI, and (iii) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
SEI). To the best knowledge of SEI, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which SEI is
affiliated or with which SEI has a business relationship, or any firm or
corporation that competes with SEI, except that employees, stockholders,
officers, or directors of SEI and members of their immediate families may own
stock in publicly traded companies that may compete with SEI. To the best
knowledge of SEI, no officer, director, or stockholder or any member of their
immediate families is, directly or indirectly, interested in any material
contract with SEI (other than as set forth on Schedule 4.20).
4.21 Manufacturing and Marketing Rights. Except as set forth in
Schedule 4.21, SEI has not granted rights to manufacture, produce, assemble,
license, market, or sell its products to any other person and is not bound by
any agreement that affects SEI's exclusive rights to develop, manufacture,
assemble, distribute, market, or sell its products.
4.22 Stock Purchase Agreement. SEI has executed a form of the Stock
Purchase Agreement and delivered it to each other party thereto, and the Stock
Purchase Agreement constitutes the valid and binding obligations of SEI,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights of creditors generally.
4.23 Disclosure. Neither this Agreement nor any Schedule hereto nor any
certificate or other document referenced herein or therein and furnished to the
Purchaser by SEI contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein, in light of the circumstances under which they were made, not
misleading. There is no material fact known to SEI, or to the reasonable belief
of SEI, relating to the business, properties, affairs, operations, condition
(financial or otherwise) or prospects of SEI that materially adversely affects
the same or materially adversely affects the ability of SEI to perform its
<PAGE>
obligations under this Agreement, the Securities, the Security Agreement or any
other document or agreement contemplated hereby or thereby that has not been
disclosed to the Purchaser by SEI. No claim made by the Purchaser that is based
on an alleged breach of the representation and warranty contained in the
preceding sentence shall result in liability of SEI to the Purchaser if SEI
proves that the Purchaser had actual knowledge of the same material fact prior
to the Closing under this Agreement, the burden of proof of such knowledge being
on SEI.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER.
The obligation of Purchaser to purchase and pay for the Securities to
be purchased by it on the Closing Date shall be subject to the satisfaction on
or before the Closing Date of the conditions hereinafter set forth, which
conditions are solely for the Purchaser's benefit and may be waived only in
writing by it.
5.1 Securities and Security Documents. The Securities and the Security
Documents shall have been duly executed and delivered by the parties thereto in
the respective definitive forms of such documents approved by Purchaser.
Arrangements which Purchaser, in Purchaser's sole discretion, deems satisfactory
shall have been made for such instruments to be duly filed, delivered or
recorded in all places necessary to perfect and maintain the liens respectively
purported to be created thereby and all governmental charges payable in
connection therewith shall have been paid (or payment shall have been provided
for) in full, and shall be in full force and effect and no term or condition
thereof shall have been amended, modified or waived without the prior written
consent of Purchaser.
5.2 Proceedings Satisfactory. All proceedings taken on or prior to the
Closing Date in connection with the issuance of the Securities and the
consummation of the transactions contemplated hereby and all documents and
instruments relating thereto shall be reasonably satisfactory in form and
substance to Purchaser and Purchaser's counsel; and Purchaser and Purchaser's
counsel shall have received copies of such documents, instruments, and
certificates of officers of the Issuers in form and substance reasonably
satisfactory to Purchaser and Purchaser's counsel, all as Purchaser or they may
reasonably request in connection therewith.
5.3 Other Securities and Related Transactions; Intercreditor Agreement.
The Purchaser shall have reviewed and approved the form, terms and provisions of
all the Other Securities Documents, and such Other Securities Documents shall
have been duly executed and delivered by the parties thereto in the respective
forms so approved, and all transactions relating to the Other Securities shall
have been consummated in accordance with the terms so approved. The Purchaser
shall have reviewed and approved the Intercreditor Agreement, and such
Intercreditor Agreement shall have been duly executed and delivered by the
parties thereto in the
<PAGE>
respective forms so approved.
5.4 Security Agreements. The Purchaser shall have received Security
Agreements in substantially the forms of Exhibit D and E, duly executed by each
of Antigua, SEI and Southhampton which evidence the security interests granted
Purchaser in the assets of Antigua, SEI and Southhampton, respectively, to
secure the obligations of Antigua under the Note and the guarantees by
Southhampton and SEI of the obligations of Antigua as set forth herein and the
Guaranties.
5.5 Stock Purchase Agreement; Capital Investment. The Purchaser shall
have reviewed and approved the terms and conditions of the Stock Purchase
Agreement and all other documents and agreements to be executed in connection
with the acquisition by SEI of all of the outstanding capital stock of Antigua.
The Stock Purchase Agreement and all other such documents and agreements shall
have been executed and delivered by all parties thereto, and SEI shall have
acquired all of the outstanding stock of Antigua.
5.6 Representations True, etc.; Compliance Certificate. All
representations and warranties of the Loan Parties contained in Sections 2, 3
and 4 shall be true and not misleading, in each case on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date; each of the Loan Parties shall have
performed all agreements on its part required to be performed under this
Agreement on or prior to the Closing Date; no Default or Event of Default shall
have occurred and be continuing; none of the Loan Parties shall have
consolidated with, merged into, or sold, leased or otherwise disposed of its
properties as an entirety or substantially as an entirety to any Person (except
as contemplated in the Stock Purchase Agreement); all conditions specified in
Section 5 shall have been satisfied; and Purchaser shall have received (i)
certificates signed by the Chairman of the Board of Directors, the President or
the Principal Financial Officer of Antigua, SEI and Southhampton, respectively,
dated the Closing Date, certifying to the effect specified in this Section, and
(ii) such other certificates and assurances reasonably requested by Purchaser.
5.7 Opinion of Counsel. The Loan Parties shall provide Purchaser with
the written legal opinions of Quarles & Brady, counsel to Antigua, Bonn,
Luscher, Padden & Wilkins, counsel to SEI, and Tupper, Jonsson & Yeadon, counsel
to Southhampton, addressed to the Purchaser and otherwise in forms and substance
reasonably satisfactory to Purchaser.
5.8 Approval of VSE. The Agreement and the issuance of the Warrant, to
the extent required, shall have received the consent and approval of the VSE.
5.9 Commitment for Public Offering. Southhampton shall have entered
into a letter of intent with Cruttenden Roth, Inc., as lead
<PAGE>
underwriter, to commence as soon as practicable (in the discretion of Cruttenden
Roth, Inc.) a public offering of securities to be issued by Southhampton; and
Southhampton shall have paid Cruttenden Roth, Inc. all fees and expenses to be
paid upon execution, and under the terms, of the letter of intent.
6. PREPAYMENT AND SUBORDINATION OF THE NOTE.
6.1 Prepayment. The Note shall not be subject to prepayment of
principal except as set forth in the Note and in this Section 6. Interest on the
Note shall be prepaid monthly in advance as provided therein. Upon notice given
as provided below, Antigua, at its option, may prepay the Note in whole or in
part at any time at par (less any prepaid but unaccrued interest as of the date
of prepayment), without premium. In addition, if at any time there occurs a
Refinancing (as defined in Section 10 below), then, within 15 business days of
the consummation of such Refinancing, Antigua shall prepay the Note in whole,
and not in part, at par (less any prepaid but unaccrued interest thereon as of
the date of prepayment) without premium. Antigua will give written notice of
prepayment of the Note pursuant to this Section 6.1 to Purchaser not less than
ten (10) business days prior to the date fixed for such prepayment in such
notice, which notice shall specify the amount so to be prepaid and the date
fixed for such prepayment. Upon the giving of notice of any prepayment as
provided in this Section, Antigua will prepay on the date therein fixed for
prepayment the principal amount of the Note so to be prepaid as specified in
such notice, unless such notice is revoked not later than three (3) days prior
to the date fixed for prepayment therein.
6.2 Subordination. Except as disclosed on Schedule 6.2, and except as
provided for in the Subordination Agreement, dated as of May 7, 1997, by and
between LaSalle Business Credit, Inc., Imperial Bank Arizona and Purchaser (the
"Subordination Agreement")and the Intercreditor Agreement, the indebtedness
evidenced by the Note shall not be subordinated to any existing or future debt
of the Loan Parties.
7. FINANCIAL INFORMATION; COMPLIANCE CERTIFICATES; MAINTENANCE OF RECORDS.
Southhampton has or will engage an accounting firm from the group
commonly known as the "Big Six" to audit and review its financial statements.
Southhampton will furnish to Purchaser, so long as Purchaser shall hold the
Note:
(a) within thirty (30) days after the end of each month in
each fiscal year, an unaudited consolidated balance sheet of Southhampton and
the related consolidated statements of income and stockholders' equity, such
consolidated balance sheet to be as of the end of such month and such statements
of income and stockholders' equity to be for the month and, for the period from
the beginning of the fiscal year to the end of such month, in each case with
comparative statements (where available) for the
<PAGE>
corresponding period in the prior fiscal year;
(b) within forty-five (45) days after the end of each fiscal
quarter in each fiscal year (other than the last fiscal quarter in each fiscal
year), an unaudited consolidated balance sheet of Southhampton and the related
consolidated statements of income, stockholders' equity and cash flows, such
consolidated balance sheet to be as of the end of such fiscal quarter and such
consolidated statements of income, stockholders' equity and cash flows to be for
the fiscal quarter and for the period from the beginning of the fiscal year to
the end of such fiscal quarter, in each case with comparative statements for the
corresponding period in the prior fiscal year;
(c) within ninety (90) days after the end of each fiscal year,
a consolidated balance sheet of Southhampton and the related consolidated
statements of income, stockholders' equity and cash flows, prepared in
accordance with GAAP and audited by its independent public accountants, such
consolidated balance sheet to be as of the end of such fiscal year and such
consolidated statements of income, stockholders' equity and cash flows to be for
the period from the beginning of the fiscal year to the end of such fiscal year,
in each case with comparative statements for the prior fiscal year;
(d) promptly following receipt by Southhampton, each audit
response letter, accountant's management letter and other written report
submitted to Southhampton by its independent public accountants in connection
with an annual or interim audit or review of the books of Southhampton;
(e) concurrently with sending or making available the same,
all press releases, reports and financial statements that Southhampton sends or
makes available to its shareholders generally or directors generally; and
(f) immediately upon becoming aware of (i) any Default, Event
of Default or other default in the performance of any covenant, agreement or
condition contained in this Agreement, the Securities or the Security Documents,
or (ii) any Default or, Event of Default under any other Southhampton
Indebtedness or Antigua Indebtedness, a certificate of the President, a Vice
President or the Principal Financial Officer of Southhampton, specifying such
Default, Event of Default or other default and the nature and status thereof.
8. INSPECTION.
8.1 Inspection. So long as Purchaser shall hold the Note, Purchaser and
Purchaser's authorized representatives shall have the right to visit and inspect
any of the properties of Southhampton, SEI and/or Antigua, to examine the books
of account and records of Southhampton, SEI and/or Antigua, to be provided with
copies and extracts therefrom (at Southhampton's expense), to discuss the
<PAGE>
affairs, finances and accounts of Southhampton, SEI and/ or Antigua with, and to
be advised as to the same by, its and their officers and employees, and its
independent public accountants (and Southhampton, SEI and/or Antigua authorizes
such independent public accountants to discuss such Loan Parties' financial
matters with Purchaser and Purchaser's representatives, regardless of whether
any representative of such Loan Party is present), all upon reasonable prior
notice and at such reasonable times and intervals as Purchaser may desire.
Southhampton, SEI and Antigua will likewise afford Purchaser the opportunity to
obtain any information, to the extent such Loan Party possesses such information
or can acquire it without unreasonable effort or expense, necessary to verify
the accuracy of any of the representations and warranties made by such Loan
Party hereunder.
Neither Purchaser nor its representatives shall (a) use any such
information in any manner detrimental to Southhampton, SEI or Antigua, as the
case may be, or (b) disclose, divulge, provide or make accessible any such
information to any person or entity (other than limited disclosures to their
representatives to the extent necessary to evaluate matters related solely to
Southhampton, SEI or Antigua).
9. COVENANTS.
The Loan Parties jointly and severally covenant and agree that on and
after the date hereof, so long as any Note shall be outstanding:
9.1 Payment of Note. Antigua shall pay the principal of and interest on
the Note on the dates and in the manner provided in the Note and this Agreement.
The obligation of Antigua described in the preceding two (2) sentences is
absolute and unconditional, irrespective of any tax or accounting treatment of
such obligation.
9.2 Guaranty of Payment. Southhampton and SEI shall directly,
primarily, absolutely and unconditionally guarantee the payment of the Note in
accordance with the terms of the form of Guaranty attached hereto as Exhibit C.
9.3 Limitations on Distributions and Investments. Except to the extent
necessary to make payments under indebtedness incurred in connection with the
Other Securities Documents, none of the Loan Parties shall, directly or
indirectly, (1) declare or pay any dividend or make any distribution on their
capital stock or ownership interests (other than dividends payable in shares of
such of its own equity securities as are not (a) entitled by their terms to any
redemptions, dividends or other cash payments, or (b) cumulative or
participating preferred stock), (2) redeem, retire, purchase or otherwise
acquire for value any shares of any class of its own capital stock or ownership
interests other than by the issuance of their own capital stock in exchange
therefor, (3), except as otherwise provided in the Subordination Agreement,
prepay, purchase, repurchase, redeem, defease or otherwise acquire
<PAGE>
or retire for value, prior to scheduled maturity, any indebtedness that is
subordinated to the Note, other than in the ordinary course of business, or (4)
make any Restricted Investments.
9.4 Limitation on Indebtedness. None of the Loan Parties shall,
directly or indirectly, create, incur, assume, guarantee, suffer to exist or
otherwise in any manner become liable or commit to become liable with respect to
any indebtedness, including, but not limited to pari passu indebtedness or
indebtedness senior to the Note, except for (a) the Note, (b) indebtedness
existing on the Closing Date which is set forth in Schedules 2.6, 3.6, or 4.6,
respectively, and any extension of maturity, refinancing or modification of the
terms thereof; provided, however, that (i) such extension, refinancing or
modification is pursuant to terms that are not less favorable to the Loan
Parties than the terms of the indebtedness being extended, refinanced or
modified and (ii) after giving effect to the extension, refinancing or
modification, the principal amount of such indebtedness is not greater than the
amount of indebtedness outstanding immediately prior to such extension,
refinancing or modification, and the obligors on such indebtedness have not
changed; (c) additional indebtedness of the Loan Parties that at any time
outstanding does not exceed an aggregate amount of (i) 85% of accounts
receivable, (ii) 55% of inventory, and (iii) 80% of tangible assets, subject to
the Purchaser's approval pursuant to Section 7.2 hereof; (d) existing
indebtedness with respect to capital lease obligations including such capital
lease obligations set forth on Schedules 2.7, 3.7 and 4.7 hereto; (e)
indebtedness to trade creditors incurred in the ordinary course of business; and
(f) indebtedness that is subordinated to the Note.
9.5 Limitations on Liens. None of the Loan Parties shall, directly or
indirectly, create, incur, assume or suffer to exist or otherwise cause or
suffer to become effective any lien of any kind, other than Permitted Liens.
9.6 Observance of Statutes, Regulations and Orders. The Loan Parties
shall remain at all times in material compliance with all statutes or other
rules or regulations of any governmental body, including any environmental law,
the violation of which might materially affect adversely the business, business
prospects, properties, conditions (financial or otherwise) or operations of the
Issuers or the ability of the Issuers to perform their respective obligations
under this Agreement or the Securities and the Security Documents.
9.7 Corporate Existence. The Loan Parties shall do or cause to be done
all things necessary to preserve and keep in full force and effect their
respective corporate existence in accordance with their rights (charter and
statutory), licenses and franchises; provided, however, that none of the Loan
Parties shall be required to preserve any such right, license or franchise if
the respective Board of Directors shall determine in good faith in accordance
with the respective charter that the preservation thereof is no longer
<PAGE>
desirable in the conduct of the business of the Loan Parties, taken
collectively, and that the loss thereof is not adverse in any material respect
to the Loan Parties or the value of the Securities.
9.8 Taxes. The Loan Parties shall pay, prior to delinquency, all
material taxes, assessments and governmental levies that may be imposed upon
them except as contested in good faith and by appropriate proceedings.
9.9 Limitations on Transactions with Affiliates. None of the Loan
Parties shall make any payment to or investment in, or enter into any
transaction with, any Affiliate, including, without limitation the purchase,
sale or exchange of property or the rendering of any service, except pursuant to
the reasonable requirements of their existing or proposed businesses, provided
that such transaction is on terms comparable to those generally available on an
arm's-length basis in equivalent transactions with third parties, as evidenced
by a resolution of the disinterested members of the respective Boards of
Directors adopted in good faith to that effect.
9.10 Investment Company Act. None of the Loan Parties shall become an
investment company subject to registration under the Investment Company Act of
1940, as amended.
9.11 Maintenance of Properties. The Loan Parties shall maintain,
preserve, protect and keep their properties in good repair, working order and
condition (ordinary wear and tear excepted), and make necessary and proper
repairs, renewals and replacements so that their business carried on in
connection therewith may be properly conducted at all times consistent with past
practices of the Loan Parties.
9.12 Books and Records. The Loan Parties shall keep books and records
that accurately reflect all of its material business affairs and transactions.
9.13 Maintenance of Insurance. The Loan Parties shall, at all times, at
their sole cost and expense, maintain insurance against loss or damage to the
property and assets comprising their respective portion and share of the
Collateral (as defined in the Security Documents) with responsible and reputable
insurance companies or associations reasonably satisfactory to Purchaser,
licensed to write insurance in the state where such Collateral is situated and
which have a Best's rating of A or better, in such amounts and covering such
risks as are usually carried by companies engaged in similar businesses and
owning similar property in the same general area as the area in which such
property is located including, without limitation, fire, public liability,
property damage, miscellaneous equipment, inventory, comprehensive general and
automobile liability, workers' compensation and employer's liability, and errors
and omissions. Subject to the Intercreditor Agreement:
<PAGE>
(i) All such insurance policies covering the
Collateral shall name Antigua, SEI or Southhampton, as
appropriate, as named insured and shall name Purchaser as
additional named insured without Purchaser being liable for
premiums or other costs or expenses. Each such policy shall
provide for all losses to be paid to Antigua, SEI or
Southhampton, as appropriate, and for losses to be adjusted
with the insurer by Antigua, SEI or Southhampton; provided
that, if the insurer shall have received written notice from
Purchaser that an Event of Default has occurred and is
continuing unremedied, any such payment for loss or
destruction of or damage to the Collateral shall be paid
directly to Purchaser and any such adjustments shall be made
solely by Purchaser. All such insurance payments received by
Purchaser while an Event of Default shall have occurred and be
continuing unremedied shall be held or applied by Purchaser as
provided in subsection (vii) of this Section 9.13.
(ii) The Loan Parties shall furnish to the Purchaser
within ten (10) days of the date hereof insurance
certificates, in form and substance satisfactory to Purchaser,
evidencing compliance by the Issuers with the terms of this
Section 9.13.
(iii) At least thirty (30) days prior to the
expiration of each such policy, the Loan Parties shall furnish
Purchaser with evidence satisfactory to Purchaser of the
payment of premium and the reissuance of a policy continuing
insurance in force as required by this Agreement. All such
policies or certificates shall contain a provision that such
policies will not be canceled or materially amended, which
term shall include any reduction in the scope or limits of
coverage, without at least thirty (30) days' prior written
notice by such insurer to Purchaser. In the event the Loan
Parties fail to provide, maintain, keep in force or deliver
and furnish to Purchaser the policies of insurance required by
this Section 9.13, the Purchaser may, but shall not be
obligated to, procure such insurance or single interest
insurance for such risks covering Purchaser's interest, and
the applicable Loan Party will pay all premiums thereon
promptly upon demand by Purchaser, together with interest
thereon at the rate then applicable to the advances made to
the hereunder from the date of expenditure by Purchaser until
reimbursement by the appropriate Loan Party.
(iv) All policies of insurance required to be
furnished by the Loan Parties pursuant to this Section 9.13
shall have attached thereto the "Lender's Loss Payable
Endorsement" or its equivalent, or a loss payable clause
acceptable to Purchaser, for the benefit of Purchaser.
<PAGE>
(v) The Loan Parties shall observe and comply with
the requirements of all policies of insurance required to be
maintained in accordance with this Agreement and shall so
perform and satisfy the requirements of the companies writing
such policies so that at all times companies of good standing
satisfactory to Purchaser shall be willing to write and to
continue such insurance.
(vi) Upon request by Purchaser, the Loan Parties
shall furnish Purchaser a certificate of an officer of such
Loan Parties containing a detailed list of the insurance
policies of such Loan Parties required by or referred to in
this Section 9.13 then outstanding and in force.
(vii) All insurance money received by Purchaser shall
be held by Purchaser to secure the performance by the Loan
Parties of their obligations under this Agreement and the
other Security Documents.
9.14 Accounting Changes. The Loan Parties shall not in their respective
consolidated financial statements, (i) make or permit any change in accounting
principles or reporting practices, except as permitted by GAAP or (ii) change
their respective fiscal years.
9.15 Merger, Consolidation or Sale. None of the Loan Parties shall
consolidate or merge with or into, or sell, transfer, lease or convey all or
substantially all of its assets to, any Person other than pursuant to the terms
of the Stock Purchase Agreement. Any such action will be construed as a "Change
of Control" and shall be subject to the repurchase provisions contained in
Section 9.16.
9.16 Change of Control. If at any time there is a Change of Control of
any of the Loan Parties, other than as contemplated by the Stock Purchase
Agreement, then the Loan Parties shall, within 30 days following the occurrence
of any such event, send a notice to Purchaser offering to repurchase the Note at
the par amount thereof, plus interest accrued and unpaid on the Note to the date
of such repurchase. If Purchaser desires to accept such offer, Purchaser must
advise the Loan Parties of such acceptance within 30 days of the date of
receiving such notice. The Loan Parties shall then repurchase the Note so
tendered for repurchase by Purchaser by paying the purchase price to Purchaser
(or any person or persons designated by Purchaser in such acceptance notice), in
immediately available funds, within five days of the Loan Parties' receipt of
Purchaser's acceptance notice. As used herein, "Change of Control" shall mean
(i) the acquisition, directly or indirectly, by any person or group (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
of the beneficial ownership of securities of any of the Loan Parties possessing
more than fifty (50%) of the total combined voting power of all outstanding
securities of any of the Loan Parties; (ii) a merger or
<PAGE>
consolidation in which any of the Loan Parties is not the surviving entity,
except for a transaction the principal purpose of which is to change the state
in which any of the loan parties is incorporated; (iii) the sale, transfer or
other disposition of all or substantially all of the assets of any of the Loan
Parties; (iv) a complete liquidation or dissolution of any of the Loan Parties;
or (v) any reverse merger in which any of the Loan Parties is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of any of the Loan Parties' outstanding securities
are transferred to or acquired by a person or persons different from the persons
holding those securities immediately prior to such merger.
9.17 Compliance with ERISA. The Loan Parties shall not permit any ERISA
affiliate to (i) terminate any Welfare Plan so as to result in any material
liability of the Issuer or ERISA Affiliate to the PBGC, (ii) permit to exist any
other event or condition that presents a material risk of such termination by
the PBGC of any Welfare Plan, including, but not limited to, the occurrence of
any Reportable Event, (iii) withdraw, or permit any ERISA Affiliate to incur any
withdrawal liability with respect to any Multiemployer Plan or (iv) permit a
Reportable Event to occur with respect to any Welfare Plan which would present a
material risk to the Issuer of incurring a material liability on account of such
Welfare Plan. All capitalized terms used in this section and not defined herein
shall have the meanings ascribed thereto under ERISA or the Code.
9.18 Employee Stock Option Plans. Antigua shall not authorize or issue
options or rights to purchase any shares of its capital stock to any person or
entity other than SEI; SEI shall not authorize or issue options or rights to
purchase any shares of its capital stock to any person or entity other than
Southhampton; and Southhampton shall not authorize the issuance of options to
purchase more than ten percent (10%) of the outstanding shares of Southhampton
Common Stock, on a fully-diluted basis, pursuant to any employee stock option
plan or similar plan providing for the issuance to officers, directors or
employees of or consultants to the Loan Parties or any of their Affiliates of
options, warrants or other rights to purchase Southhampton Common Stock or
Southhampton Preferred Stock.
9.19 Sale of Assets. None of the Loan Parties shall sell, lease,
transfer or dispose of any of its interest in its properties or assets, whether
real, personal or mixed, or tangible or intangible, other than in the ordinary
course of business consistent with prudent business practice (which includes the
disposition in a commercially reasonable manner of equipment and inventory that
is obsolete).
9.20 Restriction on Creation and Ownership of Subsidiaries; Restriction
on Transfer of Subsidiary Interest. None of the Loan Parties shall create or
suffer to exist any subsidiary, unless the Loan Parties shall have obtained
Purchaser's prior written consent. The Loan Parties shall not transfer, sell or
otherwise hypothecate
<PAGE>
its interest in any subsidiary without the prior written consent of Purchaser.
9.21 Disclosure of Environmental Claims. Each Loan Party shall provide
Purchaser with written notice as to the existence of any environmental claim
known to such Loan Party on or effecting any real property owned or leased by
such Loan Party or on or affecting any real property upon which such Loan Party
has a lien securing any indebtedness.
9.22 Consolidated Capital Expenditures. None of the Loan Parties shall
make or incur any capital expenditure which would cause the aggregate of all
capital expenditures for the Loan Parties taken together in any 12-month period
to be in excess of $3,500,000.
9.23 Restricted Payments. None of the Loan Parties shall make (directly
or indirectly) or cause or permit any Person controlled by the Loan Parties to
make (directly or indirectly) any (i) Restricted Payment (as defined in Section
10.1 below) if the Restricted Payment would cause the aggregate of all
Restricted Payments in any 12-month period to exceed fifty percent (50%) of the
excess of the year-to-date aggregate net income of the Loan Parties over the
aggregate of any Restricted Payments theretofore made by the Loan Parties during
that year, or (ii) Restricted Investment (as defined in Section 10.1 below).
9.24 Preservation of Collateral. The Loan Parties shall act at all
times in such a manner as to preserve the value of the Collateral, and shall
refrain from taking any action with respect to the Collateral that would have a
material adverse effect on the value of the Note.
9.25 Board Seat. The Loan Parties shall, within thirty (30) days after
written request by Purchaser, take appropriate action, including, but not
limited to, amendment of its certificate of incorporation and bylaws, to provide
for an additional seat on its Board of Directors and elect a representative
appointed by Purchaser to fill such board seat. The Loan Parties shall use their
best efforts to re-elect such director or an alternative director appointed by
Purchaser for as long a period of time as requested by Purchaser, not to exceed
five years from the date hereof.
9.26 Issuance of Additional Shares. In the event that, after the date
hereof, it is determined that the aggregate issued and outstanding shares of
Southhampton Common Stock, and any options, warrants or rights to purchase
Southhampton Common Stock, are greater than the number of outstanding shares of
Southhampton Common Stock, on a fully diluted basis, as reflected on Schedule
3.3, the number of shares of Southhampton Common Stock issuable upon exercise of
the Warrant shall be adjusted such that the number of shares issuable upon
exercise of the Warrant will equal the same percentage of the outstanding shares
of Southhampton Common Stock
<PAGE>
on a fully diluted basis as of the date hereof.
10. DEFINITIONS.
10.1 Definitions. Except as otherwise specified or as the context may
otherwise require, the following terms shall have the respective meanings set
forth below whenever used in this Agreement:
"Affiliate" means a Person (1) that directly or indirectly controls, or
is controlled by, or is under common control with, the Issuers, (2) that
beneficially owns ten percent (10%) or more of the voting securities of the
Issuers, or (3) ten percent (10%) or more of the voting securities (or in the
case of a Person that is not a corporation, ten percent ( 10%) or more of the
equity interest) of which is owned by the Issuers. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Person" shall include an individual, a corporation, an association, a
partnership, a trust or estate, a government, foreign or domestic, and any
agency or political subdivision thereof, or any other entity.
"Refinancing" shall mean any transaction, or series of transactions
entered into (regardless of when consummated) within a consecutive 183 day
period, pursuant to which the Loan Parties borrow funds, issue debt and/or
equity securities or otherwise raise capital with gross proceeds to the Loan
Parties of $3,000,000 or more.
"Restricted Investment" shall mean any investment except:
(a) investments in property used or useful in the business of
the Loan Parties;
(b) investments in direct obligations of the United States of
America, or any agency thereof, which represents the full faith and credit of
the United States of America, maturing in twelve (12) months from the date of
origin thereof;
(c) investments, deposits, certificates of deposit or bankers'
acceptances maturing within twelve (12) months from the date of origin thereof,
issued by a bank or trust company organized under the laws of the United States
of America or any state thereof, having capital, surplus and undivided profits
of not less than $100,000,000;
(d) receivables or notes arising from the sale of goods and
services in the ordinary course of business of the Loan Parties;
<PAGE>
(e) investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business;
(f) investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;
(g) investments consisting of (i) compensation of employees,
officers and directors of the Loan Parties so long as the Board of Directors
determines that such compensation is in the best interests of the Loan Parties;
(ii) travel advances, employee relocation loans and other employee loans and
advances in the ordinary course of business; (iii) loans to employees, officers
or directors relating to the purchase of equity securities of the Loan Parties;
and (iv) other loans to officers or employees approved by the Board of
Directors, provided that the aggregate investments under subsections (iii) and
(iv) aforesaid shall not exceed $250,000 at any time; and
(h) other investments aggregating not in excess of $100,000 at
any time.
"Restricted Payment" shall mean (a) except as otherwise provided in
Section 9.3 above, any direct or indirect dividend or other distribution of
assets, properties, cash, rights, obligations, partnership interests, limited
liability company interests or securities paid, made, declared or authorized by
the Loan Parties on or in respect of any class of such Loan Party's capital
stock, (b) any direct or indirect payment by or on behalf of the Loan Parties in
connection with the redemption, purchase, retirement or other acquisition of its
capital stock, and (c) except as provided in the Subordination Agreement, the
payment before maturity of any indebtedness that is subordinate to or pari passu
with the Note.
10.2 Accounting Terms. All accounting terms used herein which are not
expressly defined in this Agreement have the meanings respectively given to them
in accordance with GAAP, all computations made pursuant to this Agreement shall
be made in accordance with GAAP, and all balance sheets and other financial
statements shall be prepared in accordance with GAAP, except in the case of
unaudited financial statements which are subject to year-end audit adjustments
and the absence of footnotes.
11. EVENTS OF DEFAULT; REMEDIES.
11.1 Events of Default Defined; Acceleration of Maturity. If any of the
following events ("Events of Default") shall occur and be continuing for the
applicable periods set forth below (for any reason whatsoever and whether it
shall be voluntary or involuntary or by operation of law or otherwise):
<PAGE>
(a) default shall be made by Antigua in the payment of all or
any portion of the principal of, or premium (if any) on, the Note when and as
the same shall become due and payable, whether at stated maturity, by
acceleration, by notice of prepayment or otherwise; or
(b) default shall be made by Antigua in the payment of any
interest on the Note when and as such interest shall become due and payable, and
such default shall have continued for a period of five (5) business days; or
(c) default shall be made by any of the Loan Parties in the
performance or observance of any covenant contained in Sections 7 and 9 hereof;
(d) default shall be made by any of the Loan Parties in the
performance or observance of any other covenant, agreement or condition
contained in this Agreement or the Securities or the Security Documents or any
indebtedness of the Loan Parties, including, but not limited to, the Other
Securities, the Other Securities Documents or any other debt owed by the Loan
Parties, whether such debt is senior or subordinate to the Note, and except as
set forth in subsections (a), (b) and (c) of this Section 11.1, such default
shall have continued for a period of ten (10) days after such default shall
first have become known to the Loan Parties; provided, however, that if the
nature of the default is such that it cannot reasonably be cured within said
period, then the Loan Parties shall have such additional period of time as may
reasonably be necessary (but in no event to exceed thirty (30) days) to
effectuate such cure; or
(e) any of the Loan Parties shall (1) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(2) be generally unable to pay its debts as such debts become due, (3) make a
general assignment for the benefit of its creditors, (4) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), (5) file
a petition seeking to take advantage of any other law providing for the relief
of debtors, (6) fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary case
under such Bankruptcy Code, (7) take any action under the laws of its
jurisdiction of incorporation analogous to any of the foregoing, or (8) take any
corporate action for the purpose of effecting any of the foregoing; or
(f) a proceeding or case shall be commenced, without the
application or consent of the Loan Parties, in any court of competent
jurisdiction, seeking (1) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of the debts of the Loan Parties
respectively, (2) the appointment of a trustee, receiver, custodian, liquidator
or the like of the Loan Parties respectively or of all or any substantial
<PAGE>
part of their respective assets, or (3) similar relief in respect of the Loan
Parties under any law providing for the relief of debtors, and such proceeding
or case shall continue undismissed, or unstayed and in effect, for a period of
sixty (60) days; or an order for relief shall be entered in an involuntary case
under such Bankruptcy Code, against the Loan Parties, respectively; or action
under the laws of the jurisdiction of incorporation of the Loan Parties
analogous to any of the foregoing shall be taken with respect to the Loan
Parties respectively and shall continue unstayed and in effect for any period of
sixty (60) days; or
(g) a final judgment for the payment of money shall be
rendered by a court of competent jurisdiction against the Loan Parties and the
Loan Parties shall not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereof within thirty
(30) days from the date of entry thereof and within said period of thirty (30)
days, or such longer period during which execution of such judgment shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal, and such judgment together with all other such judgments
shall exceed in the aggregate $50,000; or
(h) any representation or warranty made by the Loan Parties in
this Agreement or any Security Document or in any certificate or other
instrument delivered pursuant hereto or thereto or in connection with any
provision hereof of thereof shall be false or incorrect in any material respect
as of the date made; then, upon the occurrence of any Event of Default, the
unpaid principal amount of the Note, together with the interest accrued thereon
and all other amounts payable by the Issuers hereunder, shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by the
Loan Parties.
The provisions of this Section are subject, however, to the condition
that if, at any time after the Note shall have so become due and payable,
Antigua shall pay all arrears of interest on the Note and all payments on
account of the principal of the Note which shall have become due otherwise than
by acceleration, with interest on such principal and, to the extent permitted by
law, on overdue payments of interest, at the rate specified in the Note and all
Events of Default (other than nonpayment of principal of and accrued interest on
Note, and amounts equal to premium as aforesaid, due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to Section 13,
then, and in every such case, the holder of such Note, by written notice to
Antigua, may rescind and annul any such acceleration and its consequences; but
no such action shall affect any subsequent Default or Event of Default or impair
any right consequent thereon.
11.2 Suits for Enforcement. If any Event of Default described in
Subsection (a) or (b) of Section 11.1 above with respect to the Note, shall have
occurred and be continuing, then the Purchaser may proceed to protect and
enforce its rights, either by suit in equity
<PAGE>
or by action at law, or both, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the exercise of
any power granted in this Agreement, or such holder may proceed to enforce the
payment of all sums due upon the Note or to enforce any other legal or equitable
right of such holder.
Each of the Loan Parties covenants that, if it shall default in the
making of any payment due under the Note or in the performance or observance of
any agreement contained in this Agreement, it will pay to Purchaser such further
amounts, to the extent lawful, as shall be sufficient to pay the costs and
expenses of collection or of otherwise enforcing Purchaser's rights, including
reasonable counsel fees and costs and expenses incurred in connection with any
restructuring, refinancing, workout, bankruptcy or other similar transaction or
proceeding. The obligations set forth in this paragraph shall survive the
payment in full of the Note.
11.3 Remedies Cumulative; Remedies Not Waived. No remedy herein
conferred upon Purchaser is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. No course of dealing between the Issuers and Purchaser
and no delay or failure in exercising any rights hereunder shall operate as a
waiver of any rights of Purchaser.
11.4 Security Documents. Each of the Loan Parties and the Purchaser
hereby agree to the terms of the Security Documents and Purchaser and any
assignee of the Note shall be bound thereby and by any amendments to such
documents approved in accordance with this Agreement.
12. REGISTRATION, TRANSFER AND EXCHANGE OF NOTE; LOST, ETC., NOTES. Antigua
will keep at its principal executive office a register in which, subject to such
reasonable regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), it will provide for the registration and transfer of
the Note.
The Note may not be sold, transferred, pledged or hypothecated unless
the proposed transaction does not require registration or qualification under
federal or state securities laws or unless the proposed transaction is
registered or qualified as required. Any transferee of the Note shall be deemed
to have made the representations set forth in Section 1.3 of this Agreement.
Upon receipt by Antigua of evidence satisfactory to it of the loss,
theft, destruction or mutilation of the Note, and (in case of loss, theft or
destruction) of indemnity reasonably satisfactory to it, upon surrender and
cancellation of such Note or receipt of such indemnity, Antigua will make and
deliver in lieu of such Note a new Note in the same denomination and dated as of
the date to which interest has been paid thereon.
<PAGE>
Notwithstanding the foregoing provisions of this Section, if any
certificate evidencing the Note is lost, stolen or destroyed, then the affidavit
of a holder's Secretary or Assistant Secretary (or other responsible official),
setting forth the circumstances with respect to such loss, theft or destruction,
shall be accepted as satisfactory evidence thereof.
13. AMENDMENT AND WAIVER.
13.1 Amendment and Waiver. Any term, covenant, agreement or condition
of this Agreement, the Note or the Security Documents may, with the written
consent of the Loan Parties as authorized by their respective Board of
Directors, be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument signed by the Purchaser.
13.2 Effect of Amendment or Waiver. Any amendment or waiver pursuant to
Section 13.1 shall be binding upon the holder of the Note, upon each future
holder of the Note and upon the Loan Parties, in each case whether or not a
notation thereof shall have been placed on the Note.
14. TAXES.
The Loan Parties will pay all taxes (including interest and penalties),
other than taxes imposed on the income of the holders of the Securities, which
may be payable in respect of the execution and delivery of this Agreement or of
the execution and delivery of any of the Securities or of any amendment of, or
waiver or consent under or with respect to, this Agreement or any of the
Securities and will save Purchaser and all subsequent holders of the Securities
harmless against any loss or liability resulting from nonpayment or delay in
payment of any such tax. The obligations of the Issuers under this Section shall
survive the payment of the Note and the exercise of the Warrant.
15. MISCELLANEOUS.
15.1 Fees and Expenses. The Loan Parties jointly and severally agree to
pay Cruttenden Roth, Inc. upon the Closing Date a funding fee equal to five
percent (5%) of the amount of the Note issued at the Closing, 3% of which shall
be paid at the Closing and 2% of which shall be added to the principal amount of
the Note. In addition, the Loan Parties agree, whether or not the transactions
contemplated hereby are consummated, to pay all reasonable legal expenses
incident to such transaction, or filing or recording of any financing statement,
mortgage, security agreement, document or other instrument, with respect to this
Agreement or any of the Securities or Security Documents. The obligations of the
Loan Parties under this Section shall inure to the benefit of Cruttenden Roth,
Inc. as a third party beneficiary of this Agreement and shall survive the
payment of the Note and the exercise of the Warrant.
<PAGE>
The Loan Parties agree that Purchaser may withhold from the purchase
price payable in accordance with Section 1.2 the funding fee and all other fees
and expenses otherwise payable by the Loan Parties on the Closing Date in
accordance with this Section 15.1 .
15.2 Reliance on and Survival of Representations. All agreements,
representations and warranties of the Loan Parties herein and in the Security
Documents and in any certificates or other instruments delivered pursuant to
this Agreement or the Security Documents shall (A) be deemed to be material and
to have been relied upon by Purchaser, notwithstanding any investigation
heretofore or hereafter made by Purchaser or on Purchaser's behalf, and (B)
survive the execution and delivery of this Agreement and of the Securities, and
shall continue in effect so long as any Security is outstanding; provided,
however, that all statements as to factual matters contained herein shall be
deemed to be representations and warranties by the Loan Parties hereunder solely
as of the date of such representation or warranty.
15.3 Successors and Assigns. This Agreement shall bind and inure to the
benefit of and be enforceable by the Loan Parties, Purchaser and Purchaser's
respective successors and assigns, and, in addition, shall inure to the benefit
of and be enforceable by each person who shall from time to time be a holder of
any portion of the Note. The Loan Parties may not assign their rights under this
Agreement or Security Documents.
15.4 Indemnification. The Loan Parties agree to defend (with counsel
reasonably satisfactory to Purchaser), protect, indemnify and hold harmless
Purchaser, each affiliate or subsidiary of Purchaser, and each of their
respective officers, directors, employees, attorneys and agents (each an
"Indemnified Party") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on, incurred by, or asserted against, any Indemnified Party
(whether direct, indirect or consequential and whether based on any federal,
state or local laws or regulations including, without limitation, securities,
environmental and commercial laws and regulations, under common law or in
equity, or based on contract or otherwise) in any manner relating to or arising
out of this Agreement, the Securities and the Securities Agreement, the Other
Securities and the Other Securities Agreement, the Stock Purchase Agreement, the
Intercreditor Agreement, the Subordination Agreement or any other agreement,
act, event or transaction related or attendant thereto; provided, however, that
the Loan Parties shall not have any obligation hereunder to any Indemnified
Party with respect to matters caused by or resulting from the willful misconduct
or gross negligence of such Indemnified Party. To the extent that the
undertaking to indemnify set forth in the preceding
<PAGE>
sentence may be unenforceable because it is violative of any law or public
policy, the Loan Parties shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon from the date incurred by each Indemnified Party until paid by Loan
Parties, be added to the Obligations of Issuers and be secured by the
Collateral. The provisions of this Section 15.4 shall survive the satisfaction
and payment of the other obligations herein and the termination of this
Agreement.
15.5 Notices. All notices and other communications provided for in this
Agreement shall be in writing and delivered, telecopied or mailed, first class
postage prepaid, addressed:
(i) if to Antigua:
THE ANTIGUA GROUP, INC.
9319 North 94th Way
Scottsdale, Arizona 85258
Attention: L. Stephen Haynes
Gerald K. Whitley
Telephone: (602) 860-1444
Telecopy: (602) 860-9609
(ii) if to Southhampton:
SOUTHHAMPTON ENTERPRISES, CORP.
9211 Diplomacy Row
Dallas, Texas 75247
Attention: L. Steven Haynes
Telephone: (214) 631-7290
Telecopy: (214) 631-7297
(ii) if to SEI:
SOUTHHAMPTON ENTERPRISES, INC.
9211 Diplomacy Row
Dallas, Texas 75247
Attention: L. Steven Haynes
Telephone: (214) 631-7290
Telecopy: (214) 631-7297
(iv) if to Purchaser, at the address set forth on
Purchaser's signature page and as may be designated by notice to the Issuers;
and
(v) if to any subsequent holder of the Securities, to
the address as may be hereafter specified by notice to the Issuers.
Any such notice or communication shall be deemed to have been duly
given when delivered, telecopied or mailed as aforesaid.
<PAGE>
15.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
15.7 Governing Law. This Agreement and the Note and (unless otherwise
provided) all amendments, supplements, waivers and consents relating hereto or
thereto shall be governed by and construed in accordance with the laws of the
State of California without regard to principles of conflicts of law.
15.8 Arbitration. The parties hereto agree that in the event of any
dispute arising in connection with the construction or enforcement of this
Agreement or in connection with the issuance of the Securities, such dispute
shall be submitted to arbitration, such arbitration proceedings to be held in
Orange County, California, in accordance with the rules then obtaining of the
National Association of Securities Dealers, Inc., and this agreement to
arbitrate shall be specifically enforceable. Any award rendered in any such
arbitration proceeding shall be final and binding on each of the parties, and
judgment may be entered thereon in the Superior Court of the State of California
for the County of Orange or any other court of competent jurisdiction; provided,
however, that the arbitrators shall be required to follow the law and any errors
of law shall be appealable to the Orange County Superior Court or to a reference
proceeding under the rules thereof. The costs and fees of any such arbitration
proceeding shall be borne by the respective parties thereto, but the arbitrators
may in their discretion award costs and reasonable attorneys' fees to the
prevailing party. Notwithstanding any of the foregoing, this Section 15.8 shall
not apply to the enforcement by any holder of any of the Securities of its
rights thereunder at law or in equity in the event of an actual or alleged
default by Company of its obligations under the Note or under the Warrant, as
the case may be.
15.9 Waiver of Jury Trial. PURCHASER, EACH SUBSEQUENT HOLDER OF A
SECURITY, BY ITS ACCEPTANCE THEREOF, AND THE LOAN PARTIES, EACH HEREBY AGREE TO
WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES, OR ANY OTHER
AGREEMENTS RELATING TO THE SECURITIES OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS TRANSACTION. The scope of this waiver is intended to
be all encompassing of any and all disputes that may be filed in any court,
which are not submitted to arbitration pursuant to Section 15.8 hereof, and that
relate to the subject matter of this transaction, including without limitation,
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Purchaser and the Loan Parties each acknowledge that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on the waiver in entering into this Agreement, and that each
will continue to rely on the waiver in their related future dealings. Purchaser
and the Loan Parties further represent and warrant that each has reviewed
<PAGE>
this waiver with its legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, THE SECURITIES, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE SECURITIES. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the Court.
15.10 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys, fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
15.11 No Commissions. Except for the fee payable to Cruttenden Roth,
Inc. and referred to in Section 15.1 above, the Loan Parties hereby represent
and warrant to Purchaser that no Person is entitled to any brokerage commission,
finders' fee or other compensation arising out of or connected with the
transactions contemplated by this Agreement.
15.12 Invalidity. The invalidity of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement or of this Agreement as a whole.
IN WITNESS WHEREOF, this Securities Purchase Agreement is executed as
of the date first above written.
ANTIGUA: THE ANTIGUA GROUP, INC.
a Nevada corporation
By: /s/ Gerald K. Whitley
Its: Vice President - Finance
SOUTHHAMPTON: SOUTHHAMPTON ENTERPRISES CORP.
a British Columbia, Canada corporation
By: /s/ Thomas E. Dooley, Jr.
Its: President
SEI: SOUTHHAMPTON ENTERPRISES, INC.
a Texas corporation
By: /s/ Thomas E. Dooley, Jr.
<PAGE>
Its: Secretary
PURCHASER: THE CRUTTENDEN ROTH BRIDGE FUND, LLC
a California limited liability company
By: /s/ Shelly Singhal
Name: Shelly Singhal
Title: Manager
Address for Notices and Payments:
The Cruttenden Roth Bridge Fund, LLC
c/o Cruttenden Roth Incorporated
18301 Von Karman
Irvine, California 92715-1009
Attention: Mr. Shelly Singhal
Telephone: (714) 757-5700
Telecopy: (714) 852-9603
<PAGE>
With a copy to: Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Nick E. Yocca, Esq.
Telephone: (715) 725-4000
Telecopy: (714) 725-4100
<PAGE>
Exhibits
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Guaranty Agreement
Exhibit D Security Agreement
Exhibit E Security and Pledge Agreement (Southhampton)
Exhibit F Security and Pledge Agreement (SEI)
Exhibit G Financial Statements of Antigua
Exhibit H Financial Statements of Southhampton
Exhibit I Financial Statements of SEI
Exhibit 10.36
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR IS SUCH REGISTRATION
CONTEMPLATED. THIS NOTE MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED AT ANY TIME WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY
TO IT AND TO ITS COUNSEL TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN
VIOLATION OF THE ACT, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.
ANTIGUA GROUP, INC.
SENIOR SUBORDINATED SECURED NOTE
DUE MAY 7, 1998
$1,020,000 Irvine, California
May 7, 1997
FOR VALUE RECEIVED, the undersigned, ANTIGUA GROUP, INC., a Nevada
corporation (the "Company"), hereby promises to pay to THE CRUTTENDEN ROTH
BRIDGE FUND, LLC, a California limited liability company ("Payee") or registered
assigns ("Holder"), the principal sum of ONE MILLION TWENTY THOUSAND DOLLARS
($1,020,000) (or so much thereof as shall not have been prepaid) on earlier of
(i) May 7, 1998, or (ii) the effective date of a public offering of any of the
Company's securities to the general public or other financing the aggregate
proceeds of which (after deduction for underwriter's discounts and expenses
related to the issuance) exceed $3,000,000 (the "Maturity Date"), together with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal balance hereof at the rate of thirteen percent (13%) from
the date hereof, under the terms of the Securities Purchase Agreement dated as
of even date herewith (the "Agreement") between the Company and Payee, payable
monthly in advance, commencing June 1, 1997 (which first payment shall
additionally include accrued interest from the date hereof to and including such
date), until said principal shall have become due and payable in accordance with
the Agreement, and to pay interest at the foregoing rate per annum on any
overdue principal and, to the extent permitted by applicable law, on any
interest overdue (without regard to any applicable grace period), until the same
shall be paid.
Payments of principal, prepayment charges (if any) and interest are to
be made at the office of Holder at the address for notice set forth in the
Agreement or such other address of which Holder informs Company in writing, in
lawful money of the United States of America.
<PAGE>
The indebtedness evidenced by this Note is secured by, and this Note is
the "Note" referred to in, that certain Security Agreement dated as of the date
hereof between the Company and Payee.
This Note is issued pursuant to the Agreement and is also entitled to
the benefits thereof. As provided in the Agreement, this Note is subject to
mandatory prepayment requirements, and is further subject to optional
prepayments in whole or in part, without any prepayment charge, all as specified
in the Agreement.
Upon surrender of this Note for registration of transfer or assignment,
duly endorsed, or accompanied by a written instrument of transfer or assignment
duly executed, by the registered Holder hereof or such Holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued to,
and, at the option of the Holder, registered in the name of, the transferee or
assignee. The Company may deem and treat the person in whose name this Note is
registered as the Holder and owner hereof for the purpose of receiving payments
and for all other purposes whatsoever, and the Company shall not be affected by
any notice to the contrary.
If an Event of Default (as defined in the Agreement) shall occur and be
continuing, the principal of this Note may, under certain circumstances, become
or be declared due and payable in the manner and with the effect provided in
said Agreement.
All agreements between the Company and the Payee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Payee for the use, forbearance
or detention of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof, provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest
than the highest permissible rate under applicable law in effect as of the date
hereof, then this Note shall be governed by such new law as of its effective
date. If, from any circumstance whatsoever, fulfillment of any provision hereof
or the Agreement at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstances the Payee should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest, and if the
principal amount of this Note has been paid in full, shall be refunded to the
Company. This provision shall
2
<PAGE>
control every other provision of all agreements between the Company and the
Payee.
ANTIGUA GROUP, INC., a Nevada
corporation
By: /s/ Gerald K. Whitley
Name:
Title:
3
Exhibit 10.37
GUARANTY
This Guaranty, dated as of May 7, 1997, is made by SOUTHHAMPTON ENTERPRISES
CORP., a British Columbia, Canada corporation (the "Guarantor"), in favor of the
Cruttenden Roth Bridge Fund, LLC, a California limited liability company (the
"Purchaser").
R E C I T A L S :
A. The Guarantor, Southhampton Enterprises, Inc., a Texas Corporation
("SEI"), The Antigua Group, Inc., a Nevada corporation (the "Borrower"), and the
Purchaser are parties to a Securities Purchase Agreement, dated as of the date
hereof (the "Purchase Agreement"), pursuant to which the Purchaser has agreed,
among other things, to purchase from the Borrower a 13.00% Senior Secured Note
due May 7, 1998 in the principal amount of $1,020,000 (the "Note"), upon the
terms and conditions set forth therein.
B. Guarantor will derive substantial direct and indirect economic benefit
from the Purchaser's making the loan and accepting the Note, and Purchaser is
willing to make such investment, but only upon the condition, among others, that
Guarantor shall have executed and delivered this Guaranty in favor of the
Purchaser.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and to induce the Purchaser to
enter into the Purchase Agreement, it is agreed as follows:
1. Grant of Guaranty.
1.1 Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees to the Purchaser and to its successors, endorsees and/or assigns, the
full and prompt payment by the Borrower, as and when due and payable, whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise, of
all (i) obligations set forth in the Note, the Purchase Agreement or any other
agreement or document now or hereafter securing the Note (collectively referred
to herein as the "Loan Documents"), and (ii) indebtedness, obligations and other
liabilities, direct or indirect, absolute or contingent, now existing or
hereafter arising of the Borrower to the Purchaser. Guarantor further agrees to
pay all costs and expenses, including without limitation, all court costs and
reasonable attorneys' fees paid or incurred by the Purchaser in endeavoring to
collect all or any part of the Borrower's obligations hereunder.
<PAGE>
Guarantor accepts full responsibility or any obligation on the
part of Lenders to investigate and ascertain, and for keeping itself informed
of, the financial condition of Company.
1.2 No Release. Guarantor shall continue to be liable under this
Guaranty and the provisions hereof shall remain in full force and effect
notwithstanding (i) any modification, agreement or stipulation between the
Borrower and the Purchaser, or their respective successors and assigns, with
respect to the Loan Documents; (ii) Purchaser's waiver of or failure to enforce
any of the terms, covenants or conditions contained in the Loan Documents or any
modification thereof; or (iii) any release of any real or personal property or
other security then held by the Purchaser for the performance of the obligations
hereby guaranteed.
1.3 Guaranty of Payment. The liability of Guarantor upon this Guaranty
is a guaranty of payment and not of collectability, and is not conditional or
contingent upon the genuineness, validity, regularity or enforceability of the
Agreement or other instruments relating to the obligations hereby guaranteed or
the pursuit by the Purchaser of any remedies which it now has or may hereafter
have with respect thereto.
1.4 Waiver of Demand. Guarantor hereby waives: (i) diligence and
demand of payment; (ii) all notices to Guarantor, to Borrower or to any other
person, including, but not limited to, notices of the acceptance of this
Guaranty or the creation, renewal, extension, modification, or accrual of any
obligations contained in the Loan Documents, notice of nonpayment or default
under the Loan Documents or notice of any other matters relating thereto; (iii)
all demands whatsoever; (iv) any statute of limitations affecting its liability
hereunder or the enforcement thereof; and (v) all principles or provisions of
law, which conflict with the terms of this Guaranty. Moreover, Guarantor agrees
that its obligations shall not be affected by any circumstances which constitute
a legal or equitable discharge of a guarantor or surety.
1.5 No Prior Remedy Received. Guarantor agrees that the Purchaser or
its assigns or endorsees may enforce this Guaranty without the necessity of
resorting to or exhausting any security or collateral; and Guarantor hereby
waives the right to require the Purchaser or their assigns or endorsees to
proceed against Borrower, to foreclose any lien on any real or personal
property, to exercise any right or remedy under the Loan Documents, to pursue
any other remedy or to enforce any other right.
1.6 No Limitation of Rights. Guarantor further agrees that nothing
contained herein shall prevent the Purchaser from suing on the Note or from
exercising any rights available to it thereunder or under any of the Loan
Documents and that the exercise of any of the aforesaid rights shall not
constitute a legal or
2
<PAGE>
equitable discharge of Guarantor. Guarantor understands that the exercise by the
Purchaser of certain rights and remedies contained in the Loan Documents may
affect or eliminate Guarantor's right of subrogation against Borrower and that
Guarantor may therefore incur a partially or totally nonreimbursable liability
hereunder; nevertheless, Guarantor hereby authorizes and empowers the Purchaser
to exercise, in its sole discretion, any rights and remedies, or any combination
thereof, which may then be available, since it is the intent and purpose of
Guarantor that the obligations hereunder shall be absolute, independent and
unconditional under any and all circumstances as if the same were direct
obligations of the Guarantor. Without limiting the generality of the foregoing,
Guarantor hereby expressly waives any and all benefits under California Civil
Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849 and 2850 and California
Code of Civil Procedure Sections 580a and 580d. Notwithstanding any foreclosure
of the lien of any deed of trust or security agreement with respect to any or
all of any real or personal property secured thereby, whether by the exercise of
the power of sale contained therein, by an action for judicial foreclosure or by
an acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound
under this Guaranty.
2. Cumulation of Remedies. The remedies provided in this Guaranty in favor
of the Purchaser shall not be deemed exclusive but shall be cumulative and shall
be in addition to all of the remedies in favor of the Purchaser existing at law
or in equity. Nothing in this Guaranty shall require the Purchaser to pursue
their rights under Section 1 hereof before proceeding against Borrower or
executing against any other security or collateral securing performance of
Borrower's obligations to the Purchaser under the Loan Documents or Guarantor's
obligations to the Purchaser under this Guaranty.
3. Miscellaneous.
3.1 No Waiver. No delay on the part of the Purchaser in exercising any
of its powers or rights, or the partial or single exercise thereof, shall
constitute a waiver thereof.
3.2 Modifications. No provision of this Guaranty may be changed,
waived, modified or varied except by an instrument in writing signed by the
parties hereto.
3.3 Section Heading. The Section headings in this Guaranty are for
ease of reference only and shall not affect the meanings or construction of the
terms and provisions of this Guaranty.
3.4 Further Documents. Guarantor agrees to execute, acknowledge, and
deliver any documents or instruments which the
3
<PAGE>
Purchaser may request in order to better evidence or effectuate this Guaranty
and the transactions contemplated hereby.
3.5 Notices. Any and all notices or other communications required or
permitted by this Guaranty or by law to be given or delivered to any party
hereto by any other party to this Guaranty shall be in writing and may be
personally served or sent by United States registered or certified mail with
first-class postage prepaid, and properly addressed. Notice shall be deemed
given when delivered, if personally delivered, or if sent by mail, upon the
earlier of actual receipt or the third day after the date of mailing thereof.
For purposes hereof, mail will be deemed properly addressed if sent to the
addresses for the parties set forth in the Loan Documents. Any party may change
its address for this purpose by giving a written notice thereof as herein
provided.
3.6 Guaranty Agreement Binding Upon Successors, Etc. This Guaranty is
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors or assigns.
Notwithstanding the foregoing, Guarantor may not assign any of its rights or
delegate any of its duties hereunder without the prior written consent of the
Purchaser.
3.7 Costs of Enforcement. In the event a dispute or controversy arises
hereunder between the parties, or any action is brought by any party to enforce
its rights hereunder, the prevailing party in any such dispute, controversy or
action shall be entitled to recover its reasonable attorneys' fees, court costs
and other related expenses from the other party.
3.8 Gender and Number. As used in this Guaranty, the masculine,
feminine or neuter gender, and the singular or plural number, shall each be
deemed to include the others whenever the context so indicates.
3.9 Severability of Provisions. It is intended that each Section of
this Guaranty shall be viewed as separate and divisible, and in the event that
any Section, or any portion thereof, shall be held to be invalid, the remaining
Sections shall continue to be in full force and effect.
3.10 Applicable Law. This Guaranty has been executed in and shall be
construed and governed by the laws of the State of California. As part of the
consideration for the Purchaser's investment in the Note, Guarantor and the
Purchaser hereby agree that all actions or proceedings arising directly or
indirectly hereunder, whether instituted by the Purchaser or Guarantor, may, at
the option of the Purchaser, be litigated in courts having situs within the
State of California, County of Orange and Guarantor hereby expressly consents to
the jurisdiction of any local, state or federal court located within said state
and county, and consents
4
<PAGE>
that any service of process in such action or proceeding may be made by personal
service upon Guarantor wherever Guarantor may be located, or by certified or
registered mail directed to Guarantor at its last known address. Guarantor and
the Purchaser waive trial by jury, any objection based on forum non conveniens,
and any objection to venue of any action instituted hereunder.
IN WITNESS WHEREOF, the parties have executed and delivered this Guaranty
in ____________________, as of May 7, 1997.
GUARANTOR:
SOUTHHAMPTON ENTERPRISES, CORP.
By: /s/ Thomas E. Dooley, Jr.
Its: President
5
Exhibit 10.38
GUARANTY
This Guaranty, dated as of May 7, 1997, is made by SOUTHHAMPTON ENTERPRISES
INC., a Texas corporation (the "Guarantor"), in favor of the Cruttenden Roth
Bridge Fund, LLC, a California limited liability company (the "Purchaser").
R E C I T A L S :
A. Southhampton Enterprises Corp., a British Columbia, Canada corporation
("Southhampton"), the Guarantor and The Antigua Group, Inc., a Nevada
corporation (the "Borrower") and the Purchaser are parties to a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
pursuant to which the Purchaser has agreed, among other things, to purchase from
the Borrower a 13.00% Senior Secured Note due May 7, 1998 in the principal
amount of $1,020,000 (the "Note"), upon the terms and conditions set forth
therein.
B. Guarantor will derive substantial direct and indirect economic benefit
from the Purchaser's making the loan and accepting the Note, and Purchaser is
willing to make such investment, but only upon the condition, among others, that
Guarantor shall have executed and delivered this Guaranty in favor of the
Purchaser.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and to induce the Purchaser to
enter into the Purchase Agreement, it is agreed as follows:
1. Grant of Guaranty.
1.1 Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees to the Purchaser and to its successors, endorsees and/or assigns, the
full and prompt payment by the Borrower, as and when due and payable, whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise, of
all (i) obligations set forth in the Note, the Purchase Agreement or any other
agreement or document now or hereafter securing the Note (collectively referred
to herein as the "Loan Documents"), and (ii) indebtedness, obligations and other
liabilities, direct or indirect, absolute or contingent, now existing or
hereafter arising of the Borrower to the Purchaser. Guarantor further agrees to
pay all costs and expenses, including without limitation, all court costs and
reasonable attorneys' fees paid or incurred by the Purchaser in endeavoring to
collect all or any part of the Borrower's obligations hereunder.
<PAGE>
Guarantor accepts full responsibility or any obligation on the
part of Lenders to investigate and ascertain, and for keeping itself informed
of, the financial condition of Company.
1.2 No Release. Guarantor shall continue to be liable under this
Guaranty and the provisions hereof shall remain in full force and effect
notwithstanding (i) any modification, agreement or stipulation between the
Borrower and the Purchaser, or their respective successors and assigns, with
respect to the Loan Documents; (ii) Purchaser's waiver of or failure to enforce
any of the terms, covenants or conditions contained in the Loan Documents or any
modification thereof; or (iii) any release of any real or personal property or
other security then held by the Purchaser for the performance of the obligations
hereby guaranteed.
1.3 Guaranty of Payment. The liability of Guarantor upon this Guaranty
is a guaranty of payment and not of collectability, and is not conditional or
contingent upon the genuineness, validity, regularity or enforceability of the
Agreement or other instruments relating to the obligations hereby guaranteed or
the pursuit by the Purchaser of any remedies which it now has or may hereafter
have with respect thereto.
1.4 Waiver of Demand. Guarantor hereby waives: (i) diligence and
demand of payment; (ii) all notices to Guarantor, to Borrower or to any other
person, including, but not limited to, notices of the acceptance of this
Guaranty or the creation, renewal, extension, modification, or accrual of any
obligations contained in the Loan Documents, notice of nonpayment or default
under the Loan Documents or notice of any other matters relating thereto; (iii)
all demands whatsoever; (iv) any statute of limitations affecting its liability
hereunder or the enforcement thereof; and (v) all principles or provisions of
law, which conflict with the terms of this Guaranty. Moreover, Guarantor agrees
that its obligations shall not be affected by any circumstances which constitute
a legal or equitable discharge of a guarantor or surety.
1.5 No Prior Remedy Received. Guarantor agrees that the Purchaser or
its assigns or endorsees may enforce this Guaranty without the necessity of
resorting to or exhausting any security or collateral; and Guarantor hereby
waives the right to require the Purchaser or their assigns or endorsees to
proceed against Borrower, to foreclose any lien on any real or personal
property, to exercise any right or remedy under the Loan Documents, to pursue
any other remedy or to enforce any other right.
1.6 No Limitation of Rights. Guarantor further agrees that nothing
contained herein shall prevent the Purchaser from
2
<PAGE>
suing on the Note or from exercising any rights available to it thereunder or
under any of the Loan Documents and that the exercise of any of the aforesaid
rights shall not constitute a legal or equitable discharge of Guarantor.
Guarantor understands that the exercise by the Purchaser of certain rights and
remedies contained in the Loan Documents may affect or eliminate Guarantor's
right of subrogation against Borrower and that Guarantor may therefore incur a
partially or totally nonreimbursable liability hereunder; nevertheless,
Guarantor hereby authorizes and empowers the Purchaser to exercise, in its sole
discretion, any rights and remedies, or any combination thereof, which may then
be available, since it is the intent and purpose of Guarantor that the
obligations hereunder shall be absolute, independent and unconditional under any
and all circumstances as if the same were direct obligations of the Guarantor.
Without limiting the generality of the foregoing, Guarantor hereby expressly
waives any and all benefits under California Civil Code Sections 2809, 2810,
2819, 2845, 2847, 2848, 2849 and 2850 and California Code of Civil Procedure
Sections 580a and 580d. Notwithstanding any foreclosure of the lien of any deed
of trust or security agreement with respect to any or all of any real or
personal property secured thereby, whether by the exercise of the power of sale
contained therein, by an action for judicial foreclosure or by an acceptance of
a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty.
2. Cumulation of Remedies. The remedies provided in this Guaranty in favor
of the Purchaser shall not be deemed exclusive but shall be cumulative and shall
be in addition to all of the remedies in favor of the Purchaser existing at law
or in equity. Nothing in this Guaranty shall require the Purchaser to pursue
their rights under Section 1 hereof before proceeding against Borrower or
executing against any other security or collateral securing performance of
Borrower's obligations to the Purchaser under the Loan Documents or Guarantor's
obligations to the Purchaser under this Guaranty.
3. Miscellaneous.
3.1 No Waiver. No delay on the part of the Purchaser in exercising any
of its powers or rights, or the partial or single exercise thereof, shall
constitute a waiver thereof.
3.2 Modifications. No provision of this Guaranty may be changed,
waived, modified or varied except by an instrument in writing signed by the
parties hereto.
3.3 Section Heading. The Section headings in this Guaranty are for
ease of reference only and shall not affect the meanings or construction of the
terms and provisions of this Guaranty.
3
<PAGE>
3.4 Further Documents. Guarantor agrees to execute, acknowledge, and
deliver any documents or instruments which the Purchaser may request in order to
better evidence or effectuate this Guaranty and the transactions contemplated
hereby.
3.5 Notices. Any and all notices or other communications required or
permitted by this Guaranty or by law to be given or delivered to any party
hereto by any other party to this Guaranty shall be in writing and may be
personally served or sent by United States registered or certified mail with
first-class postage prepaid, and properly addressed. Notice shall be deemed
given when delivered, if personally delivered, or if sent by mail, upon the
earlier of actual receipt or the third day after the date of mailing thereof.
For purposes hereof, mail will be deemed properly addressed if sent to the
addresses for the parties set forth in the Loan Documents. Any party may change
its address for this purpose by giving a written notice thereof as herein
provided.
3.6 Guaranty Agreement Binding Upon Successors, Etc. This Guaranty is
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors or assigns.
Notwithstanding the foregoing, Guarantor may not assign any of its rights or
delegate any of its duties hereunder without the prior written consent of the
Purchaser.
3.7 Costs of Enforcement. In the event a dispute or controversy arises
hereunder between the parties, or any action is brought by any party to enforce
its rights hereunder, the prevailing party in any such dispute, controversy or
action shall be entitled to recover its reasonable attorneys' fees, court costs
and other related expenses from the other party.
3.8 Gender and Number. As used in this Guaranty, the masculine,
feminine or neuter gender, and the singular or plural number, shall each be
deemed to include the others whenever the context so indicates.
3.9 Severability of Provisions. It is intended that each Section of
this Guaranty shall be viewed as separate and divisible, and in the event that
any Section, or any portion thereof, shall be held to be invalid, the remaining
Sections shall continue to be in full force and effect.
3.10 Applicable Law. This Guaranty has been executed in and shall be
construed and governed by the laws of the State of California. As part of the
consideration for the Purchaser's investment in the Note, Guarantor and the
Purchaser hereby agree that all actions or proceedings arising directly or
indirectly hereunder, whether instituted by the Purchaser or Guarantor, may, at
the option of the Purchaser, be litigated in courts having
4
<PAGE>
situs within the State of California, County of Orange and Guarantor hereby
expressly consents to the jurisdiction of any local, state or federal court
located within said state and county, and consents that any service of process
in such action or proceeding may be made by personal service upon Guarantor
wherever Guarantor may be located, or by certified or registered mail directed
to Guarantor at its last known address. Guarantor and the Purchaser waive trial
by jury, any objection based on forum non conveniens, and any objection to venue
of any action instituted hereunder.
IN WITNESS WHEREOF, the parties have executed and delivered this Guaranty
in ____________________, as of May 7, 1997.
GUARANTOR:
SOUTHHAMPTON ENTERPRISES, INC.
By: /s/ Thomas E. Dooley, Jr.
Its: Secretary
5
Exhibit 10.39
SECURITY AND PLEDGE AGREEMENT
THIS AGREEMENT is made as of May 7, 1997, by SOUTHHAMPTON ENTERPRISES
CORP., a corporation organized under the laws of British Columbia, Canada
("Parent"), to THE CRUTTENDEN ROTH BRIDGE FUND, LLC, a California limited
liability company ("Secured Party").
RECITALS
A. THE ANTIGUA GROUP, INC., a Nevada corporation and Parent's indirect
wholly-owned subsidiary ("Debtor") has executed and delivered to Secured Party
that certain note (the "Note") captioned "Senior Subordinated Secured Note"
dated as of the date hereof, in the original principal amount of $1,020,000.
B. As part of the consideration for the granting of the loan evidenced by the
Note to Debtor and as additional security therefor, Secured Party has required
that Parent grant a security interest in the "Collateral" (as defined below) and
Parent desires to grant such security interest.
NOW, THEREFORE, in consideration of the covenants and promises
hereinafter set forth and other valuable consideration, the parties agree as
follows:
1. Definitions. Certain terms used in this Agreement shall have the
meaning set forth below.
"Collateral" means all of Parent's right, title and interest (whether
now held or hereafter acquired) in and to all personal property (whether
tangible or intangible) described in Exhibit "A" hereto, incorporated herein by
reference.
"Event of Default" means (i) an Event of Default as defined in, and
occurring under, that certain Securities Purchase Agreement (the "Securities
Purchase Agreement") of even date herewith by and between Debtor and Secured
Party, inter alia, (ii) any default by Debtor in the performance of any
obligation, covenant or agreement contained in the Security Agreement of even
date herewith to which it is a party, or (iii) any default by Parent in the
performance of any obligation, covenant or agreement contained herein.
"Indebtedness" means the indebtedness evidenced by the Note and any
other indebtedness or liability of Debtor to Secured Party now existing or
hereafter arising under the Note.
"Intercreditor Agreement" means the Intercreditor Agreement entered
into concurrently herewith by and among LaSalle Business Credit, Inc.
("LaSalle"), Thomas E. Dooley, as agent for the shareholders of the Debtor
("Dooley"), the Secured Party, Imperial Bank ("Imperial"), and the Debtor, which
provides for the relative rights and priorities of the various security
interests in the
<PAGE>
Collateral.
"Permitted Liens" shall bear the same meaning as in the Securities
Purchase Agreement.
"Senior Debt" shall bear the same meaning as in the Securities Purchase
Agreement.
"Subordination Agreement" means the Subordination Agreement entered
into concurrently herewith by and among LaSalle, Dooley, the Secured Party and
Imperial which provides for the relative rights of payment of the indebtedness
of Debtor.
2. Grant of Security Interest. As additional security for the
Indebtedness, Parent hereby grants a security interest in the Collateral to
Secured Party.
3. Parent's Representations and Warranties. Parent represents and
warrants as follows:
(a) Title to Collateral. Except for the security interests
granted to Secured Party under this Security Agreement, and except for Permitted
Liens, Parent is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good, marketable and insurable title thereto free and clear of any and all liens
other than Permitted Liens.
(b) Location of Collateral. Parent hereby represents and
warrants that Parent's chief executive office is located at the address
specified in item 1 of Exhibit "B". Parent shall not, without at least thirty
(30) days' prior written notice to Secured Party, (i) change Parent's name or
place of business (or, if Parent has more than one place of business, its chief
executive office), or the office in which Parent's records relative to
receivables are kept, (ii) keep Collateral consisting of certificated
securities, as defined in Section 3(j) below, or chattel paper, at any location
other than its chief executive office set forth in item 1 of Exhibit "B" hereto,
and (iii) keep Collateral consisting of equipment or inventory at any location
other than the locations set forth in item 2 of Exhibit "B" hereto.
(c) Repair and Inspection of Collateral. Parent shall maintain
and protect its properties, assets and facilities, including without limitation
its equipment and fixtures, in good order and working repair and condition
(taking into consideration ordinary wear and tear) and from time to time make or
cause to be made all needful and proper repairs, renewals and replacements
thereto and shall competently manage and care for its property in accordance
with prudent industry practices. Upon reasonable notice, Parent shall permit
Secured Party or its agents to inspect all of such property from time to time.
(d) Insurance of Collateral. Parent shall maintain,
<PAGE>
with financially sound and reputable companies, insurance policies insuring (i)
its equipment, fixtures and inventory against loss by fire, explosion, theft and
such other casualties as are usually insured against by companies engaged in the
same or similar businesses and (ii) Parent and Secured Party against liability
for personal injury and property damage relating to such equipment, fixtures and
inventory. Such policies are to be in such amounts and against at least such
risk as are usually insured against in the same general area by companies of the
same or a similar size engaged in the same or a similar business as Parent.
Parent shall give to Secured Party written notice of loss or damage to the
Collateral, and file proofs of loss. Parent shall not settle or adjust any claim
in excess of $50,000 without the prior written consent of Secured Party.
(e) Payment of Taxes and Fees Assessed Upon Collateral. Parent
shall pay, when due, all taxes and assessments now or hereafter relating to, or
imposed or assessed upon the Collateral.
(f) No Transfer of Collateral. Parent shall not voluntarily,
involuntarily, or by operation of law, sell, assign, transfer or otherwise
dispose of the Collateral, or any interest therein, or permit any of the
foregoing to occur, and shall not otherwise do or permit anything to be done or
occur that may impair the Collateral as security hereunder, except that Parent
may sell its inventory in the ordinary course of business, and, so long as
Parent has not committed an Event of Default, (i) Parent may sell or otherwise
dispose of the Collateral when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the conduct of the business of Parent and (ii) Parent may
grant non-exclusive licenses (and exclusive licenses within specified geographic
regions) and other similar arrangements for the use of Parent's property for
good faith business purposes.
(g) Defense of Title to Collateral. Parent shall defend any
proceeding which may affect title to, or Secured Party's security interest in,
the Collateral, or the first priority of such security interest after that
created with respect to Permitted Liens, and shall indemnify, defend, protect
and hold Secured Party harmless against any and all liability, damages, causes
of action or other costs or expenses, including reasonable attorneys' fees,
arising out of or incurred in connection with or on account of any such
proceeding, unless such proceeding is caused by Secured Party's gross negligence
or willful misconduct.
(h) Maintenance of Secured Party's Security Interest. Parent
shall do all such acts and things as may be necessary or appropriate, or which
Secured Party from time to time or at any time reasonably requests as necessary
in its opinion, to establish and maintain a perfected security interest in the
Collateral, subject to no other liens or encumbrances other than Permitted
Liens; and Parent shall pay the cost of all filings or recordings of this
Agreement or any other document or instrument in all public offices whenever it
is deemed by Secured Party to be necessary or
<PAGE>
desirable. Parent irrevocably constitutes and appoints Secured Party the
attorney-in-fact of Parent to execute, deliver and, if appropriate, to file or
record with the appropriate filing officer or office such security agreements,
financing statements, continuation statements or other instruments as Secured
Party may request or require in order to impose, perfect or continue the
perfection of, the lien or security interest created hereby. The foregoing power
of attorney is coupled with an interest and shall survive a Transfer or the
dissolution, bankruptcy, insolvency or termination of Parent as an entity.
Parent shall not execute or authorize the filing of any financing statement in
favor of any person or entity other than Secured Party or other than related to
the Permitted Liens.
(i) Provision of Accurate Information. Parent shall provide to
Secured Party any information it reasonably requires pertaining to the
Collateral, the Indebtedness or the provisions hereof. All information supplied
to Secured Party by or on behalf of Parent is and shall be true, correct and
complete, and Parent shall promptly notify Secured Party of any material change
in such information not later than five (5) days after any such change. Parent
shall promptly notify Secured Party of any event causing loss or depreciation in
the value of any Collateral.
(j) Certificated Securities. On or prior to the date hereof,
Parent shall deliver to Secured Party any note, certificated security or
instrument (a "certificate security") not otherwise pledged or hypothecated to
an unaffiliated creditor or otherwise owned by and in control of Parent,
including, without limitation, those certificated securities listed on Exhibit
"C" hereto. In the event a certificated security is returned to Parent's control
while Debtor continues to have unsatisfied obligations under the Note, such
certificated security shall be immediately delivered to Secured Party who shall
hold same until Debtor's obligations under the Note are satisfied in full. In
the event that Parent purchases, acquires or is otherwise transferred
certificated securities while Debtor continues to have unsatisfied obligations
under the Note, Parent shall immediately deposit such security with Secured
Party and Secured Party shall continue to hold same as if such security were
listed on Exhibit "C" hereto until Debtor's obligations under the Note are
satisfied in full. All certificated securities delivered to Secured Party
pursuant hereto shall be delivered in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment or stock
powers, executed in blank, in form and substance reasonably acceptable to
Secured Party.
(k) Prompt Payment of Expenses. Parent shall pay to Secured
Party immediately on demand all expenses (including reasonable attorneys' fees,
other legal expenses and costs and the cost of filing financing statements and
any renewals or extensions thereof) incurred by Secured Party under this
Agreement, with interest at the greater of the interest rate charged on the Note
or any default rate thereunder but not more than the maximum rate
<PAGE>
allowed by applicable usury law, from the date of such expenditure.
4. Default: Remedies.
(a) Remedies. Subject to the provisions of the Intercreditor
Agreement and the Subordination Agreement, upon an Event of Default, Secured
Party may, at its option and without notice to Parent or Debtor, declare the
Indebtedness secured hereby due and payable pursuant to the terms of the
Securities Purchase Agreement and shall have all of the remedies of a secured
party under the Uniform Commercial Code, including the right and power to sell,
or otherwise dispose of, the Collateral, or any part thereof, at any one or more
public or private sales as permitted by applicable law, at such location as
Secured Party may choose, and for that purpose may take immediate and exclusive
possession of the Collateral, or any part thereof, and with or without judicial
process enter upon any premises on which the Collateral, or any part thereof,
may be situated and remove the same therefrom without being deemed guilty of
trespass and without liability for damages thereby occasioned. At Secured
Party's option and demand, Parent shall assemble the Collateral and make it
available to Secured Party at the premises of Parent, or at such other place and
at the time designated in the demand.
(b) Secured Party's Rights to Collateral. Subject to the
provisions of the Intercreditor Agreement and the Subordination Agreement,
Secured Party may hold, maintain, preserve and prepare the Collateral for sale;
control, manage, rent and lease the Collateral; collect all rents and income
from the Collateral and apply the same in any order of priority to reimburse
Secured Party for any costs and expenses incurred hereunder and to the payment
or performance of Parent's obligations hereunder, and apply the balance to
interest and then to principal of the Indebtedness secured hereby; or secure the
appointment of a receiver of the Collateral. Secured Party may also render the
Collateral unusable, or repair and renovate the same, and dispose of the
Collateral on Parent's premises. Parent expressly waives any right to require an
election of remedies by Secured Party existing after an Event of Default
hereunder, except that Parent shall be entitled to notice of sale or other
disposition of the Collateral, and Parent agrees that if such notice is served
on Parent as hereinafter specified a minimum of five (5) days before the time of
sale or disposition, such notice shall be deemed commercially reasonable and
shall fully satisfy any requirement for giving of such notice. Any person,
including Parent and Secured Party, shall be eligible to purchase any part or
all of such Collateral at any such sale or disposition. Parent acknowledges that
sales of the Collateral for cash or on credit to a wholesaler, retailer or user
of the Collateral, or at public or private auction, within the discretion of
Secured Party, are all commercially reasonable. Any disposition made hereunder
may be conducted by an employee or agent of Secured Party.
(c) Stay; Extension. The Parent agrees (to the extent it may
lawfully do so) that it will not at any time insist upon,
<PAGE>
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or other law that would prohibit or forgive the Debtor
from paying all or a portion of the principal of or interest on the Note as
contemplated herein, wherever enacted, now or at any time hereinafter in force,
or that may materially affect the covenants or the performance of this Agreement
in a manner inconsistent with the provisions of this Agreement. The Parent
expressly waives all benefit or advantage of any such law and agrees not to
hinder, delay or impede the execution of any power granted to Secured Party
hereunder, but will suffer and permit the execution of such power as though no
such law has been enacted. If a court of competent jurisdiction prescribes that
the Parent may not waive its rights to take the benefit or advantage of any stay
or extension law or any other law in accordance with the prior sentence, then
the obligation to pay interest on the Note shall be reduced to the maximum legal
limit under applicable law governing the interest payable in connection with the
Note.
(d) Application of Proceeds. Subject to any applicable
provisions of the Intercreditor Agreement, the Proceeds of any sale, disposition
or other realization upon all or any part of the Collateral shall be distributed
by Secured Party in the following order of priorities:
First, to Secured Party in an amount sufficient to pay in full the reasonable
costs of Secured Party in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by Secured Party in connection therewith, including, without
limitation, reasonable attorneys' fees;
Second, to Secured Party in an amount equal to the then unpaid principal amount
of and accrued interest and prepayment premiums, if any, on the Note;
Third, to Secured Party in an amount equal to any other Indebtedness which is
then unpaid; and
Finally, upon payment in full of all Indebtedness and upon satisfaction of all
other provisions of the Intercreditor Agreement, to Parent or its
representatives or as a court of competent jurisdiction may direct.
(e) Assumption of Expenses and Payments. In connection with
any Event of Default, Secured Party may incur expenses, including reasonable
attorneys' fees, expenses and costs, appropriate to the exercise of any right or
power under this Agreement, make any payment agreed to be made by Parent
hereunder, and perform any obligation of Parent hereunder, without, however, any
obligation so to do. Any monies expended hereunder by Secured Party, including
attorneys' fees, shall be chargeable, with interest at the greater of the
interest rate then charged on the Note or any default rate thereunder, but not
more than the maximum
<PAGE>
rate allowed by applicable usury law, to Debtor and become part of the
Indebtedness secured hereby.
(f) Remedies Cumulative. The remedies of Secured Party
hereunder are cumulative and the exercise of any one or more of the remedies
provided for herein, or under the Uniform Commercial Code, shall not be
construed as a waiver of any of the other remedies of the Secured Party, so long
as any part of the Indebtedness remains unsatisfied. The acceptance by Secured
Party of this Security Agreement shall not waive or impair any other security
Secured Party may have or hereafter acquire for the payment of the Indebtedness,
nor shall the taking of any such additional security waive or impair this
Agreement, or any term, covenant or condition herein contained, but Secured
Party may resort to any security it may have in such order it may deem proper.
Release of the security interest hereunder in any or all of the Collateral shall
not affect the liability of any person on the Indebtedness secured hereby.
5. Miscellaneous.
(a) Secured Party's Rights Not Barred. Until the Indebtedness
is paid and performed in full, Secured Party's rights shall continue even if the
Indebtedness, or any portion thereof, is barred by any statute of limitations.
The right of Parent, if any, to plead any and all statutes of limitation as a
defense to any demand with respect to the Indebtedness is expressly waived by
Parent, to the full extent permissible by law.
(b) Form and Effect of Waivers. No delay or failure on the
part of Secured Party in exercising any right, privilege or remedy hereunder
shall operate as a waiver of such or any other right, privilege or remedy, and
no waiver whatsoever shall be valid unless in writing, signed by Secured Party
and then only to the extent set forth therein.
(c) Notices. Except when otherwise required by law, all
notices required to be given hereunder shall be served (i) to Parent at the
addresses specified item 1 on Exhibit "B" hereto and (ii) to Secured Party at
the address specified with respect thereto in the Securities Purchase Agreement,
and shall in each instance, unless otherwise provided by law, be deemed given,
received, made or communicated on the date personal delivery is effected or, if
mailed, on the delivery date or attempted delivery date if refused.
(d) Severability of Terms. If any term of this Agreement, or
the application thereof to any person or circumstance, shall, to any extent, be
declared invalid or unenforceable, the remainder of this Agreement, or the
application of such term to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
such term shall be valid and enforceable to the fullest extent permitted by law.
(e) Financing Statement. A financing statement (and
<PAGE>
when requested by Secured Party, a fixture filing) placing of record the
security interest hereunder shall be executed and delivered by Parent to Secured
Party contemporaneously herewith, and Secured Party is authorized to file or
record the same.
(f) Construction. The terms and provisions contained herein
shall, unless the context otherwise requires, have the meaning and be construed
as provided in the Uniform Commercial Code. Reference in this Agreement to the
"Uniform Commercial Code" refers to the Uniform Commercial Code as enacted in
the State of California. Whenever the words "including", "includes" or "include"
are used in this Agreement (including any Exhibit hereto), they shall be read as
though the phrase, "without limitation," immediately followed the same.
(g) Successors and Assigns. The terms "Parent" and "Secured
Party" include and are binding upon the successors and assigns hereof.
(h) Definition of Prompt Notice. The use herein of the words
"prompt notice", or "notify promptly", or "give notice promptly", or "promptly",
or "immediately," or words of similar import, when used with reference to any
notice to be given or act to be undertaken by Parent, shall mean notice given or
such act performed in any event not later than five (5) days after the
occurrence of the specified event for which notice or action is required, unless
another time period is expressly made applicable.
(i) Amendment in Writing. This Agreement may not be amended,
modified or changed, nor shall any waiver of any provision hereof be effective,
except by an instrument in writing and signed by the party against whom
enforcement of any amendment, change or modification is sought.
(j) Governing Law. This Security Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
California (without regard to conflicts of law), except where federal law is
applicable (including, without limitation, any applicable federal law preempting
state laws).
IN WITNESS WHEREOF, Parent has executed and delivered this Agreement to
Secured Party as of the day and year first above written.
"PARENT"
SOUTHHAMPTON ENTERPRISES
CORP., a corporation organized under
the laws of British Columbia, Canada
By: /s/ Thomas E. Dooley, Jr.
Its: President
<PAGE>
EXHIBIT "A"
COLLATERAL
Any of the following, whether now owned or hereafter acquired by Parent, as
defined as "Debtor" for purposes of this Exhibit "A":
a. all present and future rights to payment for goods sold or leased or
for services rendered, whether or not represented by instruments or chattel
paper, and whether or not earned by performance; all present and future rights
to payments arising out of the licensing of computer software and systems; all
accounts, contract rights, chattel paper, instruments and documents, proceeds of
any letter of credit of which Debtor is a beneficiary; all forms of obligations
whatsoever owed to Debtor, including any obligations of any subsidiary or
affiliate of Debtor owed to Debtor, together with all instruments and documents
of title representing any of the foregoing; all rights in any returned or
repossessed goods; all rights, security and guarantees with respect to any of
the foregoing, including, without limitation, any right of stoppage in transit;
together with all property included within the definitions of "accounts",
"chattel papers", "documents" and "instruments" set forth in the Uniform
Commercial Code in effect in the State of California (the "UCC");
b. all goods held or intended for sale or lease by Debtor; or furnished
or to be furnished under contracts of service, all raw materials, work in
process, finished goods, materials and supplies of every nature used or usable
in connection with the manufacture, packing, shipping, advertising or sale of
any such goods, together with all property included within the definition of
"inventory" set forth in the UCC;
c. all choses in action, causes of action and all other intangible
property of every kind and nature, including, without limitation, corporate or
other business records, inventions, designs, patents, patent applications,
trademarks, trademark applications, trade names, processes, operation manuals,
techniques, trade secrets, goodwill, registrations, copyrights, licenses,
franchises, customer lists, tax refunds, tax refund claims, rights of claims
against carriers and shippers, investments and interests in subsidiaries, leases
and rights to indemnification, together with all property which is included
within the definition of "general intangibles" as set forth in the UCC;
A-1
<PAGE>
d. equipment and fixtures, including, without limitation, computer
hardware, computer software, and systems, furniture, machinery, vehicles and
trade fixtures, together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof, together
with all other such items which are included within the definitions of
"equipment" and "fixtures" as set forth in the UCC;
e. all certificated securities, all uncertificated securities, all
securities entitlements, all securities accounts and all other investment
property, each as defined is Division of the UCC, including, without limitation,
those securities listed on Exhibit "C" to the Security Agreement by and between
Secured Party and Debtor together with all options and other rights with respect
to such securities and financial instruments and all dividends, cash and other
property (including any distribution with respect to any stock dividend or
split) from time to time received or receivable with respect thereto or in
exchange therefor; and
f. to the extent not otherwise included, all proceeds and products of
any or all of the foregoing.
A-2
<PAGE>
EXHIBIT "B"
1. The legal name of Parent and the address of its chief executive
office is:
SOUTHHAMPTON ENTERPRISES CORP.
9211 Diplomacy Row
Dallas, Texas 75247
2. The Parent has the following places of business:
SOUTHHAMPTON ENTERPRISES CORP.
9211 Diplomacy Row
Dallas, Texas 75247
B-1
<PAGE>
EXHIBIT C
Certificate Number of
Issuer and Address No. Shares
C-1
Exhibit 10.40
SECURITY AND PLEDGE AGREEMENT
THIS AGREEMENT is made as of May 7, 1997, by SOUTHHAMPTON ENTERPRISES,
INC., a Texas corporation ("Parent"), to THE CRUTTENDEN ROTH BRIDGE FUND, LLC, a
California limited liability company ("Secured Party").
RECITALS
A. THE ANTIGUA GROUP, INC., a Nevada corporation and Parent's direct
wholly-owned subsidiary ("Debtor") has executed and delivered to Secured Party
that certain note (the "Note") captioned "Senior Subordinated Secured Note"
dated as of the date hereof, in the original principal amount of $1,020,000.
B. As part of the consideration for the granting of the loan evidenced by the
Note to Debtor and as additional security therefor, Secured Party has required
that Parent grant a security interest in the "Collateral" (as defined below) and
Parent desires to grant such security interest.
NOW, THEREFORE, in consideration of the covenants and promises
hereinafter set forth and other valuable consideration, the parties agree as
follows:
1. Definitions. Certain terms used in this Agreement shall have the
meaning set forth below.
"Collateral" means all of Parent's right, title and interest (whether
now held or hereafter acquired) in and to all personal property (whether
tangible or intangible) described in Exhibit "A" hereto, incorporated herein by
reference.
"Event of Default" means (i) an Event of Default as defined in, and
occurring under, that certain Securities Purchase Agreement (the "Securities
Purchase Agreement") of even date herewith by and between Debtor and Secured
Party, inter alia, (ii) any default by Debtor in the performance of any
obligation, covenant or agreement contained in the Security Agreement of even
date herewith to which it is a party, or (iii) any default by Parent in the
performance of any obligation, covenant or agreement contained herein.
"Indebtedness" means the indebtedness evidenced by the Note and any
other indebtedness or liability of Debtor to Secured Party now existing or
hereafter arising under the Note.
"Intercreditor Agreement" means the Intercreditor Agreement entered
into concurrently herewith by and among LaSalle Business Credit, Inc.
("LaSalle"), Thomas E. Dooley, as agent for the shareholders of the Antigua
Group, Inc. ("Dooley"), the Secured Party, Imperial Bank ("Imperial"), and the
Debtor, which provides for the relative rights and priorities of the various
security interests in the Collateral.
<PAGE>
"Permitted Liens" shall bear the same meaning as in the Securities
Purchase Agreement.
"Senior Debt" shall bear the same meaning as in the Securities Purchase
Agreement.
"Subordination Agreement" means the Subordination Agreement entered
into concurrently herewith by and among LaSalle, Dooley, the Secured Party and
Imperial which provides for the relative rights of payment of the indebtedness
of Debtor.
2. Grant of Security Interest. As additional security for the
Indebtedness, Parent hereby grants a security interest in the Collateral to
Secured Party.
3. Parent's Representations and Warranties. Parent represents and
warrants as follows:
(a) Title to Collateral. Except for the security interests
granted to Secured Party under this Security Agreement, and except for Permitted
Liens, Parent is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good, marketable and insurable title thereto free and clear of any and all liens
other than Permitted Liens.
(b) Location of Collateral. Parent hereby represents and
warrants that Parent's chief executive office is located at the address
specified in item 1 of Exhibit "B". Parent shall not, without at least thirty
(30) days' prior written notice to Secured Party, (i) change Parent's name or
place of business (or, if Parent has more than one place of business, its chief
executive office), or the office in which Parent's records relative to
receivables are kept, (ii) keep Collateral consisting of certificated
securities, as defined in Section 3(j) below, or chattel paper, at any location
other than its chief executive office set forth in item 1 of Exhibit "B" hereto,
and (iii) keep Collateral consisting of equipment or inventory at any location
other than the locations set forth in item 2 of Exhibit "B" hereto.
(c) Repair and Inspection of Collateral. Parent shall maintain
and protect its properties, assets and facilities, including without limitation
its equipment and fixtures, in good order and working repair and condition
(taking into consideration ordinary wear and tear) and from time to time make or
cause to be made all needful and proper repairs, renewals and replacements
thereto and shall competently manage and care for its property in accordance
with prudent industry practices. Upon reasonable notice, Parent shall permit
Secured Party or its agents to inspect all of such property from time to time.
(d) Insurance of Collateral. Parent shall maintain, with
financially sound and reputable companies, insurance policies insuring (i) its
equipment, fixtures and inventory against loss by
<PAGE>
fire, explosion, theft and such other casualties as are usually insured against
by companies engaged in the same or similar businesses and (ii) Parent and
Secured Party against liability for personal injury and property damage relating
to such equipment, fixtures and inventory. Such policies are to be in such
amounts and against at least such risk as are usually insured against in the
same general area by companies of the same or a similar size engaged in the same
or a similar business as Parent. Parent shall give to Secured Party written
notice of loss or damage to the Collateral, and file proofs of loss. Parent
shall not settle or adjust any claim in excess of $50,000 without the prior
written consent of Secured Party.
(e) Payment of Taxes and Fees Assessed Upon Collateral. Parent
shall pay, when due, all taxes and assessments now or hereafter relating to, or
imposed or assessed upon the Collateral.
(f) No Transfer of Collateral. Parent shall not voluntarily,
involuntarily, or by operation of law, sell, assign, transfer or otherwise
dispose of the Collateral, or any interest therein, or permit any of the
foregoing to occur, and shall not otherwise do or permit anything to be done or
occur that may impair the Collateral as security hereunder, except that Parent
may sell its inventory in the ordinary course of business, and, so long as
Parent has not committed an Event of Default, (i) Parent may sell or otherwise
dispose of the Collateral when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the conduct of the business of Parent and (ii) Parent may
grant non-exclusive licenses (and exclusive licenses within specified geographic
regions) and other similar arrangements for the use of Parent's property for
good faith business purposes.
(g) Defense of Title to Collateral. Parent shall defend any
proceeding which may affect title to, or Secured Party's security interest in,
the Collateral, or the first priority of such security interest after that
created with respect to Permitted Liens, and shall indemnify, defend, protect
and hold Secured Party harmless against any and all liability, damages, causes
of action or other costs or expenses, including reasonable attorneys' fees,
arising out of or incurred in connection with or on account of any such
proceeding, unless such proceeding is caused by Secured Party's gross negligence
or willful misconduct.
(h) Maintenance of Secured Party's Security Interest. Parent
shall do all such acts and things as may be necessary or appropriate, or which
Secured Party from time to time or at any time reasonably requests as necessary
in its opinion, to establish and maintain a perfected security interest in the
Collateral, subject to no other liens or encumbrances other than Permitted
Liens; and Parent shall pay the cost of all filings or recordings of this
Agreement or any other document or instrument in all public offices whenever it
is deemed by Secured Party to be necessary or desirable. Parent irrevocably
constitutes and appoints Secured Party the attorney-in-fact of Parent to
execute, deliver and, if
<PAGE>
appropriate, to file or record with the appropriate filing officer or office
such security agreements, financing statements, continuation statements or other
instruments as Secured Party may request or require in order to impose, perfect
or continue the perfection of, the lien or security interest created hereby. The
foregoing power of attorney is coupled with an interest and shall survive a
Transfer or the dissolution, bankruptcy, insolvency or termination of Parent as
an entity. Parent shall not execute or authorize the filing of any financing
statement in favor of any person or entity other than Secured Party or other
than related to the Permitted Liens.
(i) Provision of Accurate Information. Parent shall provide to
Secured Party any information it reasonably requires pertaining to the
Collateral, the Indebtedness or the provisions hereof. All information supplied
to Secured Party by or on behalf of Parent is and shall be true, correct and
complete, and Parent shall promptly notify Secured Party of any material change
in such information not later than five (5) days after any such change. Parent
shall promptly notify Secured Party of any event causing loss or depreciation in
the value of any Collateral.
(j) Certificated Securities. On or prior to the date hereof,
Parent shall deliver to Secured Party any note, certificated security or
instrument (a "certificate security") not otherwise pledged or hypothecated to
an unaffiliated creditor or otherwise owned by and in control of Parent,
including, without limitation, those certificated securities listed on Exhibit
"C" hereto. In the event a certificated security is returned to Parent's control
while Debtor continues to have unsatisfied obligations under the Note, such
certificated security shall be immediately delivered to Secured Party who shall
hold same until Debtor's obligations under the Note are satisfied in full. In
the event that Parent purchases, acquires or is otherwise transferred
certificated securities while Debtor continues to have unsatisfied obligations
under the Note, Parent shall immediately deposit such security with Secured
Party and Secured Party shall continue to hold same as if such security were
listed on Exhibit "C" hereto until Debtor's obligations under the Note are
satisfied in full. All certificated securities delivered to Secured Party
pursuant hereto shall be delivered in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment or stock
powers, executed in blank, in form and substance reasonably acceptable to
Secured Party.
(k) Prompt Payment of Expenses. Parent shall pay to Secured
Party immediately on demand all expenses (including reasonable attorneys' fees,
other legal expenses and costs and the cost of filing financing statements and
any renewals or extensions thereof) incurred by Secured Party under this
Agreement, with interest at the greater of the interest rate charged on the Note
or any default rate thereunder but not more than the maximum rate allowed by
applicable usury law, from the date of such expenditure.
<PAGE>
4. Default: Remedies.
(a) Remedies. Subject to the provisions of the Intercreditor
Agreement, upon an Event of Default, Secured Party may, at its option and
without notice to Parent or Debtor, declare the Indebtedness secured hereby due
and payable pursuant to the terms of the Securities Purchase Agreement and shall
have all of the remedies of a secured party under the Uniform Commercial Code,
including the right and power to sell, or otherwise dispose of, the Collateral,
or any part thereof, at any one or more public or private sales as permitted by
applicable law, at such location as Secured Party may choose, and for that
purpose may take immediate and exclusive possession of the Collateral, or any
part thereof, and with or without judicial process enter upon any premises on
which the Collateral, or any part thereof, may be situated and remove the same
therefrom without being deemed guilty of trespass and without liability for
damages thereby occasioned. At Secured Party's option and demand, Parent shall
assemble the Collateral and make it available to Secured Party at the premises
of Parent, or at such other place and at the time designated in the demand.
(b) Secured Party's Rights to Collateral. Subject to the
provisions of the Intercreditor Agreement and the Subordination Agreement,
Secured Party may hold, maintain, preserve and prepare the Collateral for sale;
control, manage, rent and lease the Collateral; collect all rents and income
from the Collateral and apply the same in any order of priority to reimburse
Secured Party for any costs and expenses incurred hereunder and to the payment
or performance of Parent's obligations hereunder, and apply the balance to
interest and then to principal of the Indebtedness secured hereby; or secure the
appointment of a receiver of the Collateral. Secured Party may also render the
Collateral unusable, or repair and renovate the same, and dispose of the
Collateral on Parent's premises. Parent expressly waives any right to require an
election of remedies by Secured Party existing after an Event of Default
hereunder, except that Parent shall be entitled to notice of sale or other
disposition of the Collateral, and Parent agrees that if such notice is served
on Parent as hereinafter specified a minimum of five (5) days before the time of
sale or disposition, such notice shall be deemed commercially reasonable and
shall fully satisfy any requirement for giving of such notice. Any person,
including Parent and Secured Party, shall be eligible to purchase any part or
all of such Collateral at any such sale or disposition. Parent acknowledges that
sales of the Collateral for cash or on credit to a wholesaler, retailer or user
of the Collateral, or at public or private auction, within the discretion of
Secured Party, are all commercially reasonable. Any disposition made hereunder
may be conducted by an employee or agent of Secured Party.
(c) Stay; Extension. The Parent agrees (to the extent it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or other law that would prohibit or forgive the Debtor from paying
all or a portion of the
<PAGE>
principal of or interest on the Note as contemplated herein, wherever enacted,
now or at any time hereinafter in force, or that may materially affect the
covenants or the performance of this Agreement in a manner inconsistent with the
provisions of this Agreement. The Parent expressly waives all benefit or
advantage of any such law and agrees not to hinder, delay or impede the
execution of any power granted to Secured Party hereunder, but will suffer and
permit the execution of such power as though no such law has been enacted. If a
court of competent jurisdiction prescribes that the Parent may not waive its
rights to take the benefit or advantage of any stay or extension law or any
other law in accordance with the prior sentence, then the obligation to pay
interest on the Note shall be reduced to the maximum legal limit under
applicable law governing the interest payable in connection with the Note.
(d) Application of Proceeds. Subject to any applicable
provisions of the Intercreditor Agreement, the Proceeds of any sale, disposition
or other realization upon all or any part of the Collateral shall be distributed
by Secured Party in the following order of priorities:
First, to Secured Party in an amount sufficient to pay in full the reasonable
costs of Secured Party in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by Secured Party in connection therewith, including, without
limitation, reasonable attorneys' fees;
Second, to Secured Party in an amount equal to the then unpaid principal amount
of and accrued interest and prepayment premiums, if any, on the Note;
Third, to Secured Party in an amount equal to any other Indebtedness which is
then unpaid; and
Finally, upon payment in full of all Indebtedness and upon satisfaction of all
other provisions of the Intercreditor Agreement, to Parent or its
representatives or as a court of competent jurisdiction may direct.
(e) Assumption of Expenses and Payments. In connection with
any Event of Default, Secured Party may incur expenses, including reasonable
attorneys' fees, expenses and costs, appropriate to the exercise of any right or
power under this Agreement, make any payment agreed to be made by Parent
hereunder, and perform any obligation of Parent hereunder, without, however, any
obligation so to do. Any monies expended hereunder by Secured Party, including
attorneys' fees, shall be chargeable, with interest at the greater of the
interest rate then charged on the Note or any default rate thereunder, but not
more than the maximum rate allowed by applicable usury law, to Debtor and become
part of the Indebtedness secured hereby.
<PAGE>
(f) Remedies Cumulative. The remedies of Secured Party
hereunder are cumulative and the exercise of any one or more of the remedies
provided for herein, or under the Uniform Commercial Code, shall not be
construed as a waiver of any of the other remedies of the Secured Party, so long
as any part of the Indebtedness remains unsatisfied. The acceptance by Secured
Party of this Security Agreement shall not waive or impair any other security
Secured Party may have or hereafter acquire for the payment of the Indebtedness,
nor shall the taking of any such additional security waive or impair this
Agreement, or any term, covenant or condition herein contained, but Secured
Party may resort to any security it may have in such order it may deem proper.
Release of the security interest hereunder in any or all of the Collateral shall
not affect the liability of any person on the Indebtedness secured hereby.
5. Special Provisions Concerning Trademarks.
(a) Additional Representations and Warranties. The Parent
represents and warrants that it is the true and lawful exclusive owner of the
trademarks listed in Exhibit "D" hereto, incorporated herein as reference, and
that said listed trademarks constitute all the trademarks registered in the
United States Patent and Trademark Office that the Parent now owns or uses in
connection with its business. The Parent represents and warrants that it owns or
is licensed to use all trademark that it uses. The Parent further warrants that
it is aware of no third party claim that any aspect of the Parent's present or
contemplated business operations infringes or will infringe any trademark.
(b) Licenses and Assignments. The Parent hereby agrees not to
divest itself of any right under a mark absent prior written approval of the
Secured Party.
(c) Infringements. The Parent agrees, promptly upon learning
thereof, to notify the Secured Party in writing of the name and address of, and
to furnish such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating any of the Parent's rights in
and to any significant trademark, or with respect to any party claiming that the
Parent's use of any significant trademark violates any property right of that
party. The Parent further agrees, unless otherwise directed by the Secured
Party, diligently to prosecute any Person infringing any significant trademark.
(d) Preservation of Trademark. The Parent agrees to use its
significant trademark in interstate commerce during the time in which this
Agreement is in effect, sufficiently to preserve such trademark as marks or
service marks registered under the laws of the United States
(e) Maintenance of Registration. The Parent shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. ss.ss._1051 et seq. to maintain trademark registration, including, but
not limited to, affidavits
<PAGE>
of use and applications for renewals of registration in the United States Patent
and Trademark Office for all of its trademark pursuant to 15 U.S.C. ss.ss.
1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection
therewith, and shall not abandon any such filing of affidavit of use or any such
application of renewal prior to the exhaustion of all administrative and
judicial remedies without prior written consent of the Required Banks. The
Parent agrees to notify the Secured Party six months prior to the dates on which
the affidavits of use or the applications for renewal registration are due that
the affidavit of use or the renewal is being processed.
(f) Future Registered Trademark. If any mark registration
issues hereafter to the Parent as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 30 days of
receipt of such certificate the Parent shall deliver a copy of such certificate,
and a grant of security in such mark, to the Secured Party, confirming the grant
thereof hereunder, the form of such confirmatory grant to be substantially the
same as the form hereof.
(g) Remedies. Subject to the provisions of the Intercreditor
Agreement and the Subordination Agreement, if an Event of Default shall occur
and be continuing, the Secured Party may, by written notice to the Parent, take
any or all of the following actions: (i) declare the entire right, title and
interest of the Parent in and to each of the trademark, together with all
trademark rights and rights of protection to the same, vested, in which event
such rights, title and interest shall immediately vest, in the Secured Party for
satisfaction of the Indebtedness secured hereby due and payable pursuant to the
terms of the Securities Purchase Agreement, in which case the Parent agrees to
execute an assignment in form and substance satisfactory to the Secured Party of
all its rights, title and interest in and to the trademark to the Secured Party
for satisfaction of the Indebtedness secured hereby due and payable pursuant to
the terms of the Securities Purchase Agreement; (ii) take and use or sell the
trademark and the goodwill of the Parent's business symbolized by the trademark
and the right to carry on the business and use the assets of the Parent in
connection with which the trademark have been used; and (iii) direct the Parent
to refrain, in which event the Parent shall refrain, from using the trademark in
any manner whatsoever, directly or indirectly, and, if requested by the Secured
Party, change the Parent's corporate name to eliminate therefrom any use of any
trademark and execute such other and further documents that the Secured Party
may request to further confirm this and to transfer ownership of the trademark
and registrations and any pending trademark application in the United States
Patent and Trademark Office to the Secured Party.
6. Miscellaneous.
(a) Secured Party's Rights Not Barred. Until the Indebtedness
is paid and performed in full, Secured Party's rights
<PAGE>
shall continue even if the Indebtedness, or any portion thereof, is barred by
any statute of limitations. The right of Parent, if any, to plead any and all
statutes of limitation as a defense to any demand with respect to the
Indebtedness is expressly waived by Parent, to the full extent permissible by
law.
(b) Form and Effect of Waivers. No delay or failure on the
part of Secured Party in exercising any right, privilege or remedy hereunder
shall operate as a waiver of such or any other right, privilege or remedy, and
no waiver whatsoever shall be valid unless in writing, signed by Secured Party
and then only to the extent set forth therein.
(c) Notices. Except when otherwise required by law, all
notices required to be given hereunder shall be served (i) to Parent at the
addresses specified item 1 on Exhibit "B" hereto and (ii) to Secured Party at
the address specified with respect thereto in the Securities Purchase Agreement,
and shall in each instance, unless otherwise provided by law, be deemed given,
received, made or communicated on the date personal delivery is effected or, if
mailed, on the delivery date or attempted delivery date if refused.
(d) Severability of Terms. If any term of this Agreement, or
the application thereof to any person or circumstance, shall, to any extent, be
declared invalid or unenforceable, the remainder of this Agreement, or the
application of such term to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
such term shall be valid and enforceable to the fullest extent permitted by law.
(e) Financing Statement. A financing statement (and when
requested by Secured Party, a fixture filing) placing of record the security
interest hereunder shall be executed and delivered by Parent to Secured Party
contemporaneously herewith, and Secured Party is authorized to file or record
the same.
(f) Construction. The terms and provisions contained herein
shall, unless the context otherwise requires, have the meaning and be construed
as provided in the Uniform Commercial Code. Reference in this Agreement to the
"Uniform Commercial Code" refers to the Uniform Commercial Code as enacted in
the State of California. Whenever the words "including", "includes" or "include"
are used in this Agreement (including any Exhibit hereto), they shall be read as
though the phrase, "without limitation," immediately followed the same.
(g) Successors and Assigns. The terms "Parent" and "Secured
Party" include and are binding upon the successors and assigns hereof.
(h) Definition of Prompt Notice. The use herein of the words
"prompt notice", or "notify promptly", or "give notice promptly", or "promptly",
or "immediately," or words of similar
<PAGE>
import, when used with reference to any notice to be given or act to be
undertaken by Parent, shall mean notice given or such act performed in any event
not later than five (5) days after the occurrence of the specified event for
which notice or action is required, unless another time period is expressly made
applicable.
(i) Amendment in Writing. This Agreement may not be amended,
modified or changed, nor shall any waiver of any provision hereof be effective,
except by an instrument in writing and signed by the party against whom
enforcement of any amendment, change or modification is sought.
(j) Governing Law. This Security Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
California (without regard to conflicts of law), except where federal law is
applicable (including, without limitation, any applicable federal law preempting
state laws).
IN WITNESS WHEREOF, Parent has executed and delivered this Agreement to
Secured Party as of the day and year first above written.
"PARENT"
SOUTHHAMPTON ENTERPRISES INC.,
a Texas corporation
By: /s/ Thomas E. Dooley, Jr.
Its: Secretary
<PAGE>
EXHIBIT "A"
COLLATERAL
Any of the following, whether now owned or hereafter acquired by Parent, as
defined as "Debtor" for purposes of this Exhibit "A":
a. all present and future rights to payment for goods sold or leased or
for services rendered, whether or not represented by instruments or chattel
paper, and whether or not earned by performance; all present and future rights
to payments arising out of the licensing of computer software and systems; all
accounts, contract rights, chattel paper, instruments and documents, proceeds of
any letter of credit of which Debtor is a beneficiary; all forms of obligations
whatsoever owed to Debtor, including any obligations of any subsidiary or
affiliate of Debtor owed to Debtor, together with all instruments and documents
of title representing any of the foregoing; all rights in any returned or
repossessed goods; all rights, security and guarantees with respect to any of
the foregoing, including, without limitation, any right of stoppage in transit;
together with all property included within the definitions of "accounts",
"chattel papers", "documents" and "instruments" set forth in the Uniform
Commercial Code in effect in the State of California (the "UCC");
b. all goods held or intended for sale or lease by Debtor; or furnished
or to be furnished under contracts of service, all raw materials, work in
process, finished goods, materials and supplies of every nature used or usable
in connection with the manufacture, packing, shipping, advertising or sale of
any such goods, together with all property included within the definition of
"inventory" set forth in the UCC;
c. all choses in action, causes of action and all other intangible
property of every kind and nature, including, without limitation, corporate or
other business records, inventions, designs, patents, patent applications,
trademarks, trademark applications, trade names, processes, operation manuals,
techniques, trade secrets, goodwill, registrations, copyrights, licenses,
franchises, customer lists, tax refunds, tax refund claims, rights of claims
against carriers and shippers, investments and interests in subsidiaries, leases
and rights to indemnification, together with all property which is included
within the definition of "general intangibles" as set forth in the UCC;
A-1
<PAGE>
d. equipment and fixtures, including, without limitation, computer
hardware, computer software, and systems, furniture, machinery, vehicles and
trade fixtures, together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof, together
with all other such items which are included within the definitions of
"equipment" and "fixtures" as set forth in the UCC;
e. all certificated securities, all uncertificated securities, all
securities entitlements, all securities accounts and all other investment
property, each as defined is Division of the UCC, including, without limitation,
those securities listed on Exhibit "C" to the Security Agreement by and between
Secured Party and Debtor together with all options and other rights with respect
to such securities and financial instruments and all dividends, cash and other
property (including any distribution with respect to any stock dividend or
split) from time to time received or receivable with respect thereto or in
exchange therefor; and
f. to the extent not otherwise included, all proceeds and products of
any or all of the foregoing.
A-2
<PAGE>
EXHIBIT "B"
1. The legal name of Parent and the address of its chief executive
office is:
SOUTHHAMPTON ENTERPRISES INC.
9211 Diplomacy Row
Dallas, Texas 75247
2. The Parent has the following places of business:
SOUTHHAMPTON ENTERPRISES INC.
9211 Diplomacy Row
Dallas, Texas 75247
B-1
<PAGE>
EXHIBIT "C"
Certificate Number of
Issuer and Address No. Shares
C-1
<PAGE>
EXHIBIT "D"
UNITED STATES REGISTERED TRADEMARKS
Trademark Reg. No. Reg. Date Goods
Towel Caddy 1567963 11/28/89
D-1
Exhibit 10.41
SECURITY AGREEMENT
THIS AGREEMENT is made as of May 7, 1997, by THE ANTIGUA GROUP, INC., a
Nevada corporation ("Debtor"), to THE CRUTTENDEN ROTH BRIDGE FUND, LLC, a
California limited liability company ("Secured Party").
RECITALS
A. Debtor has executed and delivered to Secured Party that certain note (the
"Note") captioned "Senior Subordinated Secured Note" dated as of the date
hereof, in the original principal amount of $1,020,000.
B. As part of the consideration for the granting of the loan evidenced by the
Note and as additional security therefor, Secured Party has required that Debtor
grant a security interest in the "Collateral" (as defined below) and Debtor
desires to grant such security interest.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
set forth and other valuable consideration, the parties agree as follows:
1. Definitions. Certain terms used in this Agreement shall have the meaning
set forth below.
"Collateral" means all of Debtor's right, title and interest (whether now
held or hereafter acquired) in and to all personal property (whether tangible or
intangible) described in Exhibit "A" hereto, incorporated herein by reference.
"Event of Default" means (i) an Event of Default as defined in, and
occurring under, that certain Securities Purchase Agreement (the "Securities
Purchase Agreement") of even date herewith by and between Debtor and Secured
Party or (ii) any default by Debtor in the performance of any obligation,
covenant or agreement contained herein.
"Indebtedness" means the indebtedness evidenced by the Note and any other
indebtedness or liability of Debtor to Secured Party now existing or hereafter
arising under the Note.
"Intercreditor Agreement" means the Intercreditor Agreement entered into
concurrently herewith by and among LaSalle Business Credit, Inc. ("LaSalle"),
Thomas E. Dooley, as agent for the shareholders of Debtor ("Dooley"), the
Secured Party, Imperial Bank ("Imperial"), and the Debtor, which provides for
the relative rights and priorities of the various security interests in the
Collateral.
<PAGE>
"Permitted Liens" shall bear the same meaning as in the Securities Purchase
Agreement.
"Senior Debt" shall bear the same meaning as in the Securities Purchase
Agreement.
"Subordination Agreement" means the Subordination Agreement entered into
concurrently herewith by and among LaSalle, Dooley, the Secured Party and
Imperial which provides for the relative rights of payment of the indebtedness
of Debtor.
2. Grant of Security Interest. As security for the Indebtedness, Debtor
hereby grants a security interest in the Collateral to Secured Party.
3. Debtor's Representations and Warranties. Debtor represents and warrants
as follows:
(a) Title to Collateral. Except for the security interests granted to
Secured Party under this Security Agreement, and except for Permitted Liens,
Debtor is the sole legal and equitable owner of each item of the Collateral in
which it purports to grant a security interest hereunder, having good,
marketable and insurable title thereto free and clear of any and all liens other
than Permitted Liens.
(b) Location of Collateral. Debtor shall not, without at least thirty
(30) days' prior written notice to Secured Party, (i) change Debtor's name or
place of business (or, if Debtor has more than one place of business, its chief
executive office), or the office in which Debtor's records relative to
receivables are kept, (ii) keep Collateral consisting of chattel paper at any
location other than its chief executive office set forth in item 1 of Exhibit
"B" hereto, and (iii) keep Collateral consisting of equipment or inventory at
any location other than the locations set forth in item 2 of Exhibit B hereto.
(c) Repair and Inspection of Collateral. Debtor shall maintain and
protect its properties, assets and facilities, including without limitation its
equipment and fixtures, in good order and working repair and condition (taking
into consideration ordinary wear and tear) and from time to time make or cause
to be made all needful and proper repairs, renewals and replacements thereto and
shall competently manage and care for its property in accordance with prudent
industry practices. Upon reasonable notice, Debtor shall permit Secured Party or
its agents to inspect all of such property from time to time.
(d) Insurance of Collateral. Debtor shall maintain, with financially
sound and reputable companies, insurance policies insuring (i) its equipment,
fixtures and inventory against loss by fire, explosion, theft and such other
casualties as are usually insured against by companies engaged in the same or
similar businesses and (ii) Debtor and Secured Party against liability for
<PAGE>
personal injury and property damage relating to such equipment, fixtures and
inventory. Such policies are to be in such amounts and against at least such
risk as are usually insured against in the same general area by companies of the
same or a similar size engaged in the same or a similar business as Debtor.
Debtor shall give to Secured Party written notice of loss or damage to the
Collateral, and file proofs of loss. Debtor shall not settle or adjust any claim
in excess of $50,000 without the prior written consent of Secured Party.
(e) Payment of Taxes and Fees Assessed Upon Collateral. Debtor shall
pay, when due, all taxes and assessments now or hereafter relating to, or
imposed or assessed upon the Collateral.
(f) No Transfer of Collateral. Debtor shall not voluntarily,
involuntarily, or by operation of law, sell, assign, transfer or otherwise
dispose of the Collateral, or any interest therein, or permit any of the
foregoing to occur, and shall not otherwise do or permit anything to be done or
occur that may impair the Collateral as security hereunder, except that Debtor
may sell its inventory in the ordinary course of business, and, so long as
Debtor has not committed an Event of Default, (i) Debtor may sell or otherwise
dispose of the Collateral when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the conduct of the business of Debtor and (ii) Debtor may
grant non-exclusive licenses (and exclusive licenses within specified geographic
regions) and other similar arrangements for the use of Debtor's property for
good faith business purposes.
(g) Defense of Title to Collateral. Debtor shall defend any proceeding
which may affect title to, or Secured Party's security interest in, the
Collateral, or the first priority of such security interest after that created
with respect to Permitted Liens, and shall indemnify, defend, protect and hold
Secured Party harmless against any and all liability, damages, causes of action
or other costs or expenses, including reasonable attorneys' fees, arising out of
or incurred in connection with or on account of any such proceeding, unless such
proceeding is caused by Secured Party's gross negligence or willful misconduct.
(h) Maintenance of Secured Party's Security Interest. Debtor shall do
all such acts and things as may be necessary or appropriate, or which Secured
Party from time to time or at any time reasonably requests as necessary in its
opinion, to establish and maintain a perfected security interest in the
Collateral, subject to no other liens or encumbrances other than Permitted
Liens; and Debtor shall pay the cost of all filings or recordings of this
Agreement or any other document or instrument in all public offices whenever it
is deemed by Secured Party to be necessary or desirable. Debtor irrevocably
constitutes and appoints Secured Party the attorney-in-fact of Debtor to
execute, deliver and, if appropriate, to file or record with the appropriate
filing officer or office such security agreements, financing statements,
continuation statements or other instruments as Secured Party may
<PAGE>
request or require in order to impose, perfect or continue the perfection of,
the lien or security interest created hereby. The foregoing power of attorney is
coupled with an interest and shall survive a Transfer or the dissolution,
bankruptcy, insolvency or termination of Debtor as an entity. Debtor shall not
execute or authorize the filing of any financing statement in favor of any
person or entity other than Secured Party or other than related to the Permitted
Liens.
(i) Provision of Accurate Information. Debtor shall provide to Secured
Party any information it reasonably requires pertaining to the Collateral, the
Indebtedness or the provisions hereof. All information supplied to Secured Party
by or on behalf of Debtor is and shall be true, correct and complete, and Debtor
shall promptly notify Secured Party of any material change in such information
not later than five (5) days after any such change. Debtor shall promptly notify
Secured Party of any event causing loss or depreciation in the value of any
Collateral.
(j) Prompt Payment of Expenses. Debtor shall pay to Secured Party
immediately on demand all expenses (including reasonable attorneys' fees, other
legal expenses and costs and the cost of filing financing statements and any
renewals or extensions thereof) incurred by Secured Party under this Agreement,
with interest at the greater of the interest rate charged on the Note or any
default rate thereunder but not more than the maximum rate allowed by applicable
usury law, from the date of such expenditure.
4. Default: Remedies.
(a) Remedies. Subject to the provisions of the Intercreditor Agreement
and the Subordination Agreement, upon an Event of Default, Secured Party may, at
its option and without notice to Debtor, declare the Indebtedness secured hereby
due and payable pursuant to the terms of the Securities Purchase Agreement and
shall have all of the remedies of a secured party under the Uniform Commercial
Code, including the right and power to sell, or otherwise dispose of, the
Collateral, or any part thereof, at any one or more public or private sales as
permitted by applicable law, at such location as Secured Party may choose, and
for that purpose may take immediate and exclusive possession of the Collateral,
or any part thereof, and with or without judicial process enter upon any
premises on which the Collateral, or any part thereof, may be situated and
remove the same therefrom without being deemed guilty of trespass and without
liability for damages thereby occasioned. At Secured Party's option and demand,
Debtor shall assemble the Collateral and make it available to Secured Party at
the premises of Debtor, or at such other place and at the time designated in the
demand.
(b) Secured Party's Rights to Collateral. Subject to the provisions of
the Intercreditor Agreement and the Subordination Agreement, Secured Party may
hold, maintain, preserve and prepare the Collateral for sale; control, manage,
rent and lease the
<PAGE>
Collateral; collect all rents and income from the Collateral and apply the same
in any order of priority to reimburse Secured Party for any costs and expenses
incurred hereunder and to the payment or performance of Debtor's obligations
hereunder, and apply the balance to interest and then to principal of the
Indebtedness secured hereby; or secure the appointment of a receiver of the
Collateral. Secured Party may also render the Collateral unusable, or repair and
renovate the same, and dispose of the Collateral on Debtor's premises. Debtor
expressly waives any right to require an election of remedies by Secured Party
existing after an Event of Default hereunder, except that Debtor shall be
entitled to notice of sale or other disposition of the Collateral, and Debtor
agrees that if such notice is served on Debtor as hereinafter specified a
minimum of five (5) days before the time of sale or disposition, such notice
shall be deemed commercially reasonable and shall fully satisfy any requirement
for giving of such notice. Any person, including Debtor and Secured Party, shall
be eligible to purchase any part or all of such Collateral at any such sale or
disposition. Debtor acknowledges that sales of the Collateral for cash or on
credit to a wholesaler, retailer or user of the Collateral, or at public or
private auction, within the discretion of Secured Party, are all commercially
reasonable. Any disposition made hereunder may be conducted by an employee or
agent of Secured Party.
(c) Stay; Extension. The Debtor agrees (to the extent it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or other law that would prohibit or forgive the Debtor from paying all or a
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereinafter in force, or that may
materially affect the covenants or the performance of this Agreement in a manner
inconsistent with the provisions of this Agreement. The Debtor expressly waives
all benefit or advantage of any such law and agrees not to hinder, delay or
impede the execution of any power granted to Purchaser hereunder, but will
suffer and permit the execution of such power as though no such law has been
enacted. If a court of competent jurisdiction prescribes that the Debtor may not
waive its rights to take the benefit or advantage of any stay or extension law
or any other law in accordance with the prior sentence, then the obligation to
pay interest on the Note shall be reduced to the maximum legal limit under
applicable law governing the interest payable in connection with the Note.
(d) Application of Proceeds. Subject to the provisions of the
Intercreditor Agreement, the Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed by
Secured Party in the following order of priorities:
First, to Secured Party in an amount sufficient to pay in full the reasonable
costs of Secured Party in connection with such sale, disposition or other
realization, including all fees, costs,
<PAGE>
expenses, liabilities and advances incurred or made by Secured Party in
connection therewith, including, without limitation, reasonable attorneys' fees;
Second, to Secured Party in an amount equal to the then unpaid principal amount
of and accrued interest and prepayment premiums, if any, on the Note;
Third, to Secured Party in an amount equal to any other Indebtedness which is
then unpaid; and
Finally, upon payment in full of all Indebtedness and upon satisfaction of all
other provisions of the Intercreditor Agreement, to Debtor or its
representatives or as a court of competent jurisdiction may direct.
(e) Assumption of Expenses and Payments. In connection with any Event
of Default, Secured Party may incur expenses, including reasonable attorneys'
fees, expenses and costs, appropriate to the exercise of any right or power
under this Agreement, make any payment agreed to be made by Debtor hereunder,
and perform any obligation of Debtor hereunder, without, however, any obligation
so to do. Any monies expended hereunder by Secured Party, including attorneys'
fees, shall be chargeable, with interest at the greater of the interest rate
then charged on the Note or any default rate thereunder, but not more than the
maximum rate allowed by applicable usury law, to Debtor and become part of the
Indebtedness secured hereby.
(f) Remedies Cumulative. The remedies of Secured Party hereunder are
cumulative and the exercise of any one or more of the remedies provided for
herein, or under the Uniform Commercial Code, shall not be construed as a waiver
of any of the other remedies of the Secured Party, so long as any part of the
Indebtedness remains unsatisfied. The acceptance by Secured Party of this
Security Agreement shall not waive or impair any other security Secured Party
may have or hereafter acquire for the payment of the Indebtedness, nor shall the
taking of any such additional security waive or impair this Agreement, or any
term, covenant or condition herein contained, but Secured Party may resort to
any security it may have in such order it may deem proper. Release of the
security interest hereunder in any or all of the Collateral shall not affect the
liability of any person on the Indebtedness secured hereby.
5. Special Provisions Concerning Trademarks.
(a) Additional Representations and Warranties. The Debtor represents
and warrants that it is the true and lawful exclusive owner of the trademarks
listed in Exhibit "D" hereto, incorporated herein as reference, and that said
listed trademarks constitute all the trademarks registered in the United States
Patent and Trademark Office that the Debtor now owns or uses in connection with
its business. The Debtor represents and warrants that it owns or is licensed to
use all trademark that it uses. The
<PAGE>
Debtor further warrants that it is aware of no third party claim that any aspect
of the Debtor's present or contemplated business operations infringes or will
infringe any trademark.
(b) Licenses and Assignments. The Debtor hereby agrees not to divest
itself of any right under a mark absent prior written approval of the Secured
Party.
(c) Infringements. The Debtor agrees, promptly upon learning thereof,
to notify the Secured Party in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating any of the Debtor's rights in
and to any significant trademark, or with respect to any party claiming that the
Debtor's use of any significant trademark violates any property right of that
party. The Debtor further agrees, unless otherwise directed by the Secured
Party, diligently to prosecute any Person infringing any significant trademark.
(d) Preservation of Trademark. The Debtor agrees to use its
significant trademark in interstate commerce during the time in which this
Agreement is in effect, sufficiently to preserve such trademark as marks or
service marks registered under the laws of the United States
(e) Maintenance of Registration. The Debtor shall, at its own expense,
diligently process all documents required by the Trademark Act of 1946, 15
U.S.C. ss.ss. 1051 et seq. to maintain trademark registration, including, but
not limited to, affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its trademark
pursuant to 15 U.S.C. ss.ss. 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith, and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Required Banks. The Debtor agrees to notify the Secured Party six months prior
to the dates on which the affidavits of use or the applications for renewal
registration are due that the affidavit of use or the renewal is being
processed.
(f) Future Registered Trademark. If any mark registration issues
hereafter to the Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within 30 days of receipt
of such certificate the Debtor shall deliver a copy of such certificate, and a
grant of security in such mark, to the Secured Party, confirming the grant
thereof hereunder, the form of such confirmatory grant to be substantially the
same as the form hereof.
(g) Remedies. Subject to the provisions of the Intercreditor Agreement
and the Subordination Agreement, if an Event of Default shall occur and be
continuing, the Secured Party
<PAGE>
may, by written notice to the Debtor, take any or all of the following actions:
(i) declare the entire right, title and interest of the Debtor in and to each of
the trademark, together with all trademark rights and rights of protection to
the same, vested, in which event such rights, title and interest shall
immediately vest, in the Secured Party for satisfaction of the Indebtedness
secured hereby due and payable pursuant to the terms of the Securities Purchase
Agreement, in which case the Debtor agrees to execute an assignment in form and
substance satisfactory to the Secured Party of all its rights, title and
interest in and to the trademark to the Secured Party for satisfaction of the
Indebtedness secured hereby due and payable pursuant to the terms of the
Securities Purchase Agreement; (ii) take and use or sell the trademark and the
goodwill of the Debtor's business symbolized by the trademark and the right to
carry on the business and use the assets of the Debtor in connection with which
the trademark have been used; and (iii) direct the Debtor to refrain, in which
event the Debtor shall refrain, from using the trademark in any manner
whatsoever, directly or indirectly, and, if requested by the Secured Party,
change the Debtor's corporate name to eliminate therefrom any use of any
trademark and execute such other and further documents that the Secured Party
may request to further confirm this and to transfer ownership of the trademark
and registrations and any pending trademark application in the United States
Patent and Trademark Office to the Secured Party.
6. Miscellaneous.
(a) Secured Party's Rights Not Barred. Until the Indebtedness is paid
and performed in full, Secured Party's rights shall continue even if the
Indebtedness, or any portion thereof, is barred by any statute of limitations.
The right of Debtor, if any, to plead any and all statutes of limitation as a
defense to any demand with respect to the Indebtedness is expressly waived by
Debtor, to the full extent permissible by law.
(b) Form and Effect of Waivers. No delay or failure on the part of
Secured Party in exercising any right, privilege or remedy hereunder shall
operate as a waiver of such or any other right, privilege or remedy, and no
waiver whatsoever shall be valid unless in writing, signed by Secured Party and
then only to the extent set forth therein.
(c) Notices. Except when otherwise required by law, all notices
required to be given hereunder shall be served in the manner and at the
addresses specified for the giving of notice in the Securities Purchase
Agreement, and shall, unless otherwise provided by law, be deemed given,
received, made or communicated on the date personal delivery is effected or, if
mailed, on the delivery date or attempted delivery date if refused.
(d) Severability of Terms. If any term of this Agreement, or the
application thereof to any person or circumstance, shall, to any extent, be
declared invalid or
<PAGE>
unenforceable, the remainder of this Agreement, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each such term shall be valid
and enforceable to the fullest extent permitted by law.
(e) Financing Statement. A financing statement (and when requested by
Secured Party, a fixture filing) placing of record the security interest
hereunder shall be executed and delivered by Debtor to Secured Party
contemporaneously herewith, and Secured Party is authorized to file or record
the same.
(f) Construction. The terms and provisions contained herein shall,
unless the context otherwise requires, have the meaning and be construed as
provided in the Uniform Commercial Code. Reference in this Agreement to the
"Uniform Commercial Code" refers to the Uniform Commercial Code as enacted in
the State of California. Whenever the words "including", "includes" or "include"
are used in this Agreement (including any Exhibit hereto), they shall be read as
though the phrase, "without limitation," immediately followed the same.
(g) Successors and Assigns. The terms "Debtor"and"Secured Party"
include and are binding upon the successors and assigns hereof.
(h) Definition of Prompt Notice. The use herein of the words "prompt
notice", or "notify promptly", or "give notice promptly", or "promptly", or
"immediately," or words of similar import, when used with reference to any
notice to be given or act to be undertaken by Debtor, shall mean notice given or
such act performed in any event not later than five (5) days after the
occurrence of the specified event for which notice or action is required, unless
another time period is expressly made applicable.
(i) Amendment in Writing. This Agreement may not be amended, modified
or changed, nor shall any waiver of any provision hereof be effective, except by
an instrument in writing and signed by the party against whom enforcement of any
amendment, change or modification is sought.
(j) Governing Law. This Security Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California
(without regard to conflicts of law), except where federal law is applicable
(including, without limitation, any applicable federal law preempting state
laws).
(k) Chief Executive Office. Debtor hereby represents and warrants that
Debtor's chief executive office is located in Scottsdale, Arizona.
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement to
Secured Party as of the day and year first above written.
<PAGE>
"DEBTOR"
THE ANTIGUA GROUP, INC.
a Nevada corporation
By: /s/ Gerald K. Whitley
Its: Vice President - Finance
<PAGE>
EXHIBIT "A"
COLLATERAL
Any of the following, whether now owned or hereafter acquired by Debtor:
a. all present and future rights to payment for goods sold or leased or for
services rendered, whether or not represented by instruments or chattel paper,
and whether or not earned by performance; all present and future rights to
payments arising out of the licensing of computer software and systems; all
accounts, contract rights, chattel paper, instruments and documents, proceeds of
any letter of credit of which Debtor is a beneficiary; all forms of obligations
whatsoever owed to Debtor, including any obligations of any subsidiary or
affiliate of Debtor owed to Debtor, together with all instruments and documents
of title representing any of the foregoing; all rights in any returned or
repossessed goods; all rights, security and guarantees with respect to any of
the foregoing, including, without limitation, any right of stoppage in transit;
together with all property included within the definitions of "accounts",
"chattel papers", "documents" and "instruments" set forth in the Uniform
Commercial Code in effect in the State of California (the "UCC");
b. all goods held or intended for sale or lease by Debtor; or furnished or
to be furnished under contracts of service, all raw materials, work in process,
finished goods, materials and supplies of every nature used or usable in
connection with the manufacture, packing, shipping, advertising or sale of any
such goods, together with all property included within the definition of
"inventory" set forth in the UCC;
c. all choses in action, causes of action and all other intangible property
of every kind and nature, including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, processes, operation manuals, techniques,
trade secrets, goodwill, registrations, copyrights, licenses, franchises,
customer lists, tax refunds, tax refund claims, rights of claims against
carriers and shippers, investments and interests in subsidiaries, leases and
rights to indemnification, together with all property which is included within
the definition of "general intangibles" as set forth in the UCC;
A-1
<PAGE>
d. equipment and fixtures, including, without limitation, computer
hardware, computer software, and systems, furniture, machinery, vehicles and
trade fixtures, together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof, together
with all other such items which are included within the definitions of
"equipment" and "fixtures" as set forth in the UCC; and
e. to the extent not otherwise included, all proceeds and products of any
or all of the foregoing.
A-2
<PAGE>
EXHIBIT "B"
1. The legal name of Debtor and the address of its chief executive office
is:
The Antigua Group, Inc..
9319 North 94th Way
Scottsdale, Arizona 85258
2. Debtor has the following places of business:
Address
9319 North 94th Way
Scottsdale, Arizona 85258
B-1
Exhibit 10.42
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE TO CERTAIN OTHER
INDEBTEDNESS OF MAKER AS PROVIDED IN THAT SUBORDINATION AGREEMENT DATED MAY 7,
1997, BY AND AMONG LASALLE BUSINESS CREDIT, INC., IMPERIAL BANK, THE CRUTTENDEN
ROTH BRIDGE FUND, LLC, AND THOMAS E. DOOLEY, JR., AS AGENT.
THREE YEAR NOTE
PROMISSORY NOTE
$5,198,000.00 Phoenix, Arizona
May 7, 1997
FOR VALUE RECEIVED, the undersigned SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia Corporation (hereinafter called "Maker"), promises to pay to
the order of THOMAS E. DOOLEY, JR., as agent for the Sellers, defined below, at
12401 East Saddle Horn Drive, Scottsdale, Arizona 85259 (together with all
subsequent holders of this Note, hereinafter called "Payee"), or at such other
place as Payee may from time to time designate in writing, the principal sum of
FIVE MILLION ONE HUNDRED NINETY-EIGHT THOUSAND AND NO/100ths DOLLARS
($5,198,000.00), plus interest calculated on a daily basis (based on a 360-day
year) from the date hereof on the principal balance from time to time
outstanding as hereinafter provided, payable as follows:
A. Interest shall accrue at the rate of Eight and One Quarter percent (8
1/4%) per annum.
B. All accrued interest shall be due and payable quarterly on the first
day of each August, November, February and May, commencing August
1997.
C. In addition to accrued interest, a repayment of principal in the
amount of $95,933.33 shall be due and payable quarterly on the first
day of each August, November, February and May, commencing August
1997.
D. Upon any Securities Offering that is not a Qualified Securities
Offering, a repayment of principal in the amount of $1,299,500.00
shall be due and payable immediately upon demand by Payee.
E. Upon any Qualified Securities Offering, the entire outstanding
principal balance of this Note shall be due and payable immediately
upon demand by Payee.
F. Notwithstanding any other provision hereof, if not earlier due and
payable, the entire unpaid principal balance, all accrued and unpaid
interest, and all other
<PAGE>
amounts payable hereunder shall be due and payable in full on May 7,
2000.
As used in this Note, "Securities Offering" means any registered equity
securities offering in the United States of America of the common stock of Maker
(other than on Form S-4, or securities issued pursuant to an employee benefit
plan or in connection with a transaction subject to Rule 145 of the Securities
Act of 1933); and "Qualified Securities Offering" means a Securities Offering in
which the gross proceeds, together with the gross proceeds of all prior
Securities Offerings, total at least $12,000,000,00.
Upon a Securities Offering, or at any time and from time to time
thereafter, at the election of Payee, all or any part of the outstanding
principal amount of this Note may be converted into shares of Maker's common
stock at the lesser of: (i) $7.50 per share, or (ii) the price of such common
stock in the first Securities Offering, (hereinafter referred to as the
"Conversion Price"). If the entire outstanding principal balance of this Note is
not converted at the time of the Securities Offering, the Conversion Price shall
be adjusted upon certain events affecting Maker's common stock, as provided in
Exhibit "A" attached hereto. All shares of common stock of Maker obtained by
Payee as a result of its exercise of the conversion rights in this Note shall be
subject to the Registration Rights Agreement attached hereto as Exhibit "B".
Maker shall not have any right to prepay this Note prior to a Securities
---
Offering. Thereafter Maker may prepay this Note in full but not in part, without
penalty, upon not less than ten (10) business days prior written notice of the
proposed prepayment; subject, however, to any exercise by Payee of its
conversion rights under this Note at any time prior to receipt of the
prepayment.
Maker agrees to an effective rate of interest that is the rate stated above
plus any additional rate of interest resulting from any other charges in the
nature of interest paid or to be paid by or on behalf of Maker, or any benefit
received or to be received by Payee, in connection with this Note.
Principal, interest and all other sums payable hereunder shall be paid in
lawful money of the United States of America in immediately available funds.
If any payment required under this Note is not paid when due, then Maker
shall pay a "late charge" equal to three percent (3%) of the amount of that
payment. This late charge may be assessed without notice, shall be immediately
due and payable and shall be in addition to all other rights and remedies
available to Payee.
All payments on this Note shall be applied first to the payment of any
costs, fees or other charges incurred in connection with the indebtedness
evidenced hereby, next to the payment of
<PAGE>
accrued interest and then to the reduction of the principal balance.
This Note is executed pursuant to that Stock Purchase Agreement, dated
April 21, 1997, among the parties identified on the attached Schedule 1 (the
"Sellers), Maker, and Southhampton Enterprises, Inc., a Texas corporation
("SEI"), which provides for the purchase by SEI from the Sellers of all of the
issued and outstanding capital stock of The Antigua Group, Inc., a Nevada
corporation ("Antigua") upon the terms and conditions set forth therein (the
"Stock Purchase Agreement"). This Note is secured by certain security agreements
and pledge agreements, of even date herewith, executed by Maker, SEI, and
Antigua. This Note and such security agreements and pledge agreements, together
with all other documents or instruments evidencing, securing, or executed or
delivered in connection with the indebtedness evidenced by this Note, and which
specifically refer to this Note, are hereinafter called the "Transaction
Documents."
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(1) the failure to pay any sum due and owing under this Note or under
any of the other Transaction Documents and such failure continues for a period
of ten days;
(2) the failure to perform or observe the covenants, conditions,
provisions or agreements of this Note or any of the other Transaction Documents
(other than a failure described in one or more other subparagraphs of this
provision) and such failure continues for a period of fifteen days after notice
thereof to Maker;
(3) any representation by Maker in the Transaction Documents shall
prove to have been false in any material respect;
(4) the filing by Maker or any endorser, guarantor or surety hereof
(or against Maker or any endorser, guarantor or surety hereof to which Maker or
such endorser, guarantor or surety acquiesces or which is not dismissed within
60 days after the filing thereof) of any proceeding under the federal bankruptcy
laws of the United States of America, the Bankruptcy and Insolvency Act (Canada)
or other similar laws now or hereafter in effect; or the entry of an order for
relief under such laws with respect to Maker or any endorser, guarantor or
surety hereof;
(5) the appointment of a receiver, trustee, custodian or conservator
of any assets of Maker or any endorser, guarantor or surety hereof;
(6) the insolvency, assignment for the benefit of creditors, failure
to pay its debts as they mature or admission in writing of its inability or
failure to pay its debts as they mature, by Maker or any endorser, guarantor or
surety hereof;
<PAGE>
(7) the liquidation, termination or dissolution of Maker or any
endorser, guarantor or surety hereof, if other than a natural person;
(8) any attachment, garnishment, levy or execution upon or judicial
seizure of any assets of Maker or any endorser, guarantor or surety hereof in
excess of $50,000.00 in the aggregate;
(9) the existence or filing of any lien or encumbrance in excess of
$50,000.00 in the aggregate, other than any lien or encumbrance permitted by the
Transaction Documents, against any collateral or security for this Note;
(10) the institution of any legal action or proceedings to enforce any
lien or encumbrance in excess of $50,000.00 in the aggregate upon any collateral
or security for this Note;
(11) the occurrence of any default under any financing to Maker by
Lasalle Business Credit, Inc., Imperial Bank, or The Cruttenden Roth Bridge
Fund, LLC, or under any other financing to Maker in excess of $50,000.00 in the
aggregate, which default remains uncured after any applicable notice and period
for cure provided in connection therewith;
(12) except as permitted in the Transaction Documents, any sale,
transfer, assignment or other disposition by Maker of any of the outstanding
capital stock of Southhampton Enterprises, Inc., a Texas corporation ("SEI"), or
any sale, transfer, assignment or other disposition by SEI of any of the
outstanding capital stock of the Antigua Group, Inc., a Nevada corporation;
(13) the direct or indirect ownership by any single person or entity
of more than fifty percent (50%) of the outstanding capital stock of Maker.
Upon the occurrence of any Event of Default, at the option of Payee, the
entire unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable hereunder
shall bear interest at Thirteen and One Quarter percent (13 1/4%) per annum.
Maker shall pay all costs and expenses, including reasonable attorneys' fees and
court costs, incurred in the collection or enforcement of all or any part of
this Note. All such costs and expenses shall be secured by the Transaction
Documents. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Payee.
Failure of Payee to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event
<PAGE>
of any subsequent default or in the event of continuance of any existing default
after demand for strict performance hereof.
Maker, sureties, guarantors and endorsers hereof: (a) agree to be jointly
and severally bound, (b) severally waive demand, diligence, presentment for
payment, protest and demand, and notice of extension, dishonor, protest, demand
and nonpayment of this Note, (c) consent that Payee may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt evidenced by this Note, at the request of any other person primarily liable
hereon, and such consent shall not alter nor diminish the liability of any
person, and (d) agree that Payee may setoff at any time any sums or property
owed to any of them by Payee.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Stock Purchase Agreement
for the giving of notices.
This Note shall be governed by and construed according to the laws of the
State of Arizona.
All exhibits and schedules attached to this Note are incorporated herein by
each reference thereto.
Payee may bring any action or proceeding to enforce or arising out of this
Note in any court of competent jurisdiction. Any action or proceeding brought by
Maker arising out of this Note shall be brought solely in a court of competent
jurisdiction located in the County of Maricopa, State of Arizona, or in the
United States District Court for the District of Arizona. Maker waives any
objection which it may now or hereafter have to venue of any such action or
proceeding and waives any right to seek removal of any action or proceeding
commenced in accordance herewith. If either party commences any action or
proceeding arising out of this Note, in a court located in the County of
Maricopa, State of Arizona, or the United States District Court for the District
of Arizona, the other party hereby agrees that it will submit and does hereby
irrevocably submit to the personal jurisdiction of such courts and will not
attempt to have such action dismissed, abated, or transferred on the ground of
forum non convenience or similar grounds; provided, however, that nothing
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contained herein shall prohibit any party from seeking, by appropriate motion,
to remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. If such action is so removed,
however, neither party shall seek to transfer such action to any other district,
nor shall either party seek to transfer to any other district any action which
the other party originally commences in such federal court.
<PAGE>
Maker agrees that a summons and complaint or equivalent documents
commencing an action or proceeding in any court shall be validly and properly
served and shall confer personal jurisdiction over Maker if served upon Bonn,
Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona 85004,
Attention: John M. Welch, Esq., whom Maker hereby designates and appoints as
Maker's authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in such action or proceeding in any such
court. Maker shall be sent, by certified mail to Maker's notice address as
provided herein, a copy of such summons and complaint at the time of service
upon such agent; provided, however, that any such copy shall be sent solely as a
courtesy for Maker and its failure to receive such copy shall in no way affect
the validity and propriety of the service made on Maker through such agent.
Maker agrees that if it desires to make any change in its agent for service,
such change shall be subject to Payee's written approval, which approval shall
not be unreasonably withheld.
MAKER AND PAYEE (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH
THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS, THE INDEBTEDNESS EVIDENCED BY THIS
NOTE, ANY COLLATERAL OR SECURITY FOR THIS NOTE, OR ANY DEALINGS BETWEEN MAKER
AND PAYEE IN CONNECTION WITH THE TRANSACTIONS THAT ARE THE SUBJECT OF THIS NOTE
AND THE OTHER TRANSACTION DOCUMENTS, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION
SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER INVOLVING A CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION BASED IN CONTRACT, TORT OR OTHERWISE. EITHER PARTY MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT
OTHERWISE HAVE TO TRIAL BY JURY.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia Corporation
By /s/ L. Steven Haynes
Its President
MAKER
<PAGE>
SCHEDULE 1
Sellers
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Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the
Thomas E. Dooley and Gail Dooley Revocable Trust of 1988, dated
10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors
Act fbo Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors
Act fbo Shawn T. Dooley
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable
Intervivos Trust dated December 31, 1982
Peter J. Dooley, Trustee under the 1989 Trust Agreement
established separate irrevocable Gift Trusts f/b/o the children
of Thomas and Gail Dooley dated March 7, 1989
<PAGE>
Exhibit A
ADJUSTMENT OF CONVERSION PRICE
A. Scheduled Adjustments in Conversion Price. The Conversion Price
(subject to further adjustment as set forth in Sections B, C and D hereof) for
each share of Maker's common stock ("Common Stock") into which the Note is
convertible shall be the lesser of (i) $7.50 per share, or (ii) the price of
such Common Stock in the first Securities Offering.
B. Adjustment for Dividends in Other Stock, Property;
Reclassifications. In case at any time or from time to time after the date of
the Securities Offering, the holders of the Common Stock of Maker (or any shares
of stock or other securities at the time receivable upon the conversion of this
Note) shall have received, or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor,
(1) Common Stock or other or additional stock or other
securities or property (other than cash) by way of dividend,
(2) any cash paid or payable out of any source other than
retained earnings (determined in accordance with generally accepted
accounting principles), or
(3) Common Stock or other or additional stock or other
securities or property (including cash) by way of stock-split,
spin-off, reclassification, combination or shares or similar corporate
arrangement,
then and in each such case Payee, upon the conversion of this Note, shall be
entitled to receive the amount of stock and other securities and property
(including cash in the cases referred to in clauses [2] and [3] above) which
such Payee would hold on the date of such exercise if on the date of the
Securities Offering he had been the holder of record of the number of shares of
Common Stock of Maker into which this Note was then convertible and had
thereafter, during the period from the date of the Securities Offering through
the date of such exercise, retained such shares and/or all Common Stock or other
or additional stock and other securities and property (including cash in the
cases referred to in clauses [2] and [3] above) receivable by Payee as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections B, C and D.
C. Adjustment for Reorganization, Consolidation, Merger. In case of any
reorganization of Maker (or any other corporation the stock or other securities
of which are at the time receivable upon the conversion of this Note) after the
date of the Securities Offering, or in case, after the date of the Securities
Offering, Maker (or any such other corporation) shall consolidate with or merge
into another corporation or convey all or substantially all its assets to
another corporation, in each such case Payee, upon the conversion hereof as
provided herein at any time after the consummation of such reorganization,
consolidation, merger or conveyance,
Exhibit A
Page 1 of 3
<PAGE>
shall be entitled to receive, in lieu of the stock or other securities and
property receivable upon the conversion of this Note prior to such consummation,
the stock or other securities or property to which such Payee would have been
entitled upon such consummation if such Payee had converted this Note
immediately prior thereto, all subject to further adjustment as provided in
Sections B and D; in each such case, the terms of this Note shall be applicable
to the shares of stock or other securities or property receivable upon the
conversion of this Note after such consummation.
D. Stock Split and Reverse Stock Split. if Maker at any time or from
time to time after the date of the Securities Offering effects a subdivision of
the outstanding Common Stock, the Conversion Price (or Adjusted Conversion
Price) then in effect immediately before that subdivision shall be
proportionately decreased and the number of shares of Common Stock theretofore
receivable upon the conversion of this Note shall be proportionately increased.
If Maker at any time or from time to time after the date of the Securities
Offering combines the outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price (or Adjusted Conversion Price) then in effect
immediately before that combination shall be proportionately increased and the
number of shares of Common Stock theretofore receivable upon the conversion of
this Note shall be proportionately decreased. Each adjustment under this Section
D shall become effective at the close of business on the date the subdivision or
combination becomes effective.
E. No Dilution or Impairment. Maker will not, by amendment of its
Articles of Incorporation or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Note, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of Payee against dilution or other
impairment. Without limiting the generality of the foregoing, Maker (a) will not
increase the par value of any share of stock receivable upon the conversion of
the Note above the amount payable therefor upon such exercise, and (b) will take
all such action as may be necessary or appropriate in order that Maker may
validly and legally issue fully paid and nonassessable shares upon the
conversion of the Note at the time outstanding.
F. Other Action Affecting Common Stock. In case after the date hereof
Maker shall take any action affecting the Common Stock other than an action
described in any of the foregoing Sections A through D hereof, inclusive, which
in the opinion of Maker's Board of Directors would have a materially adverse
effect upon the rights of the Payee, the Conversion Price then in effect and the
securities issuable upon conversion of this Note shall be adjusted in such
manner and at such time as the Board of Directors may in good faith determine to
be equitable in the circumstances.
G. Accountant Certificate as to Adjustment. In each case of an
adjustment in the Conversion Price or in shares of Common Stock or other stock,
securities or property receivable on the conversion of the Note, Maker at its
expense shall cause independent public accountants of recognized standing
selected by Maker (who may be the independent public accountants then
Exhibit A
Page 2 of 3
<PAGE>
auditing the books of Maker) to compute such adjustment in accordance with the
terms of the Note and prepare a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based, including a
statement of (a) the consideration received or to be received by Maker for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Conversion Price in effect following such adjustment.
Maker will forthwith mail a copy of each such certificate to Payee.
H. Adjustment of Other Securities. If at any time, as a result of any
adjustment made pursuant to this Exhibit A, the Payee thereafter shall become
entitled to receive, upon conversion of this Note, any securities other than
shares of Common Stock, thereafter the number of such other securities so
receivable upon exercise hereof shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained above in this Exhibit A and the
provisions of this Exhibit A with respect to the Common Stock shall apply on
like terms to any such other securities.
I. Notices of Record Date. In case after the date of the Securities
Offering,
(1) Maker shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the
conversion of the Note) or Preferred Stock for the purpose of entitling
them to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or
(2) of any capital reorganization of Maker, any
reclassification of the capital stock of Maker, any consolidation or
merger of Maker with or into another corporation, or any conveyance of
all or substantially all of the assets of Maker to another corporation,
or
(3) of any voluntary dissolution, liquidation or winding-up of
Maker,
then, and in each such case, Maker will mail or cause to be mailed to Payee a
notice specifying, as the case may be, (a) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (b) the date on
which such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the conversion of the Note) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up such notice shall be mailed at least 30
days prior to the date therein specified.
Exhibit A
Page 3 of 3
<PAGE>
Exhibit B
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), which shall be
effective as of May 7, 1997, is by and between Southhampton Enterprises Corp., a
British Columbia corporation (the "Company"), and Thomas E. Dooley, Jr., as
agent (the "Shareholder");
RECITALS:
A. The Company and the Shareholder are parties to a Stock Purchase
Agreement, dated April 21, 1997, (the "Stock Purchase Agreement").
B. Pursuant to the Stock Purchase Agreement, the Shareholder is
acquiring shares of the Company's common stock, no par value.
C. Pursuant to the Stock Purchase Agreement, the Shareholder is also
acquiring warrants to purchase shares of the Company's common stock, and
promissory notes which may be converted into the Company's common stock.
D. The shares of the Company's common stock which will or may be issued
pursuant to the Stock Purchase Agreement, as described in Recital Sections B and
C, are referred to in this Agreement as the "Common Stock."
E. The Common Stock will not be registered under the Securities Act of
1933, as amended, or under the securities laws of any state, in reliance upon
exemptions from registration thereunder.
In consideration of the mutual covenants and obligations hereinafter
set forth, the Company and the Shareholder, hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the terms listed in
this Section shall have the meanings set forth below:
(a) "Affiliate" of any Person means any other Person who
either directly or indirectly is in control of, is controlled by or is under
common control with such Person; provided that for purposes of this definition
an investment entity shall be deemed to be controlled by its investment manager,
investment advisor or general partner.
(b) "Business Day" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a day on which banking institutions in the City
of Phoenix are authorized by law, regulation or executive order to close.
Exhibit B
Page 1 of 12
<PAGE>
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are effect from time to time.
(d) "Holder" shall mean the Shareholder and his successors,
assigns and transferees (subject to Section 10 hereof). For purposes of this
Agreement, the Company may deem the registered holder of a Registrable Security
as the Holder thereof (subject to Section 10 hereof).
(e) "Person" shall mean an individual, partnership,
corporation, limited liability company, joint venture, trust or unincorporated
organization, a government or agency or political subdivision thereof or any
other entity.
(f) "Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by a prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference in such prospectus.
(g) "Registrable Securities" shall mean (i) all shares of
Common Stock issued or issuable to the Shareholder pursuant to the Stock
Purchase Agreement as further described in Recital Sections B and C; and (ii)
any other securities issued as a result of or in connection with any stock
dividend, stock split or reverse stock split, combination, recapitalization,
reclassification, merger or consolidation, exchange or distribution in respect
of the shares of Common Stock referred in to (i) above.
(h) "Registration Expenses" shall have the meaning set forth
in Section 6 hereof.
(i) "Registration Statement" shall mean any registration
statement which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus included therein, all
amendments and supplements to such Registration Statement including post
effective amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
(j) "Registration Termination Date" shall mean the earlier to
occur of (i) the date that is five years following the date hereof or (ii) the
first date upon which the Registrable Securities may be sold without limitation
under Rule 144 under the Securities Act (as such Rule may be amended from time
to time), other than the limitations set forth in paragraphs (c), (f) and (h) of
such Rule, as determined by the opinion of counsel to the Company (which shall
be reasonably satisfactory to counsel to the Holders).
(k) "SEC" shall mean the U.S. Securities and Exchange
Commission, or any other U.S. federal agency at the time administering the
Securities Act.
Exhibit B
Page 2 of 12
<PAGE>
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
(m) "Underwritten Offering" shall mean an offering that is
registered under the Securities Act in which securities of the Company are sold
pursuant to a firm commitment underwriting, to an underwriter at a fixed price
for reoffering to the public or pursuant to agency or best efforts arrangements
with an underwriter.
SECTION 2. Securities Subject to this Agreement. The Registrable
Securities are entitled to the benefits of this Agreement.
SECTION 3. Demand Registration.
(a) Demand Registration (i) Upon the written request of
Holders owning not less than 50% of the Registrable Securities (excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act), and provided that
there is then no effective Registration Statement in effect with respect to such
Registrable Securities, the Company will effect, in accordance with the terms of
this Agreement, the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register by such Holders,
subject to Section 3(c) hereof; provided that the number of securities requested
to be so registered shall be not less than 50% of the Registrable Securities
held by such requesting Holders. No such request may be made earlier than the
date on which the Company has published financial results covering at least 30
days of "post-merger" combined results of operations (with respect to the
transaction contemplated by the Stock Purchase Agreement (the "Demand
Commencement Date"), in accordance with the SEC interpretations of APB Opinion
No. 16, as determined by the Company. The Company shall promptly notify the
Holders of the Demand Commencement Date. In addition, no such request shall be
made during the 90-day period following the completion of any Underwritten
Offering of the Company's shares of Common Stock and no such request shall be
made to include any Registrable Securities in the initial public offering of
securities of the Company. The Company shall not be obligated to effect more
than two demand registrations pursuant to this Section 3, provided that the
Company shall not be required to effect more than one registration on a form
other than S-3 (or any successor to such form).
(ii) Expenses. The Company shall pay all Registration
Expenses with respect to any demand registration pursuant to this Section 3.
(b) Effectiveness of Registration Statement. The Company
agrees to use its best efforts to (i) cause the Registration Statement relating
to any demand registration pursuant to this Section 3 to become effective under
the Securities Act as promptly as practicable (ii) thereafter keep such
Registration Statement effective continuously for the period specified in the
next succeeding paragraph; and (iii) prevent the happening of any event of the
kinds described in clauses (4) or (5) of Section 5(a)(ii) hereof.
Exhibit B
Page 3 of 12
<PAGE>
A demand registration requested pursuant to this Section 3
will not be deemed to have been effected unless the Registration Statement
relating thereto has become effective under the Securities Act and remain
continuously effective (except as otherwise permitted under this Agreement) for
a period ending on the earlier of:
(A) in the case of a Registration Statement on Form S-3
(subject to Section 5(c) below), the Registration Termination
Date; or
(B) in the case of a Registration Statement on a Form other
than Form S-3, the date which is 90 days after the effective
date of such Registration Statement; or
(C) the date on which all Registrable Securities covered by
such Registration Statement have been sold and the
distribution contemplated thereby has been completed.
(c) Inclusion of Other Securities. The Company, and any other
holder of the Company's securities that has registration rights, may include its
securities in any demand registration effected pursuant to this Section 3;
provided, however, that if the managing underwriter or underwriters of any
Underwritten Offering contemplated thereby advise the Holders in writing that
the total amount or kind of securities which such Holder, the Company or any
such other holder intends to include in such proposed public offering is
sufficiently large to affect the success of the proposed public offering
requested by the Holder or Holders materially and adversely, then the amount or
kind of securities to be offered for the account of the Company or any such
other holder shall be reduced to the extent necessary to reduce the total amount
or kind of securities to be included in such proposed public offering to the
amount or kind recommended by such managing underwriter or underwriters.
(d) Form. Registrations under this Section 3 will be on a form
permitted by the rules and regulations of the SEC selected by the Company;
provided, however, the Company may use Form S-3 if at the time of filing such
Registration Statement the Company is eligible to use such Form.
(e) Manner of Sale. The Company may (but shall have no
obligation to) cause any Registrable Securities that are the subject of a demand
registration pursuant to this Section 3 to be sold in an Underwritten Offering
in which event the Company shall have the right to designate the managing
underwriter or underwriters thereof (which shall be reasonably satisfactory to
the Holders whose Registrable Securities are the subject of such demand
registration).
SECTION 4. Piggyback Registration.
(a) Piggyback Registration. If the Company at any time
proposes to file a registration statement with respect to any class of equity
securities, whether for its own account (other than a registration statement on
Form S-4 or S-8, or any successor or substantially similar
Exhibit B
Page 4 of 12
<PAGE>
form or a registration statement covering (i) an employee stock option, stock
purchase or compensation plan or securities issued or issuable pursuant to any
such plan or (ii) a dividend reinvestment plan) or for the account of a holder
of securities of the Company pursuant to registration rights granted by the
Company (a "Requesting Securityholder"), then the Company shall in each case
give written notice of such proposed filing to all Holders of Registrable
Securities at least 20 Business Days before the anticipated filing date of any
such registration statement by the Company, and such notice shall offer to all
Holders the opportunity to have any or all of the Registrable Securities held by
such Holders included in such registration statement. Each Holder of Registrable
Securities desiring to have his Registrable Securities registered under this
Section 4 shall so advise the Company in writing within 10 Business Days after
the date of receipt of such notice (which request shall set forth the amount of
Registrable Securities for which registration is requested), and the Company
shall include in such Registration Statement all such Registrable Securities so
requested to be included therein; provided, however, that if such Registration
Statement is for an Underwritten Offering, the Holders of Registrable Securities
included therein shall join in the underwriting on the same terms and conditions
as the Company or the Requesting Securityholders except that the Holders of
Registrable Securities shall not be required to give any representations and
warranties relating to the Company, and shall execute any underwriting
agreement, "lock-up" letters or other customary agreements or documents executed
by the Company or the Requesting Securityholders in connection therewith.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
any such proposed public offering advise the Holders in writing that the total
amount or kind of securities which the Holders of Registrable Securities, the
Company, the Requesting Securityholders and any other Persons intended to be
included in such proposed public offering is sufficiently large to affect the
success of such proposed public offering materially and adversely, then the
amount or kind of securities to be offered for the accounts of the Holders of
Registrable Securities shall be reduced pro rata, together with the amount or
kind of securities to be offered for the accounts of any other Persons
requesting registration of securities pursuant to rights similar to the rights
of the Holders under this Section 4, to the extent necessary to reduce the total
amount or kind of securities to be included in such proposed public offering to
the amount or kind recommended by such managing underwriter or underwriters
before the securities offered by the Company or any Requesting Securityholder
are so reduced. Notwithstanding the foregoing, however, the Holders shall have
no right to include any Registrable Securities in the Company's initial public
offering of securities.
(b) No Obligation. Neither the giving of notice by the Company
nor any request by the Holders to register Registrable Securities pursuant to
Section 4(a) shall in any way obligate the Company to file any such Registration
Statement. The Company may, at any time prior to the effective date thereof,
determine not to offer the securities to which Registration Statement relates
and/or withdraw the Registration Statement from the SEC, without liability of
the Company to the Holders.
SECTION 5. Registration Procedures and Other Agreements.
(a) General. In connection with the Company's registration
obligations pursuant to Section 3 and, to the extent applicable thereto, Section
4 hereof, the Company will:
Exhibit B
Page 5 of 12
<PAGE>
(i) prepare and file with the SEC a new Registration
Statement or such amendments and post-effective amendments to an existing
Offering Registration Statement as may be necessary to keep such Registration
Statement effective as set forth in Section 3(b); provided, however, that no
Registration Statement shall be required to remain in effect after all
Registrable Securities covered by such Registration Statement have been sold and
distributed as contemplated by such Registration Statement;
(ii) notify each selling Holder promptly (1) when a new
Registration Statement, amendment thereto, Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any
new Registration Statement or posteffective amendment, when it has become
effective, (2) of any request by the SEC for amendments or supplements to any
Registration Statement or Prospectus or for additional information, (3) of the
issuance by the SEC of any comments with respect to any filing, (4) of any stop
order suspending the effectiveness of any Registration Statement or the
initiation or threatening of any proceedings for such purpose, (5) of any
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (6) of the happening of any event which makes any statement of a
material fact made in any Registration Statement, Prospectus or any document
incorporated therein by reference untrue or which requires the making of any
changes in any Registration Statement, Prospectus or any document incorporated
therein by reference in order to make the statements therein (in the case of any
Prospectus, in the light of the circumstances under which they were made) not
misleading; and make every reasonable effort to obtain as promptly as
practicable the withdrawal of any order or other action suspending the
effectiveness of any Registration Statement or suspending the qualification or
registration (or exemption therefrom) of the Registrable Securities for sale in
any jurisdiction;
(iii) furnish to each selling Holder, without charge, at
least one manually signed or "edgarized" copy and as many conformed copies as
may reasonable be requested, of the then effective Registration Statement and
any post-effective amendment thereto, and one copy of all financial statements
and schedules, all documents incorporated therein by reference and all exhibits
thereto (including those incorporated by reference);
(iv) deliver to each selling Holder, without charge, as
many copies of the then effective Prospectus (including each prospectus subject
to completion) and any amendments or supplements thereto as such Holder may
reasonably request;
(v) use its best efforts to register or qualify under
the securities or blue sky laws of such jurisdictions as the selling Holders
reasonably request in writing and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the then effective Registration Statement;
provided, however, that the Company will not be required to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify, or (y) subject itself to general taxation in any such jurisdiction, or
(z) register or qualify such Registrable Securities under the securities or blue
sky laws of any jurisdiction in which the Company does not then maintain a
currently effective registration or qualification of any of its securities;
Exhibit B
Page 6 of 12
<PAGE>
(vi) upon the occurrence of any event contemplated by
clause (6) of Section 5(a)(ii) hereof, as promptly as practicable (in light of
the circumstances causing the occurrence of such event) prepare a supplement or
post-effective amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made, not misleading;
(vii) use reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on each securities
exchange (or quotation system operated by a national securities association) on
which identical securities issued by the Company are then listed, and enter into
customary agreements including, if necessary, a listing application and
indemnification agreement in customary form;
(viii) if the registration is in connection with an
Underwritten Offering, enter into an underwriting agreement with respect to the
Registrable Securities, which agreement shall contain provisions that are
customary in connection with underwritten secondary offerings, including
representations and warranties, opinions of counsel, letters of accountants and
indemnification provisions with underwriters that acquire Registrable
Securities;
(ix) otherwise use its best efforts to comply in all
material respects with all applicable rules and regulations of the SEC relating
to such registration and the distribution of the securities being offered and
make generally available to its securities holders earnings statements
satisfying the provisions of Section 11 (a) of the Securities Act and complying
with Rule 158 of the SEC thereunder;
(x) cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc.; and
(xi) make available for inspection by a representative
of selling Holders and any attorney or accountant retained by such selling
Holders, all financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by, and to cooperate
fully with, any such representative, underwriter, attorney or accountant in
connection with such registration, and otherwise to cooperate fully in
connection with any due diligence investigation; provided that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company, prior to the release or disclosure to them of any such information,
records or documents.
(b) Each selling Holder shall furnish to the Company, upon
request, in writing such information and documents as, in the opinion of counsel
to the Company may be reasonably required to prepare properly and file such
Registration Statement in accordance with the applicable provisions of the
Securities Act.
Exhibit B
Page 7 of 12
<PAGE>
SECTION 6. Registration Expenses. All expenses incident to the Company
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of one
counsel in connection with blue sky qualifications or registrations (or the
obtaining of exemptions therefrom) of the Registrable Securities), the
reasonable fees and disbursements of counsel retained by the Holders (which
counsel shall be reasonably satisfactory to the Company), printing expenses
(including expenses of printing Prospectuses), messenger and delivery expenses,
internal expenses (including all salaries and expenses of its officers and
employees performing legal or accounting duties), fees and disbursements of its
counsel and its independent certified public accountants (including the expenses
of any special audit or "comfort" letters required by or incident to such
performance or compliance), securities acts liability insurance (if the Company
elects to obtain such insurance), fees and expenses of any special experts
retained by the Company in connection with any registration hereunder and the
fees and expenses of any other Person retained by the Company (all such fees and
expenses being referred to as "Registration Expenses"), shall be borne by the
Company, whether or not any Registration Statement becomes effective.
SECTION 7. Suspension of Sales under Certain Circumstances.
(a) Upon receipt of any notice from the Company that
dispositions under the then current Prospectus must be discontinued and
suspended, whether as a result of an event described in Section 5(a)(ii)(4),(5)
or (6) hereof or otherwise, each Holder will forthwith discontinue and suspend
disposition of Registrable Securities pursuant to such Prospectus until (i) the
Holders are advised in writing by the Company that a new Registration Statement
covering the offer of Registrable Securities has become effective under the
Securities Act, or (ii) the Holders receive copies of a supplemented or amended
Prospectus contemplated by Section 5(a) hereof, or (iii) the Holders are advised
in writing by the Company that the use of the Prospectus may be resumed.
(b) If at any time following the date hereof any of the
Company's shares of Common Stock are to be sold pursuant to an Underwritten
Offering, then for the period commencing 45 days prior to, and expiring 180 days
after, the effective date of such Underwritten Offering, none of the Holders
will effect any public sale or distribution of any Registrable Securities or any
other shares of Common Stock of the Company then owned by such Holders, other
than pursuant to such Underwritten Offering (if any Registrable Securities are
included in such Underwritten Offering).
SECTION 8. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, but without
duplication, each Holder of Registrable Securities, any their respective
officers and directors, if any, and each Person who controls such Holder within
the meaning of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement of a
material fact in, or any omission of
Exhibit B
Page 8 of 12
<PAGE>
a material fact required to be stated in, any Registration Statement or in any
preliminary or final Prospectus, or any amendment or supplement thereto, or
necessary to make the statements therein (in the case of a Prospectus in light
of the circumstances under which they were made) not misleading, except insofar
as the same are caused by or contained in any information furnished in writing
to the Company by any Holder or any underwriter expressly for use therein;
provided that the Company will not be liable pursuant to this Section 8(a) if
such losses, claims, damages, liabilities or expenses have been caused by the
failure of any selling Holder to deliver a copy of the Registration Statement or
Prospectus, or any amendments or supplements thereto, after the Company has
furnished such copies to such Holder.
(b) Indemnification by the Holders of Registrable Securities.
In connection with any Registration Statement covering Registrable Securities of
any Holder, such Holder will furnish to the Company in writing such information
as the Company reasonably requests for use in connection with any such
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, but without duplication, the Company, its
officers, directors, shareholders, employees, advisors and agents, and each
Person who controls the Company (within the meaning of the Securities Act),
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact in, or any omission of a material fact
required to be stated in, the Registration Statement or in any preliminary or
final Prospectus, or any amendment or supplement thereto, or necessary to make
the statements therein (in the case of a Prospectus in light of the
circumstances under which they were made) not misleading, but only to the extent
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
therein. If the offering to which the Registration Statement relates is an
Underwritten Offering, each Holder agrees to enter into an underwriting
agreement in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each Person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such Holder of the
Company.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided, however,
that any Person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in, but not control, the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such indemnified Person, unless (A) the indemnifying party shall have failed to
assume the defense of such claim and employ counsel reasonably, satisfactory to
the indemnified party in a timely manner, or (B) in the reasonable judgment of
any such Person, based upon written advice of its counsel, a conflict of
interest may exist between such Person and the indemnifying party with respect
to such claims (in which case, if the Person notifies the indemnifying party in
writing, that such Person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of any such claim as to which such conflict of interest may
exist). The indemnifying party will not be subject to any liability for any
settlement made without its consent. No indemnified party will be required to
consent to the entry of any
Exhibit B
Page 9 of 12
<PAGE>
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of the claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, as well as one local counsel in each relevant jurisdiction.
(d) Contribution. If for any reason the indemnification
provided for in Section 8(a) or 8(b) hereof is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by Sections 8(a) and
8(b) hereof, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentations.
SECTION 9. Current Public Information. The Company agrees that it will
file all reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
it ceases to be required to file such reports, it will, upon the request of
Holders owning not less than 51% of the Registrable Securities [excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act], make publicly
available other information), and it will take such further action as may
reasonably be required, in each case to the extent required from time to time to
enable the Holders to sell Registrable Securities without registration under the
Securities Act within the limitations of the applicable exemptions provided by
(x) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (y) any similar regulation hereinafter adopted by the SEC.
SECTION 10. No Inconsistent Agreements. The Company has not previously
entered into and shall not in the future enter into any agreement, arrangement
or understanding with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
SECTION 11. Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, without the written
consent of (a) the Company and (b) the Holders owning not less than 51% of the
Registrable Securities (excluding any Registrable Securities that have
previously been sold pursuant to a Registration Statement hereunder or Rule 144
under the Securities Act).
SECTION 12. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, facsimile, or air-courier guaranteeing overnight delivery:
Exhibit B
Page 10 of 12
<PAGE>
(a) If to a Holder of Registrable Securities, at the most
current address for such Holder, as it appears on the books of the Company; and
(b) If to the Company: The Antigua Group, Inc., 9319 North
94th Way, Scottsdale, AZ 85258, Attention: Chief Executive Officer; facsimile
no. 860-9609, or at such other address as may be designated from time to time by
notice given in accordance with the provisions of this Section 11.
All such notices and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery or
facsimile, on the date of such delivery, (ii) in the case of air courier, on the
Business Day after the date when sent, and (iii) in the case of mailing, on the
fifth Business Day following such mailing.
SECTION 13. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, transferees and assigns of the
parties hereto; provided, however, that (a) no transferee in any transfer made
in reliance on Rule 144 under the Securities Act shall have any rights as a
Holder under this Agreement; and (b) no Person to whom the Registrable
Securities are transferred shall have any rights under this Agreement as a
Holder unless such Person agrees to be bound by the terms and conditions of this
Agreement.
SECTION 14. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
SECTION 15. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Arizona without reference to principles of conflict of
laws. The parties to this Agreement hereby consent to the jurisdiction in
personam of the Superior Court of the State of Arizona, in and for the County of
Maricopa or of the United States District Court for the District of Arizona, in
any legal proceeding to enforce any obligations under this Agreement, and agree
that venue in Maricopa County is not inconvenient.
SECTION 16. Construction. The Section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. All terms used in one number or
gender shall be construed to include any other number or gender as the context
may require. Whenever the words "include," "includes," or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 17. Entire Agreement. This Agreement, together with any other
documents and certificates delivered hereunder and the Stock Purchase Agreement,
state the entire agreement of the Company and the Shareholder with respect to
the subject matter hereof, merge all prior negotiations, agreements and
understandings, if any, and state in full all representations, warranties and
agreements which have induced this Agreement.
Exhibit B
Page 11 of 12
<PAGE>
IN WITNESS WHEREOF, the Company and the Shareholder have duly executed
and delivered this agreement as of the date written above.
____________________________________
By:_________________________________
IN WITNESS WHEREOF, the Company and the Shareholder have duly executed
and delivered this Agreement as of the date first written above.
____________________________________
By:_________________________________
Exhibit B
Page 12 of 12
Exhibit 10.43
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE TO CERTAIN OTHER
INDEBTEDNESS OF MAKER AS PROVIDED IN THAT SUBORDINATION AGREEMENT DATED MAY 7,
1997, BY AND AMONG LASALLE BUSINESS CREDIT, INC., IMPERIAL BANK, THE CRUTTENDEN
ROTH BRIDGE FUND, LLC, AND THOMAS E. DOOLEY, JR., AS AGENT.
- --------------------------------------------------------------------------------
TWO YEAR NOTE
PROMISSORY NOTE
$325,000.00 Phoenix, Arizona
May 7, 1997
FOR VALUE RECEIVED, the undersigned SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia Corporation (hereinafter called "Maker"), promises to pay to
the order of THOMAS E. DOOLEY, JR., as agent for the Sellers, defined below, at
12401 East Saddle Horn Drive, Scottsdale, Arizona 85259 (together with all
subsequent holders of this Note, hereinafter called "Payee"), or at such other
place as Payee may from time to time designate in writing, the principal sum of
THREE HUNDRED TWENTY FIVE THOUSAND AND NO/100ths DOLLARS ($325,000.00), plus
interest calculated on a daily basis (based on a 360-day year) from the date
hereof on the principal balance from time to time outstanding as hereinafter
provided, payable as follows:
A. Interest shall accrue at the rate of Eight and One Quarter percent (8
1/4%) per annum.
B. All accrued interest shall be due and payable quarterly on the first
day of each August, November, February and May, commencing August
1997.
C. Upon any Securities Offering that is not a Qualified Securities
Offering, a repayment of principal in the amount of $81,250.00 shall
be due and payable immediately upon demand by Payee.
D. Upon any Qualified Securities Offering, the entire outstanding
principal balance of this Note shall be due and payable immediately
upon demand by Payee.
E. Notwithstanding any other provision hereof, if not earlier due and
payable, the entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable hereunder shall be due and
payable in full on May 7, 1999.
As used in this Note, "Securities Offering" means any registered equity
securities offering in the United States of America of the common stock of Maker
(other than on Form S-4, or securities issued pursuant to an employee benefit
plan or in connection with a transaction subject to Rule 145 of the Securities
Act of 1933); and "Qualified Securities Offering" means a Securities Offering in
which the gross proceeds, together with the gross proceeds of all prior
Securities Offerings, total at least $12,000,000,00.
Upon a Securities Offering, or at any time and from time to time
thereafter, at the election of Payee, all or any part of the outstanding
principal amount of this Note may be converted into shares of Maker's common
stock at the lesser of: (i) $7.50 per share, or (ii) the price of such common
stock in
<PAGE>
the first Securities Offering, (hereinafter referred to as the "Conversion
Price"). If the entire outstanding principal balance of this Note is not
converted at the time of the Securities Offering, the Conversion Price shall be
adjusted upon certain events affecting Maker's common stock, as provided in
Exhibit "A" attached hereto. All shares of common stock of Maker obtained by
Payee as a result of its exercise of the conversion rights in this Note shall be
subject to the Registration Rights Agreement attached hereto as Exhibit "B".
Maker shall not have any right to prepay this Note prior to a Securities
Offering. Thereafter Maker may prepay this Note in full but not in part, without
penalty, upon not less than ten (10) business days prior written notice of the
proposed prepayment; subject, however, to any exercise by Payee of its
conversion rights under this Note at any time prior to receipt of the
prepayment.
Maker agrees to an effective rate of interest that is the rate stated above
plus any additional rate of interest resulting from any other charges in the
nature of interest paid or to be paid by or on behalf of Maker, or any benefit
received or to be received by Payee, in connection with this Note.
Principal, interest and all other sums payable hereunder shall be paid in
lawful money of the United States of America in immediately available funds.
If any payment required under this Note is not paid when due, then Maker
shall pay a "late charge" equal to three percent (3%) of the amount of that
payment. This late charge may be assessed without notice, shall be immediately
due and payable and shall be in addition to all other rights and remedies
available to Payee.
All payments on this Note shall be applied first to the payment of any
costs, fees or other charges incurred in connection with the indebtedness
evidenced hereby, next to the payment of accrued interest and then to the
reduction of the principal balance.
This Note is executed pursuant to that Stock Purchase Agreement, dated
April 21, 1997, among the parties identified on the attached Schedule 1 (the
"Sellers), Maker, and Southhampton Enterprises, Inc., a Texas corporation
("SEI"), which provides for the purchase by SEI from the Sellers of all of the
issued and outstanding capital stock of The Antigua Group, Inc., a Nevada
corporation ("Antigua") upon the terms and conditions set forth therein (the
"Stock Purchase Agreement"). This Note is secured by certain security agreements
and pledge agreements, of even date herewith, executed by Maker, SEI, and
Antigua. This Note and such security agreements and pledge agreements, together
with all other documents or instruments evidencing, securing, or executed or
delivered in connection with the indebtedness evidenced by this Note, and which
specifically refer to this Note, are hereinafter called the "Transaction
Documents."
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(1) the failure to pay any sum due and owing under this Note or under
any of the other Transaction Documents and such failure continues for a period
of ten days;
(2) the failure to perform or observe the covenants, conditions,
provisions or agreements of this Note or any of the other Transaction Documents
(other than a failure described in one or more other subparagraphs of this
provision) and such failure continues for a period of fifteen days after notice
thereof to Maker;
-2-
<PAGE>
(3) any representation by Maker in the Transaction Documents shall
prove to have been false in any material respect;
(4) the filing by Maker or any endorser, guarantor or surety hereof
(or against Maker or any endorser, guarantor or surety hereof to which Maker or
such endorser, guarantor or surety acquiesces or which is not dismissed within
60 days after the filing thereof) of any proceeding under the federal bankruptcy
laws of the United States of American, the Bankruptcy and Insolvency Act
(Canada) or other similar laws now or hereafter in effect; or the entry of an
order for relief under such laws with respect to Maker or any endorser,
guarantor or surety hereof;
(5) the appointment of a receiver, trustee, custodian or conservator
of any assets of Maker or any endorser, guarantor or surety hereof;
(6) the insolvency, assignment for the benefit of creditors, failure
to pay its debts as they mature or admission in writing of its inability or
failure to pay its debts as they mature, by Maker or any endorser, guarantor or
surety hereof;
(7) the liquidation, termination or dissolution of Maker or any
endorser, guarantor or surety hereof, if other than a natural person;
(8) any attachment, garnishment, levy or execution upon or judicial
seizure of any assets of Maker or any endorser, guarantor or surety hereof in
excess of $50,000.00 in the aggregate;
(9) the existence or filing of any lien or encumbrance in excess of
$50,000.00 in the aggregate, other than any lien or encumbrance permitted by the
Transaction Documents, against any collateral or security for this Note;
(10) the institution of any legal action or proceedings to enforce any
lien or encumbrance in excess of $50,000.00 in the aggregate upon any collateral
or security for this Note;
(11) the occurrence of any default under any financing to Maker by
Lasalle Business Credit, Inc., Imperial Bank, or The Cruttenden Roth Bridge
Fund, LLC, or under any other financing to Maker in excess of $50,000.00 in the
aggregate, which default remains uncured after any applicable notice and period
for cure provided in connection therewith;
(12) except as permitted in the Transaction Documents, any sale,
transfer, assignment or other disposition by Maker of any of the outstanding
capital stock of Southhampton Enterprises, Inc., a Texas corporation ("SEI"), or
any sale, transfer, assignment or other disposition by SEI of any of the
outstanding capital stock of the Antigua Group, Inc., a Nevada corporation;
(13) the direct or indirect ownership by any single person or entity
of more than fifty percent (50%) of the outstanding capital stock of Maker.
Upon the occurrence of any Event of Default, at the option of Payee, the
entire unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable hereunder
shall bear interest at Thirteen and One Quarter percent (13 1/4%) per annum.
Maker shall pay all costs and expenses, including reasonable
-3-
<PAGE>
attorneys' fees and court costs, incurred in the collection or enforcement of
all or any part of this Note. All such costs and expenses shall be secured by
the Transaction Documents. In the event of any court proceedings, court costs
and attorneys' fees shall be set by the court and not by jury and shall be
included in any judgment obtained by Payee.
Failure of Payee to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default
or in the event of continuance of any existing default after demand for strict
performance hereof.
Maker, sureties, guarantors and endorsers hereof: (a) agree to be jointly
and severally bound, (b) severally waive demand, diligence, presentment for
payment, protest and demand, and notice of extension, dishonor, protest, demand
and nonpayment of this Note, (c) consent that Payee may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt evidenced by this Note, at the request of any other person primarily liable
hereon, and such consent shall not alter nor diminish the liability of any
person, and (d) agree that Payee may setoff at any time any sums or property
owed to any of them by Payee.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Stock Purchase Agreement
for the giving of notices.
This Note shall be governed by and construed according to the laws of the
State of Arizona.
All exhibits and schedules attached to this Note are incorporated herein by
each reference thereto.
Payee may bring any action or proceeding to enforce or arising out of this
Note in any court of competent jurisdiction. Any action or proceeding brought by
Maker arising out of this Note shall be brought solely in a court of competent
jurisdiction located in the County of Maricopa, State of Arizona, or in the
United States District Court for the District of Arizona. Maker waives any
objection which it may now or hereafter have to venue of any such action or
proceeding and waives any right to seek removal of any action or proceeding
commenced in accordance herewith. If either party commences any action or
proceeding arising out of this Note, in a court located in the County of
Maricopa, State of Arizona, or the United States District Court for the District
of Arizona, the other party hereby agrees that it will submit and does hereby
irrevocably submit to the personal jurisdiction of such courts and will not
attempt to have such action dismissed, abated, or transferred on the ground of
forum non convenience or similar grounds; provided, however, that nothing
contained herein shall prohibit any party from seeking, by appropriate motion,
to remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. If such action is so removed,
however, neither party shall seek to transfer such action to any other district,
nor shall either party seek to transfer to any other district any action which
the other party originally commences in such federal court.
Maker agrees that a summons and complaint or equivalent documents
commencing an action or proceeding in any court shall be validly and properly
served and shall confer personal jurisdiction over Maker if served upon Bonn,
Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona 85004,
Attention: John M. Welch, Esq., whom Maker hereby designates and appoints as
Maker's authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in such action or proceeding in any such
court. Maker shall be sent, by certified mail to Maker's notice address as
provided herein, a copy of such summons and complaint at the time of service
upon
-4-
<PAGE>
such agent; provided, however, that any such copy shall be sent solely as a
courtesy for Maker and its failure to receive such copy shall in no way affect
the validity and propriety of the service made on Maker through such agent.
Maker agrees that if it desires to make any change in its agent for service,
such change shall be subject to Payee's written approval, which approval shall
not be unreasonably withheld.
MAKER AND PAYEE (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH
THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS, THE INDEBTEDNESS EVIDENCED BY THIS
NOTE, ANY COLLATERAL OR SECURITY FOR THIS NOTE, OR ANY DEALINGS BETWEEN MAKER
AND PAYEE IN CONNECTION WITH THE TRANSACTIONS THAT ARE THE SUBJECT OF THIS NOTE
AND THE OTHER TRANSACTION DOCUMENTS, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION
SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER INVOLVING A CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION BASED IN CONTRACT, TORT OR OTHERWISE. EITHER PARTY MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT
OTHERWISE HAVE TO TRIAL BY JURY.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
SOUTHHAMPTON ENTERPRISES CORP., a British
Columbia Corporation
By /s/ Thomas E. Dooley
Its President
MAKER
-5-
<PAGE>
SCHEDULE 1
Sellers
- -------
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim
L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
EXHIBIT A
[Provisions for adjustment of Conversion Price]
Page 2 of 1
<PAGE>
EXHIBIT B
[Registration Rights Agreement]
Page 3 of 1
Exhibit 10.44
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE TO CERTAIN OTHER
INDEBTEDNESS OF MAKER AS PROVIDED IN THAT SUBORDINATION AGREEMENT DATED MAY 7,
1997, BY AND AMONG LASALLE BUSINESS CREDIT, INC., IMPERIAL BANK, THE CRUTTENDEN
ROTH BRIDGE FUND, LLC, AND THOMAS E. DOOLEY, JR., AS AGENT.
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PROFIT NOTE
PROMISSORY NOTE
$855,000.00 Phoenix, Arizona
May 7, 1997
FOR VALUE RECEIVED, the undersigned SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia Corporation (hereinafter called "Maker"), promises to pay to
the order of THOMAS E. DOOLEY, JR., as agent for the Sellers, defined below, at
12401 East Saddle Horn Drive, Scottsdale, Arizona 85259 (together with all
subsequent holders of this Note, hereinafter called "Payee"), or at such other
place as Payee may from time to time designate in writing, the principal sum of
EIGHT HUNDRED FIFTY FIVE THOUSAND AND NO/100THS DOLLARS ($855,000.00), plus
interest calculated on a daily basis (based on a 360-day year) from the date
hereof on the principal balance from time to time outstanding as hereinafter
provided, payable as follows:
A. Interest shall accrue at the rate of Eight and One Quarter percent (8
1/4%) per annum.
B. All accrued interest shall be due and payable quarterly on the first
day of each August, November, February and May, commencing August
1997.
C. Upon any Securities Offering that is not a Qualified Securities
Offering, a repayment of principal in the amount of $213,750.00 shall
be due and payable immediately upon demand by Payee.
D. Upon any Qualified Securities Offering, the entire outstanding
principal balance of this Note shall be due and payable immediately
upon demand by Payee.
E. Notwithstanding any other provision hereof, if not earlier due and
payable, the entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable hereunder shall be due and
payable in full on May 7, 1999.
As used in this Note, "Securities Offering" means any registered equity
securities offering in the United States of America of the common stock of Maker
(other than on Form S-4, or securities issued pursuant to an employee benefit
plan or in connection with a transaction subject to Rule 145 of the Securities
Act of 1933); and "Qualified Securities Offering" means a Securities Offering in
which the gross proceeds, together with the gross proceeds of all prior
Securities Offerings, total at least $12,000,000,00.
<PAGE>
Upon a Securities Offering, or at any time and from time to time
thereafter, at the election of Payee, all or any part of the outstanding
principal amount of this Note may be converted into shares of Maker's common
stock at the lesser of: (i) $7.50 per share, or (ii) the price of such common
stock in the first Securities Offering, (hereinafter referred to as the
"Conversion Price"). If the entire outstanding principal balance of this Note is
not converted at the time of the Securities Offering, the Conversion Price shall
be adjusted upon certain events affecting Maker's common stock, as provided in
Exhibit "A" attached hereto. All shares of common stock of Maker obtained by
Payee as a result of its exercise of the conversion rights in this Note shall be
subject to the Registration Rights Agreement attached hereto as Exhibit "B".
Maker shall not have any right to prepay this Note prior to a Securities
Offering. Thereafter Maker may prepay this Note in full but not in part, without
penalty, upon not less than ten (10) business days prior written notice of the
proposed prepayment; subject, however, to any exercise by Payee of its
conversion rights under this Note at any time prior to receipt of the
prepayment.
Maker agrees to an effective rate of interest that is the rate stated above
plus any additional rate of interest resulting from any other charges in the
nature of interest paid or to be paid by or on behalf of Maker, or any benefit
received or to be received by Payee, in connection with this Note.
Principal, interest and all other sums payable hereunder shall be paid in
lawful money of the United States of America in immediately available funds.
If any payment required under this Note is not paid when due, then Maker
shall pay a "late charge" equal to three percent (3%) of the amount of that
payment. This late charge may be assessed without notice, shall be immediately
due and payable and shall be in addition to all other rights and remedies
available to Payee.
All payments on this Note shall be applied first to the payment of any
costs, fees or other charges incurred in connection with the indebtedness
evidenced hereby, next to the payment of accrued interest and then to the
reduction of the principal balance.
This Note is executed pursuant to that Stock Purchase Agreement, dated
April 21, 1997, among the parties identified on the attached Schedule 1 (the
"Sellers), Maker, and Southhampton Enterprises, Inc., a Texas corporation
("SEI"), which provides for the purchase by SEI from the Sellers of all of the
issued and outstanding capital stock of The Antigua Group, Inc., a Nevada
corporation ("Antigua") upon the terms and conditions set forth therein (the
"Stock Purchase Agreement"). This Note is secured by certain security agreements
and pledge agreements, of even date herewith, executed by Maker, SEI, and
Antigua. This Note and such security agreements and pledge agreements, together
with all other documents or instruments evidencing, securing, or executed or
delivered in connection with the indebtedness evidenced by this Note, and which
specifically refer to this Note, are hereinafter called the "Transaction
Documents."
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(1) the failure to pay any sum due and owing under this Note or under
any of the other Transaction Documents and such failure continues for a period
of ten days;
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<PAGE>
(2) the failure to perform or observe the covenants, conditions,
provisions or agreements of this Note or any of the other Transaction Documents
(other than a failure described in one or more other subparagraphs of this
provision) and such failure continues for a period of fifteen days after notice
thereof to Maker;
(3) any representation by Maker in the Transaction Documents shall
prove to have been false in any material respect;
(4) the filing by Maker or any endorser, guarantor or surety hereof
(or against Maker or any endorser, guarantor or surety hereof to which Maker or
such endorser, guarantor or surety acquiesces or which is not dismissed within
60 days after the filing thereof) of any proceeding under the federal bankruptcy
laws of the United States of American, the Bankruptcy and Insolvency Act
(Canada) or other similar laws now or hereafter in effect; or the entry of an
order for relief under such laws with respect to Maker or any endorser,
guarantor or surety hereof;
(5) the appointment of a receiver, trustee, custodian or conservator
of any assets of Maker or any endorser, guarantor or surety hereof;
(6) the insolvency, assignment for the benefit of creditors, failure
to pay its debts as they mature or admission in writing of its inability or
failure to pay its debts as they mature, by Maker or any endorser, guarantor or
surety hereof;
(7) the liquidation, termination or dissolution of Maker or any
endorser, guarantor or surety hereof, if other than a natural person;
(8) any attachment, garnishment, levy or execution upon or judicial
seizure of any assets of Maker or any endorser, guarantor or surety hereof in
excess of $50,000.00 in the aggregate;
(9) the existence or filing of any lien or encumbrance in excess of
$50,000.00 in the aggregate, other than any lien or encumbrance permitted by the
Transaction Documents, against any collateral or security for this Note;
(10) the institution of any legal action or proceedings to enforce any
lien or encumbrance in excess of $50,000.00 in the aggregate upon any collateral
or security for this Note;
(11) the occurrence of any default under any financing to Maker by
Lasalle Business Credit, Inc., Imperial Bank, or The Cruttenden Roth Bridge
Fund, LLC, or under any other financing to Maker in excess of $50,000.00 in the
aggregate, which default remains uncured after any applicable notice and period
for cure provided in connection therewith;
(12) except as permitted in the Transaction Documents, any sale,
transfer, assignment or other disposition by Maker of any of the outstanding
capital stock of Southhampton Enterprises, Inc., a Texas corporation ("SEI"), or
any sale, transfer, assignment or other disposition by SEI of any of the
outstanding capital stock of the Antigua Group, Inc., a Nevada corporation;
(13) the direct or indirect ownership by any single person or entity
of more than fifty percent (50%) of the outstanding capital stock of Maker.
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<PAGE>
Upon the occurrence of any Event of Default, at the option of Payee, the
entire unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable hereunder
shall bear interest at Thirteen and One Quarter percent (13 1/4%) per annum.
Maker shall pay all costs and expenses, including reasonable attorneys' fees and
court costs, incurred in the collection or enforcement of all or any part of
this Note. All such costs and expenses shall be secured by the Transaction
Documents. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Payee.
Failure of Payee to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default
or in the event of continuance of any existing default after demand for strict
performance hereof.
Maker, sureties, guarantors and endorsers hereof: (a) agree to be jointly
and severally bound, (b) severally waive demand, diligence, presentment for
payment, protest and demand, and notice of extension, dishonor, protest, demand
and nonpayment of this Note, (c) consent that Payee may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt evidenced by this Note, at the request of any other person primarily liable
hereon, and such consent shall not alter nor diminish the liability of any
person, and (d) agree that Payee may setoff at any time any sums or property
owed to any of them by Payee.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Stock Purchase Agreement
for the giving of notices.
This Note shall be governed by and construed according to the laws of the
State of Arizona.
All exhibits and schedules attached to this Note are incorporated herein by
each reference thereto.
Payee may bring any action or proceeding to enforce or arising out of this
Note in any court of competent jurisdiction. Any action or proceeding brought by
Maker arising out of this Note shall be brought solely in a court of competent
jurisdiction located in the County of Maricopa, State of Arizona, or in the
United States District Court for the District of Arizona. Maker waives any
objection which it may now or hereafter have to venue of any such action or
proceeding and waives any right to seek removal of any action or proceeding
commenced in accordance herewith. If either party commences any action or
proceeding arising out of this Note, in a court located in the County of
Maricopa, State of Arizona, or the United States District Court for the District
of Arizona, the other party hereby agrees that it will submit and does hereby
irrevocably submit to the personal jurisdiction of such courts and will not
attempt to have such action dismissed, abated, or transferred on the ground of
forum non convenience or similar grounds; provided, however, that nothing
contained herein shall prohibit any party from seeking, by appropriate motion,
to remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. If such action is so removed,
however, neither party
-4-
<PAGE>
shall seek to transfer such action to any other district, nor shall either party
seek to transfer to any other district any action which the other party
originally commences in such federal court.
Maker agrees that a summons and complaint or equivalent documents
commencing an action or proceeding in any court shall be validly and properly
served and shall confer personal jurisdiction over Maker if served upon Bonn,
Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona 85004,
Attention: John M. Welch, Esq., whom Maker hereby designates and appoints as
Maker's authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in such action or proceeding in any such
court. Maker shall be sent, by certified mail to Maker's notice address as
provided herein, a copy of such summons and complaint at the time of service
upon such agent; provided, however, that any such copy shall be sent solely as a
courtesy for Maker and its failure to receive such copy shall in no way affect
the validity and propriety of the service made on Maker through such agent.
Maker agrees that if it desires to make any change in its agent for service,
such change shall be subject to Payee's written approval, which approval shall
not be unreasonably withheld.
MAKER AND PAYEE (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH
THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS, THE INDEBTEDNESS EVIDENCED BY THIS
NOTE, ANY COLLATERAL OR SECURITY FOR THIS NOTE, OR ANY DEALINGS BETWEEN MAKER
AND PAYEE IN CONNECTION WITH THE TRANSACTIONS THAT ARE THE SUBJECT OF THIS NOTE
AND THE OTHER TRANSACTION DOCUMENTS, AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION
SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER INVOLVING A CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION BASED IN CONTRACT, TORT OR OTHERWISE. EITHER PARTY MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT
OTHERWISE HAVE TO TRIAL BY JURY.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
SOUTHHAMPTON ENTERPRISES CORP., a British
Columbia Corporation
By /s/ Thomas E. Dooley
Its President
MAKER
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<PAGE>
SCHEDULE 1
Sellers
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Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim
L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
EXHIBIT A
[Provisions for adjustment of Conversion Price]
Page 2 of 1
<PAGE>
EXHIBIT B
[Registration Rights Agreement]
Page 3 of 1
Exhibit 10.45
THE INDEBTEDNESS UNDER THIS GUARANTEE IS SUBORDINATE TO CERTAIN OTHER
INDEBTEDNESS OF GUARANTOR AS PROVIDED IN THAT SUBORDINATION AGREEMENT DATED MAY
7, 1997, BY AND AMONG LASALLE BUSINESS CREDIT, INC., IMPERIAL BANK, THE
CRUTTENDEN ROTH BRIDGE FUND, LLC, AND THOMAS E. DOOLEY, JR., AS AGENT.
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UNCONDITIONAL GUARANTEE OF PAYMENT
TO: THOMAS E. DOOLEY, as Agent
1. FOR VALUABLE CONSIDERATION, the undersigned (hereinafter severally
and collectively called "Guarantor"), whose address is set forth after
Guarantor's signature below, jointly and severally, and unconditionally,
guarantees and promises to pay to THOMAS E. DOOLEY, JR., as agent for the
parties identified on Schedule 1 hereto (hereinafter called "Lender"), or order,
upon demand, in lawful money of the United States of America: (i) that note of
even date herewith, made by SOUTHHAMPTON ENTERPRISES CORP., a British Columbia
Corporation (hereinafter called "Borrower"), in favor of Lender in the face
amount of FIVE MILLION ONE HUNDRED NINETY EIGHT THOUSAND DOLLARS ($5,198,000.00)
(the "Three Year Note"), principal and interest and all other sums payable
thereunder, or at the election of Lender any one or more installments thereof,
in the event that Borrower fails to punctually pay any one or more installments
of the Note (principal and/or interest), or any other sum payable thereunder at
the time and in the manner provided therein; (ii) that note dated of even date
herewith, made by Borrower, in favor of Lender in the face amount of THREE
HUNDRED TWENTY FIVE THOUSAND DOLLARS ($325,000.00) (the "Two Year Note"),
principal and interest and all other sums payable thereunder, or at the election
of Lender any one or more installments thereof, in the event that Borrower fails
to punctually pay any one or more installments of the Note (principal and/or
interest), or any other sum payable thereunder at the time and in the manner
provided therein; (iii) that note of even date herewith, made by Borrower, in
favor of Lender in the face amount of EIGHT HUNDRED FIFTY FIVE THOUSAND AND
NO/100 ($855,000.00) (the "Profit Note"), principal and interest and all other
sums payable thereunder, or at the election of Lender any one or more
installments thereof, in the event that Borrower fails to punctually pay any one
or more installments of the Note (principal and/or interest), or any other sum
payable thereunder at the time and in the manner provided therein (the Two Year
Note, the Three Year Note and the Profit Note are herein severally and
collectively called the "Note"); and (iv) all other indebtedness of Borrower to
Lender arising under or in connection with the Note, any agreement between
Borrower and Lender executed and delivered in connection with the Note, any
security agreement or instrument securing payment of the Note, and all other
documents and instruments evidencing, securing, or executed or delivered in
connection the Note. The word "indebtedness" is used in its most comprehensive
sense and includes any and all advances, debts, obligations, and liabilities of
Borrower previously, now or hereafter made, incurred or created, with or without
notice to Guarantor, whether voluntary or involuntary, and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, whether Borrower is liable individually or jointly
with others, whether such indebtedness is reduced to judgment, whether recovery
upon such indebtedness may be or hereafter become barred by any statute of
limitations, and whether such indebtedness may be or hereafter become otherwise
unenforceable. The indebtedness evidenced by the Note together with all other
indebtedness specified above is hereinafter collectively called the
"Indebtedness").
2. The obligations of Guarantor hereunder are joint and several if
Guarantor is more than one person or entity, are separate and independent of the
obligations of Borrower and of any other guarantor, and a separate action or
actions may be brought and prosecuted against Guarantor whether
<PAGE>
action is brought against Borrower or any other guarantor or whether Borrower or
any other guarantor is joined in any action or actions. The obligations of
Guarantor hereunder are also separate and independent of Guarantor's obligations
in any other capacity, including without limitation as a general partner if
Borrower is a partnership and Guarantor is a general partner in Borrower, and an
action may be brought and prosecuted against Guarantor under this Guarantee
separately from, or concurrently with, any action against Guarantor for
Guarantor's obligations in any other capacity. The obligations of Guarantor
hereunder shall survive and continue in full force and effect until payment in
full of the Indebtedness is actually received by Lender and the period of time
has expired during which any payment made to Lender of all or part of the
Indebtedness may be determined to be a "Preferential Payment" (defined below),
notwithstanding any release or termination of Borrower's or any other
guarantor's liability by express or implied agreement with Lender or by
operation of law, and notwithstanding that the Indebtedness or any part thereof
is deemed to have been paid or discharged by operation of law or by some act or
agreement of Lender. For purposes of this Guarantee, the Indebtedness shall be
deemed to be paid only to the extent that Lender actually receives immediately
available funds, to the extent of any credit bid by Lender at any foreclosure or
trustee's sale of any security for the Indebtedness, or to the extent agreed in
writing by Lender.
3. Guarantor shall remain liable under this Guarantee for all
Indebtedness arising (including without limitation all interest accruing under
the Note) after the filing of a petition or the commencement of any proceeding
by or against Borrower under any bankruptcy or insolvency laws, or after the
discharge or release of Borrower under any bankruptcy or insolvency laws. If, as
a result of any bankruptcy of Borrower, or for any other reason, Lender is
required to return or restore, or pay to a trustee, receiver or any other person
or entity, any payment previously made to Lender of all or any part of the
Indebtedness ("Preferential Payment"), the liability of Guarantor hereunder
shall continue, or shall be reinstated and revived, with respect to that amount
as though such amount had never been received by Lender.
4. Guarantor is providing this Guarantee at the instance and request of
Borrower to induce Lender to extend or continue financial accommodations to
Borrower. Guarantor hereby represents and warrants that Guarantor is and will
continue to be fully informed about all aspects of the financial condition and
business affairs of Borrower that Guarantor deems relevant to the obligations of
Guarantor hereunder and hereby waives and fully discharges Lender from any and
all obligations to communicate to Guarantor any information whatsoever regarding
Borrower or Borrower's financial condition or business affairs.
5. Guarantor authorizes Lender, without notice or demand and without
affecting Guarantor's liability hereunder, from time to time, to: (a) renew,
modify, compromise, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the Indebtedness or any part thereof,
including increasing or decreasing the rate of interest thereon; (b) release,
substitute or add any one or more endorsers, Guarantor or other guarantors; (c)
take and hold security for the payment of this Guarantee or the Indebtedness,
and enforce, exchange, substitute, subordinate, waive or release any such
security; (d) proceed against such security and direct the order or manner of
sale of such security as Lender in its discretion may determine; and (e) apply
any and all payments from Borrower, Guarantor or any other guarantor, or
recoveries from such security, in such order or manner as Lender in its
discretion may determine.
6. Guarantor waives and agrees not to assert: (a) any right to require
Lender to proceed against Borrower or any other guarantor, to proceed against or
exhaust any security for the Indebtedness, to pursue any other remedy available
to Lender, or to pursue any remedy in any particular order or manner; (b) the
benefit of any statute of limitations affecting Guarantor's liability hereunder
or the enforcement hereof; (c) demand, diligence, presentment for payment,
protest and demand, and notice of extension, dishonor, protest, demand,
nonpayment and acceptance of this Guarantee; (d) notice of the
<PAGE>
existence, creation or incurring of new or additional indebtedness of Borrower
to Lender; (e) the benefits of any statutory or other provision limiting the
liability of a surety, including without limitation, the provisions of A.R.S.
ss.ss.12-1641, et seq. and Rule 17(f) of the Arizona Rules of Civil Procedure;
(f) any defense arising by reason of any impairment of any security for the
Indebtedness, or any impairment of Guarantor's subrogation rights or other
rights against Borrower or any other guarantor; (g) any defense arising by
reason of any disability or other defense of Borrower or by reason of the
cessation from any cause whatsoever (other than payment in full) of the
liability of Borrower for the Indebtedness; and (h) the benefits of any
statutory provision limiting the right of Lender to recover a deficiency
judgment, or to otherwise proceed against any person or entity obligated for
payment of the Indebtedness, after any foreclosure or trustee's sale of any
security for the Indebtedness, including without limitation the benefits to
Guarantor of A.R.S. ss.33-814 and ss.12-1566. Until payment in full of the
Indebtedness, Guarantor shall have no right of subrogation and hereby waives any
right to enforce any remedy which Lender now has, or may hereafter have, against
Borrower, and waives any benefit of, and any right to participate in, any
security now or hereafter held by Lender.
7. All existing and future indebtedness of Borrower to Guarantor (the
"Junior Debt") is hereby subordinated to the Indebtedness and is hereby assigned
to Lender as security for this Guarantee. Upon the request of Lender, the Junior
Debt shall be collected, enforced and received by Guarantor as trustee for
Lender and shall be paid over to Lender on account of the Indebtedness, but
without reducing or affecting in any manner the liability of Guarantor under the
other provisions of this Guarantee. Any promissory note now or hereafter
evidencing the Junior Debt shall be marked with a legend indicating that it is
subordinate to the Indebtedness and subject to this Guarantee and, if Lender
requests, shall be delivered to Lender. Guarantor from time to time will execute
such other documents and take such other actions as Lender in its reasonable
judgment may consider necessary or appropriate to perfect, preserve and enforce
its rights with respect to the Junior Debt.
8. In addition to all liens upon, and rights of setoff against, the
monies, securities or other property of Guarantor given to Lender by law, Lender
shall have a lien and a right of setoff against, and Guarantor hereby grants to
Lender a security interest in, all monies, securities and other property of
Guarantor now and hereafter in the possession of or on deposit with Lender,
whether held in a general or special account or deposit, or for safekeeping or
otherwise. No lien or right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, by any neglect to exercise such right of
setoff or to enforce such lien, or by any delay in so doing.
9. If Borrower is other than a natural person, it is not necessary for
Lender to inquire into the powers of Borrower or the officers, directors,
partners, managers, trustees, or agents acting or purporting to act on its
behalf, and any of the Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
10. Guarantor agrees to pay all attorneys' fees and all other costs and
expenses which may be incurred by Lender in enforcing this Guarantee. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Lender.
11. This Guarantee sets forth the entire agreement of Guarantor and
Lender with respect to the subject matter hereof and supersedes all prior oral
and written agreements and representations by Lender to Guarantor. There are no
conditions, oral or otherwise, to the effectiveness of this Guarantee. No
modification or waiver of any provision of this Guarantee or any right of Lender
hereunder, and no release of Guarantor from any obligation hereunder, shall be
effective unless in a writing executed by an authorized officer of Lender.
<PAGE>
12. This Guarantee shall inure to the benefit of Lender and its
successors and assigns and shall be binding upon Guarantor and its heirs,
personal representatives, successors and assigns. Lender may assign this
Guarantee in whole or in part without notice.
13. This Guarantee shall be governed by and construed according to the
laws of the State of Arizona.
14. Lender may bring any action or proceeding to enforce or arising out
of this Guarantee in any court of competent jurisdiction. Any action or
proceeding brought by Guarantor arising out of this Guarantee shall be brought
solely in a court of competent jurisdiction located in the County of Maricopa,
State of Arizona, or in the United States District Court for the District of
Arizona. Guarantor waives any objection which it may now or hereafter have to
venue of any such action or proceeding and waives any right to seek removal of
any action or proceeding commenced in accordance herewith. If either party
commences any action or proceeding arising out of this Guarantee, in a court
located in the County of Maricopa, State of Arizona, or the United States
District Court for the District of Arizona, the other party hereby agrees that
it will submit and does hereby irrevocably submit to the personal jurisdiction
of such courts and will not attempt to have such action dismissed, abated, or
transferred on the ground of forum non convenience or similar grounds; provided,
however, that nothing contained herein shall prohibit any party from seeking, by
appropriate motion, to remove any action brought in a Arizona state court to the
United States District Court for the District of Arizona. If such action is so
removed, however, neither party shall seek to transfer such action to any other
district, nor shall either party seek to transfer to any other district any
action which the other party originally commences in such federal court.
15. Guarantor agrees that a summons and complaint or equivalent
documents commencing an action or proceeding in any court shall be validly and
properly served and shall confer personal jurisdiction over Guarantor if served
upon Bonn, Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona
85004, Attention: John M. Welch, Esq., whom Guarantor hereby designates and
appoints as Guarantor's authorized agent to accept and acknowledge on its behalf
service of any and all process which may be served in such action or proceeding
in any such court. Guarantor shall be sent, by certified mail to Guarantor's
notice address as provided herein, a copy of such summons and complaint at the
time of service upon such agent; provided, however, that any such copy shall be
sent solely as a courtesy for Guarantor and its failure to receive such copy
shall in no way affect the validity and propriety of the service made on
Guarantor through such agent. Guarantor agrees that if it desires to make any
change in its agent for service, such change shall be subject to Lender's
written approval, which approval shall not be unreasonably withheld.
16. GUARANTOR AND LENDER (BY ITS ACCEPTANCE OF THIS GUARANTEE) HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN
CONNECTION WITH THIS GUARANTEE, THE INDEBTEDNESS, ANY COLLATERAL OR SECURITY FOR
THIS GUARANTEE, OR ANY DEALINGS BETWEEN GUARANTOR AND LENDER IN CONNECTION WITH
THE TRANSACTIONS THAT ARE THE SUBJECT OF THIS GUARANTEE, AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS
PROVISION SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER INVOLVING A
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED IN CONTRACT, TORT OR OTHERWISE.
EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF ANY
RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
<PAGE>
IN WITNESS WHEREOF these presents are executed as of the 7th day of
May, 1997.
GUARANTOR:
---------
THE ANTIGUA GROUP, INC., a Nevada
corporation
By /s/ Gerald K. Whitley
Its VP - Finance
Address: 9319 North 94th Way
Scottsdale, AZ 85258
SOUTHHAMPTON ENTERPRISES INC., a Texas
corporation
By /s/ Thomas E. Dooley
Its Secretary
Address: 9211 Diplomacy Row
Dallas, TX 75247
<PAGE>
SCHEDULE 1
Sellers
- -------
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo Kim
L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
Exhibit 10.46
SECURITY AGREEMENT
(SEC)
THIS SECURITY AGREEMENT is made and entered into as of the 7th day of
May, 1997, by SOUTHHAMPTON ENTERPRISES CORP., a British Columbia corporation
(hereinafter called "Debtor"), whose chief executive office (or residence if
Debtor is an individual without an office) is located at 9211 Diplomacy Row,
Dallas, Texas 75247 in favor of THOMAS E. DOOLEY, JR., as agent for Sellers
(defined below), and his heirs, personal representatives, successors and assigns
(hereinafter called "Secured Party"), whose address is 12401 East Saddle Horn
Drive, Scottsdale, Arizona 85259.
1. RECITALS
1.1 The parties identified on Schedule 1 hereto (the "Sellers"),
Debtor, and Southhampton Enterprises Inc., a Texas corporation ("SEI") have
entered into a Stock Purchase Agreement dated April 21, 1997 (the "Stock
Purchase Agreement"), which provides for the purchase by SEI from Sellers of all
of the issued and outstanding common stock of The Antigua Group, Inc., a Nevada
corporation ("Antigua").
1.2 Secured Party has agreed to provide certain financing to Debtor in
connection with the Stock Purchase Agreement, provided that Secured Party
receives, among other things, a security interest in all personal property now
owned or hereafter acquired by Debtor.
1.3 LaSalle Business Credit, Inc. ("LaSalle") has provided or agreed to
provide certain financing to Antigua according to the terms of a Loan and
Security Agreement, dated January 23, 1997, as modified by a Modification
Agreement of even date herewith, and according to the terms of a Loan and
Security Agreement of even date herewith, all between LaSalle and Antigua. In
connection therewith and as a condition of that financing, Debtor has executed
and delivered to LaSalle a Security Agreement, of even date herewith, granting
to LaSalle a security interest in all personal property owned or acquired by
Debtor (the "LaSalle Security Agreement").
1.4 Imperial Bank, a California banking corporation ("Imperial") has
agreed to provide certain financing to Antigua according to the terms of a
Credit Agreement, of even date herewith, by and among Imperial, Debtor, SEI and
Antigua. In connection therewith and as a condition of that financing, Debtor
has executed and delivered to Imperial a Security Agreement, of even date
herewith, granting to Imperial a pledge and security interest in, among other
things, all personal property owned or acquired by Debtor (the "Imperial
Security Agreement").
1.5 The Cruttenden Roth Bridge Fund, L.L.C, a California limited
liability company ("Cruttenden") has also agreed to provide certain financing to
Antigua according to the terms of a Securities Purchase Agreement, of even date
herewith, by and among Cruttenden, Debtor, SEI and Antigua. In connection
therewith and as a condition of that financing, Debtor has executed and
delivered to Cruttenden a Security and Pledge Agreement, of even date herewith,
granting to Cruttenden a security interest in, among other things, all personal
owned or acquired by Debtor (the "Cruttenden Security Agreement").
1.6 LaSalle, Imperial, Cruttenden, Secured Party, Debtor, SEI and
Antigua have entered into an Intercreditor Agreement, of even date herewith (the
"Intercreditor Agreement"), to among other things, establish the respective
priorities of the security interests of LaSalle, Imperial, Cruttenden and
Secured Party in the personal property of Debtor.
<PAGE>
1.7 The security interests in favor of LaSalle, Imperial and Cruttenden
in the personal property of Debtor under the LaSalle Security Agreement, the
Imperial Security Agreement and the Cruttenden Security Agreement, respectively,
as modified or limited by the Intercreditor Agreement, are herein called the
"Permitted Security Interests".
2. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of the property described below in, to or
under which Debtor now has or hereafter acquires any right, title or interest,
whether present, future or contingent:
(a) All accounts, general intangibles, instruments, documents
and chattel paper, including all accounts receivable, notes, drafts,
lease agreements and security agreements, and all goods, if any,
represented thereby, and including but not limited to such items
described on the Collateral Schedule (if any) attached hereto, whether
now existing or hereafter acquired or created from time to time;
(b) All inventory now owned or hereafter acquired, wherever
located, including all goods held for sale or lease in Debtor's
business, as now or hereafter conducted, or furnished or to be
furnished under contracts of service, and all raw materials, work in
process, finished goods, and materials to be used or consumed in
Debtor's business (whether or not the inventory is represented by
warehouse receipts or bills of lading or has been or may be placed in
transit or delivered to a public warehouse);
(c) All equipment now owned or hereafter acquired, including
all furniture, fixtures, furnishings, vehicles (whether titled or
non-titled), machinery, materials and supplies, wherever located,
including but not limited to such items described on the collateral
schedule (if any) attached hereto, together with all parts,
accessories, attachments, additions thereto or replacements therefor;
(d) All investment property, including certificated
securities, uncertificated securities, securities accounts, securities
entitlements, commodity accounts and commodity contracts, and including
but not limited to those items described on the collateral schedule (if
any) attached hereto, together with all dividends, distributions and
payments with respect thereto, all other rights and interests arising
therefrom, and all substitutions and replacements therefor;
(e) All of the property described on the collateral schedule
(if any) attached hereto.
(f) All property of Debtor that is now or may hereafter be in
the possession or control of Secured Party in any capacity, including
without limitation all monies owed or that become owed by Secured Party
to Debtor;
(g) All policies or certificates of insurance covering any of
the property described herein, and all awards, loss payments, proceeds
and premium refunds that may become payable with respect to such
policies;
<PAGE>
(h) All books, records, correspondence, files, electronic and
other media relating to the property described herein, all records,
data and information stored thereon, and all computer software,
databases and other informations systems used to create, maintain,
process and utilize such records, data and information;
together with all proceeds of any of the foregoing property, whether due or to
become due from any sale, exchange or other disposition thereof, whether cash or
non-cash in nature, and whether represented by checks, drafts, notes or other
instruments for the payment of money, including, without limitation, all
property, whether cash or non-cash in nature, derived from tort, contractual or
other claims arising in connection with any of the foregoing property. All
property described above is hereinafter called the "Collateral."
3. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $5,198,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by Debtor payable to the order of Secured Party,
and all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Three Year Note");
(b) Payment of the sum of $325,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by Debtor, payable to the order of Secured Party,
and all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Two Year Note");
(c) Payment of the sum of $855,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by Debtor, payable to the order of Secured Party,
and all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Profit Note");
(d) Payment, performance and observance by Debtor, SEI and/or
Antigua of each covenant, condition and provision contained in any
other security agreement or pledge agreement of even date herewith
securing payment of the Note (defined below) or in any other document
or instrument evidencing, securing or executed and delivered in
connection with the indebtedness evidenced by the Note, and which
specifically refers to the Note, and of all monies expended or advanced
by Secured Party pursuant to the terms thereof or to preserve any right
of Secured Party thereunder; and
(e) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
3.1 The Three Year Note, the Two Year Note and the Profit Note are
herein severally and collectively called the "Note". All the indebtedness and
obligations secured by this Agreement are hereafter collectively called the
"Obligation."
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Debtor (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized; (ii) is qualified
to do business and is in good standing under the laws of the state in which the
Collateral is located and in each state in which it is doing business; (iii) has
full power and authority to own its properties and assets and to carry on its
businesses as now conducted; and (iv) is fully authorized and permitted to
execute and deliver this Agreement and to enter into any transactions evidenced
by any portion of the Collateral. The execution, delivery and performance by
Debtor of this Agreement and all other documents and instruments relating to the
Obligation will not result in any breach of the terms and conditions or
constitute a default under any agreement or instrument under which Debtor is a
party or is obligated. Debtor is not in default in the performance or observance
of any covenants, conditions or provisions of any such agreement or instrument.
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor primarily for business use.
4.3 The address of Debtor set forth at the beginning of this Agreement
is the chief executive office of Debtor.
4.4 All tangible Collateral will be kept at Debtor's address set forth
at the beginning of this Agreement and/or at the locations described on Schedule
"2" attached hereto. Debtor's records concerning the Collateral will be kept at
Debtor's address set forth at the beginning of this Agreement.
4.5 Debtor is the owner of the Collateral free of all security
interests or other encumbrances except the Security Interest and the Permitted
Security Interests; no financing statement covering the Collateral is filed or
recorded in any public office except those to perfect the Security Interest and
the Permitted Security Interests.
4.6 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each Obligor is solvent, and the amount that Debtor has represented
to Secured Party as owing by each Obligor is the amount actually and
unconditionally owing by that Obligor, without deduction except for normal cash
discounts where applicable; no Obligor has any defense, setoff, claim or
counterclaim against Debtor that can be asserted against Secured Party whether
in any proceeding to enforce the Security Interest or otherwise. Each document,
instrument and chattel paper included in the Collateral is complete and regular
on its face and free from evidence of forgery or alteration. No default has
occurred in connection with any instrument, document or chattel paper included
in the Collateral, no payment in connection therewith is overdue and no
presentment, dishonor or protest has occurred in connection therewith.
4.7 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions or constitute a
default under any agreement or instrument under which Debtor is a party or is
obligated. Debtor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
<PAGE>
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest and the Permitted Security Interests. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean
that Secured Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, shall cause the Security Interest to be shown as a valid first lien on
the Certificate of Title for all titled vehicles and shall deliver the
Certificates of Title, or lien filing receipts, as applicable, to Secured Party
as evidence thereof.
5.7 Debtor shall immediately deliver to Secured Party all instruments,
documents, chattel paper and certificated securities (together with stock powers
satisfactory to Secured Party, executed in blank) that are at any time included
in the Collateral and that are not then held by LaSalle, Imperial or Cruttenden
in connection with the Permitted Security Interests. Debtor, upon demand, shall
promptly deliver to Secured Party all invoices, shipping or delivery records,
purchase orders, contracts or other items related to the Collateral. Debtor
shall notify Secured Party immediately of any default by any Obligor in the
payment or performance of its obligations with respect to any Collateral.
Debtor, without Secured Party's prior written consent, shall not make or agree
to make any alteration, modification or cancellation of, or substitution for, or
credit, adjustment or allowance on, any Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, unless waived in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and shall deliver to Secured Party confirming specific assignments
of all accounts, instruments, documents and chattel paper included in the
Collateral.
<PAGE>
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except the Permitted Security
Interests. Debtor shall act and perform as necessary and shall execute and file
all security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims except the Permitted Security Interests, to keep the
Collateral in good condition and repair, to procure and maintain insurance
thereon, or to perform otherwise as required herein, Secured Party may advance
the monies necessary to pay the same, to accomplish such repairs, to procure and
maintain such insurance or to so perform; Secured Party is hereby authorized to
enter upon any property in the possession or control of Debtor for such
purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF
COLLATERAL BY DEBTOR
6.1 Secured Party, after the occurrence and during the continuation of
an Event of Default, without notice to Debtor, may notify any or all Obligors of
the existence of the Security Interest and may direct the Obligors to make all
payments on the Collateral to Secured Party. Until Secured Party has notified
the Obligors to remit payments directly to it, Debtor, at Debtor's own cost and
expense, shall collect or cause to be collected the accounts and monies due
under the accounts, documents, instruments and general intangibles or pursuant
to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor shall be applied to the
<PAGE>
Obligation in such order and manner and at such time as Secured Party, in its
sole discretion, shall determine. In addition, Debtor shall promptly notify
Secured Party of the return to or possession by Debtor of goods underlying any
Collateral; Debtor shall hold the same in trust for Secured Party and shall
dispose of the same as Secured Party directs.
6.2 Secured Party, after the occurrence and during the continuation of
any Event of Default, without notice to Debtor, may demand, collect and sue on
the Collateral (either in Debtor's or Secured Party's name), enforce,
compromise, settle or discharge the Collateral and endorse Debtor's name on any
instruments, documents, or chattel paper included in or pertaining to the
Collateral; Debtor hereby irrevocably appoints Secured Party its attorney in
fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) retain possession of any other
Collateral and use it in any lawful manner consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any event or condition defined in the Note as an
"Event of Default" shall constitute and is hereby defined to be an Event of
Default under this Security Agreement.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
<PAGE>
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
(e) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least ten (10) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
<PAGE>
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange, substitute, subordinate, waive or release
any such security; (iii) join in any extension or subordination agreement; or
(iv) release any part of the Collateral from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of Arizona. Each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
9.5 Debtor shall execute and deliver such additional documents and
instruments and shall do such other acts as Secured Party may reasonably require
to fully implement the intent of this Agreement.
9.6 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.7 This Agreement which shall remain in full force and effect until
all of the Obligation shall have been paid and performed in full.
9.8 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.9 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder,
<PAGE>
including pledgees, of note or notes evidencing the Obligation. The provisions
hereof shall apply to the parties according to the context thereof and without
regard to the number or gender of words or expressions used.
9.10 All exhibits and schedules attached hereto are incorporated herein
at each reference thereto.
9.11 All notices required or permitted to be given hereunder shall be
in writing and shall be given at the place and in the manner provided in the
Stock Purchase Agreement.
9.12 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
9.13 Secured Party may bring any action or proceeding to enforce or
arising out of this Note in any court of competent jurisdiction. Any action or
proceeding brought by Debtor arising out of this Note shall be brought solely in
a court of competent jurisdiction located in the County of Maricopa, State of
Arizona, or in the United States District Court for the District of Arizona.
Debtor waives any objection which it may now or hereafter have to venue of any
such action or proceeding and waives any right to seek removal of any action or
proceeding commenced in accordance herewith. If either party commences any
action or proceeding arising out of this Note, in a court located in the County
of Maricopa, State of Arizona, or the United States District Court for the
District of Arizona, the other party hereby agrees that it will submit and does
hereby irrevocably submit to the personal jurisdiction of such courts and will
not attempt to have such action dismissed, abated, or transferred on the ground
of forum non convenience or similar grounds; provided, however, that nothing
contained herein shall prohibit any party from seeking, by appropriate motion,
to remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. If such action is so removed,
however, neither party shall seek to transfer such action to any other district,
nor shall either party seek to transfer to any other district any action which
the other party originally commences in such federal court.
9.14 Debtor agrees that a summons and complaint or equivalent documents
commencing an action or proceeding in any court shall be validly and properly
served and shall confer personal jurisdiction over Debtor if served upon Bonn,
Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona 85004,
Attention: John M. Welch, Esq., whom Debtor hereby designates and appoints as
Debtor's authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in such action or proceeding in any such
court. Debtor shall be sent, by certified mail to Debtor's notice address as
provided herein, a copy of such summons and complaint at the time of service
upon such agent; provided, however, that any such copy shall be sent solely as a
courtesy for Debtor and its failure to receive such copy shall in no way affect
the validity and propriety of the service made on Debtor through such agent.
Debtor agrees that if it desires to make any change in its agent for service,
such change shall be subject to Secured Party's written approval, which approval
shall not be unreasonably withheld.
DEBTOR AND SECURED PARTY (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN
CONNECTION WITH THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS, THE INDEBTEDNESS
EVIDENCED BY THIS NOTE, ANY COLLATERAL OR SECURITY FOR THIS NOTE, OR ANY
DEALINGS BETWEEN DEBTOR AND SECURED PARTY IN CONNECTION WITH THE TRANSACTIONS
THAT ARE THE SUBJECT OF THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS, AND AGREE
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. THIS PROVISION SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER
INVOLVING A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED IN
<PAGE>
CONTRACT, TORT OR OTHERWISE. EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES CORP., a British
Columbia corporation
By /s/ Thomas E. Dooley
Its President
DEBTOR
<PAGE>
SCHEDULE 1
Sellers
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Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
<PAGE>
SCHEDULE 2
Collateral Locations
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1710-1177 West Hastings
Vancouver, British Columbia
2105 Midland Avenue
Scarborough, Ontario
<PAGE>
COLLATERAL SCHEDULE
Exhibit 10.47
SECURITY AGREEMENT
(SEI)
THIS SECURITY AGREEMENT is made and entered into as of the 7th day of
May, 1997, by SOUTHHAMPTON ENTERPRISES INC., a Texas corporation (hereinafter
called "Debtor"), whose chief executive office (or residence if Debtor is an
individual without an office) is located at 9211 Diplomacy Row, Dallas, Texas
75247 in favor of THOMAS E. DOOLEY, JR., as agent for Sellers (defined below),
and his heirs, personal representatives, successors and assigns (hereinafter
called "Secured Party"), whose address is 12401 East Saddle Horn Drive,
Scottsdale, Arizona 85259.
1. RECITALS
1.1 The parties identified on Schedule 1 hereto (the "Sellers"),
Southhampton Enterprises Corp., a British Columbia corporation ("SEC") and
Debtor have entered into a Stock Purchase Agreement dated April 21, 1997 (the
"Stock Purchase Agreement"), which provides for the purchase by Debtor from
Sellers of all of the issued and outstanding common stock of The Antigua Group,
Inc., a Nevada corporation ("Antigua").
1.2 Secured Party has agreed to provide certain financing to SEC in
connection with the Stock Purchase Agreement, provided that Secured Party
receives, among other things, a security interest in all personal property now
owned or hereafter acquired by Debtor.
1.3 LaSalle Business Credit, Inc. ("LaSalle") has provided or agreed to
provide certain financing to Antigua according to the terms of a Loan and
Security Agreement, dated January 23, 1997, as modified by a Modification
Agreement of even date herewith, and according to the terms of a Loan and
Security Agreement of even date herewith, all between LaSalle and Antigua. In
connection therewith and as a condition of that financing, Debtor has executed
and delivered to LaSalle a Security Agreement, of even date herewith, granting
to LaSalle a security interest in all personal property owned or acquired by
Debtor (the "LaSalle Security Agreement").
1.4 Imperial Bank, a California banking corporation ("Imperial") has
agreed to provide certain financing to Antigua according to the terms of a
Credit Agreement, of even date herewith, by and among Imperial, SEC, Debtor, and
Antigua. In connection therewith and as a condition of that financing, Debtor
has executed and delivered to Imperial a Security Agreement, of even date
herewith, granting to Imperial a pledge and security interest in, among other
things, all personal property owned or acquired by Debtor (the "Imperial
Security Agreement").
1.5 The Cruttenden Roth Bridge Fund, L.L.C, a California limited
liability company ("Cruttenden") has also agreed to provide certain financing to
Antigua according to the terms of a Securities Purchase Agreement, of even date
herewith, by and among Cruttenden, SEC, Debtor, and Antigua. In connection
therewith and as a condition of that financing, Debtor has executed and
delivered to Cruttenden a Security and Pledge Agreement, of even date herewith,
granting to Cruttenden a security interest in, among other things, all personal
owned or acquired by Debtor (the "Cruttenden Security Agreement").
1.6 LaSalle, Imperial, Cruttenden, Secured Party, SEC, Debtor, and
Antigua have entered into an Intercreditor Agreement, of even date herewith (the
"Intercreditor Agreement"), to among other things, establish the respective
priorities of the security interests of LaSalle, Imperial, Cruttenden and
Secured Party in the personal property of Debtor.
<PAGE>
1.7 The security interests in favor of LaSalle, Imperial and Cruttenden
in the personal property of Debtor under the LaSalle Security Agreement, the
Imperial Security Agreement and the Cruttenden Security Agreement, respectively,
as modified or limited by the Intercreditor Agreement, are herein called the
"Permitted Security Interests".
2. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of the property described below in, to or
under which Debtor now has or hereafter acquires any right, title or interest,
whether present, future or contingent:
(a) All accounts, general intangibles, instruments, documents
and chattel paper, including all accounts receivable, notes, drafts,
lease agreements and security agreements, and all goods, if any,
represented thereby, and including but not limited to such items
described in the Collateral Schedule (if any) attached hereto, whether
now existing or hereafter acquired or created from time to time;
(b) All inventory now owned or hereafter acquired, wherever
located, including all goods held for sale or lease in Debtor's
business, as now or hereafter conducted, or furnished or to be
furnished under contracts of service, and all raw materials, work in
process, finished goods, and materials to be used or consumed in
Debtor's business (whether or not the inventory is represented by
warehouse receipts or bills of lading or has been or may be placed in
transit or delivered to a public warehouse);
(c) All equipment now owned or hereafter acquired, including
all furniture, fixtures, furnishings, vehicles (whether titled or
non-titled), machinery, materials and supplies, wherever located,
including but not limited to such items described on the collateral
schedule (if any) attached hereto, together with all parts,
accessories, attachments, additions thereto or replacements therefor;
(d) All investment property, including certificated
securities, uncertificated securities, securities accounts, securities
entitlements, commodity accounts and commodity contracts, and including
but not limited to those items described on the collateral schedule (if
any) attached hereto, together with all dividends, distributions and
payments with respect thereto, all other rights and interests arising
therefrom, and all substitutions and replacements therefor;
(e) All of the property described on the collateral schedule
(if any) attached hereto.
(f) All property of Debtor that is now or may hereafter be in
the possession or control of Secured Party in any capacity, including
without limitation all monies owed or that become owed by Secured Party
to Debtor;
(g) All policies or certificates of insurance covering any of
the property described herein, and all awards, loss payments, proceeds
and premium refunds that may become payable with respect to such
policies;
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<PAGE>
(h) All books, records, correspondence, files, electronic and
other media relating to the property described herein, all records,
data and information stored thereon, and all computer software,
databases and other informations systems used to create, maintain,
process and utilize such records, data and information;
together with all proceeds of any of the foregoing property, whether due or to
become due from any sale, exchange or other disposition thereof, whether cash or
non-cash in nature, and whether represented by checks, drafts, notes or other
instruments for the payment of money, including, without limitation, all
property, whether cash or non-cash in nature, derived from tort, contractual or
other claims arising in connection with any of the foregoing property. All
property described above is hereinafter called the "Collateral."
3. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $5,198,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Three Year Note");
(b) Payment of the sum of $325,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Two Year Note");
(c) Payment of the sum of $855,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Profit Note");
(d) Payment, performance and observance by SEC, Debtor, and/or
Antigua of each covenant, condition and provision contained in any
other security agreement or pledge agreement of even date herewith
securing payment of the Note (defined below) or in any other document
or instrument evidencing, securing or executed and delivered in
connection with the indebtedness evidenced by the Note, and which
specifically refers to the Note, and of all monies expended or advanced
by Secured Party pursuant to the terms thereof or to preserve any right
of Secured Party thereunder; and
(e) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
3.1 The Three Year Note, the Two Year Note and the Profit Note are
herein severally and collectively called the "Note". All the indebtedness and
obligations secured by this Agreement are hereafter collectively called the
"Obligation."
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Debtor (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized; (ii) is qualified
to do business and is in good standing under the laws of the state in which the
Collateral is located and in each state in which it is doing business; (iii) has
full power and authority to own its properties and assets and to carry on its
businesses as now conducted; and (iv) is fully authorized and permitted to
execute and deliver this Agreement and to enter into any transactions evidenced
by any portion of the Collateral. The execution, delivery and performance by
Debtor of this Agreement and all other documents and instruments relating to the
Obligation will not result in any breach of the terms and conditions or
constitute a default under any agreement or instrument under which Debtor is a
party or is obligated. Debtor is not in default in the performance or observance
of any covenants, conditions or provisions of any such agreement or instrument.
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor primarily for business use.
4.3 The address of Debtor set forth at the beginning of this Agreement
is the chief executive office of Debtor.
4.4 All tangible Collateral will be kept at Debtor's address set forth
at the beginning of this Agreement and/or at the locations described on Schedule
"2" attached hereto. Debtor's records concerning the Collateral will be kept at
Debtor's address set forth at the beginning of this Agreement.
4.5 Debtor is the owner of the Collateral free of all security
interests or other encumbrances except the Security Interest and the Permitted
Security Interests; no financing statement covering the Collateral is filed or
recorded in any public office except those to perfect the Security Interest and
the Permitted Security Interests.
4.6 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each Obligor is solvent, and the amount that Debtor has represented
to Secured Party as owing by each Obligor is the amount actually and
unconditionally owing by that Obligor, without deduction except for normal cash
discounts where applicable; no Obligor has any defense, setoff, claim or
counterclaim against Debtor that can be asserted against Secured Party whether
in any proceeding to enforce the Security Interest or otherwise. Each document,
instrument and chattel paper included in the Collateral is complete and regular
on its face and free from evidence of forgery or alteration. No default has
occurred in connection with any instrument, document or chattel paper included
in the Collateral, no payment in connection therewith is overdue and no
presentment, dishonor or protest has occurred in connection therewith.
4.7 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions or constitute a
default under any agreement or instrument under which Debtor is a party or is
obligated. Debtor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
-4-
<PAGE>
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest and the Permitted Security Interests. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean
that Secured Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, shall cause the Security Interest to be shown as a valid first lien on
the Certificate of Title for all titled vehicles and shall deliver the
Certificates of Title, or lien filing receipts, as applicable, to Secured Party
as evidence thereof.
5.7 Debtor shall immediately deliver to Secured Party all instruments,
documents, chattel paper and certificated securities (together with stock powers
satisfactory to Secured Party, executed in blank) that are at any time included
in the Collateral and that are not then held by LaSalle, Imperial or Cruttenden
in connection with the Permitted Security Interests. Debtor, upon demand, shall
promptly deliver to Secured Party all invoices, shipping or delivery records,
purchase orders, contracts or other items related to the Collateral. Debtor
shall notify Secured Party immediately of any default by any Obligor in the
payment or performance of its obligations with respect to any Collateral.
Debtor, without Secured Party's prior written consent, shall not make or agree
to make any alteration, modification or cancellation of, or substitution for, or
credit, adjustment or allowance on, any Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, unless waived in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and
-5-
<PAGE>
shall deliver to Secured Party confirming specific assignments of all accounts,
instruments, documents and chattel paper included in the Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except the Permitted Security
Interests. Debtor shall act and perform as necessary and shall execute and file
all security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims except the Permitted Security Interests, to keep the
Collateral in good condition and repair, to procure and maintain insurance
thereon, or to perform otherwise as required herein, Secured Party may advance
the monies necessary to pay the same, to accomplish such repairs, to procure and
maintain such insurance or to so perform; Secured Party is hereby authorized to
enter upon any property in the possession or control of Debtor for such
purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF
COLLATERAL BY DEBTOR
6.1 Secured Party, after the occurrence and during the continuation of
an Event of Default, without notice to Debtor, may notify any or all Obligors of
the existence of the Security Interest and may direct the Obligors to make all
payments on the Collateral to Secured Party. Until Secured Party has notified
the Obligors to remit payments directly to it, Debtor, at Debtor's own cost and
expense, shall collect or cause to be collected the accounts and monies due
under the accounts, documents, instruments and general intangibles or pursuant
to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of
-6-
<PAGE>
the requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor shall be applied to the Obligation in such order and manner and
at such time as Secured Party, in its sole discretion, shall determine. In
addition, Debtor shall promptly notify Secured Party of the return to or
possession by Debtor of goods underlying any Collateral; Debtor shall hold the
same in trust for Secured Party and shall dispose of the same as Secured Party
directs.
6.2 Secured Party, after the occurrence and during the continuation of
any Event of Default, without notice to Debtor, may demand, collect and sue on
the Collateral (either in Debtor's or Secured Party's name), enforce,
compromise, settle or discharge the Collateral and endorse Debtor's name on any
instruments, documents, or chattel paper included in or pertaining to the
Collateral; Debtor hereby irrevocably appoints Secured Party its attorney in
fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) retain possession of any other
Collateral and use it in any lawful manner consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any event or condition defined in the Note as an
"Event of Default" shall constitute and is hereby defined to be an Event of
Default under this Security Agreement.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
-7-
<PAGE>
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
(e) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least ten (10) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of
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<PAGE>
Secured Party in exercising any such rights shall be construed to preclude it
from the exercise thereof at any time while that Event of Default is continuing.
Secured Party may enforce any one or more rights or remedies hereunder
successively or concurrently. By accepting payment or performance of any of the
Obligation after its due date, Secured Party shall not thereby waive the
agreement contained herein that time is of the essence, nor shall Secured Party
waive either its right to require prompt payment or performance when due of the
remainder of the Obligation or its right to consider the failure to so pay or
perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange, substitute, subordinate, waive or release
any such security; (iii) join in any extension or subordination agreement; or
(iv) release any part of the Collateral from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of Arizona. Each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
9.5 Debtor shall execute and deliver such additional documents and
instruments and shall do such other acts as Secured Party may reasonably require
to fully implement the intent of this Agreement.
9.6 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
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<PAGE>
9.7 This Agreement which shall remain in full force and effect until
all of the Obligation shall have been paid and performed in full.
9.8 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.9 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
9.10 All exhibits and schedules attached hereto are incorporated herein
at each reference thereto.
9.11 All notices required or permitted to be given hereunder shall be
in writing and shall be given at the place and in the manner provided in the
Stock Purchase Agreement.
9.12 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
9.13 Secured Party may bring any action or proceeding to enforce or
arising out of this Note in any court of competent jurisdiction. Any action or
proceeding brought by Debtor arising out of this Note shall be brought solely in
a court of competent jurisdiction located in the County of Maricopa, State of
Arizona, or in the United States District Court for the District of Arizona.
Debtor waives any objection which it may now or hereafter have to venue of any
such action or proceeding and waives any right to seek removal of any action or
proceeding commenced in accordance herewith. If either party commences any
action or proceeding arising out of this Note, in a court located in the County
of Maricopa, State of Arizona, or the United States District Court for the
District of Arizona, the other party hereby agrees that it will submit and does
hereby irrevocably submit to the personal jurisdiction of such courts and will
not attempt to have such action dismissed, abated, or transferred on the ground
of forum non convenience or similar grounds; provided, however, that nothing
contained herein shall prohibit any party from seeking, by appropriate motion,
to remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. If such action is so removed,
however, neither party shall seek to transfer such action to any other district,
nor shall either party seek to transfer to any other district any action which
the other party originally commences in such federal court.
9.14 Debtor agrees that a summons and complaint or equivalent documents
commencing an action or proceeding in any court shall be validly and properly
served and shall confer personal jurisdiction over Debtor if served upon Bonn,
Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona 85004,
Attention: John M. Welch, Esq., whom Debtor hereby designates and appoints as
Debtor's authorized agent to accept and acknowledge on its behalf service of any
and all process which may be served in such action or proceeding in any such
court. Debtor shall be sent, by certified mail to Debtor's notice address as
provided herein, a copy of such summons and complaint at the time of service
upon such agent; provided, however, that any such copy shall be sent solely as a
courtesy for Debtor and its failure to receive such copy shall in no way affect
the validity and propriety of the service made on Debtor through such agent.
Debtor agrees that if it desires to make any change in its agent for
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<PAGE>
service, such change shall be subject to Secured Party's written approval, which
approval shall not be unreasonably withheld.
DEBTOR AND SECURED PARTY (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN
CONNECTION WITH THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS, THE INDEBTEDNESS
EVIDENCED BY THIS NOTE, ANY COLLATERAL OR SECURITY FOR THIS NOTE, OR ANY
DEALINGS BETWEEN DEBTOR AND SECURED PARTY IN CONNECTION WITH THE TRANSACTIONS
THAT ARE THE SUBJECT OF THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS, AND AGREE
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. THIS PROVISION SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER
INVOLVING A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED IN CONTRACT, TORT OR
OTHERWISE. EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE
WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
10. NON-DEBTOR BORROWER PROVISIONS
10.1 All advances of principal under the Note shall be made to SEC
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of SEC or the officers, directors,
partners, members or agents acting or purporting to act on its behalf. Debtor is
and shall continue to be fully informed as to all aspects of the business
affairs of SEC that it deems relevant to the risks it is assuming and hereby
waives and fully discharges Secured Party from any and all obligations to
communicate to Debtor any facts of any nature whatsoever regarding SEC and SEC's
business affairs.
10.2 Debtor authorizes Secured Party, without notice or demand, without
affecting the obligations of Debtor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the Security Interest, from time to time, at the request
of any person primarily obligated therefor, to renew, compromise, extend,
accelerate or otherwise change the time for payment or performance of, or
otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Debtor waives and agrees not
to assert: (i) any right to require Secured Party to proceed against SEC; (ii)
the benefits of any statutory provision limiting the liability of a surety,
including without limitation the benefit of A.R.S. ss.12-1641, et seq. and Rule
17(f) of the Arizona Rules of Civil Procedure; and (iii) any defense arising by
reason of any disability or other defense of SEC or by reason of the cessation
from any cause
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<PAGE>
whatsoever of the liability of SEC. Debtor shall have no right of subrogation
and hereby waives any right to enforce any remedy which Secured Party now has,
or may hereafter have, against Borrower.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES INC., a Texas
corporation
By /s/ L. Steven Haynes
Its Secretary
DEBTOR
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<PAGE>
SCHEDULE 1
Sellers
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Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
SCHEDULE 2
Collateral Locations
- --------------------
1710-1177 West Hastings
Vancouver, British Columbia
2105 Midland Avenue
Scarborough, Ontario
Page 1 of 1
Exhibit 10.48
SECURITY AGREEMENT
(Antigua)
THIS SECURITY AGREEMENT is made and entered into as of the 7th day of
May, 1997, by THE ANTIGUA GROUP, INC., a Nevada corporation (hereinafter called
"Debtor"), whose chief executive office is located at 9319 North 94th Way,
Scottsdale, Arizona, in favor of THOMAS E. DOOLEY, JR., as agent for Sellers
(defined below), and his heirs, personal representatives, successors and assigns
(hereinafter called "Secured Party"), whose address is 12401 East Saddle Horn
Drive, Scottsdale, Arizona 85259.
1. RECITALS
1.1 The parties identified on Schedule 1 hereto (the "Sellers"),
Southhampton Enterprises Corp., a British Columbia corporation ("SEC") and
Southhampton Enterprises Inc., a Texas corporation ("SEI") have entered into a
Stock Purchase Agreement dated April 21, 1997 (the "Stock Purchase Agreement"),
which provides for the purchase by SEI from Sellers of all of the issued and
outstanding common stock of Debtor.
1.2 Secured Party has agreed to provide certain financing to SEC in
connection with the Stock Purchase Agreement, provided that Secured Party
receives, among other things, a security interest in all personal property now
owned or hereafter acquired by Debtor.
1.3 LaSalle Business Credit, Inc. ("LaSalle") has provided or agreed to
provide certain financing to Debtor according to the terms of a Loan and
Security Agreement, dated January 23, 1997, as modified by a Modification
Agreement of even date herewith, and according to the terms of a Loan and
Security Agreement of even date herewith, all between LaSalle and Debtor. In
connection therewith and as a condition of that financing, Debtor has executed
and delivered to LaSalle a Security Agreement, of even date herewith, granting
to LaSalle a security interest in all personal property owned or acquired by
Debtor (the "LaSalle Security Agreement").
1.4 Imperial Bank, a California banking corporation ("Imperial") has
agreed to provide certain financing to Debtor according to the terms of a Credit
Agreement, of even date herewith, by and among Imperial, SEC, SEI and Debtor. In
connection therewith and as a condition of that financing, Debtor has executed
and delivered to Imperial a Security Agreement, of even date herewith, granting
to Imperial a pledge and security interest in, among other things, all personal
property owned or acquired by Debtor (the "Imperial Security Agreement").
1.5 The Cruttenden Roth Bridge Fund, L.L.C, a California limited
liability company ("Cruttenden") has also agreed to provide certain financing to
Debtor according to the terms of a Securities Purchase Agreement, of even date
herewith, by and among Cruttenden, SEC, SEI and Debtor. In connection therewith
and as a condition of that financing, Debtor has executed and delivered to
Cruttenden a Security and Pledge Agreement, of even date herewith, granting to
Cruttenden a security interest in, among other things, all personal owned or
acquired by Debtor (the "Cruttenden Security Agreement").
1.6 LaSalle, Imperial, Cruttenden, Secured Party, SEC, SEI and Debtor
have entered into an Intercreditor Agreement, of even date herewith (the
"Intercreditor Agreement"), to among other things, establish the respective
priorities of the security interests of LaSalle, Imperial, Cruttenden and
Secured Party in the personal property of Debtor.
1.7 The security interests in favor of LaSalle, Imperial and Cruttenden
in the personal property of Debtor under the LaSalle Security Agreement, the
Imperial Security Agreement and the
<PAGE>
Cruttenden Security Agreement, respectively, as modified or limited by the
Intercreditor Agreement, are herein called the "Permitted Security Interests".
2. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of the property described below in, to or
under which Debtor now has or hereafter acquires any right, title or interest,
whether present, future or contingent:
(a) All accounts, general intangibles, instruments, documents
and chattel paper, including all accounts receivable, notes, drafts,
lease agreements and security agreements, and all goods, if any,
represented thereby, and including but not limited to such items
described on the collateral schedule attached hereto, whether now
existing or hereafter acquired or created from time to time;
(b) All inventory now owned or hereafter acquired, wherever
located, including all goods held for sale or lease in Debtor's
business, as now or hereafter conducted, or furnished or to be
furnished under contracts of service, and all raw materials, work in
process, finished goods, and materials to be used or consumed in
Debtor's business (whether or not the inventory is represented by
warehouse receipts or bills of lading or has been or may be placed in
transit or delivered to a public warehouse);
(c) All equipment now owned or hereafter acquired, including
all furniture, fixtures, furnishings, vehicles (whether titled or
non-titled), machinery, materials and supplies, wherever located,
including but not limited to such items described on the collateral
schedule attached hereto, together with all parts, accessories,
attachments, additions thereto or replacements therefor;
(d) All investment property, including certificated
securities, uncertificated securities, securities accounts, securities
entitlements, commodity accounts and commodity contracts, and including
but not limited to those items described on the collateral schedule
attached hereto, together with all dividends, distributions and
payments with respect thereto, all other rights and interests arising
therefrom, and all substitutions and replacements therefor;
(e) All of the property described on the collateral schedule
attached hereto, including but not limited to the property defined
therein as the "Trademarks" and the "Trademark Rights".
(f) All property of Debtor that is now or may hereafter be in
the possession or control of Secured Party in any capacity, including
without limitation all monies owed or that become owed by Secured Party
to Debtor;
(g) All policies or certificates of insurance covering any of
the property described herein, and all awards, loss payments, proceeds
and premium refunds that may become payable with respect to such
policies;
(h) All books, records, correspondence, files, electronic and
other media relating to the property described herein, all records,
data and information stored thereon,
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<PAGE>
and all computer software, databases and other informations systems
used to create, maintain, process and utilize such records, data and
information;
together with all proceeds of any of the foregoing property, whether due or to
become due from any sale, exchange or other disposition thereof, whether cash or
non-cash in nature, and whether represented by checks, drafts, notes or other
instruments for the payment of money, including, without limitation, all
property, whether cash or non-cash in nature, derived from tort, contractual or
other claims arising in connection with any of the foregoing property. All
property described above is hereinafter called the "Collateral."
3. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $5,198,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Three Year Note");
(b) Payment of the sum of $325,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Two Year Note");
(c) Payment of the sum of $855,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Profit Note");
(d) Payment, performance and observance by SEC, SEI, and/or
Debtor, of each covenant, condition and provision contained in any
other security agreement or pledge agreement of even date herewith
securing payment of the Note (defined below) or in any other document
or instrument evidencing, securing or executed and delivered in
connection with the indebtedness evidenced by the Note, and which
specifically refers to the Note, and of all monies expended or advanced
by Secured Party pursuant to the terms thereof or to preserve any right
of Secured Party thereunder; and
(e) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
3.1 The Three Year Note, the Two Year Note and the Profit Note are
herein severally and collectively called the "Note". All the indebtedness and
obligations secured by this Agreement are hereafter collectively called the
"Obligation."
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Debtor (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized; (ii) is qualified
to do business and is in good standing under the laws of the state in which the
Collateral is located and in each state in which it is doing business; (iii) has
full power and authority to own its properties and assets and to carry on its
businesses as now conducted; and (iv) is fully authorized and permitted to
execute and deliver this Agreement and to enter into any transactions evidenced
by any portion of the Collateral. The execution, delivery and performance by
Debtor of this Agreement and all other documents and instruments relating to the
Obligation will not result in any breach of the terms and conditions or
constitute a default under any agreement or instrument under which Debtor is a
party or is obligated. Debtor is not in default in the performance or observance
of any covenants, conditions or provisions of any such agreement or instrument.
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor primarily for business use.
4.3 The address of Debtor set forth at the beginning of this Agreement
is the chief executive office of Debtor.
4.4 All tangible Collateral will be kept at Debtor's address set forth
at the beginning of this Agreement. Debtor's records concerning the Collateral
will be kept at Debtor's address set forth at the beginning of this Agreement.
4.5 Debtor is the owner of the Collateral free of all security
interests or other encumbrances except the Security Interest and the Permitted
Security Interests; no financing statement covering the Collateral is filed or
recorded in any public office except those to perfect the Security Interest and
the Permitted Security Interests.
4.6 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. Each Obligor is solvent, and the amount that Debtor has represented
to Secured Party as owing by each Obligor is the amount actually and
unconditionally owing by that Obligor, without deduction except for normal cash
discounts where applicable; no Obligor has any defense, setoff, claim or
counterclaim against Debtor that can be asserted against Secured Party whether
in any proceeding to enforce the Security Interest or otherwise. Each document,
instrument and chattel paper included in the Collateral is complete and regular
on its face and free from evidence of forgery or alteration. No default has
occurred in connection with any instrument, document or chattel paper included
in the Collateral, no payment in connection therewith is overdue and no
presentment, dishonor or protest has occurred in connection therewith.
4.7 The Trademarks are subsisting and have not been adjudged invalid or
unenforceable in whole or in part; each of the Trademarks is valid and
enforceable; and no claim has been made that the use of any of the Trademarks
does or may violate the rights of any third person. Debtor has used proper
statutory notice in connection with its use of the Trademarks; and Debtor has
used or required the use of for the duration of this Agreement, consistent
standards of quality in the manufacture of products sold and services rendered
under the Trademarks.
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<PAGE>
4.8 Debtor is fully authorized and permitted to execute and deliver
this Agreement and to enter into any transactions evidenced by any portion of
the Collateral. The execution, delivery and performance by Debtor of this
Agreement and all other documents and instruments relating to the Obligation
will not result in any breach of the terms and conditions or constitute a
default under any agreement or instrument under which Debtor is a party or is
obligated. Debtor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest and the Permitted Security Interests. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean
that Secured Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, shall cause the Security Interest to be shown as a valid first lien on
the Certificate of Title for all titled vehicles and shall deliver the
Certificates of Title, or lien filing receipts, as applicable, to Secured Party
as evidence thereof.
5.7 Debtor shall immediately deliver to Secured Party all instruments,
documents, chattel paper and certificated securities (together with stock powers
satisfactory to Secured Party, executed in blank) that are at any time included
in the Collateral and that are not then held by LaSalle, Imperial or Cruttenden
in connection with the Permitted Security Interests. Debtor, upon demand, shall
promptly deliver to Secured Party all invoices, shipping or delivery records,
purchase orders, contracts or other items related to the Collateral. Debtor
shall notify Secured Party immediately of any default by any Obligor in the
payment or performance of its obligations with respect to any Collateral.
Debtor, without Secured Party's prior written consent, shall not make or agree
to make any alteration, modification or cancellation of, or substitution for, or
credit, adjustment or allowance on, any Collateral.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
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<PAGE>
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, unless waived in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and shall deliver to Secured Party confirming specific assignments
of all accounts, instruments, documents and chattel paper included in the
Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except the Permitted Security
Interests. Debtor shall act and perform as necessary and shall execute and file
all security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
necessary by Secured Party from time to time to establish and determine the
validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims except the Permitted Security Interests, to keep the
Collateral in good condition and repair, to procure and maintain insurance
thereon, or to perform otherwise as required herein, Secured Party may advance
the monies necessary to pay the same, to accomplish such repairs, to procure and
maintain such insurance or to so perform; Secured Party is hereby authorized to
enter upon any property in the possession or control of Debtor for such
purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF
COLLATERAL BY DEBTOR
6.1 Secured Party, after the occurrence and during the continuation of
an Event of Default, without notice to Debtor, may notify any or all Obligors of
the existence of the Security Interest and may direct the Obligors to make all
payments on the Collateral to Secured Party. Until Secured Party has
-6-
<PAGE>
notified the Obligors to remit payments directly to it, Debtor, at Debtor's own
cost and expense, shall collect or cause to be collected the accounts and monies
due under the accounts, documents, instruments and general intangibles or
pursuant to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor shall be applied to the Obligation in such order and manner and
at such time as Secured Party, in its sole discretion, shall determine. In
addition, Debtor shall promptly notify Secured Party of the return to or
possession by Debtor of goods underlying any Collateral; Debtor shall hold the
same in trust for Secured Party and shall dispose of the same as Secured Party
directs.
6.2 Secured Party, after the occurrence and during the continuation of
any Event of Default, without notice to Debtor, may demand, collect and sue on
the Collateral (either in Debtor's or Secured Party's name), enforce,
compromise, settle or discharge the Collateral and endorse Debtor's name on any
instruments, documents, or chattel paper included in or pertaining to the
Collateral; Debtor hereby irrevocably appoints Secured Party its attorney in
fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) retain possession of any other
Collateral and use it in any lawful manner consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. TRADEMARKS; AGREEMENT TO ASSIGN INTEREST; PATENT AND TRADEMARK
OFFICE
8.1 If Debtor shall obtain rights to any new trademarks or service
marks, the provisions of this Agreement shall automatically apply thereto and
Debtor shall give prompt written notice thereof to Secured Party. Debtor
irrevocably and unconditionally authorizes Secured Party to modify this
Agreement by amending the Collateral Schedule hereto to include any additional
or future trademarks, service marks and applications therefor owned or acquired
by Debtor without any further assent or signature of Debtor.
-7-
<PAGE>
8.2 Upon the occurrence of an Event of Default, in addition to all
other rights and remedies available to Secured Party hereunder or under
applicable law, Debtor shall execute any and all documents, agreements and
instruments considered necessary, appropriate or convenient by Lender or its
counsel to effectuate the assignment, transfer and conveyance of the Trademarks
to Secured Party or its assignee. Debtor hereby irrevocably and unconditionally
authorizes and empowers Secured Party as Secured Party may select, in its
exclusive discretion, as Debtor's true and lawful attorney-in-fact, with the
power to endorse Debtor's name on all such documents, agreements and
instruments, including without limitation assignments. Debtor hereby ratifies
all that such attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney shall be irrevocable as long as this Agreement remains in
effect, and constitutes a power of attorney coupled with an interest. All of
Secured Party's rights and remedies with respect to the Trademarks, whether
established by this Agreement, by any other document executed in connection with
the Obligation, or by law, shall be cumulative and may be exercised separately
or concurrently.
8.3 If Secured Party shall elect to exercise any of the rights
hereunder with respect to the Trademarks, the United States Patent and Trademark
Office shall have the right to rely upon Secured Party's written statement of
Secured Party's right to sell, assign and transfer the trademarks and the Debtor
hereby irrevocably and unconditionally authorizes the United States Patent and
Trademark Office to recognize such sale by Secured Party either in Debtor's name
or in Secured Party's name without the necessity or obligation of the United
States Patent and Trademark Office to ascertain the existence of any default by
the Debtor under the Credit Agreement.
9. EVENTS OF DEFAULT; REMEDIES
9.1 The occurrence of any event or condition defined in the Note as an
Event of Default shall constitute and is hereby defined to be an "Event of
Default" under this Security Agreement.
9.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
-8-
<PAGE>
(e) Upon obtaining possession of the Collateral or any part
thereof, after notice to Debtor as provided in Paragraph 8.4 herein,
sell such Collateral at public or private sale either with or without
having such Collateral at the place of sale. The proceeds of such sale,
after deducting therefrom all expenses of Secured Party in taking,
storing, repairing and selling the Collateral (including reasonable
attorneys' fees) shall be applied to the payment of the Obligation, and
any surplus thereafter remaining shall be paid to Debtor or any other
person that may be legally entitled thereto. In the event of a
deficiency between such net proceeds from the sale of the Collateral
and the total amount of the Obligation, Debtor, upon demand, shall
promptly pay the amount of such deficiency to Secured Party.
9.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
9.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least ten (10) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
9.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by Secured Party in enforcing payment and performance
of the Obligation or in exercising the rights and remedies of Secured Party
hereunder. All such costs and expenses shall be secured by this Agreement and by
all deeds of trust and other lien and security documents securing the
Obligation. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Secured Party.
9.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
10. MISCELLANEOUS PROVISIONS
10.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
-9-
<PAGE>
10.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange, substitute, subordinate, waive or release
any such security; (iii) join in any extension or subordination agreement; or
(iv) release any part of the Collateral from the Security Interest.
10.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension, dishonor, protest, demand and nonpayment, relating to the
Obligation; and (v) any benefit of, and any right to participate in, any other
security now or hereafter held by Secured Party.
10.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the laws of the State of Arizona. Each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
10.5 Debtor shall execute and deliver such additional documents and
instruments and shall do such other acts as Secured Party may reasonably require
to fully implement the intent of this Agreement.
10.6 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
10.7 This Agreement which shall remain in full force and effect until
all of the Obligation shall have been paid and performed in full.
10.8 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
10.9 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
10.10 All exhibits and schedules attached hereto are incorporated
herein at each reference thereto.
-10-
<PAGE>
10.11 All notices required or permitted to be given hereunder shall be
in writing and shall be given at the place and in the manner provided in the
Stock Purchase Agreement.
10.12 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
10.13 Secured Party may bring any action or proceeding to enforce or
arising out of this Note in any court of competent jurisdiction. Any action or
proceeding brought by Debtor arising out of this Note shall be brought solely in
a court of competent jurisdiction located in the County of Maricopa, State of
Arizona, or in the United States District Court for the District of Arizona.
Debtor waives any objection which it may now or hereafter have to venue of any
such action or proceeding and waives any right to seek removal of any action or
proceeding commenced in accordance herewith. If either party commences any
action or proceeding arising out of this Note, in a court located in the County
of Maricopa, State of Arizona, or the United States District Court for the
District of Arizona, the other party hereby agrees that it will submit and does
hereby irrevocably submit to the personal jurisdiction of such courts and will
not attempt to have such action dismissed, abated, or transferred on the ground
of forum non convenience or similar grounds; provided, however, that nothing
contained herein shall prohibit any party from seeking, by appropriate motion,
to remove any action brought in a Arizona state court to the United States
District Court for the District of Arizona. If such action is so removed,
however, neither party shall seek to transfer such action to any other district,
nor shall either party seek to transfer to any other district any action which
the other party originally commences in such federal court.
10.14 Debtor agrees that a summons and complaint or equivalent
documents commencing an action or proceeding in any court shall be validly and
properly served and shall confer personal jurisdiction over Debtor if served
upon Bonn, Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona
85004, Attention: John M. Welch, Esq., whom Debtor hereby designates and
appoints as Debtor's authorized agent to accept and acknowledge on its behalf
service of any and all process which may be served in such action or proceeding
in any such court. Debtor shall be sent, by certified mail to Debtor's notice
address as provided herein, a copy of such summons and complaint at the time of
service upon such agent; provided, however, that any such copy shall be sent
solely as a courtesy for Debtor and its failure to receive such copy shall in no
way affect the validity and propriety of the service made on Debtor through such
agent. Debtor agrees that if it desires to make any change in its agent for
service, such change shall be subject to Secured Party's written approval, which
approval shall not be unreasonably withheld.
DEBTOR AND SECURED PARTY (BY ITS ACCEPTANCE OF THIS NOTE) HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR IN
CONNECTION WITH THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS, THE INDEBTEDNESS
EVIDENCED BY THIS NOTE, ANY COLLATERAL OR SECURITY FOR THIS NOTE, OR ANY
DEALINGS BETWEEN DEBTOR AND SECURED PARTY IN CONNECTION WITH THE TRANSACTIONS
THAT ARE THE SUBJECT OF THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS, AND AGREE
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. THIS PROVISION SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING, WHETHER
INVOLVING A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED IN CONTRACT, TORT OR
OTHERWISE. EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE
WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
11. NON-DEBTOR BORROWER PROVISIONS
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<PAGE>
11.1 All advances of principal under the Note shall be made to SEC
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of SEC or the officers, directors,
partners, members or agents acting or purporting to act on its behalf. Debtor is
and shall continue to be fully informed as to all aspects of the business
affairs of SEC that it deems relevant to the risks it is assuming and hereby
waives and fully discharges Secured Party from any and all obligations to
communicate to Debtor any facts of any nature whatsoever regarding SEC and SEC's
business affairs.
11.2 Debtor authorizes Secured Party, without notice or demand, without
affecting the obligations of Debtor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the Security Interest, from time to time, at the request
of any person primarily obligated therefor, to renew, compromise, extend,
accelerate or otherwise change the time for payment or performance of, or
otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Debtor waives and agrees not
to assert: (i) any right to require Secured Party to proceed against SEC; (ii)
the benefits of any statutory provision limiting the liability of a surety,
including without limitation the benefit of A.R.S. ss.12-1641, et seq. and Rule
17(f) of the Arizona Rules of Civil Procedure; and (iii) any defense arising by
reason of any disability or other defense of SEC or by reason of the cessation
from any cause whatsoever of the liability of SEC. Debtor shall have no right of
subrogation and hereby waives any right to enforce any remedy which Secured
Party now has, or may hereafter have, against Borrower.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
THE ANTIGUA GROUP, INC., Nevada corporation
By /s/ Gerald K. Whitley
Its VP - Finance
DEBTOR
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<PAGE>
SCHEDULE 1
Sellers
- -------
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
COLLATERAL SCHEDULE
All trademarks, trade names, trade dress and service marks including,
without limitation, all those described on Exhibit A attached hereto and made a
part hereof, and all renewals thereof (the "Trademarks"), together with all
prints, labels and materials on which said Trademarks have appeared or appear
and all designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, the entire goodwill of the business in connection
with which the Trademarks are used, all claims for damages by reason of past
infringement of the Trademarks with the right to sue for and collect the same,
and together with all license rights in the foregoing and all royalties for such
licenses (collectively, the "Trademark Rights").
Page 1 of 1
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Trademarks
- ----------
Docket No. Trademark Registration/S.N. Information
<S> <C> <C>
397-T-1 ANTIGUA U.S. Reg. No. 1,242,152, 6/14/83
Section 8 & 15 Affidavit filed 1/4/89
496-T-1 ANTIGUA Canadian Reg. Nos. 315,232 and
315,554, 6/86
496-T-3 ANTIGUA U.S. Reg. No. 1,480,871, 3/15/88
Section 8 & 15 Affidavit filed 2/28/94
496-T-4 KACHINA DESIGN LOGO U.S. Reg. No. 1,561,053, 10/17/89
Section 8 and 15 Affidavit filed
10/17/94
496-T-4 KACHINA DESIGN LOGO Canadian Reg. No. 376,744, 12/7/90
496-T-5 ANTIGUA Japan, Reg. No. 2,608,773 (C1 17)
496-T-5 ANTIGUA/ German Reg. No. 2,075,051, 8/17/94
KACHINA
496-T-5 ANTIGUA/ Sweden Reg. No. 259,283, 7/1/94
KACHINA
496-T-5 ANTIGUA/ Pending Applications In:
KACHINA Ireland, SN 4386/93
Italy, Reg. No. 681.817 issued 7/21/96
Korea, No. 6537/94
U.K., No. 1566114 issued 3/10/94
U.K., No. 1365483 (Kachina Logo)
issued 2/9/97
496-T-6 KACHINA DESIGN LOGO Japan, Reg. No. 2, 516,061 (C1 24)
3/31/93 and Reg. No. 2,596,912 (C1
17) 11/30/93
496-T-7 ANTECH U.S. Reg. No. 1,683,030, 4/14/92
496-T-8 AII APPAREL U.S. Reg. No. 1,809,289, 12/7/93
496-T-11 ANTIGUA SPORT AND DESIGN LOGO U.S. Reg. No. 1,940,578 12/12/95
496-T-12 WHEN THE SPORT IS EVERYTHING U.S. Application S.N. 74/528,972
filed 5/24/94
496-T-13 ANTIGUA Pending Application In:
Australia (No Serial Nos. Available)
496-T-14 ANTIGUA European Community Trademark
Application (CTM) - Pending
(No Serial No. Available)
</TABLE>
Exhibit A
Page 1 of 2
<PAGE>
Trade Name: The Antigua Group, Inc.
Pending Trademarks:
(a) "ANTIGUA"
Australia and New Zealand trademark registration applications
are pending for Men's sportswear, namely, sports shirts, v-neck sweaters,
cardigans, sleeveless sweater vests, jackets, gloves, and golf gloves; Ladies'
sportswear, namely, short sleeve sport blouses, v-neck sweaters, cardigans,
jackets, gloves, and golf gloves; Men's and Ladies' sportswear, namely blouses,
shirts, sweaters and jackets. Term 15 years, Renewable.
(b) "ANTIGUA"
Australia and New Zealand trademark registration applications
are pending for golf headcovers, putter covers, hand towels and shoulder straps.
Term 15 years, Renewable.
Exhibit A
Page 2 of 2
Exhibit 10.49
TRADEMARK SECURITY AGREEMENT
(Antigua)
THIS TRADEMARK SECURITY AGREEMENT is made and entered into as of the
7th day of May, 1997, by THE ANTIGUA GROUP, INC., a Nevada corporation
(hereinafter called "Debtor"), whose chief executive office is located at 9319
North 94th Way, Scottsdale, Arizona, in favor of THOMAS E. DOOLEY, JR., as agent
for Sellers (defined below), and his heirs, personal representatives, successors
and assigns (hereinafter called "Secured Party"), whose address is 12401 East
Saddle Horn Drive, Scottsdale, Arizona 85259.
RECITALS
A. Debtor has adopted, used and is using, or has a bona fide intent to
use, the trademarks, trade names, trade dress and service marks listed on the
attached Exhibit A, which trademarks, trade names, trade dress and service marks
are registered, or the subject of pending applications for registration, in the
United States Patent and Trademark Office, and all renewals thereof (the
"Trademarks");
B. The parties identified on Schedule 1 hereto (the "Sellers"),
Southhampton Enterprises Corp., a British Columbia corporation ("SEC") and
Southhampton Enterprises Inc., a Texas corporation ("SEI") have entered into a
Stock Purchase Agreement dated April 21, 1997 (the "Stock Purchase Agreement"),
which provides for the purchase by SEI from Sellers of all of the issued and
outstanding common stock of Debtor.
C. Secured Party has agreed to provide certain financing to SEC in
connection with the Stock Purchase Agreement, provided that Secured Party
receives, among other things, a security interest in the Trademarks and certain
related rights and interests.
D. Debtor has executed and delivered to Secured Party a Security
Agreement, of even date herewith (the "Security Agreement"), in which Debtor has
granted to Secured Party a security interest in all right, title and interest of
Debtor in and to, among other things, the Trademarks, together with all prints,
labels and materials on which said Trademarks have appeared or appear and all
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, the entire goodwill of the business in connection with
which the Trademarks are used, all claims for damages by reason of past
infringement of the Trademarks with the right to sue for and collect the same,
and together with all license rights in the foregoing and all royalties for such
licenses (collectively, the "Trademark Rights"), to secure the payment,
performance and observance of the indebtedness and obligations described and
defined in the Security Agreement as the "Obligation."
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby covenants and agrees
with Secured Party as follows:
1. Debtor hereby grants to Lender a security interest in, and
mortgage on, all right, title and interest of Debtor in and to the Trademarks
and the Trademark Rights (collectively, the "Collateral"), to secure the prompt
payment, performance and observance of the Obligation, as defined in the
Security Agreement, said security interest to flow with the title to the
Collateral.
2. Debtor hereby acknowledges and affirms that the rights and
remedies of Lender with respect to the security interest in the Collateral made
and granted hereby are more fully set forth
<PAGE>
in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
3. Secured Party's security interest in the Collateral is
subject to certain prior security interests as provided in the Security
Agreement.
4. Nothing in this document shall limit the rights,
obligations and/or remedies of the parties as set forth in the Security
Agreement or in the other documents and instruments evidencing and securing the
Obligation.
IN WITNESS WHEREOF, Debtor has caused this document to be duly executed
by its officer thereunto duly authorized as of the 7th day of May, 1997.
THE ANTIGUA GROUP, INC., a Nevada
corporation
By /s/ Gerald K. Whitley
Its VP - Finance
DEBTOR
Debtor's Address: 9319 North 94th Way
Scottsdale, AZ 85258
/s/ Thomas E. Dooley, Jr.
THOMAS E. DOOLEY, JR., as agent for Sellers
SECURED PARTY
Secured Party's Address:
12401 East Saddle Horn Drive
Scottsdale, Arizona 85259
-2-
<PAGE>
SCHEDULE 1
Sellers
- -------
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
EXHIBIT A
to
Trademark Security Agreement
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Trademarks
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Docket No. Trademark Registration/S.N. Information
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397-T-1 ANTIGUA U.S. Reg. No. 1,242,152, 6/14/83
Section 8 & 15 Affidavit filed 1/4/89
496-T-3 ANTIGUA U.S. Reg. No. 1,480,871, 3/15/88
Section 8 & 15 Affidavit filed 2/28/94
496-T-4 KACHINA DESIGN LOGO U.S. Reg. No. 1,561,053, 10/17/89
Section 8 and 15 Affidavit filed
10/17/94
496-T-7 ANTECH U.S. Reg. No. 1,683,030, 4/14/92
496-T-8 AII APPAREL U.S. Reg. No. 1,809,289, 12/7/93
496-T-11 ANTIGUA SPORT AND DESIGN LOGO U.S. Reg. No. 1,940,578 12/12/95
496-T-12 WHEN THE SPORT IS EVERYTHING U.S. Application S.N. 74/528,972
filed 5/24/94
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Trade Name: The Antigua Group, Inc.
Exhibit A
Page 1
Exhibit 10.50
PLEDGE AND SECURITY AGREEMENT
AND IRREVOCABLE PROXY
(SEC)
THIS PLEDGE AND SECURITY AGREEMENT AND IRREVOCABLE PROXY is made and
entered into as of the 7th day of May, 1997, by SOUTHHAMPTON ENTERPRISES CORP.,
a British Columbia corporation (hereinafter called "Pledgor"), whose chief
executive office is located at 9211 Diplomacy Row, Dallas, Texas 75247 in favor
of THOMAS E. DOOLEY, JR., as agent for Sellers (defined below), and his heirs,
personal representatives, successors and assigns (hereinafter called "Secured
Party"), whose address is 12401 East Saddle Horn Drive, Scottsdale, Arizona
85259.
1. RECITALS
1.1 The parties identified on Schedule 1 hereto (the "Sellers"),
Pledgor, and Southhampton Enterprises Inc., a Texas corporation ("SEI") have
entered into a Stock Purchase Agreement dated April 21, 1997 (the "Stock
Purchase Agreement"), which provides for the purchase by SEI from Sellers of all
of the issued and outstanding common stock of The Antigua Group, Inc., a Nevada
corporation ("Antigua").
1.2 Secured Party has agreed to make certain financial accommodations
to Pledgor in connection with the Stock Purchase Agreement, provided that
Secured Party receives, among other things, a pledge and security interest in
all stock and securities issued by SEI now owned or hereafter acquired by
Pledgor.
1.3 Imperial Bank, a California banking corporation ("Imperial") has
agreed to provide certain financing to Antigua according to the terms of a
Credit Agreement, of even date herewith, by and among Imperial, Pledgor, SEI and
Antigua. In connection therewith and as a condition of that financing, Pledgor
has executed and delivered to Imperial a Pledge and Irrevocable Proxy Security
Agreement, of even date herewith, granting to Imperial a pledge and security
interest in, among other things, all stock and securities issued by SEI owned or
acquired by Pledgor (the "Imperial Pledge Agreement").
1.4 The Cruttenden Roth Bridge Fund, L.L.C, a California limited
liability company ("Cruttenden") has also agreed to provide certain financing to
Antigua according to the terms of a Securities Purchase Agreement, of even date
herewith, by and among Cruttenden, Pledgor, SEI and Antigua. In connection
therewith and as a condition of that financing, Pledgor has executed and
delivered to Cruttenden a Security and Pledge Agreement, of even date herewith,
granting to Cruttenden a pledge and security interest in, among other things,
all stock and securities issued by SEI owned or acquired by Pledgor (the
"Cruttenden Pledge Agreement").
1.5 Pledgor, as of the date of this Agreement, is the owner of the
shares of the common stock of SEI listed on Exhibit A attached hereto.
2. PLEDGE OF STOCK
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
stock in SEI now owned or hereafter acquired by Pledgor, including without
limitation the stock described on Exhibit "A" hereto, together with all earnings
thereon, all additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split,
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warrants or other rights, reclassification, readjustment or other change in the
capital structure of SEI, and the securities of any corporation or other
properties received upon the conversion or exchange thereofpursuant to any
merger, consolidation, reorganization, sale of assets or other agreement or
received upon any liquidation of SEI or such other corporation (all hereinafter
called the "Pledged Securities"), subject, however, to the prior and superior
pledge and security interests of Imperial and Cruttenden under the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement, respectively.
2.2 In connection with the execution of this Agreement, Pledgor shall
irrevocably direct Imperial or Cruttenden, as the case may be, to deliver the
Pledged Securities, together with all stock transfer powers executed by Pledgor
and delivered to Imperial or Cruttenden, as the case may be, to Secured Party at
c/o Quarles & Brady, One East Camelback Road, Suite 400, Phoenix, Arizona
85012-1649, Attention: P. Robert Moya, Esq., or at such other address as Secured
Party may from time to time designate to Imperial or Cruttenden, as the case may
be, in writing, at such time as all of the obligations secured by the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement have been satisfied or
Pledgor is otherwise entitled to the release of the Pledged Securities from any
interest under the Imperial Pledge Agreement and the Cruttenden Pledge
Agreement. In addition, Pledgor shall cause the following legend to be added to
all certificates evidencing the Pledged Securities:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE, AND THE RIGHTS
OF THE OWNER THEREOF, ARE SUBJECT TO CERTAIN PLEDGES AND
SECURITY INTERESTS IN FAVOR OF IMPERIAL BANK, THE CRUTTENDEN
ROTH BRIDGE FUND, LLC, AND THOMAS E. DOOLEY, JR., AS AGENT,
THE PRIORITIES OF WHICH ARE SET FORTH IN AN INTERCREDITOR
AGREEMENT AMONG SUCH PARTIES DATED MAY 7, 1997.
2.3 Upon termination of the Imperial Pledge Agreement and the
Cruttenden Pledge Agreement, Pledgor shall deliver to Secured Party all then
existing certificates for the Pledged Securities, together with appropriate
stock transfer powers therefor duly executed by Pledgor in blank, with
signatures guaranteed as required by the transfer agent for the Pledged
Securities. Immediately upon receipt, Pledgor shall deliver to Secured Party all
certificates and other evidences of the Pledged Securities that come into the
possession, custody or control of Pledgor after termination of the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement, together with appropriate
stock transfer powers therefor duly executed by Pledgor in blank, with
signatures guaranteed as required by the transfer agent for the Pledged
Securities, and any other property constituting part of the Pledged Securities,
free and clear of any prior lien, claim, charge or encumbrance.
2.4 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof until the Obligation (defined below) has been discharged in full. Secured
Party shall be under no duty to exercise, or to withhold the exercise of, any of
the rights, powers, privileges and options expressly or implicitly granted to
Secured Party in this Agreement, and shall not be responsible for any failure to
do so or delay in so doing.
3. OBLIGATION SECURED
3.1 This Agreement shall secure, in such order of priority as Secured
Party may elect:
(a) Payment of the sum of $5,198,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by Pledgor, payable to the order
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of Secured Party, and all extensions, modifications, renewals or
replacements thereof (hereinafter called the "Three Year Note");
(b) Payment of the sum of $325,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by Pledgor, payable to the order of Secured Party,
and all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Two Year Note");
(c) Payment of the sum of $855,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by Pledgor, payable to the order of Secured Party,
and all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Profit Note");
(d) Payment, performance and observance by Pledgor, SEI and/or
Antigua of each covenant, condition and provision contained in any
other security agreement or pledge agreement of even date herewith
securing payment of the Note (defined below) or in any other document
or instrument evidencing, securing or executed and delivered in
connection with the indebtedness evidenced by the Note, and which
specifically refers to the Note, and of all monies expended or advanced
by Secured Party pursuant to the terms thereof or to preserve any right
of Secured Party thereunder; and
(e) Payment, performance and observance by Pledgor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Pledged Securities or any part thereof;
3.2 The Three Year Note, the Two Year Note and the Profit Note are
herein severally and collectively called the "Note". All the indebtedness and
obligations secured by this Agreement are hereafter collectively called the
"Obligation."
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
4.1 Pledgor (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized; (ii) is
qualified to do business and is in good standing under the laws of each state in
which it is doing business; (iii) has full power and authority to own its
properties and assets and to carry on its business as now conducted; and (iv) is
fully authorized and permitted to execute and deliver this Agreement. The
execution, delivery and performance by Pledgor of this Agreement and all other
documents and instruments relating to the Obligation will not result in any
breach of the terms and conditions of, nor constitute a default under, any
agreement or instrument under which Pledgor is a party or is obligated. Pledgor
is not in default in the performance or observance of any covenants, conditions
or provisions of any such agreement or instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement
is the chief executive office of Pledgor.
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4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or SEI, and Pledgor
shall defend the right, title, lien and security interest of Secured Party in
and to the Pledged Securities against the claims and demands of all persons and
other entities whatsoever, subject only to the interest of Imperial and
Cruttenden under the Imperial Pledge Agreement and the Cruttenden Pledge
Agreement.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever,
except the interest of Imperial and Cruttenden under the Imperial Pledge
Agreement and the Cruttenden Pledge Agreement, respectively.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether
or not the Pledged Securities have been transferred into the name of Secured
Party or its nominee, as Pledgor's proxy with full power, in the same manner, to
the same extent and with the same effect as if Pledgor were to do the same, in
the sole discretion of Secured Party:
(a) To call a meeting of the stockholders of SEI and to vote
the Pledged Securities, to seek the consent of such stockholders, to
remove the directors of SEI, or any of them, and to elect new directors
of SEI, who thereafter shall manage the affairs of SEI, operate its
properties and carry on its business, and otherwise take any action
with respect to the business, properties and affairs of SEI that such
new directors shall deem necessary or appropriate, including, but not
limited to, the maintenance, repair, renewal or alteration of any or
all of the properties of SEI, the leasing, subleasing, sale or other
disposition of any or all of such properties, the borrowing of money on
the credit of SEI (whether from Secured Party or others) that in the
judgment of such new directors shall be necessary to preserve any of
such properties or to discharge the obligations of SEI, and the
employment of any or all agents, attorneys, counsel, or other employees
as deemed by such new directors to be necessary for the proper
operation or conduct of the business, properties and affairs of SEI;
(b) To consent to any and all actions by or with respect to
SEI for which consent of the stockholders of SEI is or may be necessary
or appropriate; and
(c) Without limitation, to do all things that Pledgor can do
or could do as stockholder of SEI, giving Secured Party full power of
substitution and revocation;
provided, however, that the foregoing irrevocable proxy (i) shall not be
exercisable by Secured Party until termination of the Imperial Pledge Agreement
and the Cruttenden Pledge Agreement, (ii) after termination of the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement, shall not be exercisable
by Secured Party, and Pledgor alone shall have the foregoing powers, so long as
there is no Event of Default hereunder, and (iii) shall terminate at such time
as this Agreement is no longer in full force and effect. The foregoing proxy is
coupled with an interest sufficient in law to support an irrevocable power and
shall be irrevocable and shall survive the death or incapacity of Pledgor.
Pledgor hereby revokes any proxy or proxies heretofore given to any person or
persons and agrees not to give any other proxies in derogation hereof until such
time as this Agreement is no longer in full force and effect.
6. COVENANTS OF PLEDGOR
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6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of
any of the Pledged Securities or any interest therein without obtaining the
prior written consent of Secured Party and shall keep the Pledged Securities
free of all security interests or other encumbrances except the lien and
security interests granted herein, the interest of Imperial under the Imperial
Pledge Agreement, and the interest of Cruttenden under the Cruttenden Pledge
Agreement.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and
other charges which may be levied or assessed against the Pledged Securities.
6.3 Pledgor, without the prior written consent of Secured Party, shall
not authorize or permit SEI to: (i) issue any additional shares of any class of
capital stock of SEI; (ii) issue any securities convertible into or exchangeable
for shares of capital stock of SEI; (iii) issue any warrants, options, contracts
or other commitments entitling any person or entity to purchase or otherwise
acquire shares of capital stock of SEI; or (iv) reorganize or liquidate, merge
or consolidate with any other entity, make any other change in its capital
structure, or sell substantially all of its assets.
6.4 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location of
Pledgor's chief executive office.
6.5 Pledgor, at its cost and expense, shall protect and defend the
Pledged Securities, this Agreement and all of the rights of Secured Party
hereunder against all claims and demands of other parties. Pledgor shall pay all
claims and charges that in the reasonable judgment of Secured Party might
prejudice, imperil or otherwise affect the Pledged Securities. Pledgor shall
promptly notify Secured Party of any levy, distraint or other seizure, by legal
process or otherwise, of all or any part of the Pledged Securities and of any
threatened or filed claims or proceedings that might in any way affect or impair
the terms of this Agreement.
6.6 If Pledgor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Pledged Securities free from other security
interests, encumbrances or claims, or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same or to so perform.
6.7 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.8 Secured Party shall use such reasonable care in handling,
preserving and protecting the Pledged Securities in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Pledged
Securities unless there is affirmative proof of a lack of due care; the lack of
due care shall not be implied solely by virtue of any loss, destruction or
disappearance. Secured Party shall not be required to take any steps necessary
to preserve any rights in the Pledged Securities against prior parties or to
protect, perfect, preserve or maintain any security interest given to secure the
Pledged Securities.
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6.9 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 "Event of Default" hereunder shall mean any "Event of Default" as
defined in the Note.
7.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law;
(b) Transfer the Pledged Securities or any part thereof into
its own name or that of its nominee so that Secured Party or its
nominee may appear of record as the sole owner thereof;
(c) Exercise any and all rights of conversion, exchange,
subscription, or any other rights, privileges or options pertaining to
any of the Pledged Securities including, but not limited to, the right
to exchange, at its discretion, any or all of the Pledged Securities
upon the merger, consolidation, reorganization, recapitalization or
other readjustment of SEI or upon the exercise by Pledgor or Secured
Party of any right, privilege or option pertaining to any of the shares
of the Pledged Securities, and in connection therewith to deposit and
deliver such shares of Pledged Securities with any committee,
depository, transfer agent, registrar or any other agency upon such
terms as Secured Party may determine without liability except to
account for the property actually received by it;
(d) Receive and retain any dividend or other distribution on
account of the Pledged Securities; and
(e) Sell any or all of the Pledged Securities in accordance
with the provisions hereof;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the manner provided in Subparagraph below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
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(a) (i) Secured Party shall have the right at any time and
from time to time to sell, resell, assign and deliver, in its
discretion, all or any part of the Pledged Securities in one
or more units, at the same or different times, and all right,
title and interest, claim and demand therein, and right of
redemption thereof, at private sale, or at public sale to the
highest bidder for cash, upon credit or for future delivery,
Pledgor hereby waiving and releasing to the fullest extent
permitted by law any and all equity or right of redemption. If
any of the Pledged Securities are sold by Secured Party upon
credit or for future delivery, Secured Party shall not be
liable for the failure of the purchaser to purchase or pay for
same, and, in the event of any such failure, Secured Party may
resell such Pledged Securities. In no event shall Pledgor be
credited with any part of the proceeds of the sale of any
Pledged Securities until cash payment thereof has actually
been received by Secured Party.
(ii) No demand, advertisement or notice, all of which
are hereby expressly waived, shall be required in connection
with any sale or other disposition of all or any part of the
Pledged Securities that threatens to decline speedily in value
or that is of a type customarily sold on a recognized market;
otherwise Secured Party shall give Pledgor at least five (5)
days' prior notice of the time and place of any public sale or
of the time after which any private sale or other dispositions
are to be made, which Pledgor agrees is reasonable, all other
demands, advertisements and notices being hereby waived. Upon
any sale, whether under this Agreement or by virtue of
judicial proceedings, Secured Party may bid for and purchase
any or all of the Pledged Securities and, upon compliance with
the terms of the sale, may hold, retain, possess and dispose
of such items in its own absolute right without further
accountability, and as purchaser at such sale, in paying the
purchase price, may turn in any note or notes held by Secured
Party in lieu of cash up to the amount that would, upon
distribution of the net proceeds of such sale in accordance
with Subparagraph hereof, be payable to Secured Party. In case
the amount so payable thereon shall be less than the amount
due thereon, the note or notes turned in (in lieu of cash)
shall be returned to the holder thereof after being properly
stamped to show the partial payment effected by such purchase.
(b) Pledgor recognizes that Secured Party may be unable to
effect a sale to the public of all or a part of the Pledged Securities
by reason of prohibitions contained in applicable securities laws, but
may be compelled to resort to one or more sales to a restricted group
of purchasers who will be obliged to agree, among other things, to
acquire such Pledged Securities for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor
agrees that sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Securities were sold to
the public, and that Secured Party has no obligation to delay sale of
any such Pledged Securities for the period of time necessary to permit
the issuer of such Pledged Securities to register the same for sale to
the public under the applicable securities laws. Pledgor agrees that
negotiated sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner.
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(c) In all sales of Pledged Securities, public or private,
Secured Party shall apply the proceeds of sale as follows:
(i) First, to the payment of all costs and expenses
incurred hereunder or for the sale, transfer, or delivery,
including broker's and attorneys' fees;
(ii) Next to the payment of the Obligation; and
(iii) The balance, if any, to Pledgor or to the
person or persons entitled thereto upon proper demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without
limitation court costs and reasonable attorneys' fees, incurred by Secured Party
in enforcing payment and performance of the Obligation or in exercising the
rights and remedies of Secured Party hereunder. All such costs and expenses
shall be secured by this Agreement and by all other lien and security documents
securing the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
7.7 The exercise by the Secured Party of its rights and remedies upon
the occurrence of an Event of Default shall be subject to the rights of Imperial
and Cruttenden under the Imperial Pledge Agreement and the Cruttenden Pledge
Agreement, respectively.
8. MISCELLANEOUS PROVISIONS
8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or
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performance of the Obligation, to its several securities therefor in such order
and manner as it may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted herein, Secured Party,
from time to time, may: (i) extend the time for payment of all or any part of
the Obligation, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Pledged
Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
8.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the internal laws of the State of Arizona. Each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Pledgor and Secured Party.
8.6 This Agreement shall remain in full force and effect until all of
the Obligation shall have been paid and performed in full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. If more than one Pledgor is named
herein, the word Pledgor shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of the note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
8.9 All notices required or permitted to be given hereunder shall be in
writing and shall be given at the place and in the manner provided in the Stock
Purchase Agreement.
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<PAGE>
8.10 All exhibits and schedules attached to this Agreement are
incorporated herein at each reference thereto.
8.11 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
8.12 Secured Party may bring any action or proceeding to enforce or
arising out of this Agreement in any court of competent jurisdiction. Any action
or proceeding brought by Debtor arising out of this Agreement shall be brought
solely in a court of competent jurisdiction located in the County of Maricopa,
State of Arizona, or in the United States District Court for the District of
Arizona. Pledgor waives any objection which it may now or hereafter have to
venue of any such action or proceeding and waives any right to seek removal of
any action or proceeding commenced in accordance herewith. If either party
commences any action or proceeding arising out of this Agreement, in a court
located in the County of Maricopa, State of Arizona, or the United States
District Court for the District of Arizona, the other party hereby agrees that
it will submit and does hereby irrevocably submit to the personal jurisdiction
of such courts and will not attempt to have such action dismissed, abated, or
transferred on the ground of forum non convenience or similar grounds; provided,
however, that nothing contained herein shall prohibit any party from seeking, by
appropriate motion, to remove any action brought in a Arizona state court to the
United States District Court for the District of Arizona. If such action is so
removed, however, neither party shall seek to transfer such action to any other
district, nor shall either party seek to transfer to any other district any
action which the other party originally commences in such federal court.
8.13 Pledgor agrees that a summons and complaint or equivalent
documents commencing an action or proceeding in any court shall be validly and
properly served and shall confer personal jurisdiction over Pledgor if served
upon Bonn, Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona
85004, Attention: John M. Welch, Esq., whom Pledgor hereby designates and
appoints as Pledgor's authorized agent to accept and acknowledge on its behalf
service of any and all process which may be served in such action or proceeding
in any such court. Pledgor shall be sent, by certified mail to Pledgor's notice
address as provided herein, a copy of such summons and complaint at the time of
service upon such agent; provided, however, that any such copy shall be sent
solely as a courtesy for Pledgor and its failure to receive such copy shall in
no way affect the validity and propriety of the service made on Pledgor through
such agent. Pledgor agrees that if it desires to make any change in its agent
for service, such change shall be subject to Secured Party's written approval,
which approval shall not be unreasonably withheld.
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PLEDGOR AND SECURED PARTY HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
PLEDGED SECURITIES, OR ANY DEALINGS BETWEEN PLEDGOR AND SECURED PARTY IN
CONNECTION WITH THE TRANSACTIONS THAT ARE THE SUBJECT OF THIS AGREEMENT, AND
AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. THIS PROVISION SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING,
WHETHER INVOLVING A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED IN CONTRACT,
TORT OR OTHERWISE. EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO
THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES CORP., a British
Columbia corporation
By /s/ L. Steven Haynes
Its President
PLEDGOR
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<PAGE>
SCHEDULE 1
Sellers
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Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
Exhibit "A"
1,000 shares of common stock in Southhampton Enterprises, Inc., a Texas
corporation
Page 1 of 1
Exhibit 10.51
PLEDGE AND SECURITY AGREEMENT
AND IRREVOCABLE PROXY
(SEI)
THIS PLEDGE AND SECURITY AGREEMENT AND IRREVOCABLE PROXY is made and
entered into as of the 7th day of May, 1997, by SOUTHHAMPTON ENTERPRISES INC., a
Texas corporation (hereinafter called "Pledgor"), whose chief executive office
is located at 9211 Diplomacy Row, Dallas, Texas 75247 in favor of THOMAS E.
DOOLEY, JR., as agent for Sellers (defined below), and his heirs, personal
representatives, successors and assigns (hereinafter called "Secured Party"),
whose address is 12401 East Saddle Horn Drive, Scottsdale, Arizona 85259.
1. RECITALS
1.1 The parties identified on Schedule 1 hereto (the "Sellers"),
Southhampton Enterprises Corp., a British Columbia corporation ("SEC") and
Pledgor have entered into a Stock Purchase Agreement dated April 21, 1997 (the
"Stock Purchase Agreement"), which provides for the purchase by Pledgor from
Sellers of all of the issued and outstanding common stock of The Antigua Group,
Inc., a Nevada corporation (hereinafter called "Antigua").
1.2 Secured Party has agreed to make certain financial accommodations
to SEC in connection with the Stock Purchase Agreement, provided that Secured
Party receives, among other things, a pledge and security interest in all stock
and securities issued by Antigua now owned or hereafter acquired by Pledgor.
1.3 Imperial Bank, a California banking corporation ("Imperial") has
agreed to provide certain financing to Antigua according to the terms of a
Credit Agreement, of even date herewith, by and among Imperial, SEC, Pledgor and
Antigua. In connection therewith and as a condition of that financing, Pledgor
has executed and delivered to Imperial a Pledge and Irrevocable Proxy Security
Agreement, of even date herewith, granting to Imperial a pledge and security
interest in, among other things, all stock and securities issued by Antigua
owned or acquired by Pledgor (the "Imperial Pledge Agreement").
1.4 The Cruttenden Roth Bridge Fund, L.L.C, a California limited
liability company ("Cruttenden") has also agreed to provide certain financing to
Antigua according to the terms of a Securities Purchase Agreement, of even date
herewith, by and among Cruttenden, SEC, Pledgor and Antigua. In connection
therewith and as a condition of that financing, Pledgor has executed and
delivered to Cruttenden a Security and Pledge Agreement, of even date herewith,
granting to Cruttenden a pledge and security interest in, among other things,
all stock and securities issued by Antigua owned or acquired by Pledgor (the
"Cruttenden Pledge Agreement").
1.5 Pledgor, as of the date of this Agreement, is the owner of the
shares of the common stock of Antigua listed on Exhibit A attached hereto.
2. PLEDGE OF STOCK
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
stock in Antigua now owned or hereafter acquired by Pledgor, including without
limitation the stock described on Exhibit "A" hereto, together with all earnings
thereon, all additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split, warrants or other rights,
reclassification, readjustment or other change in the capital structure of
Antigua, and the securities of any corporation or other properties received upon
the conversion or exchange thereof
<PAGE>
pursuant to any merger, consolidation, reorganization, sale of assets or other
agreement or received upon any liquidation of Antigua or such other corporation
(all hereinafter called the "Pledged Securities"), subject, however, to the
prior and superior pledge and security interests of Imperial and Cruttenden
under the Imperial Pledge Agreement and the Cruttenden Pledge Agreement,
respectively.
2.2 In connection with the execution of this Agreement, Pledgor shall
irrevocably direct Imperial or Cruttenden, as the case may be, to deliver the
Pledged Securities, together with all stock transfer powers executed by Pledgor
and delivered to Imperial or Cruttenden, as the case may be, to Secured Party at
c/o Quarles & Brady, One East Camelback Road, Suite 400, Phoenix, Arizona
85012-1649, Attention: P. Robert Moya, Esq., or at such other address as Secured
Party may from time to time designate to Imperial or Cruttenden, as the case may
be, in writing, at such time as all of the obligations secured by the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement have been satisfied or
Pledgor is otherwise entitled to the release of the Pledged Securities from any
interest under the Imperial Pledge Agreement and the Cruttenden Pledge
Agreement. In addition, Pledgor shall cause the following legend to be added to
all certificates evidencing the Pledged Securities:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE, AND THE RIGHTS
OF THE OWNER THEREOF, ARE SUBJECT TO CERTAIN PLEDGES AND
SECURITY INTERESTS IN FAVOR OF IMPERIAL BANK, THE CRUTTENDEN
ROTH BRIDGE FUND, LLC, AND THOMAS E. DOOLEY, JR., AS AGENT,
THE PRIORITIES OF WHICH ARE SET FORTH IN AN INTERCREDITOR
AGREEMENT AMONG SUCH PARTIES DATED MAY 7, 1997.
2.3 Upon termination of the Imperial Pledge Agreement and the
Cruttenden Pledge Agreement, Pledgor shall deliver to Secured Party all then
existing certificates for the Pledged Securities, together with appropriate
stock transfer powers therefor duly executed by Pledgor in blank, with
signatures guaranteed as required by the transfer agent for the Pledged
Securities. Immediately upon receipt, Pledgor shall deliver to Secured Party all
certificates and other evidences of the Pledged Securities that come into the
possession, custody or control of Pledgor after termination of the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement, together with appropriate
stock transfer powers therefor duly executed by Pledgor in blank, with
signatures guaranteed as required by the transfer agent for the Pledged
Securities, and any other property constituting part of the Pledged Securities,
free and clear of any prior lien, claim, charge or encumbrance.
2.4 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof until the Obligation (defined below) has been discharged in full. Secured
Party shall be under no duty to exercise, or to withhold the exercise of, any of
the rights, powers, privileges and options expressly or implicitly granted to
Secured Party in this Agreement, and shall not be responsible for any failure to
do so or delay in so doing.
3. OBLIGATION SECURED
3.1 This Agreement shall secure, in such order of priority as Secured
Party may elect:
(a) Payment of the sum of $5,198,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Three Year Note");
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<PAGE>
(b) Payment of the sum of $325,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Two Year Note");
(c) Payment of the sum of $855,000.00 with interest thereon,
extension and other fees, late charges, prepayment premiums and
attorneys' fees, according to the terms of that Promissory Note of even
date herewith, made by SEC, payable to the order of Secured Party, and
all extensions, modifications, renewals or replacements thereof
(hereinafter called the "Profit Note");
(d) Payment, performance and observance by SEC, Pledgor and/or
Antigua of each covenant, condition and provision contained in any
other security agreement or pledge agreement of even date herewith
securing payment of the Note (defined below) or in any other document
or instrument evidencing, securing or executed and delivered in
connection with the indebtedness evidenced by the Note, and which
specifically refers to the Note, and of all monies expended or advanced
by Secured Party pursuant to the terms thereof or to preserve any right
of Secured Party thereunder; and
(e) Payment, performance and observance by Pledgor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Pledged Securities or any part thereof;
3.2 The Three Year Note, the Two Year Note and the Profit Note are
herein severally and collectively called the "Note". All the indebtedness and
obligations secured by this Agreement are hereafter collectively called the
"Obligation."
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
4.1 Pledgor (i) is duly organized, validly existing and in good
standing under the laws of the state in which it is organized; (ii) is qualified
to do business and is in good standing under the laws of each state in which it
is doing business; (iii) has full power and authority to own its properties and
assets and to carry on its business as now conducted; and (iv) is fully
authorized and permitted to execute and deliver this Agreement. The execution,
delivery and performance by Pledgor of this Agreement and all other documents
and instruments relating to the Obligation will not result in any breach of the
terms and conditions of, nor constitute a default under, any agreement or
instrument under which Pledgor is a party or is obligated. Pledgor is not in
default in the performance or observance of any covenants, conditions or
provisions of any such agreement or instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement
is the chief executive office of Pledgor.
4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or Antigua, and
Pledgor shall defend the right, title, lien and security interest of Secured
Party
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<PAGE>
in and to the Pledged Securities against the claims and demands of all persons
and other entities whatsoever, subject only to the interest of Imperial and
Cruttenden under the Imperial Pledge Agreement and the Cruttenden Pledge
Agreement.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever,
except the interest of Imperial and Cruttenden under the Imperial Pledge
Agreement and the Cruttenden Pledge Agreement, respectively.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether
or not the Pledged Securities have been transferred into the name of Secured
Party or its nominee, as Pledgor's proxy with full power, in the same manner, to
the same extent and with the same effect as if Pledgor were to do the same, in
the sole discretion of Secured Party:
(a) To call a meeting of the stockholders of Antigua and to
vote the Pledged Securities, to seek the consent of such stockholders,
to remove the directors of Antigua, or any of them, and to elect new
directors of Antigua, who thereafter shall manage the affairs of
Antigua, operate its properties and carry on its business, and
otherwise take any action with respect to the business, properties and
affairs of Antigua that such new directors shall deem necessary or
appropriate, including, but not limited to, the maintenance, repair,
renewal or alteration of any or all of the properties of Antigua, the
leasing, subleasing, sale or other disposition of any or all of such
properties, the borrowing of money on the credit of Antigua (whether
from Secured Party or others) that in the judgment of such new
directors shall be necessary to preserve any of such properties or to
discharge the obligations of Antigua, and the employment of any or all
agents, attorneys, counsel, or other employees as deemed by such new
directors to be necessary for the proper operation or conduct of the
business, properties and affairs of Antigua;
(b) To consent to any and all actions by or with respect to
Antigua for which consent of the stockholders of Antigua is or may be
necessary or appropriate; and
(c) Without limitation, to do all things that Pledgor can do
or could do as stockholder of Antigua, giving Secured Party full power
of substitution and revocation;
provided, however, that the foregoing irrevocable proxy (i) shall not be
exercisable by Secured Party until termination of the Imperial Pledge Agreement
and the Cruttenden Pledge Agreement, (ii) after termination of the Imperial
Pledge Agreement and the Cruttenden Pledge Agreement, shall not be exercisable
by Secured Party, and Pledgor alone shall have the foregoing powers, so long as
there is no Event of Default hereunder, and (iii) shall terminate at such time
as this Agreement is no longer in full force and effect. The foregoing proxy is
coupled with an interest sufficient in law to support an irrevocable power and
shall be irrevocable and shall survive the death or incapacity of Pledgor.
Pledgor hereby revokes any proxy or proxies heretofore given to any person or
persons and agrees not to give any other proxies in derogation hereof until such
time as this Agreement is no longer in full force and effect.
6. COVENANTS OF PLEDGOR
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<PAGE>
6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of
any of the Pledged Securities or any interest therein without obtaining the
prior written consent of Secured Party and shall keep the Pledged Securities
free of all security interests or other encumbrances except the lien and
security interests granted herein and the interest of Imperial under the
Imperial Pledge Agreement, and the interest of Cruttenden under the Cruttenden
Pledge Agreement.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and
other charges which may be levied or assessed against the Pledged Securities.
6.3 Pledgor, without the prior written consent of Secured Party, shall
not authorize or permit Antigua to: (i) issue any additional shares of any class
of capital stock of Antigua; (ii) issue any securities convertible into or
exchangeable for shares of capital stock of Antigua; (iii) issue any warrants,
options, contracts or other commitments entitling any person or entity to
purchase or otherwise acquire shares of capital stock of Antigua; or (iv)
reorganize or liquidate, merge or consolidate with any other entity, make any
other change in its capital structure, or sell substantially all of its assets.
6.4 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location of
Pledgor's chief executive office.
6.5 Pledgor, at its cost and expense, shall protect and defend the
Pledged Securities, this Agreement and all of the rights of Secured Party
hereunder against all claims and demands of other parties. Pledgor shall pay all
claims and charges that in the reasonable judgment of Secured Party might
prejudice, imperil or otherwise affect the Pledged Securities. Pledgor shall
promptly notify Secured Party of any levy, distraint or other seizure, by legal
process or otherwise, of all or any part of the Pledged Securities and of any
threatened or filed claims or proceedings that might in any way affect or impair
the terms of this Agreement.
6.6 If Pledgor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Pledged Securities free from other security
interests, encumbrances or claims, or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same or to so perform.
6.7 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.8 Secured Party shall use such reasonable care in handling,
preserving and protecting the Pledged Securities in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Pledged
Securities unless there is affirmative proof of a lack of due care; the lack of
due care shall not be implied solely by virtue of any loss, destruction or
disappearance. Secured Party shall not be required to take any steps necessary
to preserve any rights in the Pledged Securities against prior parties or to
protect, perfect, preserve or maintain any security interest given to secure the
Pledged Securities.
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<PAGE>
6.9 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 "Event of Default" hereunder shall mean any "Event of Default" as
defined in the Note.
7.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law;
(b) Transfer the Pledged Securities or any part thereof into
its own name or that of its nominee so that Secured Party or its
nominee may appear of record as the sole owner thereof;
(c) Exercise any and all rights of conversion, exchange,
subscription, or any other rights, privileges or options pertaining to
any of the Pledged Securities including, but not limited to, the right
to exchange, at its discretion, any or all of the Pledged Securities
upon the merger, consolidation, reorganization, recapitalization or
other readjustment of Antigua or upon the exercise by Pledgor or
Secured Party of any right, privilege or option pertaining to any of
the shares of the Pledged Securities, and in connection therewith to
deposit and deliver such shares of Pledged Securities with any
committee, depository, transfer agent, registrar or any other agency
upon such terms as Secured Party may determine without liability except
to account for the property actually received by it;
(d) Receive and retain any dividend or other distribution on
account of the Pledged Securities; and
(e) Sell any or all of the Pledged Securities in accordance
with the provisions hereof;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the manner provided in Subparagraph below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
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<PAGE>
(a) (i) Secured Party shall have the right at any time and
from time to time to sell, resell, assign and deliver, in its
discretion, all or any part of the Pledged Securities in one
or more units, at the same or different times, and all right,
title and interest, claim and demand therein, and right of
redemption thereof, at private sale, or at public sale to the
highest bidder for cash, upon credit or for future delivery,
Pledgor hereby waiving and releasing to the fullest extent
permitted by law any and all equity or right of redemption. If
any of the Pledged Securities are sold by Secured Party upon
credit or for future delivery, Secured Party shall not be
liable for the failure of the purchaser to purchase or pay for
same, and, in the event of any such failure, Secured Party may
resell such Pledged Securities. In no event shall Pledgor be
credited with any part of the proceeds of the sale of any
Pledged Securities until cash payment thereof has actually
been received by Secured Party.
(ii) No demand, advertisement or notice, all of which
are hereby expressly waived, shall be required in connection
with any sale or other disposition of all or any part of the
Pledged Securities that threatens to decline speedily in value
or that is of a type customarily sold on a recognized market;
otherwise Secured Party shall give Pledgor at least five (5)
days' prior notice of the time and place of any public sale or
of the time after which any private sale or other dispositions
are to be made, which Pledgor agrees is reasonable, all other
demands, advertisements and notices being hereby waived. Upon
any sale, whether under this Agreement or by virtue of
judicial proceedings, Secured Party may bid for and purchase
any or all of the Pledged Securities and, upon compliance with
the terms of the sale, may hold, retain, possess and dispose
of such items in its own absolute right without further
accountability, and as purchaser at such sale, in paying the
purchase price, may turn in any note or notes held by Secured
Party in lieu of cash up to the amount that would, upon
distribution of the net proceeds of such sale in accordance
with Subparagraph hereof, be payable to Secured Party. In case
the amount so payable thereon shall be less than the amount
due thereon, the note or notes turned in (in lieu of cash)
shall be returned to the holder thereof after being properly
stamped to show the partial payment effected by such purchase.
(b) Pledgor recognizes that Secured Party may be unable to
effect a sale to the public of all or a part of the Pledged Securities
by reason of prohibitions contained in applicable securities laws, but
may be compelled to resort to one or more sales to a restricted group
of purchasers who will be obliged to agree, among other things, to
acquire such Pledged Securities for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor
agrees that sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Securities were sold to
the public, and that Secured Party has no obligation to delay sale of
any such Pledged Securities for the period of time necessary to permit
the issuer of such Pledged Securities to register the same for sale to
the public under the applicable securities laws. Pledgor agrees that
negotiated sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner.
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<PAGE>
(c) In all sales of Pledged Securities, public or private,
Secured Party shall apply the proceeds of sale as follows:
(i) First, to the payment of all costs and expenses
incurred hereunder or for the sale, transfer, or delivery,
including broker's and attorneys' fees;
(ii) Next to the payment of the Obligation; and
(iii) The balance, if any, to Pledgor or to the
person or persons entitled thereto upon proper demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without
limitation court costs and reasonable attorneys' fees, incurred by Secured Party
in enforcing payment and performance of the Obligation or in exercising the
rights and remedies of Secured Party hereunder. All such costs and expenses
shall be secured by this Agreement and by all other lien and security documents
securing the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
7.7 The exercise by the Secured Party of its rights and remedies upon
the occurrence of an Event of Default shall be subject to the rights of Imperial
and Cruttenden under the Imperial Pledge Agreement and the Cruttenden Pledge
Agreement, respectively.
8. MISCELLANEOUS PROVISIONS
8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or
-8-
<PAGE>
performance of the Obligation, to its several securities therefor in such order
and manner as it may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted herein, Secured Party,
from time to time, may: (i) extend the time for payment of all or any part of
the Obligation, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Pledged
Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
8.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
according to the internal laws of the State of Arizona. Each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Pledgor and Secured Party.
8.6 This Agreement shall remain in full force and effect until all of
the Obligation shall have been paid and performed in full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. If more than one Pledgor is named
herein, the word Pledgor shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of the note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to the number or gender of
words or expressions used.
8.9 All notices required or permitted to be given hereunder shall be in
writing and shall be given at the place and in the manner provided in the Stock
Purchase Agreement.
-9-
<PAGE>
8.10 All exhibits and schedules attached to this Agreement are
incorporated herein at each reference thereto.
8.11 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
8.12 Secured Party may bring any action or proceeding to enforce or
arising out of this Agreement in any court of competent jurisdiction. Any action
or proceeding brought by Debtor arising out of this Agreement shall be brought
solely in a court of competent jurisdiction located in the County of Maricopa,
State of Arizona, or in the United States District Court for the District of
Arizona. Pledgor waives any objection which it may now or hereafter have to
venue of any such action or proceeding and waives any right to seek removal of
any action or proceeding commenced in accordance herewith. If either party
commences any action or proceeding arising out of this Agreement, in a court
located in the County of Maricopa, State of Arizona, or the United States
District Court for the District of Arizona, the other party hereby agrees that
it will submit and does hereby irrevocably submit to the personal jurisdiction
of such courts and will not attempt to have such action dismissed, abated, or
transferred on the ground of forum non convenience or similar grounds; provided,
however, that nothing contained herein shall prohibit any party from seeking, by
appropriate motion, to remove any action brought in a Arizona state court to the
United States District Court for the District of Arizona. If such action is so
removed, however, neither party shall seek to transfer such action to any other
district, nor shall either party seek to transfer to any other district any
action which the other party originally commences in such federal court.
8.13 Pledgor agrees that a summons and complaint or equivalent
documents commencing an action or proceeding in any court shall be validly and
properly served and shall confer personal jurisdiction over Pledgor if served
upon Bonn, Luscher, Padden & Wilkins, 805 North Second Street, Phoenix, Arizona
85004, Attention: John M. Welch, Esq., whom Pledgor hereby designates and
appoints as Pledgor's authorized agent to accept and acknowledge on its behalf
service of any and all process which may be served in such action or proceeding
in any such court. Pledgor shall be sent, by certified mail to Pledgor's notice
address as provided herein, a copy of such summons and complaint at the time of
service upon such agent; provided, however, that any such copy shall be sent
solely as a courtesy for Pledgor and its failure to receive such copy shall in
no way affect the validity and propriety of the service made on Pledgor through
such agent. Pledgor agrees that if it desires to make any change in its agent
for service, such change shall be subject to Secured Party's written approval,
which approval shall not be unreasonably withheld.
PLEDGOR AND SECURED PARTY HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE
PLEDGED SECURITIES, OR ANY DEALINGS BETWEEN PLEDGOR AND SECURED PARTY IN
CONNECTION WITH THE TRANSACTIONS THAT ARE THE SUBJECT OF THIS AGREEMENT, AND
AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. THIS PROVISION SHALL APPLY TO ANY SUCH ACTION OR PROCEEDING,
WHETHER INVOLVING A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED IN CONTRACT,
TORT OR OTHERWISE. EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO
THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
9. NON-PLEDGOR BORROWER PROVISIONS
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<PAGE>
9.1 All advances of principal under the Note shall be made to SEC
subject to and in accordance with the terms thereof. It is not necessary for
Secured Party to inquire into the powers of SEC or the officers, directors,
partners or agents acting or purporting to act on its behalf. Pledgor is and
shall continue to be fully informed as to all aspects of the business affairs of
SEC that it deems relevant to the risks it is assuming and hereby waives and
fully discharges Secured Party from any and all obligations to communicate to
Pledgor any facts of any nature whatsoever regarding SEC and SEC's business
affairs.
9.2 Pledgor authorizes Secured Party, without notice or demand, without
affecting the obligations of Pledgor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the lien created hereby, from time to time, at the
request of any person primarily obligated therefor, to renew, compromise,
extend, accelerate or otherwise change the time for payment or performance of,
or otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Pledgor waives and agrees not
to assert: (i) any right to require Secured Party to proceed against SEC; (ii)
the benefits of any statutory provision limiting the liability of a surety,
including without limitation the benefit of A.R.S ss.12-1641, et seq., and Rule
17(f) of the Arizona Rules of Civil Procedure; and (iii) any defense arising by
reason of any disability or other defense of SEC or by reason of the cessation
from any cause whatsoever of the liability of SEC. Pledgor shall have no right
of subrogation and hereby waives any right to enforce any remedy which Secured
Party now has, or may hereafter have, against SEC.
9.3 Nothing contained herein shall affect or limit the right of Secured
Party to proceed against any person or entity, including Pledgor or any partner
in Pledgor, with respect to the enforcement of any guarantee or other similar
rights.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
SOUTHHAMPTON ENTERPRISES INC., a Texas
corporation
By /s/ L. Steven Haynes
Its Secretary
PLEDGOR
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<PAGE>
SCHEDULE 1
Sellers
- -------
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Kim L. Dooley
Thomas E. Dooley as Custodian Under the Uniform Gifts to Minors Act fbo
Shawn T. Dooley
Thomas E. Dooley, Jr. and Gail A. Dooley, Trustees under the Thomas E.
Dooley and Gail Dooley Revocable Trust of 1988, dated 10/4/88
E. Louis Werner, Jr. Trustee, E. Louis Werner, Jr. Revocable Intervivos
Trust dated December 31, 1982
Bobbi D. Hunter, Trustee under the 1989 Trust Agreement established
separate irrevocable Gift Trusts f/b/o the children of Thomas and Gail
Dooley dated March 7, 1989
Page 1 of 1
<PAGE>
Exhibit "A"
2,074,600 shares of common stock in The Antigua Group, Inc., a Nevada
corporation
Page 1 of 1
Exhibit 10.52
AMENDMENT TO SECOND AMENDED AND
RESTATED NON-NEGOTIABLE NOTE
THIS AMENDMENT TO SECOND AMENDED AND RESTATED NON-NEGOTIABLE NOTE (this
"Amendment") is made and entered into as of the 16th day of June, 1997, by and
between THE ANTIGUA GROUP, INC., a Nevada corporation ("Maker") and GERALD K.
WHITLEY, an Arizona resident ("Payee").
WHEREAS, Maker and Payee have entered into a Second Amended and
Restated Non-Negotiable Note (the "Note") executed in connection with the Note
Amendment Agreement dated July 1, 1995 and a Stock Repurchase Agreement dated
January 1, 1993 (the "Stock Repurchase Agreement"), which instruments are
attached collectively hereto as Exhibit "1," and
WHEREAS, Maker and Payee desire to modify and amend the Note in certain
respects and to terminate the Stock Repurchase Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms not defined herein shall have the meanings
contained in the Note. Except as otherwise provided herein, all references to
money herein refer to the lawful currency of the United States.
2. As of the date of this Amendment, the outstanding principal balance
of the Note is $250,964.25. Maker reaffirms all of its obligations under the
Note, and Maker acknowledges that it has no claims, offsets or defenses with
respect to the payment of sums due under the Note.
3. Concurrently with the Closing under and as defined in the Stock
Purchase Agreement between Southhampton Enterprises Corp. ("SEC"), Southhampton
Enterprises, Inc. and the shareholders of Maker (the "Stock Purchase
Agreement"), Maker will pay Payee $83,654.75 in cash or cashier's check.
Additionally, following the Closing, Maker will make the following payments to
Payee:
a. At the earlier of July 1, 1997 or the completion of a
registered offering of securities by SEC in which gross
proceeds of at least $12 million are raised (the "Public
Offering"), Maker will pay Payee $83,654.75) in cash or
cashier's check, plus accrued interest as described in
subparagraph "c" immediately below;
b. At the earlier of September 1, 1997 or the Public Offering,
Maker will pay Payee $83,654.75 in cash or cashier's check,
plus accrued interest as described in subparagraph "c"
immediately below;
<PAGE>
c. Interest will continue to accrue from the date of this
Amendment at the rate of 9% per annum on the principal amounts
set forth in subparagraphs "a" and "b" immediately above. Such
interest will be paid monthly, on the first day of each month,
on such principal amounts until the Note, as amended by this
Amendment, is paid in full. All principal and interest under
the Note, as amended by this Amendment, if not paid sooner as
provided in this Amendment, shall be due and payable no later
than September 1, 1997.
4. Concurrently with the Closing, Payee will receive 150,600 shares of
Common Stock of SEC and Warrants to purchase 75,300 additional shares of Common
Stock of SEC at an exercise price of $1.35 (Canadian) per share during the first
year of $1.55 per share (Canadian) during the second year (the number of shares
and Warrants and the exercise price and other terms of such Warrants shall be on
terms identical to those in effect for the other participants in SEC's Private
Placement). In lieu of such shares and Warrants, at any time between the Closing
date and the date which is 12 months thereafter, Payee shall have the right to
receive up to $150,600 in cash or cashier's check, upon Payee's tender and
delivery to SEC for cancellation of up to 150,600 shares and Warrants to
purchase 75,300 shares of Common Stock of SEC, provided, however, that Payee
shall have the right to retain such shares and Warrants not tendered pursuant to
this Section. For example, if Payee tenders 75,300 shares and Warrants to
purchase 37,650 shares of Common Stock of SEC, then Payee shall be entitled to
retain the remaining 75,300 shares and Warrants to purchase 37,650 shares of
Common Stock of SEC.
The number of shares and Warrants to be canceled shall be determined on the
basis of the per share price of $1.00 and the number of Warrants received by
Payee on the date hereof. For example, if, on February 1, 1998, Payee wishes to
take cash of $50,000 in lieu of a portion of the 150,600 shares of common stock
and Warrants to purchase 75,300 shares of Common Stock of SEC that Payee shall
receive in the Private Placement, then Payee shall deliver to Maker his
certificates for 150,600 shares of Common Stock and Warrants to purchase 75,300
shares of Common Stock of SEC and Maker shall promptly thereafter deliver to
Payee (x) cash or a cashier's check for $50,000,(y) a new Common Stock
certificate for 100,600 shares of Common Stock (150,600 shares minus 50,000
shares), and (z) a new Warrant certificate entitling Payee to purchase 50,300
shares of Common Stock (75,300 shares minus 25,000 shares) on the same terms as
were formerly contained in the original Warrants.
5. The amounts set forth in Paragraph 3 above, and the amounts which
Payee may at his election receive pursuant to Paragraph 4 above, represent the
entire monetary consideration owed by Maker to Payee under the Note and this
Amendment.
6. In addition to the Events of Default described in the Note, it shall
also be an Event of Default under the Note and this Amendment if:
a. Maker shall fail for 10 calendar days after receiving
notice thereof, to pay, after it becomes due, any
payment required by Maker under this Amendment; or
<PAGE>
b. Maker transfers or disposes of all or substantially
all of its assets, Maker merges, consolidates or
enters into any other similar combination with any
other entity and is not the surviving entity or Maker
liquidates, winds-up its business or dissolves
itself.
Upon the occurrence of any Event of Default, Payee shall have all rights and
remedies provided for by law or in equity and all other rights and remedies
described in the Note or this Amendment, including, without limitation, the
right to declare all sums of principal and interest due under the Note and this
Amendment immediately due and payable without additional notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or other notices or demands of any kind or character.
7. It shall also be an Event of Default under the Note and this
Amendment if Maker becomes the subject of any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships. If that happens, all sums of principal and
interest due under the Note and this Amendment shall automatically become due
and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character.
8. This Amendment shall automatically become effective upon the Closing
under the Stock Purchase Agreement. In the event such Closing does not occur,
this Amendment shall be of no further force or effect. Upon such Closing, the
Stock Repurchase Agreement shall be automatically terminated and shall upon such
termination be of no further force or effect.
9. Except as specifically hereby amended, the Note shall remain in full
force and effect. This Amendment Shall not prejudice any rights or remedies of
Payee under the Note as hereby amended.
10. The Note and this Amendment: (a) integrate all the terms and
conditions mentioned in or incidental to the Note and this Amendment; (b)
supersede all oral negotiations and prior and other writings with respect to
their subject matter; and (c) are intended by the parties as the final
expression of the agreement with respect to the terms and conditions set forth
in the Note and this Amendment and as the complete and exclusive statement of
the terms agreed to by the parties.
11. Maker has caused this Amendment to be executed by an officer who
was duly authorized and directed to do so by a resolution of the Board of
Directors of Maker which was duly authorized and adopted by (i) the requisite
number of members of the Board of Directors at a meeting that was duly called,
notice and held, or (ii) a unanimous consent in writing executed by each of the
members of the Board of Directors.
DATED on the 16th day of June, 1997.
<PAGE>
THE ANTIGUA GROUP, INC.
/s/ Gerald K. Whitley
Gerald K. Whitley
By /s/ L. Steven Haynes
Its Chief Executive Officer
AGREED TO AND ACCEPTED
on the ____ day of June, 1997:
SOUTHHAMPTON ENTERPRISES CORP.
By /s/ L. Steven Haynes
Its Chief Executive Officer
Exhibit 10.53
NOTE AMENDMENT AGREEMENT
This Agreement is made and entered into freely and voluntarily and is
effective as of July 1, 1995, by and between Gerald K. Whitley (hereinafter
referred to as "Whitley") and The Antigua Group, Inc., a Nevada corporation
which is the successor in interest to a Delaware corporation having the same
name (hereinafter referred to as "Antigua").
RECITALS
A. Whitley and Antigua are the parties to a Stock Repurchase Agreement
dated as of January 1, 1993 (the "1993 Agreement"), whereby Antigua agreed to
purchase certain shares of Antigua stock from Whitley.
B. As part of the purchase price, Antigua issued to Whitley Antigua's
non-negotiable promissory note, dated January 1, 1993, in the principal amount
of $334,619 (the "1993 Note").
C. The parties modified the terms of the 1993 Note in a Note Amendment
Agreement dated September 30, 1994 and replaced the 1993 Note with a
non-negotiable promissory note (the "1994 Note").
D. The parties now wish to modify the 1994 Note.
COVENANTS
In Consideration of the acts, payments, covenants and mutual agreements
herein described and agreed to be performed, and for other valuable
consideration, the amount and sufficiency of which is hereby acknowledged,
Whitley and Antigua agree as follows:
1. The New Note. The parties agree that the 1994 Note is hereby
cancelled and replaced for all purposes by the new note (the "1995 Note"), which
is attached to this Agreement as Exhibit A and incorporated herein by this
reference.
2. Entire Agreement. This Agreement contains the entire understanding
of the parties concerning its subject matter and supersedes all prior and
contemporaneous oral and written negotiations, promises, commitments and
agreements.
3. Affirmation of the 1993 Agreement. Except as specifically provided
in this Agreement, the terms and provisions of the 1993 Agreement are hereby
reaffirmed by the parties in accordance with their terms.
4. Parties Bound and Assignability.
<PAGE>
a. This Agreement shall be binding upon the parties hereto and
their respective representatives, agents, successors and assigns.
b. Neither this Agreement nor any rights hereunder shall be
assigned, pledged, hypothecated or otherwise transferred by either party hereto
without the written consent of the other party.
5. Governing Law. This Agreement has been negotiated and entered into
in the State of Arizona and shall be governed by, construed and enforced in
accordance with the laws of the State of Arizona. Venue for any action
concerning this Agreement shall lie only in the state or federal courts in
Maricopa County, Arizona.
6. Continuing Cooperation. Each party to this Agreement shall be
obligated hereunder to perform such other and further acts, including without
limitation the execution of any documents or instruments which are reasonable
and may be necessary or convenient in carrying out the purpose and intent of
this Agreement.
/S/ Gerald K. Whitley
Gerald K. Whitley
THE ANTIGUA GROUP, INC.
By: /s/ Thomas E. Dooley
Its: Chairman of the Board/CEO
<PAGE>
EXHIBIT A
THE ANTIGUA GROUP, INC.
SECOND AMENDED AND RESTATED
NON-NEGOTIABLE NOTE
Dated: January 1, 1993 $334,619.00
Scottsdale, Arizona
THE ANTIGUA GROUP, INC., a Nevada corporation ("Maker"), for value
received, hereby promises to pay to the order of Gerald K. Whitley ("Payee"), at
Scottsdale, Arizona, or such other place as Payee may designate from time to
time in writing, the principal sum of $334,619.00, together with interest
accrued as provided below, on or before June 30, 1998 (the "Maturity Date").
Simple interest, which shall be payable monthly in arrears on or before
the first day of each month, shall accrue on the unpaid balance of the principal
outstanding hereunder from time to time commencing on January 1, 1993, through
and including the Maturity Date, at the rate of 6% per year. All unpaid
principal amounts and all accrued but unpaid interest shall be due and payable
on July 1, 1998. A principal payment in the amount of $25,000 shall be made on
July 30, 1994; principal payments in the amount of $58,654.75 shall be made on
each of July 20, 1995, principal payments in the amount of $83,654.75 shall be
made on July 1, 1996, and July 1, 1997, and July 1, 1998.
In addition to the interest described in the preceding paragraph,
between July 1, 1994 and June 30, 1995, interest in the amount of an additional
3% shall be paid on $58,654.75 of the principal amount, and from July 1, 1995 to
July 1, 1998 interest in the amount of an additional 3% shall be paid on the
unpaid principal amount, all at the same times and in the same manner as the
interest payments described in the preceding paragraph.
If the Maturity Date or any due date is not a business day, payment
hereunder shall be made on the next succeeding business day. Maker hereby
expressly waives any presentment, demand, protest or notice in connection with
this Note now, or hereafter, required by applicable law.
Maker hereby agrees to pay (i) all costs, expenses and fees (including
reasonable fees and expenses of counsel) incurred by Payee for enforcement of
this Note if any Event of Default occurs hereunder, and (ii) any stamp or
documentary tax or any similar charge imposed in connection with the execution,
delivery, amendment, performance or enforcement of this Note; and each of (i)
and (ii) above shall be deemed obligations due and payable under this Note.
Stock Repurchase Agreement
--------------------------
This Note is a non-negotiable promissory note (herein called the
"Note"), limited in principal amount to $334,619.00 and issued in conjunction
with a Stock Repurchase Agreement
<PAGE>
dated the same date as this Note (herein called the "Stock Repurchase
Agreement"), between Maker and Payee. This Note is governed by the provisions of
the Stock Repurchase Agreement and reference is made to the Stock Repurchase
Agreement for certain rights, limitations of rights, obligations and duties of
Maker and Payee.
Repayments
----------
Maker shall have the right, at any time and from time to time, to repay
the outstanding principal amount of this Note or any portion thereof without
penalty or premium and without paying any accrued interest thereon except (i) if
the outstanding principal amount of this Note is reduced to zero by any such
repayment Maker shall therewith pay all accrued interest and (ii) on the
Maturity Date Maker shall pay all accrued interest (as herein provided).
Defaults
--------
In case an Event of Default (as defined herein) shall have occurred and
be continuing, this Note (together with all interest accrued hereon) may be
declared, by Payee giving notice to Maker, and upon such declaration shall
become, immediately due and payable.
The following shall be Events of Default.
a. Payment of Principal and Interest. Maker shall fail for 10
calendar days after receiving notice thereof, to pay, after it
becomes due, any installment of principal or interest required
hereunder.
b. Performance of Covenants and Agreements. Maker shall be in
default in the performance of any covenant or agreement
contained in this Note or the Stock Repurchase Agreement for
30 calendar days after receiving notice thereof.
Miscellaneous
-------------
1. Assignment or Transfer. Neither this Note nor the rights, obligations,
duties, liabilities or privileges arising here-under may be assigned or
transferred by Maker or Payee to any person without the prior written
consent of the other, and any assignment or transfer without such
consent shall be void.
2. Governing Law. This Note shall be governed by and construed and
enforced under the laws of the State of Arizona.
3. Notices. All notices, demands and requests required or permitted by
this Agreement shall be in writing and, except as otherwise provided
herein, shall be deemed to have been given for all purposes (i) upon
personal delivery, (ii) one day after being sent, when sent by
professional overnight courier service from and to locations within the
continental United States, or (iii) five days after posting when sent
by United States registered or certified mail, with postage paid; if
directed to the person or entity to which notice is to be given at his
or its address set forth in this section or at any other address such
person or entity has designated by notice.
<PAGE>
Address for Maker:
The Antigua Group
9319 North 94th Way
Scottsdale, AZ 85258
Attention: Chief Executive Officer
Address for Payee:
Gerald K. Whitley
10305 E. Jenan
Scottsdale, Arizona 85260
4. Severability. If one or more of the provisions contained in this Note
shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not
affect any other provision hereof and this Note shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
IN WITNESS WHEREOF, Maker has caused this Note to be executed in its
corporate name as of the date first above written.
THE ANTIGUA GROUP, INC.
By: /s/ Thomas E. Dooley
Title: Chairman of the Board, CEO
Exhibit 10.54
AMENDMENT TO SECOND AMENDED AND
RESTATED NON-NEGOTIABLE NOTE
THIS AMENDMENT TO SECOND AMENDED AND RESTATED NON-NEGOTIABLE NOTE (the
"Amendment") is made and entered into as of the 10th day of June, 1997, by and
between THE ANTIGUA GROUP, INC., a Nevada corporation ("Maker") and RONALD A.
McPHERSON, an Arizona resident ("Payee").
WHEREAS, Maker and Payee have entered into a Second Amended and
Restated Non-Negotiable Note (the "Note") executed in connection with the Note
Amendment Agreement dated July 1, 1995 and a Stock Repurchase Agreement dated
January 1, 1993 (the "Stock Repurchase Agreement"), which instruments are
attached collectively hereto as Exhibit "1"; and
WHEREAS, Maker and Payee desire to modify and amend the Note in certain
respects and to terminate the Stock Repurchase Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms not defined herein shall have the meanings
contained in the Note. Except as otherwise provided herein, all references to
money herein refer to the lawful currency of the United States.
2. As of the date of this Amendment, the outstanding principal balance
of the Note is $250,964.25. Maker reaffirms all of its obligations under the
Note, and Maker acknowledges that it has no claims, offsets or defenses with
respect to the payment of sums due under the Note.
3. Concurrently with the Closing under and as defined in the Stock
Purchase Agreement between Southhampton Enterprises Corp. ("SEC"), Southhampton
Enterprises, Inc. and the shareholders of Maker (the "Stock Purchase
Agreement"), Maker will pay Payee $83,654.75 in cash or cashier's check.
Additionally, following the Closing, Maker will make the following payments to
Payee:
a. At the earlier of July 1, 1997 or the completion of a
registered offering of securities by SEC in which
gross proceeds of at least $12 million are raised
(the "Public Offering"), Maker will pay Payee
$83,654.75 in cash or cashier's check, plus accrued
interest as described in subparagraph "c" immediately
below;
b. At the earlier of September 1, 1997 or the Public
Offering, Maker will pay Payee $83,654.75 in cash
<PAGE>
or cashier's check, plus accrued interest as
described in subparagraph "c" immediately below;
c. Interest will continue to accrue from the date of
this Amendment at the rate of 9% per annum on the
principal amounts set forth in subparagraphs "a" and
"b" immediately above. Such interest will be paid
monthly, on the first day of each month, on such
principal amounts until the Note, as amended by this
Amendment, is paid in full. All principal and
interest under the Note, as amended by this
Amendment, if not paid sooner as provided in this
Amendment, shall be due and payable no later than
September 1, 1997.
4. Concurrently with the Closing, Payee will receive 150,600 shares of
Common Stock of SEC and Warrants to purchase 75,300 additional shares of Common
Stock of SEC at an exercise price of $1.00 per share during the first year or
$1.55 per share (Canadian) during the second year (the number of shares and
Warrants and the exercise price and other terms of such Warrants shall be on
terms identical to those in effect for the other participants in SEC's Private
Placement). In lieu of such shares and Warrants, at any time between the Closing
date and the date which is 12 months thereafter, Payee shall have the right to
receive up to $150,600 in cash or cashier's check, upon Payee's tender and
deliver to SEC for cancellation of up to 150,600 shares and Warrants to purchase
75,300 shares of Common Stock of SEC; provided, however, that Payee shall have
the right to retain such shares and Warrants not tendered pursuant to this
Section. For example, if Payee tenders 75,300 shares and Warrants to purchase
37,650 shares of Common Stock of SEC, then Payee shall entitled to retain the
remaining 75,300 shares and Warrants to purchase 37,650 shares of Common Stock
of SEC.
The number of shares and Warrants to be canceled shall be determined on the
basis of the per share price of $1.00 and the number of Warrants received by
Payee on the date hereof. For example, if, on February 1, 1998, Payee wishes to
take cash of $50,000 in lieu of a portion of the 150,600 shares of Common Stock
and Warrants to purchase 75,300 shares of Common Stock of SEC that Payee shall
receive in the Private Placement, then Payee shall deliver to Maker his
certificates for 150,600 shares of Common Stock and Warrants to purchase 75,300
shares of Common Stock of SEC and Maker shall promptly thereafter deliver to
Payee (x) cash or a cashier's check for $50,000, (y) a new Common Stock
certificate for 100,600 shares of Common Stock (150,600 shares minus 50,000
shares), and (z) a new Warrant certificate entitling Payee to purchase 50,300
shares of Common Stock (75,300 shares minus 25,000 shares) on the same terms as
were formerly contained in the original Warrants.
5. The amounts set forth in Paragraph 3 above, and the amounts which
Payee may at his election receive pursuant to
<PAGE>
Paragraph 4 above, represent the entire monetary consideration owed by Maker to
Payee under the Note and this Amendment.
6. In addition to the Events of Default described in the Note, it shall
also be an Event of Default under the Note and this Amendment if:
a. Maker shall fail for 10 calendar days after receiving
notice thereof, to pay, after it becomes due, any
payment required by Maker under this Amendment; or
b. Maker transfers or disposes of all or substantially
all of its assets, Maker merges, consolidates or
enters into any other similar combination with any
other entity and is not the surviving entity or Maker
liquidates, winds-up its business or dissolves
itself.
Upon the occurrence of any Event of Default, Payee shall have all rights and
remedies provided for by law or in equity and all other rights and remedies
described in the Note or this Amendment, including, without limitation, the
right to declare all sums of principal and interest due under the Note and this
Amendment immediately due and payable without additional notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or other notices or demands of any kind or character.
7. It shall also be an Event of Default under the Note and this
Amendment if Maker becomes the subject of any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships. If that happens, all sums of principal and
interest due under the Note and this Amendment shall automatically become due
and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character.
8. This Amendment shall automatically become effective upon the Closing
under the Stock Purchase Agreement. In the event such Closing does not occur,
this Amendment shall be of no further force and effect. Upon such Closing, the
Stock Repurchase Agreement shall be automatically terminated and shall upon such
termination be of no further force and effect.
9. Except as specifically hereby amended, the Note shall remain in full
force and effect. This Amendment shall not prejudice any rights or remedies of
Payee under the Note, as hereby amended.
10. The Note and this Amendment: (a) integrate all the terms and
conditions mentioned in or incidental to the Note and this Amendment; (b)
supersede all oral negotiations and prior and
<PAGE>
other writings with respect to their subject matter; and (c) are intended by the
parties as the final expression of the agreement with respect to the terms and
conditions set forth in the Note and this Amendment and as the complete and
exclusive statement of the terms agreed to by the parties.
11. Maker has caused this Amendment to be executed by an officer who
was duly authorized and directed to do so by a resolution of the Board of
Directors of Maker which was duly authorized and adopted by (i) the requisite
number of members of the Board of Directors at a meeting that was duly called,
notice and held, or (ii) a unanimous consent in writing executed by each of the
members of the Board of Directors.
DATED on the 10th day of June, 1997.
THE ANTIGUA GROUP, INC.
/s/ Ronald A. McPherson
Ronald A. McPherson
By /s/ L. Steven Haynes
L. Steven Haynes
Its Chief Executive Officer
AGREED TO AND ACCEPTED
on the 10th day of June, 1997:
SOUTHHAMPTON ENTERPRISES CORP.
By /s/ L. Steven Haynes
L. Steven Haynes
Its Chief Executive Officer
Exhibit 10.55
NOTE AMENDMENT AGREEMENT
This Agreement is made and entered into freely and voluntarily and is
effective as of July 1, 1995, by and between Ronald A. McPherson (hereinafter
referred to as "McPherson") and The Antigua Group, Inc., a Nevada corporation
which is the successor in interest to a Delaware corporation having the same
name (hereinafter referred to as "Antigua").
RECITALS
A. McPherson and Antigua are the parties to a Stock Repurchase
Agreement dated as of January 1, 1993 (the "1993 Agreement"), whereby Antigua
agreed to purchase certain shares of Antigua stock from McPherson.
B. As part of the purchase price, Antigua issued to McPherson Antigua's
non-negotiable promissory note, dated January 1, 1993, in the principal amount
of $334,619 (the "1993 Note").
C. The parties now wish to modify the terms of the 1993 Note.
COVENANTS
In Consideration of the acts, payments, covenants and mutual agreements
herein described and agreed to be performed, and for other valuable
consideration, the amount and sufficiency of which is hereby acknowledged,
McPherson and Antigua agree as follows:
1. The New Note. The parties agree that the 1993 Note is hereby
cancelled and replaced for all purposes by the new note (the "1995 Note"), which
is attached to this Agreement as Exhibit A and incorporated herein by this
reference.
2. Entire Agreement. This Agreement contains the entire understanding
of the parties concerning its subject matter and supersedes all prior and
contemporaneous oral and written negotiations, promises, commitments and
agreements.
3. Affirmation of the 1993 Agreement. Except as specifically provided
in this Agreement, the terms and provisions of the 1993 Agreement are hereby
reaffirmed by the parties in accordance with their terms.
4. Parties Bound and Assignability.
a. This Agreement shall be binding upon the parties hereto and
their respective representatives, agents, successors and assigns.
<PAGE>
b. Neither this Agreement nor any rights hereunder shall be
assigned, pledged, hypothecated or otherwise transferred by either party hereto
without the written consent of the other party.
5. Governing Law. This Agreement has been negotiated and entered into
in the State of Arizona and shall be governed by, construed and enforced in
accordance with the laws of the State of Arizona. Venue for any action
concerning this Agreement shall lie only in the state or federal courts in
Maricopa County, Arizona.
6. Continuing Cooperation. Each party to this Agreement shall be
obligated hereunder to perform such other and further acts, including without
limitation the execution of any documents or instruments which are reasonable
and may be necessary or convenient in carrying out the purpose and intent of
this Agreement.
/s/ Ronald A. McPherson
Ronald A. McPherson
THE ANTIGUA GROUP, INC.
By: /s/ Thomas E. Dooley
Its: Chairman of the Board/CEO
<PAGE>
EXHIBIT A
THE ANTIGUA GROUP, INC.
SECOND AMENDED AND RESTATED
NON-NEGOTIABLE NOTE
Dated: January 1, 1993 $334,619.00
Scottsdale, Arizona
THE ANTIGUA GROUP, INC., a Nevada corporation ("Maker"), for value
received, hereby promises to pay to the order of Ronald A. McPherson ("Payee"),
at Scottsdale, Arizona, or such other place as Payee may designate from time to
time in writing, the principal sum of $334,619.00, together with interest
accrued as provided below, on or before June 30, 1998 (the "Maturity Date").
Simple interest, which shall be payable monthly in arrears on or before
the first day of each month, shall accrue on the unpaid balance of the principal
outstanding hereunder from time to time commencing on January 1, 1993, through
and including the Maturity Date, at the rate of 6% per year. All unpaid
principal amounts and all accrued but unpaid interest shall be due and payable
on July 1, 1998. Principal payments in the amount of $83,654.75 shall be made on
each of June 30, 1994, July 1, 1996; July 1, 1997; and July 1, 1998.
If the Maturity Date or any due date is not a business day, payment
hereunder shall be made on the next succeeding business day. Maker hereby
expressly waives any presentment, demand, protest or notice in connection with
this Note now, or hereafter, required by applicable law.
Maker hereby agrees to pay (i) all costs, expenses and fees (including
reasonable fees and expenses of counsel) incurred by Payee for enforcement of
this Note if any Event of Default occurs hereunder, and (ii) any stamp or
documentary tax or any similar charge imposed in connection with the execution,
delivery, amendment, performance or enforcement of this Note; and each of (i)
and (ii) above shall be deemed obligations due and payable under this Note.
Stock Repurchase Agreement
--------------------------
This Note is a non-negotiable promissory note (herein called the
"Note"), limited in principal amount to $334,619.00 and issued in conjunction
with a Stock Repurchase Agreement dated the same date as this Note (herein
called the "Stock Repurchase Agreement"), between Maker and Payee. This Note is
governed by the provisions of the Stock Repurchase Agreement and reference is
made to the Stock Repurchase Agreement for certain rights, limitations of
rights, obligations and duties of Maker and Payee.
<PAGE>
Repayments
----------
Maker shall have the right, at any time and from time to time, to repay
the outstanding principal amount of this Note or any portion thereof without
penalty or premium and without paying any accrued interest thereon except (i) if
the outstanding principal amount of this Note is reduced to zero by any such
repayment Maker shall therewith pay all accrued interest and (ii) on the
Maturity Date Maker shall pay all accrued interest (as herein provided).
Defaults
--------
In case an Event of Default (as defined herein) shall have occurred and
be continuing, this Note (together with all interest accrued hereon) may be
declared, by Payee giving notice to Maker, and upon such declaration shall
become, immediately due and payable.
The following shall be Events of Default.
a. Payment of Principal and Interest. Maker shall fail for 10
calendar days after receiving notice thereof, to pay, after it
becomes due, any installment of principal or interest required
hereunder.
b. Performance of Covenants and Agreements. Maker shall be in
default in the performance of any covenant or agreement
contained in this Note or the Stock Repurchase Agreement for
30 calendar days after receiving notice thereof.
Miscellaneous
-------------
1. Assignment or Transfer. Neither this Note nor the rights, obligations,
duties, liabilities or privileges arising here-under may be assigned or
transferred by Maker or Payee to any person without the prior written
consent of the other, and any assignment or transfer without such
consent shall be void.
2. Governing Law. This Note shall be governed by and construed and
enforced under the laws of the State of Arizona.
3. Notices. All notices, demands and requests required or permitted by
this Agreement shall be in writing and, except as otherwise provided
herein, shall be deemed to have been given for all purposes (i) upon
personal delivery, (ii) one day after being sent, when sent by
professional overnight courier service from and to locations within the
continental United States, or (iii) five days after posting when sent
by United States registered or certified mail, with postage paid; if
directed to the person or entity to which notice is to be given at his
or its address set forth in this section or at any other address such
person or entity has designated by notice.
Address for Maker:
The Antigua Group
<PAGE>
9319 North 94th Way
Scottsdale, AZ 85258
Attention: Chief Executive Officer
Address for Payee:
Ronald A. McPherson
11654 North 109th Street
Scottsdale, Arizona 85259
4. Severability. If one or more of the provisions contained in this Note
shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not
affect any other provision hereof and this Note shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
IN WITNESS WHEREOF, Maker has caused this Note to be executed in its
corporate name as of the date first above written.
THE ANTIGUA GROUP, INC.
By: /s/ Thomas E. Dooley
Title: Chairman of the Board/CEO
Exhibit 11.1
ANTIGUA ENTERPRISES, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE-FULLY DILUTED
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
---------- ----------- ---------- ---------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net loss ...................................... $ (911,714) $(1,092,873) $ (722,074) $ (420,271) $(1,987,681)
Dividends on Preferred Stock .................. (29,305)
---------- ----------- ---------- ---------- -----------
Adjusted net loss ............................. $ (911,714) $(1,092,873) $ (722,074) $ (420,271) $(2,016,986)
========== =========== ========== ========== ===========
Historical
Weighted average common
shares outstanding ................. 1,531,384 1,959,423 2,188,056 2,035,606 2,611,911
Common Stock Equivalents-
Stock Options ...................... - * - * - * - * - *
Stock Warrants ..................... - * - * - * - * - *
Assumed Conversions .................. - *
Preferred Stock..................... - *
Convertible Debentures ............. - *
---------- ---------- ---------- ---------- -----------
Weighted average common and
common equivalent shares .................... 1,531,384 1,959,423 2,188,056 2,035,606 2,611,911
========== =========== ========== ========== ===========
Primary net loss per share $ (0.60) $ (0.56) $ (0.33) $ (0.21) $ (0.77)
========== =========== ========== ========== ===========
</TABLE>
*Assumed conversion of each of these securities, on an individual basis, has an
antidilutive effect on earings per share.
Ex - 5
<PAGE>
ANTIGUA ENTERPRISES, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE-PRIMARY
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ---------- ---------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net loss ....................................... $ (911,714) $(1,092,873) $ (722,074) $ (420,271) $(1,987,681)
Dividends on Preferred Stock ................... (29,305)
----------- ----------- ---------- ---------- -----------
Adjusted net loss .............................. $ (911,714) $(1,092,873) $ (722,074) $ (420,271) $(2,016,986)
=========== =========== ========== ========== ===========
Historical
Weighted average common
shares outstanding .................. 1,531,384 1,959,423 2,188,056 2,035,606 2,611,911
Common Stock Equivalents-
Stock Options ....................... - * - * - * - * - *
Stock Warrants ...................... - * - * - * - * - *
----------- ----------- ---------- ---------- -----------
Weighted average common and
common equivalent shares ..................... 1,531,384 1,959,423 2,188,056 2,035,606 2,611,911
=========== =========== ========== ========== ===========
Primary net loss per share $ (0.60) $ (0.56) $ (0.33) $ (0.21) $ (0.77)
=========== =========== ========== ========== ===========
</TABLE>
Note: Preferred stock and convertible debentures are not considered common stock
equivalents, because the applicable interest rates exceed the prime rate.
*Assumed conversion of each of these securities, on an individual basis, has an
antidilutive effect on earings per share.
Ex - 6
Exhibit 16.1
November 5, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C 20549
Ladies and Gentlemen:
We have read the item captioned "Changes in Independent Auditor" in the
Registration Statement of Antigua Enterprises Inc. on Form S-1 to be filed with
the Securities and Exchange Commission on the date of this letter. We are in
agreement with the statements in such captioned item.
Yours truly,
BDO Dunwoody
Chartered Accountants
(Internationally BDO Binder)
Exhibit 21.1
Southhampton Enterprises, Inc. Texas
The Antigua Group, Inc. Nevada
T-Sports, Inc. Texas
Southhampton de Mexico, S.A. Mexico
Promo, Inc. Texas
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
November 4, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of this
Registration Statement.
BDO Dunwoody
Chartered Accountants
(Internationally BDO Binder)
Vancouver, Canada
November 5, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 665,886
<SECURITIES> 0
<RECEIVABLES> 604,285
<ALLOWANCES> 63,500
<INVENTORY> 174,533
<CURRENT-ASSETS> 1,381,418
<PP&E> 393,454
<DEPRECIATION> 202,975
<TOTAL-ASSETS> 2,907,952
<CURRENT-LIABILITIES> 2,299,187
<BONDS> 0
0
0
<COMMON> 2,470,461
<OTHER-SE> (3,539,446)
<TOTAL-LIABILITY-AND-EQUITY> 2,907,952
<SALES> 2,857,962
<TOTAL-REVENUES> 2,948,447
<CGS> 2,263,000
<TOTAL-COSTS> 3,509,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,864
<INCOME-PRETAX> (722,074)
<INCOME-TAX> 0
<INCOME-CONTINUING> (722,074)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (722,074)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
