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
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
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;
(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
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 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
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
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 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
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
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
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
(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
(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
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
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
(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
(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
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
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
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
(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
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