www.sec.gov/cgi-bin/...y&CIK=0000884380&owner=include&count=40
ITEM 2.01 COMPLETION OF ACQUISITION OF ASSETS
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On November 7, 2007, WiseBuys Stores, Inc. ("WiseBuys"), a wholly-owned
subsidiary of Seaway Valley Capital Corporation ("Seaway Valley"), purchased all
of the outstanding capital stock of Patrick Hackett Hardware Company, a New York
corporation ("Hacketts"). Hacketts, one of the nation's oldest retailers, with
roots dating back to 1830, is a full line department store specializing in name
brand merchandise and full service hardware. At the time of the acquisition,
Hacketts had locations in five towns in upstate New York: Ogdensburg, Potsdam,
Watertown, Massena and Canton. Each store features brand name clothing for men,
women, and children, and a large selection of athletic, casual, and work
footwear. Hacketts also carries domestics, home decor, gifts, seasonal
merchandise and sporting goods. Hacketts full service hardware department
features traditional hardware, tool, plumbing, paint and electrical departments.
In connection with the acquisition, WiseBuys will contribute all of its retail
assets to Hacketts. Management intends to convert its five WiseBuys stores into
the Hacketts model, close one Hacketts store, and operate all nine remaining
stores under the Hacketts brand. After the store conversions and the closure,
the Company will operate nine Hacketts locations - Canton, Gouverneur, Hamilton,
Massena, Ogdensburg, Potsdam, Pulaski, Tupper Lake, and Watertown - all in New
York.
The shares of Hacketts were purchased from Juliann Hackett Cliff, Patrick
Hackett, Jr., and Norman V. Garrelts (the "Sellers"). Neither Seaway Valley nor
WiseBuys had any prior relationship with any of the Sellers.
In exchange for the capital stock of Hacketts, WiseBuys paid a total of six
million dollars ($6,000,000), as follows:
o $1,500,000 at closing;
o Promissory notes in the aggregate amount of $500,000 due 270 days
after closing;
o Promissory notes in the aggregate amount of $1,000,000 due 365 days
after closing;
o Promissory notes in the aggregate amount of $500,000 due 450 days
after closing; and
o Promissory notes in the aggregate amount of $2,500,000 that accrue
interest over the first three years, then require payment in equal
annual instalments of accrued interest and principal over the
following five years.
Each of the promissory notes has an interest rate of 8.0% and is personally
guaranteed by Thomas Scozzafava, the Chief Executive Officer of Seaway Valley
Capital Corporation. In addition, the notes due in 270, 365 and 450 days are
secured by a pledge of the capital stock of Hacketts.
Also as part of the transaction, WiseBuys repaid certain Hacketts indebtedness
of $493,609 held by Gordon Reid, the Chief Executive Officer of Giant Tiger. The
Gordon Reid debt had mandatory "change of control" provisions that necessitated
its repayment at the closing of the acquisition. WiseBuys also agreed to execute
a guaranty in favour of Community Bank of approximately $1.9 million in debt
owed by Hacketts to Community Bank.
In connection with the acquisition, Hacketts entered into executive employment
agreements with each of the Sellers. Ms. Cliff's and Mr. Hacketts agreements
have five year terms. Mr. Garrelts' agreement has a two year term. Each
agreement provides for three years of non-competition after its termination.
As part of the transaction, WiseBuys agreed to reserve a five percent equity
interest for the benefit of Hacketts management as part of a management
incentive program. The details of the program have not yet been finalized, but
it is anticipated that the stock reserved for Hacketts management shall be
obtained by management via incentive stock options.
Approximately $1.5 million of the acquisition funding resulted from the sale of
publicly traded securities held by WiseBuys' wholly owned subsidiary, the Seaway
Valley Fund, LLC. The remaining funds were contributed by Seaway Valley Capital
Corporation from the proceeds of its sale to Paul L. and Anaflor Graham of a
Convertible Debenture in the principal amount of $500,000. The Convertible
Debenture bears interest at 8% per annum, which is payable in the form of common
stock issued by Seaway Valley. The interest and principal are due and payable on
September 12, 2012. The holder may convert the principal and accrued interest
into common stock of Seaway Valley at a conversion rate equal to the lesser of
(a) $0.024 per share or (b) 90% of the closing market price on the date
immediately prior to the date of conversion. The Convertible Debenture may not,
however, be converted into an amount of stock which would cause the holder's
aggregate holdings to exceed 4.9% of Seaway Valley's outstanding shares.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
Audited financial statements of Patrick Hackett Hardware Company for the nine
months ended September 30, 2007 and the year ended December 31, 2006 - to be
filed by amendment
Pro Forma Financial Information showing the pro forma effect of the acquisition
of Patrick Hackett Hardware Company on the Registrants financial condition and
results of operations - to be filed by amendment.
Exhibits
10-a Stock Purchase Agreement dated May 24, 2007 among Juliann Hackett
Cliff, Patrick Hackett, Jr., Norman V. Garrelts and WiseBuys Stores,
Inc. - filed as an exhibit to the Current Report on Form 8-K filed on
October 23, 2007 and incorporated by reference herein.
10-b Amendment to Stock Purchase Agreement, dated September 18, 2007, among
Juliann Hackett Cliff, Patrick Hackett, Jr., Norman V. Garrelts and
WiseBuys Stores, Inc. - filed as an exhibit to the Current Report on
Form 8-K filed on October 23, 2007 and incorporated by reference
herein.
10-c Convertible Debenture Agreement dated September 18, 2007 issued by
Seaway Valley Capital Corporation and Paul L. and Anaflor Graham.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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