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"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., the Chief Executive Officer of The
Antigua Group, Inc., a Nevada corporation ("Antigua") and ▇▇▇▇ ▇▇▇▇▇▇, husband
and wife ("▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇ ▇▇▇▇▇▇ REVOCABLE TRUST OF 1988,
the principal shareholder of Antigua (the "▇▇▇▇▇▇ Trust"), E. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
REVOCABLE INTERVIVOS TRUST OF 1982 (the "▇▇▇▇▇▇ Trust"), a shareholder of
Antigua, and THE IRREVOCABLE GIFT TRUSTS OF THE CHILDREN OF ▇▇▇▇▇▇ AND ▇▇▇▇
▇▇▇▇▇▇ OF 1989 (the "▇▇▇▇▇▇ Children Trusts"), a shareholder of Antigua.
ARTICLE I
RECITALS
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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. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. is the Chief Executive Officer and a
director of Antigua. ▇▇▇▇▇▇, for the benefit of their minor children, owns a
total of 51,200 shares of Antigua Common Stock. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is the trustee
of the ▇▇▇▇▇▇ Trust, which owns a total of 1,653,800 shares of Antigua Common
Stock. E. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. is the trustee of the ▇▇▇▇▇▇ Trust, which owns
88,600 shares of Antigua
Common Stock. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is the trustee for the ▇▇▇▇▇▇ Children Trusts,
which collectively own a total of 181,000 shares of Antigua Common Stock.
▇▇▇▇▇▇, the ▇▇▇▇▇▇ Trust, the ▇▇▇▇▇▇ Children Trusts and the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
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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.
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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.
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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.
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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
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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
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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.
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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
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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
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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.
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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
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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,
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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.
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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.
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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
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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
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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
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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.
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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
18
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.
19
4.17 Brokerage. Except pursuant to an oral agreement with ▇▇▇▇ ▇▇▇▇▇▇
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
20
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
21
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.
22
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
23
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
24
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,
25
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.
26
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
6.1 ▇▇. ▇▇▇▇▇▇ as Director. SEC and SEI shall cause ▇▇▇ ▇▇▇▇▇▇ to
remain a director of Antigua for a period of at least two years following the
Closing. Upon the Closing, ▇▇. ▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇'▇ term as a director of Antigua,
▇▇. ▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇ as Consultant. Following the Closing, ▇▇. ▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇. Effective as of the Closing, ▇▇.
▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇ and his immediate family; and all furniture
and art currently in ▇▇. ▇▇▇▇▇▇'▇ office. Following the Closing, SEC or Antigua
shall continue to pay the following expenses of ▇▇. ▇▇▇▇▇▇: COBRA health
insurance policy premiums (for the longest period allowable by law) and
business-related cellular phone service charges for so long as ▇▇. ▇▇▇▇▇▇
remains a director of Antigua.
6.4 Revised Lease for Facilities. Upon the later of (a) 30 days after
the Closing Date, or (b) ▇▇. ▇▇▇▇▇▇ 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
27
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 ▇▇▇▇▇ Option. At the Closing, SEC will issue to ▇▇▇▇▇ ▇▇▇▇▇ 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
28
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
29
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 ▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇
$2,112,000 in immediately available funds and ▇▇. ▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇. At the Closing,
▇▇. ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ shall
have any obligation to the other, contingent or otherwise, for monies owed with
the exception of Antigua's obligations to ▇▇▇▇▇▇ as set forth in the Consulting
Agreement attached hereto as Exhibit 6.2.
6.15 Veto Power of ▇▇. ▇▇▇▇▇▇. 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, ▇▇. ▇▇▇▇▇▇ 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.
30
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 ▇▇▇▇▇ Fargo and Bank One. Prior to the date hereof,
the parties have had discussions with ▇▇▇▇▇ Fargo Bank, National Association
("▇▇▇▇▇ Fargo") and Bank One Arizona, NA ("Bank One") concerning the potential
modification of a Promissory Note dated July 17, 1995 in the
31
principal amount of $1,200,000 from ▇▇. ▇▇▇▇▇▇ to ▇▇▇▇▇ Fargo and Bank One (the
"▇▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇▇ is successful in
reaching an agreement with ▇▇▇▇▇ Fargo and Bank One pursuant to which (a) the
payment of at least $400,000 of the principal amount of the ▇▇▇▇▇▇ Bank Note is
deferred until at least June 27, 1997; and (b) no more than $800,000 is required
to be paid by ▇▇. ▇▇▇▇▇▇ concurrently with the execution of the foregoing
agreement with Bank One and ▇▇▇▇▇ Fargo, then Southhampton shall reimburse ▇▇.
▇▇▇▇▇▇ for the fees which ▇▇. ▇▇▇▇▇▇ 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 ▇▇▇▇ from the law firm ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ relating to legal work performed by such law firm for Antigua.
Antigua has informed ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ that it does not intend to pay such ▇▇▇▇. 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 ▇▇. ▇▇▇▇▇▇ 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
32
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.
33
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 ▇▇▇▇▇▇, 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
34
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, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
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;
35
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
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 ▇▇▇▇▇▇▇ &
▇▇▇▇▇, 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 ▇▇▇▇▇▇▇ &
▇▇▇▇▇, the Antigua Stock constitutes all of
the issued and outstanding capital stock of
Antigua, and
37
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 ▇▇▇▇▇▇▇ & ▇▇▇▇▇, the
execution, delivery and performance of this
Agreement by the Shareholders will not
constitute a violation of any contract or
agreement to which Antigua, ▇▇▇▇▇▇, the
▇▇▇▇▇▇ Trust or the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. dated as of the
Closing Date in which ▇▇. ▇▇▇▇▇▇ shall resign as an
officer and employee of Antigua.
38
g. A Consulting Agreement between Antigua and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇. in the form attached hereto as Exhibit
6.2.
h. Employment Agreements between Antigua and each of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇'▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
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 ▇▇▇▇▇▇, 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
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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: L.
▇▇▇▇▇▇ ▇▇▇▇▇▇, facsimile: ▇▇▇-▇▇▇-▇▇▇▇ (with a copy to Bonn, Luscher, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇,
facsimile: 602-254-0656), if to Antigua, ▇▇▇▇▇▇, the ▇▇▇▇▇▇ Children Trusts or
the ▇▇▇▇▇▇ Trust at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. (with a copy to ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: P. ▇▇▇▇▇▇ ▇▇▇▇,
facsimile: 602-230-5598), and if to The ▇▇▇▇▇▇ Trust, to E. ▇▇▇▇▇ ▇▇▇▇▇▇ at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (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
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
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
DATED on April 21, 1997.
SOUTHHAMPTON ENTERPRISES CORP.
By: /s/ L. ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
L. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its Chief Executive Officer
SOUTHHAMPTON ENTERPRISES, INC.
By: /s/ L. ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
L. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Its Chief Executive Officer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇ ▇▇▇▇▇▇
REVOCABLE TRUST OF 1988
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its
------------------------
43
E. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. REVOCABLE
INTERVIVOS TRUST OF 1982
By: /s/ E. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
----------------------------
E. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Its Trustee
IRREVOCABLE GIFT TRUSTS OF THE
CHILDREN OF ▇▇▇▇▇▇ AND ▇▇▇▇ ▇▇▇▇▇▇
OF 1989
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as
custodian for ▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as
custodian for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SHAREHOLDERS
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., an individual
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇, an individual
44