UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 19, 1999
ENTRADE INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 1-15303 52-2153008
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Central Avenue, Northfield, Illinois 60093
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 441-6650
N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
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On October 19, 1999, Entrade Inc. ("Entrade") completed its acquisition
(the "Acquisition") of all of the outstanding capital stock of Public
Liquidation Systems, Inc. and Asset Liquidation Group, Inc., which engage in
business under the name Nationwide Auction Systems (collectively, "Nationwide"),
pursuant to a Stock Purchase Agreement (the "Agreement") dated as of October 15,
1999 among Entrade, Nationwide and the stockholders of Nationwide, namely, Don
Haidl, Corey P. Schlossmann, and Peggy Haidl, as trustee of Capital Direct 1999
Trust and Core Capital IV Trust (collectively, the "Sellers").
The purchase price paid by Entrade to the Sellers under the Agreement
consisted of the following: (a) an aggregate of 1,570,000 shares of Entrade
Common Stock; (b) unsecured promissory notes (the "Notes") in the aggregate
principal amount of $4,800,000, maturing on November 29, 1999; (c) an aggregate
of $6,000,000 cash; and (d) unsecured promissory notes (the "Term Notes") in the
aggregate principal amount of $14,000,000, maturing October 1, 2001. The Notes
and the Term Notes bear interest at an annual rate of 8%. Entrade paid the cash
portion of the purchase price with its existing cash assets. Entrade also issued
80,000 shares of Entrade Common Stock in payment of fees to its agent in
connection with the closing of the transaction.
Entrade is required to prepay the Notes prior to their maturity date in
the event that it receives in excess of $4,800,000 in debt or equity financing
or does not receive a commitment for such financing by November 15, 1999. In the
event Entrade is required to prepay the Notes or pay the Notes at maturity, as
the case may be, Entrade intends to pay the Notes by delivering shares of
Entrade Common Stock (the "Note Shares") at the rate of the lower of (a) $17 per
share or (b) 85% of the average closing price of Entrade Common Stock on the New
York Stock Exchange on the last five trading days ending on the applicable due
date of the Notes.
Entrade has granted to the Sellers certain registration rights pursuant
to a Stock Restriction and Registration Rights Agreement. The Sellers have
agreed to an initial limit on the number of shares that can be sold under any
future registration statement until May 31, 2000 to 400,000 shares in the
aggregate, subject to certain adjustments. This agreement does not limit the
number of Note Shares, if any, that may be sold under any future registration
statement.
Entrade also entered into an employment agreement with Corey P.
Schlossmann, who will serve as an executive officer of Nationwide. The initial
term of the employment agreement is three years. The term will automatically be
extended on each anniversary of the agreement commencing the third anniversary
for one year unless either party gives notice that it does not wish to extend
the employment term not later than 90 days preceding such anniversary date. In
the event of termination without cause by Nationwide or by Mr. Schlossmann for
good reason, as those terms are defined in the agreement, Mr. Schlossmann will
be entitled to receive his then current base salary until the later of the end
of the then existing term or a period of six months from the termination date.
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Pursuant to his employment agreement, Mr. Schlossmann was issued a
stock option (the "Option") exercisable for the purchase of up to 200,000 shares
of Entrade Common Stock at an exercise price of $9 per share. The Option became
exercisable in full on the date of the closing of the Acquisition. As of the
closing date of the Acquisition, Mr. Schlossmann was appointed as a director of
Entrade.
Nationwide, which has operated for over 20 years, is one of the
nation's largest volume public auction firms in the disposition of municipality,
law enforcement, corporate and utility company surplus property. In addition to
vehicles and equipment, Nationwide conducts real property and jewelry auctions.
Nationwide conducts the auctions at its facilities or at off-site locations.
Nationwide has six facilities located in California, Missouri, Delaware and
Georgia.
Prior to consummation of the Acquisition, no material relationship
existed between (a) Nationwide or the Sellers and (b) Entrade or any affiliate
of Entrade, any director or officer of Entrade or any associate of a director or
officer of Entrade. The consideration under the Agreement was determined by
arms' length negotiations between Entrade and the Sellers and Nationwide.
Item 7. Financial Statements and Exhibits.
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(a) Financial Statements.
The historical financial statements of the acquired business required
by Rule 3-05 of Regulation S-X are not yet available. Pursuant to Item 7(a)(4)
of Form 8-K, such historical financial information will be filed as soon as
practicable within the period prescribed under such item.
(b) Pro forma financial information.
The pro forma financial information required by Article 11 of
Regulation S-X is not yet available. Pursuant to Item 7(b)(2) of Form 8-K, such
pro forma financial information will be filed as soon as practicable within the
period prescribed under such item.
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(c) Exhibits:
Exhibit No. Exhibit Description
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2.1 Stock Purchase Agreement dated as of October
15, 1999 among Entrade Inc., Don Haidl,
Corey P. Schlossmann, Peggy Haidl, as
trustee of the Capital Direct 1999 Trust and
the Core Capital IV Trust, Public
Liquidation Systems, Inc. and Asset
Liquidation Group, Inc. and the Closing
Letter dated as of October 15, 1999 among
all parties to the Stock Purchase Agreement,
without schedules and other exhibits.
Entrade agrees to furnish supplemen tally
copies of these schedules and other exhibits
omitted to the Commission upon request.
10.1 Promissory Note dated as of October 15, 1999
from Entrade to Don Haidl, in the principal
amount of $4,320,000.
10.2 Promissory Note dated as of October 15, 1999
from Entrade to Corey P. Schlossmann, in the
principal amount of $480,000.
10.3 Promissory Note dated as of October 15, 1999
from Entrade to Don Haidl, in the principal
amount of $12,600,000.
10.4 Promissory Note dated as of October 15, 1999
from Entrade to Corey P. Schlossmann, in the
principal amount of $1,400,000.
10.5 Employment Agreement dated as of October 15,
1999 between Entrade and Corey P.
Schlossmann.
10.6 Nonqualified Stock Option Agreement dated as
of October 15, 1999 between Entrade Inc. and
Corey P. Schlossmann.
10.7 Stock Restriction and Registration Rights
Agreement dated as of October 15, 1999
between Entrade Inc. and the Sellers.
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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.
ENTRADE INC.
By:/s/ John G. Hamm
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John G. Hamm,
Executive Vice President
and Secretary
Date: October 28, 1999
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EXHIBIT INDEX
Exhibit No. Exhibit Description
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2.1 Stock Purchase Agreement dated as of October
15, 1999 among Entrade Inc., Don Haidl,
Corey P. Schlossmann, Peggy Haidl, as
trustee of the Capital Direct 1999 Trust and
the Core Capital IV Trust, Public
Liquidation Systems, Inc. and Asset
Liquidation Group, Inc. and the Closing
Letter dated as of October 15, 1999 among
all parties to the Stock Purchase Agreement,
without schedules and other exhibits.
Entrade agrees to furnish supplemen tally
copies of these schedules and other exhibits
omitted to the Commission upon request.
10.1 Promissory Note dated as of October 15, 1999
from Entrade to Don Haidl, in the principal
amount of $4,320,000.
10.2 Promissory Note dated as of October 15, 1999
from Entrade to Corey P. Schlossmann, in the
principal amount of $480,000.
10.3 Promissory Note dated as of October 15, 1999
from Entrade to Don Haidl, in the principal
amount of $12,600,000.
10.4 Promissory Note dated as of October 15, 1999
from Entrade to Corey P. Schlossmann, in the
principal amount of $1,400,000.
10.5 Employment Agreement dated as of October 15,
1999 between Entrade and Corey P.
Schlossmann.
10.6 Nonqualified Stock Option Agreement dated as
of October 15, 1999 between Entrade Inc. and
Corey P. Schlossmann.
10.7 Stock Restriction and Registration Rights
Agreement dated as of October 15, 1999
between Entrade Inc. and the Sellers.
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Exhibit 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF
October 15, 1999
AMONG
ENTRADE INC.
PUBLIC LIQUIDATION SYSTEMS, INC.
ASSET LIQUIDATION GROUP, INC.
AND
CERTAIN STOCKHOLDERS
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TABLE OF CONTENTS
Page No.
SECTION 1 THE EXCHANGE.......................................................1
Terms of the Exchange................................................1
Consideration for the Shares.........................................1
Adjustment to the Term Notes.........................................2
Payment of the Acquisition Price.....................................2
S Period Distributions; Post-Closing Adjustment......................2
SECTION 2. THE CLOSING........................................................4
SECTION 3 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE STOCKHOLDERS....4
Share Ownership......................................................4
Authority............................................................4
No Violation, Etc....................................................5
No Other Agreements to Sell Shares...................................5
Investment Representations...........................................5
Litigation...........................................................5
SECTION 4 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
ACQUIRED CORPORATIONS.................................................5
No Other Agreements to Sell Assets or Business.......................5
Authority............................................................6
Consents, No Conflicts, Etc..........................................6
Organization, Good Standing and Capitalization of the
Acquired Corporations..............................................6
Organizational Documents and By-laws.................................7
Financial Statements.................................................7
Absence of Undisclosed Liabilities and Obligations...................7
Absence of Certain Changes or Events.................................7
Tax Matters..........................................................9
Accounts Receivable.................................................10
Inventories.........................................................10
Lists of Properties, Contracts and Personnel Data...................10
Qualification..............................................10
Real Property..............................................10
Intellectual Properties....................................11
Personal Property..........................................11
Insurance..................................................11
Other Material Contracts...................................11
Labor Agreements...........................................11
Employee Benefits..........................................11
Compensation...............................................12
Powers of Attorney.........................................12
(i)
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Equity Investments.........................................12
Indebtedness...............................................12
Bank Accounts..............................................12
Licenses and Permits.......................................12
Purchase Orders; Backlog; Capital Commitments..............12
Copies of Documents.................................................12
Tangible Properties.................................................13
Environmental Matters...............................................13
Intellectual Properties.............................................14
Insurance...........................................................15
Labor Matters.......................................................15
ERISA...............................................................15
Litigation..........................................................15
Compliance with Laws; Permits.......................................16
No Brokers..........................................................16
Illegal Payments....................................................16
Transactions with Certain Persons...................................16
Minute Books and Stock Transfer Books...............................16
Disclosure..........................................................17
SECTION 5 REPRESENTATIONS AND WARRANTIES OF ENTRADE.........................17
Authority...........................................................17
Consents, No Conflicts, Etc.........................................17
Organization, Good Standing and Capitalization of Entrade and each
of its Subsidiaries.................................................17
Organizational Documents and By-laws................................18
SEC Documents.......................................................18
Absence of Undisclosed Liabilities and Obligations..................19
Absence of Certain Changes or Events................................19
Tax Matters.........................................................21
Accounts Receivable.................................................21
Inventories.........................................................21
Lists of Properties, Contracts and Personnel Data...................22
Qualification..............................................22
Real Property..............................................22
Intellectual Properties....................................22
Personal Property..........................................22
Insurance..................................................22
Other Material Contracts...................................22
Labor Agreements...........................................23
Employee Benefits..........................................23
Compensation...............................................23
Powers of Attorney.........................................23
Equity Investments.........................................23
Indebtedness...............................................23
(ii)
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Bank Accounts..............................................23
Licenses and Permits.......................................23
Purchase Orders; Backlog; Capital Commitments..............23
Copies of Documents.................................................23
Tangible Properties.................................................24
Environmental Matters...............................................25
Intellectual Properties.............................................25
Insurance...........................................................26
Labor Matters.......................................................26
ERISA...............................................................26
Litigation..........................................................26
Compliance with Laws; Permits.......................................26
No Brokers..........................................................27
Illegal Payments....................................................27
Transactions with Certain Persons...................................27
Minute Books and Stock Transfer Books...............................27
Disclosure..........................................................28
SECTION 6 CERTAIN COVENANTS AND AGREEMENTS..................................28
No Negotiation......................................................28
Nondisclosure.......................................................28
Operations in Usual Manner..........................................28
Agreements with Key Employees.......................................30
Further Assurances..................................................30
SECTION 7 CONDITIONS TO OBLIGATIONS OF ENTRADE..............................30
Stockholders' and Acquired Corporations' Performance................31
Representations and Warranties Correct..............................31
Stock Certificates..................................................31
United States Marshals Service Dispute..............................31
Release of Corporate Guaranty.......................................31
City of Industry Lease..............................................31
Opinion of Counsel to the Stockholders and the
Acquired Corporations.............................................31
Approvals and Consents..............................................32
Resignations........................................................32
Financial Condition.................................................32
Proceedings and Documents...........................................32
Other Closing Documents.............................................32
Schlossmann Employment Agreement....................................32
Non-Compete Agreements..............................................32
Registration Rights Agreement.......................................32
SECTION 8 CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
ACQUIRED CORPORATIONS...............................................33
Entrade's Performance...............................................33
(iii)
<PAGE>
Registration Rights Agreement.......................................33
Representations and Warranties Correct..............................33
Approvals and Consents..............................................33
Financial Condition.................................................33
Proceedings and Documents...........................................34
Other Closing Documents.............................................34
SECTION 9 OBLIGATIONS OF PARTIES AFTER CLOSING..............................34
Directorship........................................................34
Entrade Stock Options...............................................34
Survival of Representations and Warranties..........................34
Stockholders' Agreements to Indemnify...............................35
Entrade's Agreement to Indemnify....................................35
Limitations on Liability of Stockholders............................35
Limitations on Liability of Entrade.................................36
Personal Guaranty of Trust Obligations..............................36
Claims for Indemnification..........................................36
SECTION 10 TERMINATION; EXPENSES.............................................37
Termination.........................................................37
Expenses............................................................38
SECTION 11 WAIVER............................................................38
SECTION 12 NOTICES, ETC......................................................38
SECTION 13 ENTIRE AGREEMENT; AMENDMENT.......................................39
SECTION 14 GENERAL...........................................................39
SECTION 15 DEFINED TERMS.....................................................40
(iv)
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EXHIBITS
Exhibit l(a) - Schedule of Stockholders
Exhibit 1(b)(iii) - Form of Short Term Note
Exhibit 1(b)(iv) - Form of Term Note
Exhibit 3(b) - Other Stockholder Documents
Exhibit 4(b) - Other Nationwide Documents
Exhibit 5(a) - Other Entrade Documents
Exhibit 6(d)(i) - Form of Schlossmann Employment Agreement
Exhibit 6(d)(ii) - Form of Employment Agreement
Exhibi 7(d) - Form of USMS Indemnification
Exhibit 7(f) - Form of Lease Amendment
Exhibit 7(g) - Form of Opinion of Parker, Milliken, Clark,
O'Hara & Samuelian
Exhibit 7(n) - Form of Non-Compete Agreement
Exhibit 7(o) - Form of Registration Rights Agreement
Exhibit 7(p)(i) - Form of JDK Agreement
Exhibit 7(p)(ii) - Form of Haidl Indemnification re: JDK
Exhibit 8(h) - Form of Opinion of Duane, Morris & Heckscher LLP
Exhibit 9(b) - Form of Stock Option Agreement
(V)
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of October 15, 1999, by and
among ENTRADE INC., a Pennsylvania corporation ("Entrade"), DON HAIDL ("Haidl")
and COREY P. SCHLOSSMANN ("Schlossmann"), individuals (together, the "Individual
Stockholders"), PEGGY HAIDL as trustee of the CAPITAL DIRECT 1999 TRUST (the
"Haidl Trust") and as trustee of the CORE CAPITAL IV TRUST (the "Schlossmann
Trust"), both California trusts (together, the "Trusts") (each of the Individual
Stockholders and the Trusts being sometimes referred to herein as a
"Stockholder" and, together, the "Stockholders"), and PUBLIC LIQUIDATION
SYSTEMS, INC. ("PLS") and ASSET LIQUIDATION GROUP, INC. ("ALG"), both Nevada
corporations doing business as Nationwide Auction Systems (each sometimes
referred to herein as an "Acquired Corporation" and, together, as the "Acquired
Corporations" or "Nationwide").
R E C I T A L S:
WHEREAS, each Stockholder owns that number of shares of the Common
Stock of each of the Acquired Corporations set forth opposite such Stockholder's
name on Exhibit l(a) hereto, and the Stockholders own, in the aggregate, all of
the issued and outstanding shares of capital stock of the Acquired Corporations
(the "Shares"); and
WHEREAS, Entrade desires to acquire all of the Shares from the
Stockholders, in exchange for the consideration and on the terms and subject to
the conditions set forth in this Agreement, and the Stockholders desire to
effect such exchange.
NOW, THEREFORE, in consideration of the mutual covenants and premises
and the representations, warranties and conditions contained herein, the parties
hereto, intending to be legally bound hereby, agree as follows:
SECTION 1. THE EXCHANGE.
(a) Terms of the Exchange. In reliance on the representations,
warranties and covenants contained herein and subject to the terms and
conditions hereof, on the Closing Date (as hereinafter defined), each
Stockholder shall transfer, convey and deliver to Entrade, and Entrade shall
acquire from each Stockholder, that number of Shares of the Acquired
Corporations set forth opposite such Stockholder's name on Exhibit l(a) hereto.
(b) Consideration for the Shares. In consideration for the
acquisition of the Shares, Entrade shall (i) issue to the Stockholders an
aggregate of One Million Five Hundred Seventy Thousand (1,570,000) fully paid
and non-assessable shares of Entrade's Common Stock ("Entrade's Stock"), (ii)
pay to the Stockholders an aggregate of Six Million Dollars ($6,000,000.00) in
cash, (iii) issue to the Stockholders its unsecured, 30-day promissory notes in
the aggregate principal amount of Four Million Eight Hundred Thousand Dollars
($4,800,000.00) (the "Short Term Notes"), which Short Term Notes shall bear
interest, be convertible into shares of Entrade's Stock, and otherwise be
payable upon the terms and conditions set forth in the form of note attached
hereto as Exhibit 1(b)(iii) and (iv) issue to the Stockholders its unsecured
2-year promissory notes in the aggregate principal amount of Fourteen Million
Dollars ($14,000,000.00) (subject to adjustment as hereinafter provided) (the
"Term Notes," and together with the Short Term Notes, the "Notes"), which Term
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Notes shall bear interest and be payable upon the terms and conditions set forth
in the form of note attached hereto as Exhibit 1(b)(iv) (the aforesaid shares of
Entrade's Stock, cash payment and Notes are hereinafter referred to collectively
as the "Acquisition Price").
(c) Adjustment to the Term Notes. Notwithstanding the
foregoing provisions of Section 1(b), if the average closing sale price of
Entrade's Stock during the five trading days immediately prior to the Closing
Date (the "Average Price") is less than Ten Dollars ($10.00) per share, then the
aggregate principal amount of the Term Notes shall be increased by an amount
determined by (i) subtracting the Average Price from $10.00 and (ii) multiplying
the remainder by 1,570,000.
(d) Payment of the Acquisition Price. On the Closing Date, the
shares of Entrade's Stock, the Notes, and the cash portion of the Acquisition
Price shall be issued in the names of and/or delivered to the Stockholders,
allocated among them as set forth on Exhibit l(a) hereto, against receipt by
Entrade from the Stockholders of certificates for the Shares together with duly
endorsed stock powers in accordance with Section 7(c) hereof.
(e) S Period Distributions; Post-Closing Adjustment. The
Stockholders shall be entitled to a distribution of all of the cumulative,
combined net profits of each of the Acquired Corporations accrued during the
period (the "S Period") from January 1, 1999 through September 30, 1999 and
shall be liable to the Acquired Corporations for all amounts distributed to them
in excess of the cumulative, combined net profits of the Acquired Corporations
or all of the cumulative, combined net losses of the Acquired Corporations, as
the case may be, in each case during the S Period, as determined in accordance
with the following procedures:
(i) As promptly as practicable following the Closing
Date, but in no event later than thirty (30) calendar days thereafter,
Nationwide shall prepare and deliver to Entrade an unaudited combined income
statement and an unaudited combined statement of cash flow of the Acquired
Corporations for the period January 1, 1999, through September 30, 1999 (the
"Closing Date Financial Statements") prepared in accordance with generally
accepted accounting principles applied in a manner consistent with their
application to the financial statements referenced in Section 4(f) hereof (the
"Prior Financial Statements") and calculations, based on the Closing Date
Financial Statements and the Prior Financial Statements, of the cumulative,
combined net profit or cumulative, combined net loss of the Acquired
Corporations and all amounts distributed by the Acquired Corporations to the
Stockholders during the S Period (the "S Period Calculations"). Promptly
following its receipt thereof, Entrade shall submit the Nationwide prepared
Closing Date Financial Statements and S Period Calculations to its auditors for
their review. After Entrade's auditors have made such revisions therein as they
and Entrade deem appropriate, but in no event later than fifteen (15) days
following the end of the aforesaid 30-day period, Entrade shall deliver the
final Closing Date Financial Statements and S Period Calculations to the
Stockholders. During the course of the preparation of the Closing Date Financial
Statements and the S Period Calculations and for thirty (30) calendar days after
the delivery thereof, Entrade shall afford each of the Stockholders, their
accountants and other representatives access to the books and records of the
Acquired Corporations during normal business hours and upon reasonable prior
notice and otherwise reasonably cooperate
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with the Stockholders, their accountants and other representatives in connection
with their evaluation of the Closing Date Financial Statements and the S Period
Calculations.
(ii) Not later than thirty (30) calendar days
following the delivery of the Closing Date Financial Statements and the S Period
Calculations by Entrade to the Stockholders, if the Stockholders do not dispute
the Closing Date Financial Statements or S Period Calculations, (A) if the S
Period Calculations reflect a cumulative combined net profit of the Acquired
Corporations during the S Period greater than the amount of the distributions to
the Stockholders during the S Period, Entrade shall cause the Acquired
Corporations to pay to the Stockholders the amount of such excess; and,
likewise, (B) if the S Period Calculations reflect an amount of distributions to
the Stockholders during the S Period greater than the cumulative, combined net
profit of the Acquired Corporations during the S Period or if the S Period
Calculations reflect a cumulative combined net loss for the Acquired
Corporations during the S Period, the Stockholders shall pay to the Acquired
Corporations the amount of such excess or the amount of such loss, as the case
may be. For the purposes of this Section 1(e) and the foregoing calculations (A)
all amounts paid or payable by the Acquired Corporations with respect to
expenses incurred by the Stockholders or the Acquired Corporations in connection
with the negotiation, execution and delivery of this Agreement, the other
Nationwide Documents, the Other Stockholder Documents and the Other Entrade
Documents and the consummation of the transactions contemplated hereby and
thereby, including without limitation the fees of Parker, Milliken, Clark,
O'Hara & Samuelian related thereto, shall be deemed expenses of the Acquired
Corporations during the S Period, regardless of whether such expenses were paid
or payable prior to or after the Closing Date, it being the intent of the
parties that all such expenses shall be borne by the Stockholders, and (B)
distributions made to the Stockholders during the S Period that were
attributable to undistributed net profits for fiscal year 1998 shall not be
deemed S Period distributions. The Stockholders jointly and severally represent
and warrant to Entrade that they have, through distributions made prior to the
date of this Agreement, collectively received all distributable net profit of
the Acquired Corporations for all periods prior to January 1, 1999.
(iii) If the Stockholders dispute the S Period
Calculations, they shall so notify Entrade not later than thirty (30) calendar
days following the delivery of the Closing Date Financial Statements and the S
Period Calculations. If Entrade and the Stockholders are unable to reach
agreement with respect to the S Period Calculations within ten (10) calendar
days following the delivery of such notice, either Entrade or the Stockholders
may refer such disagreement to the Independent Public Accountant (as such term
is hereinafter defined) whose determination shall be final, conclusive and
binding upon all parties. Entrade shall provide to the Stockholders access to
all information and personnel relevant to the calculation in dispute. The
disagreement between Entrade and the Stockholders shall be referred to the
Independent Public Accountant only upon a written request therefor (by Entrade
or the Stockholders) given to the Independent Public Accountant and to the other
party. Such written request shall set forth in reasonable detail the nature of
the disagreement between the parties thereto. In the event of any such
reference, the parties hereto shall not be bound by or restricted to the claims
theretofore made or positions theretofore asserted; and Entrade and the
Stockholders shall each be free to assert such claims, take such positions and
submit to the Independent Public Accountant such additional documentary or other
evidence as such parties or party may desire (subject only to such rules of
procedure and determinations of materiality and relevance as the Independent
Public Accountant may make). The fees and expenses charged by the
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Independent Public Accountant for such services shall be paid half by Entrade
and half by the Stockholders. Within ten (10) calendar days following the
receipt of notice of the final S Period Calculations made by the Independent
Public Accountant in accordance with this Section, Entrade shall pay to the
Stockholders, or the Stockholders shall pay to Entrade, as the case may be, the
amount calculated in accordance therewith.
(iv) The Independent Public Accountant shall be an
independent certified public accounting firm nominated by the party making the
referral of the disagreement at the time of such referral; provided that, if the
other party reasonably rejects such nomination and nominates a second
independent certified public accounting firm within two business days after such
nomination, the Independent Public Accountant shall be the independent certified
public accounting firm nominated by the other party, provided that, if the
referring party reasonably rejects such second independent certified public
accounting firm within two business days following such nomination, the
Independent Public Accountant shall be such independent certified public
accounting firm as shall be selected jointly by the first and second independent
certified public accounting firms nominated as provided above.
SECTION 2. THE CLOSING.
The closing of the acquisition and conveyance of the Shares
(the "Closing") shall take place on or before October 15, 1999, at such time and
place as the parties may agree.
SECTION 3. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
STOCKHOLDERS.
Each Stockholder hereby severally represents and warrants to
Entrade with respect to himself or itself, Haidl hereby represents and warrants
to Entrade with respect to the Haidl Trust, and Schlossmann hereby represents
and warrants to Entrade with respect to the Schlossmann Trust, as follows:
(a) Share Ownership. The number of Shares set forth opposite
such Stockholder's name on Exhibit l(a) hereto constitutes all shares of the
Acquired Corporations' Common Stock owned by such Stockholder, and such
Stockholder is the beneficial and record owner of such Shares, free and clear of
any claim, lien, pledge, option, charge, encumbrance, security interest, or
other right of any third party (collectively an "Encumbrance") of any nature
whatsoever.
(b) Authority. Such Stockholder has full power and authority
to enter into this Agreement, to execute and deliver all the other agreements,
documents and/or instruments set forth on Exhibit 3(b) and contemplated to be
executed by such Stockholder in connection with this Agreement (the "Other
Stockholder Documents") and to sell such Stockholder's Shares in accordance with
the terms hereof in a manner necessary to convey to Entrade good and marketable
title to such Shares, free and clear of any Encumbrance of any nature whatsoever
and without requiring the consent of any third party, including, without
limitation, any governmental agency or authority. This Agreement and all Other
Stockholder Documents have been duly executed and delivered by such Stockholder
and constitute the legal, valid and binding obligations of such Stockholder,
enforceable
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against such Stockholder in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting or relating to the enforcement of creditors rights generally and the
availability of equitable remedies, including specific performance. With respect
to the Trusts, the transactions contemplated herein and in the Other Stockholder
Documents have been duly approved by all necessary action of their respective
trustees, in accordance with the provisions of their respective trust
instruments and applicable law.
(c) No Violation, Etc. Neither such Stockholder's execution
and delivery of this Agreement or any of the Other Stockholder Documents, the
consummation of the transactions contemplated herein or therein, nor compliance
by such Stockholder with any of the provisions hereof or thereof will: (i)
result in the creation of any Encumbrance upon such Stockholder's Shares under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, agreement, or any other instrument or
obligation to which such Stockholder is a party or by which such Stockholder or
such Stockholder's Shares may be bound or affected, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to such
Stockholder or such Stockholder's Shares or (iii), with respect to the Trusts,
violate or conflict with any provision of their respective trust instruments.
(d) No Other Agreements to Sell Shares. Such Stockholder has
no understanding with or obligation, absolute or contingent, to any other person
or firm to sell or otherwise dispose of such Stockholder's Shares, to effect any
merger, consolidation or other reorganization of either of the Acquired
Corporations or to enter into any agreement with respect thereto, except as set
forth in Section 4(v) of the Nationwide Disclosure Letter (as hereinafter
defined).
(e) Investment Representations. Such Stockholder is acquiring
his shares of Entrade's Stock for his own account, for investment and not with a
view to the sale, transfer, disposition or distribution thereof, except as set
forth in Section 4(v) of the Nationwide Disclosure Letter. Such Stockholder
understands that such shares of Entrade's Stock have not been registered under
the securities laws of the United States of America or any state or other
political subdivision thereof, and that such shares must be held indefinitely
unless a subsequent disposition thereof is registered under the United States
and other applicable securities laws or is exempt from registration.
(f) Litigation. There is no litigation, proceeding or arbitral
action pending or, so far as is known to such Stockholder, threatened against
such Stockholder relating to such Stockholder's ownership or proposed sale of
the Shares.
SECTION 4. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
ACQUIRED CORPORATIONS.
Except as set forth in the disclosure letter delivered to
Entrade at or prior to the execution hereof (the "Nationwide Disclosure
Letter"), the Acquired Corporations, Don Haidl and the Haidl Trust jointly and
severally represent and warrant to Entrade as follows:
(a) No Other Agreements to Sell Assets or Business. Neither of
the Acquired Corporations has any understanding with or obligation, absolute or
contingent, to any other person
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or firm to sell any of its assets (other than sales of products in the ordinary
course of business), to issue any capital stock or any security convertible into
or exchangeable for capital stock, or to effect any merger, consolidation or
other reorganization or to enter into any agreement with respect thereto.
(b) Authority. This Agreement and all other agreements,
documents and instruments set forth on Exhibit 4(b) and contemplated to be
executed by the Acquired Corporations in connection with this Agreement (the
"Other Nationwide Documents") and the transactions contemplated herein and
therein have been duly approved by all necessary corporate action on the part of
each of the Acquired Corporations. This Agreement and the Other Nationwide
Documents have been duly executed and delivered by the Acquired Corporations and
constitute the legal, valid and binding agreements of the Acquired Corporations,
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws affecting or
relating to the enforcement of creditors' rights generally and the availability
of equitable remedies, including specific performance.
(c) Consents, No Conflicts, Etc. Neither the execution and
delivery of this Agreement or the Other Nationwide Documents, the consummation
of the transactions contemplated herein or therein, nor compliance by the
Acquired Corporations with any of the provisions hereof or thereof will: (i)
violate or conflict with the articles of incorporation, by-laws or other
organizational documents of either of the Acquired Corporations, (ii) violate,
conflict with, result in a breach of, constitute a default (or an event which
with the giving of notice or lapse of time or both would constitute a default)
under, or result in the acceleration of payment or performance under, or
termination of, any note, bond, mortgage, indenture, deed of trust, license,
agreement, or any other instrument or obligation to which either of the Acquired
Corporations is a party, or by which either of the Acquired Corporations or any
of their respective assets or properties may be bound or affected, (iii) result
in the creation of any Encumbrance upon any of the Shares or any of the assets
or properties of the Acquired Corporations, (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Acquired
Corporations or any of their respective assets or properties or (v) require the
consent, approval, permission or other authorization of or qualification or
filing by or with any court, arbitrator or governmental, administrative or
self-regulatory authority, except for any Approvals set forth in the Nationwide
Disclosure Letter.
(d) Organization, Good Standing and Capitalization of the
Acquired Corporations. Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Each of the Acquired Corporations has all requisite corporate power to
carry on its respective business as it is now being conducted and is duly
qualified to do business as a foreign corporation in each jurisdiction where the
failure to be qualified would have a material adverse effect on it. PLS's
authorized capital consists exclusively of 2500 shares of Common Stock, of which
100 shares are issued and outstanding. ALG's authorized capital consists
exclusively of 2500 shares of Common Stock, of which 2500 shares are issued and
outstanding. All of the issued and outstanding shares of Common Stock of the
Acquired Corporations are owned by the Stockholders in the respective amounts
shown on Exhibit l(a) hereto. All of the outstanding shares of capital stock of
the Acquired Corporations have been duly authorized and are validly issued,
fully paid and nonassessable. There are no existing options, warrants, calls or
commitments of any character whatsoever, or agreements to grant the same,
relating to either of the Acquired Corporations'
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capital stock, and neither of the Acquired Corporations has any outstanding
securities convertible into or exchangeable or exercisable for any shares of its
capital stock or any options, warrants, calls or commitments of any character
whatsoever with respect to the issuance of such convertible securities. Neither
of the Acquired Corporations holds any capital stock, options, warrants, calls
or other equity interests or any convertible securities in any other enterprise.
(e) Organizational Documents and By-laws. Each of the Acquired
Corporations has delivered to Entrade true, correct and complete copies of: (i)
the Acquired Corporation's certificate of incorporation and other organizational
documents and (ii) the Acquired Corporation's by-laws, both certified as of a
recent date by the Acquired Corporation's Secretary.
(f) Financial Statements. The Acquired Corporations have
delivered to Entrade true and complete copies of (i) the unaudited consolidated
balance sheets of the Acquired Corporations as of September 30, 1992 to
September 30, 1994 and related consolidated income statements for the fiscal
years then ended, (ii) the audited combined balance sheets of the Acquired
Corporations as of September 30, 1995 and as of December 31, 1995, 1996, 1997
and 1998 and related combined statements of earnings and retained earnings and
cash flows for the years then ended, accompanied by the unqualified audit report
of the Acquired Corporations' independent certified public accountants, which
for the years 1996 through 1998 was KPMG Peat Marwick LLP, and (iii) the
unaudited combined balance sheet of the Acquired Corporations as of June 30,
1999 and the related combined statements of earnings and retained earnings and
cash flows for the 6 month period then ended. The foregoing financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") throughout the periods indicated, and fairly
present the combined financial condition, results of operations, assets,
liabilities, changes in stockholders' equity and cash flow of the Acquired
Corporations as of the dates and for the periods indicated (subject, in the case
of unaudited statements, to normal year-end audit adjustments that would not be
material in amount or effect). The audited combined balance sheet of the
Acquired Corporations as of December 31, 1998 is referred to herein as the
"Nationwide Balance Sheet."
(g) Absence of Undisclosed Liabilities and Obligations.
Neither of the Acquired Corporations has any liabilities or obligations of any
nature (whether known or unknown and whether accrued, absolute, contingent or
otherwise) except for liabilities or obligations reflected or reserved against
in the Nationwide Balance Sheet as of December 31, 1998 (the "Nationwide Balance
Sheet Date") and current liabilities incurred in the ordinary course of business
since the Nationwide Balance Sheet Date.
(h) Absence of Certain Changes or Events. Since the Nationwide
Balance Sheet Date there has not been any:
(i) change in the condition (business, financial or
otherwise), assets, liabilities, earnings or business of the Acquired
Corporations, except for changes which have occurred in the ordinary course of
business and which have not, individually or in the aggregate, been materially
adverse to the Acquired Corporations taken as a whole;
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(ii) (A) change in the number of shares of capital
stock of the Acquired Corporations issued and outstanding, (B) declaration,
setting aside, or payment of any dividend or other distribution (whether in
cash, securities, property or otherwise) in respect of the Acquired
Corporations' capital stock, or (C) payment to any Stockholder or any Affiliate
(as defined in Section 15 hereof) of any Stockholder (whether in cash,
securities, property or otherwise) in respect of any service fee, management fee
or similar overhead charge;
(iii) (A) increase in the compensation payable or to
become payable by either of the Acquired Corporations to any of its officers,
directors, employees, independent contractors or agents (collectively
"Nationwide's Personnel"), other than increases in employee compensation given
in the ordinary course of business, or increases in compensation to management
that do no exceed, annualized with respect to any one individual, $20,000, (B)
any bonus, incentive compensation, service award or other like benefit, granted,
made or accrued, contingently or otherwise, to or for the credit of any
Nationwide's Personnel, or (C) any employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by the
Acquired Corporations except pursuant to the existing plans and arrangements
described in the Nationwide Disclosure Letter;
(iv) significant labor trouble, controversies or
unsettled grievances between either of the Acquired Corporations and any
Nationwide's Personnel or any collective bargaining organization representing or
seeking to represent Nationwide's Personnel;
(v) addition to or modification of the employee
benefit plans, arrangements or practices described in the Nationwide Disclosure
Letter, other than (A) accruals or contributions made in accordance with the
normal practices of the Acquired Corporations or (B) the extension of coverage
to other Nationwide's Personnel who became eligible after the Nationwide Balance
Sheet Date;
(vi) mortgage, pledge or subjection to any
Encumbrance of any of the Acquired Corporations' assets except (A) the lien of
current real and personal property taxes incurred but not yet due and payable or
(B) liens or obligations arising in the ordinary course of business securing
obligations not yet due and payable;
(vii) sale, assignment or transfer of any assets of
the Acquired Corporations
material, individually or in the aggregate, to their businesses as presently
conducted (hereinafter, "Nationwide Business"), other than sales of inventory in
the ordinary course of business;
(viii) waiver of any rights which, in the aggregate,
were of substantial value
to the Nationwide Business, whether or not in the ordinary course of business;
(ix) any cancellation or termination, or any threat
thereof, of any contract or other agreement material to the Nationwide Business,
it being understood and agreed that a Nationwide consignment agreement will be
considered "material" for purposes of this sub-section only if it involves
annual gross auction proceeds in excess of $100,000;
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(x) liability incurred by the Acquired Corporations
except immaterial liabilities incurred in the ordinary course of business
consistent in both kind and amount with past practices of the Acquired
Corporations;
(xi) any capital expenditure or the execution of any
capital leases with respect to any aspect of the business of the Acquired
Corporations, or any incurring of liability therefor, involving payments in
excess of $75,000 individually or in the aggregate;
(xii) borrowing of any money by the Acquired
Corporations or guaranteeing of any indebtedness of others;
(xiii) lending of any money or otherwise pledging the
credit of the Acquired Corporations;
(xiv) failure to pay any material current obligations
of the Acquired Corporations when due and payable in accordance with the
respective terms of such obligations;
(xv) agreement or undertaking by the Acquired
Corporations to do any of the foregoing; or
(xvi) other event or condition of any character which
individually or in the aggregate has materially adversely affected, or any event
or condition known to the Stockholders which it is reasonable to expect will,
individually or in the aggregate, materially adversely affect in the future, the
condition (business, financial or otherwise), assets, liabilities, earnings,
liquidity, prospects or business of the Acquired Corporations.
(i) Tax Matters. The Acquired Corporations have duly filed all
tax reports and returns required to be filed by them, including all United
States, state, local and foreign tax returns and reports. All tax returns and
reports of the Acquired Corporations filed prior to the date hereof are accurate
and complete in all material respects and were prepared in conformity with all
applicable laws and regulations. The Acquired Corporations have: (i) paid in
full all Taxes (as hereinafter defined) shown to be due on such returns and
reports or any assessment, deficiency notice, 30-day letter or similar notice
received by them and (ii) made adequate provision (by the establishment of
reserves or otherwise) for all Taxes relating to or arising in connection with
any period ending on or before the date hereof. Each of the Acquired
Corporations has delivered to Entrade true and complete copies of all tax
returns and reports of the Acquired Corporations for the taxable years ended
September 30, 1995 through December 31, 1998, together with true and complete
copies of all reports, if any, of taxing authorities relating to the examination
of such returns and reports. All Taxes which the Acquired Corporations have been
required to collect or withhold have been duly collected or withheld and, to the
extent required, have been duly paid to the proper taxing authority. Neither of
the Acquired Corporations is a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against the Acquired
Corporations that has not been paid. There are no material Tax liens upon any
property or assets of the Acquired Corporations. The results of any examinations
for all taxable periods to and including December 31, 1998 are properly
reflected in the Acquired
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Corporations' combined financial statements, and all deficiencies proposed or
assessed as a result of such examinations have been paid and settled. There are
no outstanding agreements or waivers extending any statutory period of
limitations applicable to any federal income tax return or other material tax
return of the Acquired Corporations for any period. For the purposes of this
Agreement, any United States, state, local, foreign, income, sales, use,
transfer, payroll, personal property, occupancy or other tax, levy, impost, fee,
imposition or similar charge, together with any related addition to tax,
interest or penalty thereon, is referred to as a "Tax."
(j) Accounts Receivable. Except as set forth in the Nationwide
Disclosure Letter, the accounts receivable reflected on the Nationwide Balance
Sheet, and those thereafter acquired by the Acquired Corporations, represent
bona fide receivables arising in the ordinary course of the Acquired
Corporations' businesses, are recorded in accordance with GAAP on the Acquired
Corporations' books and records and have been collected or are collectible at
the aggregate gross recorded amounts thereof less, in the case of accounts
receivable reflected on the Nationwide Balance Sheet, the allowance for doubtful
accounts set forth therein, and in the case of accounts receivable thereafter
acquired by them, an allowance for doubtful accounts established in accordance
with prior consistent practices of the Acquired Corporations. The Nationwide
Disclosure Letter also contains an aging schedule showing all accounts
receivable of the Acquired Corporations that are more than 30 days past due.
(k) Inventories. Except as set forth in the Nationwide
Disclosure Letter, the inventories reflected on the Nationwide Balance Sheet,
and those thereafter acquired by the Acquired Corporations, consist of items of
a quality and quantity usable or saleable in the ordinary course of the Acquired
Corporations' businesses within a period of nine months at aggregate values at
least equal to the aggregate values at which such items are carried on their
books. The values at which such inventories are carried on the books of the
Acquired Corporations reflect the normal inventory valuation policy of the
Acquired Corporations, and are otherwise in accordance with GAAP and the
contractual arrangements to which such inventories relate. The value of obsolete
or slow-moving inventory, inventory on consignment or used for demonstration
purposes and inventory of below standard quality has been written down to
realizable market value in accordance with GAAP. Neither of the Acquired
Corporations is under any material liability or obligation with respect to the
return of inventory or merchandise in the possession of its customers or any
third party. The inventories of the Acquired Corporations are consistent in kind
and amount with their operations in the ordinary course of business.
(l) Lists of Properties, Contracts and Personnel Data. The
Nationwide Disclosure Letter contains accurate lists and summary descriptions of
the following (indicating, where applicable, each item separately with respect
to each of the Acquired Corporations):
(i) Qualification. All jurisdictions in which the
Acquired Corporations are duly qualified to do business as foreign corporations;
(ii) Real Property. All real property owned of record
or beneficially by the Acquired Corporations and a brief description of all
structures and buildings located thereon; all leases of real property to which
either of the Acquired Corporations is a party (indicating in each such
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case, the term of the lease and the approximate number of square feet leased);
all premises occupied by the Acquired Corporations under rental arrangements
without leases (including in each case the amount of rent and the type of
occupancy); and all contracts to which either of the Acquired Corporations is a
party for the sale or purchase of real property;
(iii) Intellectual Properties. (A) All patents of any
description and pending applications therefor, all registrations of trademarks
and of other marks, all registrations of trade names, labels or other trade
rights, all registered user entries, all pending applications for any such
registrations or entries, all copyright registrations and pending applications
therefor, all other copyrights, trademarks and other marks, trade names and
other trade rights and licenses therefor (collectively "Intellectual
Properties"), all to the extent that the foregoing items are owned in whole or
in part or used by the Acquired Corporations; and (B) all computer software
(including without limitation, all computer programs, data bases and
documentation) owned in whole or in part or used by the Acquired Corporations;
(iv) Personal Property. All items of machinery,
equipment, computer hardware, motor vehicles, office furniture, fixtures and
similar personal property owned or leased by the Acquired Corporations having,
in the case of any owned property, a book value in excess of $10,000, and, in
the case of any leased property, annual lease payments in excess of $10,000,
indicating the current depreciated book value of owned items and the terms and
annual lease payments of leased items;
(v) Insurance. All policies of insurance in force
with respect to the Acquired Corporations, including, without restricting the
generality of the foregoing, those covering properties, buildings, machinery,
equipment, furniture, fixtures, operations and lives of, or performance of their
duties by, Nationwide's Personnel, including the policy numbers, names and
addresses of insurers, expiration dates, descriptions and amounts of coverage
and annual premiums (other than those otherwise set forth in the Nationwide
Disclosure Letter);
(vi) Other Material Contracts. All other contracts
and commitments of the Acquired Corporations (A) which are not terminable by the
Acquired Corporations on fewer than 30 days' notice without penalty; (B)
involving payment or receipt by the Acquired Corporations of more than $75,000;
or (C) materially affecting the business of the Acquired Corporations or
involving delivery by the Acquired Corporations of products at less than
standard prices (excluding normal trade allowances), except with respect to (A),
(B) and (C) that only those consignment agreements representing the top fifty
(50) (in terms of revenue generation) consignor customers of Nationwide have
been listed;
(vii) Labor Agreements. All labor contracts,
employment agreements and collective bargaining agreements relating to
Nationwide's Personnel;
(viii) Employee Benefits. All employee
profit-sharing, incentive, deferred compensation, welfare, pension, retirement,
group insurance and other employee benefit plans, and agreements maintained for
the benefit of Nationwide's Personnel (including all trust agreements),
identifying which plans (if any) provide any present or former Nationwide's
Personnel with benefits
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that are due or payable after termination of employment and the number of
participants in each such plan;
(ix) Compensation. The names of all Nationwide's
Personnel whose current aggregate annual rates of compensation including bonuses
are $25,000 or more, together with a summary (containing estimates to the extent
necessary) of existing bonuses, additional compensation (whether current or
deferred) and other like benefits, if any, to be paid to such persons for the
fiscal year ending December 31, 1999;
(x) Powers of Attorney. The names of all persons
holding powers of attorney from the Acquired Corporations;
(xi) Equity Investments. All marketable securities
and other equity investments, and all other notes or other obligations evidenced
by written instruments, owned by the Acquired Corporations;
(xii) Indebtedness. All notes, debentures, bonds,
letters of credit and other instruments evidencing indebtedness (including
capital leases, guarantees and lines of credit) of the Acquired Corporations;
(xiii) Bank Accounts. The name of each institution in
which the Acquired Corporations has a bank account or safe deposit box, the
number of any such account or box, and the names of all persons authorized to
draw thereon or to have access thereto;
(xiv) Licenses and Permits. All material governmental
or regulatory licenses, permits, franchises, approvals and certificates
(collectively "Permits"), if any, required to conduct the business of the
Acquired Corporations, as presently conducted, indicating in each such case
whether it is terminable by reason of the sale of the Shares hereunder; and
(xv) Purchase Orders; Backlog; Capital Commitments.
All outstanding purchase orders and supply contracts of the Acquired
Corporations in excess of $10,000 or which extend for a period of six months or
longer; the sales backlog of the Acquired Corporations as of the date hereof;
and all outstanding commitments of the Acquired Corporations in respect of any
capital item or capital improvement in excess of $10,000.
(m) Copies of Documents. The Acquired Corporations have
previously delivered or otherwise made available to Entrade or its
representatives true and complete copies of:
(i) all leases, agreements, contracts, undertakings,
commitments, arrangements and plans referenced in Sections 4(l)(ii), (iv), (vi),
(vii), (viii) and (xiv);
(ii) all deeds or other evidence of title to owned
real property referenced in Section 4(l)(ii) and copies of any title insurance
policies with respect thereto;
(iii) all Intellectual Properties referenced in
Section 4(l)(iii);
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(iv) all policies of insurance referenced in Section
4(l)(v);
(v) all instruments evidencing a power of attorney
referenced in Section 4(l)(x);
(vi) all securities, notes, debentures, bonds,
letters of credit and other instruments of indebtedness referenced in Sections
4(l)(xi) and (xii); and
(vii) all Permits referenced in Section 4(l)(xiv).
(n) Tangible Properties. Except as set forth in the Nationwide
Disclosure Letter, (i) each of the Acquired Corporations has good and marketable
title to all of its respective properties and assets, real, personal, tangible
and intangible (including those reflected in the Nationwide Balance Sheet,
except as since sold or otherwise disposed of in the ordinary course of
business, which sale or disposition, in any individual case or in the aggregate,
has not had a materially adverse effect upon the Acquired Corporations), free
and clear of all Encumbrances of any nature whatsoever, except for (A) the lien
of taxes not yet due and payable, and (B) such imperfections of title and
Encumbrances, if any, as do not materially detract from the value, or interfere
with the present use of the properties or the Nationwide Business, or otherwise
materially impair the business operations of the Acquired Corporations; (ii)
each of the Acquired Corporations has valid and enforceable leases with respect
to any premises leased by it as referenced in Section 4(l)(ii) hereto, has in
all material respects performed all the obligations required to be performed by
it to the date hereof under said leases and possesses and quietly enjoys said
premises under said leases, and such premises are not subject to any
Encumbrances, easements, rights of way, building or use restrictions,
exceptions, reservations or limitations that in any material respect interfere
with or impair the present and continued use thereof in the usual and normal
conduct of the Nationwide Business; (iii) neither of the Acquired Corporations
has received notice of violation of any applicable zoning regulation, ordinance
or other law, order, regulation or requirement relating to the operations of, or
owned or leased properties of the Acquired Corporations and the Stockholders
know of no such violation; and (iv) neither of the Acquired Corporations has
received notice of any pending or threatened condemnation proceedings relating
to any of the owned or leased properties of the Acquired Corporations and, so
far as known to the Stockholders, there are no such pending or threatened
proceedings. The plants, structures, tangible properties and equipment owned,
operated or leased by the Acquired Corporations which are material to the
businesses of the Acquired Corporations are in sufficient operating condition
and repair for operation in the ordinary course of their business, ordinary wear
and tear excepted and are in conformity in all material respects with all
applicable laws, ordinances, orders, regulations and other requirements
(including applicable zoning, environmental, occupational safety and health laws
and regulations) presently in effect or presently scheduled to take effect.
(o) Environmental Matters.
(i) The Acquired Corporations have obtained all
permits, licenses and other authorizations which are required under
Environmental Laws. As used in this Agreement, "Environmental Laws" consist of
any and all federal, state and local laws and regulations relating to health and
safety and pollution or protection of the environment, including laws and
requirements
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relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous substances
or wastes into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes. The Acquired Corporations are in material
compliance with all terms and conditions of the required permits, licenses and
authorizations, and are also in material compliance with all other provisions of
any applicable Environmental Laws. There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigations, or proceeding pending or, to the best knowledge of
the Acquired Corporations and the Stockholders, threatened against the Acquired
Corporations relating to any Environmental Law.
(ii) To the actual knowledge of the Stockholders,
there are no Hazardous Materials present on or in the soil, land, waters
(including streams, ponds, ground waters and drinking waters) and ambient air
(including indoor air) at the facilities and properties of the Acquired
Corporations, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfill, land deposits, dumps, or other containers,
or deposited or located in land, water, sumps, or any other part of the
facilities and properties of the Acquired Corporations, or incorporated into any
structure therein or thereon. As used in this Agreement, "Hazardous Materials"
means any waste or other substance that is listed, defined, designated or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic
or a pollutant or contaminant under or pursuant to any Environmental Law,
including without limitation petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos - containing materials.
(iii) There has been no release, spill, leak,
emitting, discharging, depositing, escaping, leaching or dumping (collectively,
"Release"), or, to the knowledge of the Acquired Corporations or the
Stockholders, threat of Release of any Hazardous Materials at or from the
facilities and properties of the Acquired Corporations, whether intentional or
unintentional.
(p) Intellectual Properties. The Intellectual Properties
referenced in Section 4(l)(iii) and listed in the Nationwide Disclosure Letter,
are all those used in the businesses of the Acquired Corporations. Other than as
disclosed in the Nationwide Disclosure Letter no person has a right to receive a
royalty with respect to any of the Intellectual Properties referenced in Section
4(l)(iii), and neither of the Acquired Corporations has any licenses granted by
or to it or other agreements to which it is a party, relating in whole or in
part to any Intellectual Properties, whether owned by the Acquired Corporations
or otherwise. No other Intellectual Properties are required to permit the
conduct of the Acquired Corporations' businesses as now conducted or presently
proposed to be conducted without conflict with the rights of others. All of the
patents, trademarks, trademark registrations, trade names and copyrights listed
in the Nationwide Disclosure Letter are valid and in full force and effect. To
the best of the knowledge of the Stockholders, neither of the Acquired
Corporations is infringing upon, or otherwise violating, the rights of any third
party with respect to any Intellectual Properties. No proceedings have been
instituted against or claims received by the Acquired Corporations, nor are any
proceedings threatened alleging any such violation, nor do the Stockholders know
of any valid basis for any such proceeding or claim. To the Stockholders'
knowledge, there is no infringement or other adverse claim against any of the
Intellectual Properties owned or used by the Acquired Corporations. The computer
software set forth in the Nationwide
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Disclosure Letter are all those used in the businesses of the Acquired
Corporations, and the use of such software does not violate or otherwise
infringe upon the rights of any third party.
(q) Insurance. All policies of insurance (or renewals thereof)
set forth in the Nationwide Disclosure Letter are outstanding and duly in force
on the date hereof. Such policies are in the amounts shown in the Nationwide
Disclosure Letter, and insure the plants, structures and equipment of the
Acquired Corporations for their replacement values against loss, theft and
destruction and insure the properties and businesses of the Acquired
Corporations against such losses and risks as are required by law or any
agreements to which the Acquired Corporations are a party. Except for the
applicable deductible amounts under insurance policies described in the
Nationwide Disclosure Letter, neither of the Acquired Corporations is liable
under any such insurance agreement or other such insurance arrangement as a
self-insurer of its business or assets. Neither of the Acquired Corporations has
received notice from any insurer or agent of such insurer of cancellation or
termination of any insurance policy or that substantial capital improvements or
other expenditures will have to be made in order to continue such insurance and,
so far as known to the Stockholders, no such cancellation or termination is
threatened and no such improvements or expenditures are required. No claims have
been made under any of the insurance policies of the Acquired Corporations since
January 1, 1996 except as set forth in the Nationwide Disclosure Letter.
(r) Labor Matters. Neither of the Acquired Corporations has
any labor contracts, collective bargaining agreements or written or oral
employment agreements (other than oral agreements for employment "at will") with
any of Nationwide's Personnel or any representative of Nationwide's Personnel.
Except as disclosed in the Nationwide Disclosure Letter, the Acquired
Corporations are in compliance in all material respects with all applicable laws
respecting employment practices, terms and conditions of employment and wages
and hours, and are not engaged in any unfair labor practice and neither of the
Acquired Corporations has experienced any work stoppage or other material labor
difficulty involving its employees.
(s) ERISA. There are no present or former Nationwide's
Personnel who are entitled to any pension benefit to be paid after termination
of employment other than pursuant to pension or welfare arrangements disclosed
in the Nationwide Disclosure Letter. No other benefits whatsoever are payable to
any present or former Nationwide's Personnel after termination of employment.
The Nationwide Disclosure Letter includes a list of each "employee benefit plan"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") that is maintained by the Acquired Corporations
("Employee Plan").
(t) Litigation. There is neither (i) any litigation,
proceeding or arbitral action pending or threatened against (A) the Acquired
Corporations or any of their respective properties, (B) Nationwide's Personnel
in reference to actions taken by them in such capacities, or (C) the
Stockholders with respect to the Shares, nor (ii) any pending or threatened
governmental investigation against any of the foregoing which, if adversely
determined could, in any one case or in the aggregate, have a material adverse
effect on the Nationwide Business. There are no decrees, injunctions or orders
of any court or governmental department or agency outstanding against the
Acquired Corporations or against the Stockholders with respect to the Shares.
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(u) Compliance with Laws; Permits. The Acquired Corporations
have complied in all material respects with all applicable statutes,
regulations, orders, ordinances and other laws of the United States, all state,
local and foreign governments and other governmental bodies and authorities, and
agencies of any of the foregoing to which they are subject. Neither of the
Acquired Corporations has received any notice to the effect that, or otherwise
been advised that, it is not in compliance with any of such statutes,
regulations and orders, ordinances, other laws or undertakings, and the
Stockholders have no reason to anticipate that any past or presently existing
practices, activities or circumstances are likely to result in violations of any
such regulations which could, in any one case or in the aggregate, cause a
material loss to the Nationwide Business or otherwise have a material adverse
effect on the Nationwide Business. Except for matters generally known to the
public at large, to the best of the Stockholders' knowledge, there is not
presently pending any proceeding, hearing or investigation with respect to the
adoption of amendments or modifications to existing laws or ordinances,
regulations or restrictions which, if adopted, would materially adversely affect
the Nationwide Business. The Acquired Corporations have duly filed all reports
and returns required to be filed by them with governmental authorities and
obtained all Permits which are required in connection with their businesses and
operations. The Acquired Corporations are in compliance with all terms and
conditions of all required Permits. All Permits are in full force and effect,
and no proceedings for the suspension or cancellation of any Permit is pending
or threatened.
(v) No Brokers. Except for the agreement providing for
compensation to JDK & Associates, Inc. as described in the Nationwide Disclosure
Letter, which shall be Haidl's sole responsibility, neither the Acquired
Corporations nor any Stockholder has entered into any agreement, arrangement or
understanding with any person or firm which will result in the obligation of the
Acquired Corporations, Entrade or any Stockholder to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
(w) Illegal Payments. Neither of the Acquired Corporations
nor, to the best of the Stockholders' knowledge, any employee of the Acquired
Corporations has made any payment of funds of the Acquired Corporations
prohibited by applicable law, and no funds of the Acquired Corporations have
been set aside to be used for any payment prohibited by applicable law.
(x) Transactions with Certain Persons. Neither the
Stockholders, any officer or director of the Acquired Corporations, any employee
of the Acquired Corporations or member of any such person's immediate family is
presently a party to any material transaction with the Acquired Corporations
relating to the businesses of the Acquired Corporations, including, without
limitation, any contract, agreement or other arrangement (A) providing for the
furnishing of services by, (B) providing for the rental of real or personal
property from, or (C) otherwise requiring payments to (other than for services
as officers, directors or employees of the Acquired Corporations) any such
person or corporation, partnership, trust or other entity in which any such
person has a substantial interest as a shareholder, officer, director, trustee
or partner.
(y) Minute Books and Stock Transfer Books. The minute books
and stock transfer books of the Acquired Corporations are correct, complete and
current in all material respects.
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(z) Disclosure. No representation or warranty made by the
Acquired Corporations or the Stockholders in this Agreement or in any Other
Nationwide Document or Other Stockholder Document, or in the Nationwide
Disclosure Letter, or in any of the exhibits or schedules to any of the
foregoing, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
false or misleading.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF ENTRADE .
Except as set forth in the disclosure letter delivered to the
Stockholders at or prior to the execution hereof (the "Entrade Disclosure
Letter") or as reflected in the Entrade Reports (as hereinafter defined),
Entrade hereby represents and warrants to the Stockholders as follows:
(a) Authority. This Agreement and all other agreements,
documents and instruments set forth on Exhibit 5(a) and contemplated to be
executed by Entrade in connection with this Agreement (the "Other Entrade
Documents") and the transactions contemplated herein and therein have been duly
approved by all necessary corporate action on the part of Entrade. This
Agreement and the Other Entrade Documents have been duly executed and delivered
by Entrade and constitute the legal, valid and binding agreements of Entrade,
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws affecting or
relating to the enforcement of creditors' rights generally and the availability
of equitable remedies, including specific performance.
(b) Consents, No Conflicts, Etc. Neither the execution and
delivery of this Agreement or the Other Entrade Documents, the consummation of
the transactions contemplated herein or therein, nor compliance by Entrade with
any of the provisions hereof or thereof will: (i) violate or conflict with the
certificates of incorporation, by-laws or other organizational documents of
Entrade or any of its Subsidiaries (as hereinafter defined), (ii) violate,
conflict with, result in a breach of, constitute a default (or an event which
with the giving of notice or lapse of time or both would constitute a default)
under, or result in the acceleration of payment or performance under, or
termination of, any note, bond, mortgage, indenture, deed of trust, license,
agreement, or any other instrument or obligation to which Entrade or any of its
Subsidiaries is a party, or by which Entrade or any of its Subsidiaries or any
of their respective assets or properties may be bound or affected, (iii) result
in the creation of any Encumbrance upon any of the assets or properties of
Entrade or any of its Subsidiaries, (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Entrade or any of its
Subsidiaries or any of their respective assets or properties or (v) require the
consent, approval, permission or other authorization of or qualification or
filing by or with any court, arbitrator or governmental, administrative or
self-regulatory authority, except for any Approvals set forth in the Entrade
Disclosure Letter or the Entrade Reports.
(c) Organization, Good Standing and Capitalization of Entrade
and each of its Subsidiaries. Entrade and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Entrade and each of its Subsidiaries has
all requisite corporate power to carry on its respective business as it is now
being conducted and is duly qualified to do business as a foreign corporation in
each jurisdiction where the failure to be qualified would have a material
adverse effect on it. The authorized capital stock
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of Entrade consists of 40,000,000 shares of Common Stock, no par value, of which
12,298,817 shares are issued and outstanding, and 4,000,000 shares of Preferred
Stock, $1,000 par value, of which no shares are outstanding. Except as set forth
in the Entrade Disclosure Letter or the Entrade Reports, Entrade owns directly
or indirectly all of the outstanding shares of capital stock of each of
Entrade's Subsidiaries, free and clear of all liens, pledges, security
interests, claims or other encumbrances, other than liens imposed by local law
which are not material. All of the outstanding shares of capital stock of
Entrade and each of its Subsidiaries have been duly authorized and are validly
issued, fully paid and nonassessable. Except as set forth in the Entrade
Disclosure Letter or the Entrade Reports, there are no existing options,
warrants, calls or commitments of any character whatsoever, or agreements to
grant the same, relating to Entrade or any of its Subsidiaries' capital stock,
and neither Entrade nor any of its Subsidiaries has any outstanding securities
convertible into or exchangeable or exercisable for any shares of its capital
stock or any options, warrants, calls or commitments of any character whatsoever
with respect to the issuance of such convertible securities. Except as set forth
in the Entrade Disclosure Letter or the Entrade Reports, neither Entrade nor any
of its Subsidiaries holds any capital stock, options, warrants, calls or other
equity interests or any convertible securities in any other enterprise.
(d) Organizational Documents and By-laws. Entrade has
delivered to the Stockholders true, correct and complete copies of: (i) the
articles of incorporation and other organizational documents of Entrade and each
of its Subsidiaries and (ii) the by-laws of Entrade and each of its
Subsidiaries, all certified as of a recent date by each respective corporation's
Secretary.
(e) SEC Documents.
(i) Entrade and each of its Subsidiaries has filed
all forms, reports and documents required to be filed by it with the Securities
and Exchange Commission (the "SEC") (collectively, the "Entrade Reports"). As of
their respective dates, the Entrade Reports (A) complied as to form in all
material respects with the applicable requirements of the Securities Act of 1933
(the "Securities Act"), the Exchange Act of 1934 (the "Exchange Act"), and the
rules and regulations thereunder and (B) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representation in
clause (B) of the preceding sentence shall not apply to any misstatement or
omission in any Entrade Report filed prior to the date of this Agreement that
was superseded by a subsequent report filed prior to the date of this Agreement
that specifically corrected such misstatement or omission in the applicable
report, provided such subsequent report was provided to the Stockholders and the
Acquired Corporations prior to the date of this Agreement. For purposes of this
Agreement, the Entrade Reports shall include, without limitation, the Rule
424(b)(3) Proxy Statement/Prospectus filed with the SEC on August 20, 1999 and
Entrade's Form S-4 registration statement #333-79175 effective on August 19,
1999 (including all exhibits thereto) (collectively, the "Entrade S-4
Registration Statement").
(ii) Each of the consolidated balance sheets included
in or incorporated by reference into the Entrade Reports (including the related
notes and schedules) fairly presents the assets, liabilities, changes in
stockholders' equity and consolidated financial position of Entrade and its
Subsidiaries as of its date, and each of the consolidated statements of income,
retained earnings
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and cash flows included in or incorporated by reference into the Entrade Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flow and changes in cash flow, as the case
may be, of Entrade and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that would not be material in amount or effect), in each case in
accordance with GAAP, except as may be noted therein. The consolidated balance
sheet of Artra Group Incorporated and the pro forma balance sheet of Entrade,
both dated as of June 30, 1999 and filed with the SEC in connection with
Entrade's Form 8K filing of October 6, 1999, are referred to herein together as
the "Entrade Balance Sheet."
(f) Absence of Undisclosed Liabilities and Obligations.
Neither Entrade nor any of its Subsidiaries has any liabilities or obligations
of any nature (whether known or unknown and whether accrued, absolute,
contingent or otherwise) except for liabilities or obligations reflected or
reserved against in the Entrade Balance Sheet as of June 30, 1999 (the "Entrade
Balance Sheet Date") and current liabilities incurred in the ordinary course of
business since the Entrade Balance Sheet Date.
(g) Absence of Certain Changes or Events. Since the Entrade
Balance Sheet Date there has not been any:
(i) change in the condition (business, financial or
otherwise), assets, liabilities, earnings or business of Entrade or any of its
Subsidiaries, except for changes which have occurred in the ordinary course of
business and which have not, individually or in the aggregate, been materially
adverse to Entrade and its Subsidiaries taken as a whole;
(ii) (A) change in the number of shares of capital
stock of Entrade or any of its Subsidiaries issued and outstanding, (B)
declaration, setting aside, or payment of any dividend or other distribution
(whether in cash, securities, property or otherwise) in respect of Entrade or
any of its Subsidiaries' capital stock, or (C) payment to any Affiliate (as
defined in Section 15 hereof) (whether in cash, securities, property or
otherwise) in respect of any service fee, management fee or similar overhead
charge;
(iii) (A) increase in the compensation payable or to
become payable by Entrade or any of its Subsidiaries to any of their respective
officers, directors, employees, independent contractors or agents (collectively
"Entrade's Personnel"), other than increases in employee compensation given in
the ordinary course of business, or increases in compensation to management that
do no exceed, annualized with respect to any one individual, $20,000, (B) any
bonus, incentive compensation, service award or other like benefit, granted,
made or accrued, contingently or otherwise, to or for the credit of any
Entrade's Personnel, or (C) any employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by Entrade or
any of its Subsidiaries except pursuant to the existing plans and arrangements
described in the Entrade Disclosure Letter or the Entrade Reports;
(iv) significant labor trouble, controversies or
unsettled grievances between Entrade or any of its Subsidiaries and any
Entrade's Personnel or any collective bargaining organization representing or
seeking to represent Entrade's Personnel;
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(v) addition to or modification of the employee
benefit plans, arrangements or practices described in the Entrade Disclosure
Letter or the Entrade Reports, other than (A) accruals or contributions made in
accordance with the normal practices of Entrade and its Subsidiaries or (B) the
extension of coverage to other Entrade's Personnel who became eligible after the
Entrade Balance Sheet Date;
(vi) mortgage, pledge or subjection to any
Encumbrance of any of Entrade's or its Subsidiaries' assets except (A) the lien
of current real and personal property taxes incurred but not yet due and payable
or (B) liens or obligations arising in the ordinary course of business securing
obligations not yet due and payable;
(vii) sale, assignment or transfer of any assets of
Entrade or any of its Subsidiaries material, individually or in the aggregate,
to the their businesses as presently conducted (hereinafter, "Entrade
Business"), other than sales of inventory in the ordinary course of business;
(viii) waiver of any rights which, in the aggregate,
were of substantial value to the Entrade Business, whether or not in the
ordinary course of business;
(ix) any cancellation or termination, or any threat
thereof, of any contract, agreement or other instrument material to the Entrade
Business;
(x) liability incurred by Entrade or any of its
Subsidiaries except immaterial liabilities incurred in the ordinary course of
business consistent in both kind and amount with past practices of Entrade and
its Subsidiaries;
(xi) any capital expenditure or the execution of any
capital leases with respect to any aspect of the business of Entrade or its
Subsidiaries, or any incurring of liability therefor, involving payments in
excess of $75,000 individually or in the aggregate;
(xii) borrowing of any money by Entrade or its
Subsidiaries or guaranteeing of any indebtedness of others;
(xiii) lending of any money or otherwise pledging the
credit of Entrade or any of its Subsidiaries;
(xiv) failure to pay any material current obligations
of Entrade or its Subsidiaries when due and payable in accordance with the
respective terms of such obligations;
(xv) agreement or undertaking by Entrade or any of
its Subsidiaries to do any of the foregoing; or
(xvi) other event or condition of any character which
individually or in the aggregate has materially adversely affected, or any event
or condition known to Entrade which it is reasonable to expect will,
individually or in the aggregate, materially adversely affect in the future,
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the condition (business, financial or otherwise), assets, liabilities, earnings,
liquidity, prospects or business of Entrade or any of its Subsidiaries.
(h) Tax Matters. Entrade and each of its Subsidiaries has duly
filed all tax reports and returns required to be filed by them, including all
United States, state, local and foreign tax returns and reports. All tax returns
and reports of Entrade and each of its Subsidiaries filed prior to the date
hereof are accurate and complete in all material respects and were prepared in
conformity with all applicable laws and regulations. Entrade and each of its
Subsidiaries has: (i) paid in full all Taxes shown to be due on such returns and
reports or any assessment, deficiency notice, 30-day letter or similar notice
received by them and (ii) made adequate provision (by the establishment of
reserves or otherwise) for all Taxes relating to or arising in connection with
any period ending on or before the date hereof. Entrade has delivered or made
available to the Stockholders true and complete copies of all tax returns and
reports of Entrade and its Subsidiaries (as applicable) for the taxable years
ended December 31, 1996 through December 31, 1998, together with true and
complete copies of all reports, if any, of taxing authorities relating to the
examination of such returns and reports. All Taxes which Entrade or any of its
Subsidiaries has been required to collect or withhold have been duly collected
or withheld and, to the extent required, have been duly paid to the proper
taxing authority. Neither Entrade nor any of its Subsidiaries is a party to any
pending action or proceeding by any governmental authority for the assessment of
any Tax, and no claim for assessment or collection of any Tax has been asserted
against Entrade or any of its Subsidiaries that has not been paid. There are no
material Tax liens upon any property or assets of Entrade or any of its
Subsidiaries. There are no outstanding agreements or waivers extending any
statutory period of limitations applicable to any federal income tax return or
other material tax return of Entrade or any of its Subsidiaries for any period.
(i) Accounts Receivable. Except as set forth in the Entrade
Disclosure Letter or the Entrade Reports, the accounts receivable reflected on
the Entrade Balance Sheet, and those thereafter acquired by Entrade or any of
its Subsidiaries, represent bona fide receivables arising in the ordinary course
of business, are recorded in accordance with GAAP on the books and records of
the corporations and have been collected or are collectible at the aggregate
gross recorded amounts thereof less, in the case of accounts receivable
reflected on the Entrade Balance Sheet, the allowance for doubtful accounts set
forth therein, and in the case of accounts receivable thereafter acquired, an
allowance for doubtful accounts established in accordance with prior consistent
practices of Entrade and its Subsidiaries. The Entrade Disclosure Letter also
contains an aging schedule showing all accounts receivable of Entrade and any of
its Subsidiaries that are more than 30 days past due.
(j) Inventories. Except as set forth in the Entrade Disclosure
Letter or the Entrade Reports, the inventories reflected on the Entrade Balance
Sheet, and those thereafter acquired by Entrade or its Subsidiaries, consist of
items of a quality and quantity usable or saleable in the ordinary course of
their respective businesses within a period of nine months at aggregate values
at least equal to the aggregate values at which such items are carried on their
books. The values at which such inventories are carried on the books of Entrade
and its Subsidiaries reflect the normal inventory valuation policy of Entrade
and its Subsidiaries, and are otherwise in accordance with GAAP and the
contractual arrangements to which such inventories relate. The value of obsolete
or slow-moving inventory, inventory on consignment or used for demonstration
purposes and inventory of below standard quality has been written down to
realizable market value in accordance with GAAP. Neither
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Entrade nor any of its Subsidiaries is under any material liability or
obligation with respect to the return of inventory or merchandise in the
possession of its customers or any third party. The inventories of Entrade and
its Subsidiaries are consistent in kind and amount with their operations in the
ordinary course of business.
(k) Lists of Properties, Contracts and Personnel Data. The
Entrade Disclosure Letter contains accurate lists and summary descriptions of
the following (indicating, where applicable, each item separately with respect
to Entrade and each of its Subsidiaries):
(i) Qualification. All jurisdictions in which Entrade
and its Subsidiaries are duly qualified to do business as foreign corporations;
(ii) Real Property. All real property owned of record
or beneficially by Entrade or any of its Subsidiaries and a brief description of
all structures and buildings located thereon; all leases of real property to
which either Entrade or any of its Subsidiaries is a party (indicating in each
such case, the term of the lease and the approximate number of square feet
leased); all premises occupied by Entrade and each of its Subsidiaries under
rental arrangements without leases (including in each case the amount of rent
and the type of occupancy); and all contracts to which either Entrade or any of
its Subsidiaries is a party for the sale or purchase of real property;
(iii) Intellectual Properties. (A) All Intellectual
Properties, to the extent that the same are owned in whole or in part or used by
Entrade or any of its Subsidiaries; and (B) all computer software (including
without limitation, all computer programs, data bases and documentation) owned
in whole or in part or used by Entrade or any of its Subsidiaries;
(iv) Personal Property. All items of machinery,
equipment, computer hardware, motor vehicles, office furniture, fixtures and
similar personal property owned or leased by Entrade or any of its Subsidiaries
having, in the case of any owned property, a book value in excess of $10,000,
and, in the case of any leased property, annual lease payments in excess of
$10,000, indicating the current depreciated book value of owned items and the
terms and annual lease payments of leased items;
(v) Insurance. All policies of insurance in force
with respect to Entrade or any of its Subsidiaries, including, without
restricting the generality of the foregoing, those covering properties,
buildings, machinery, equipment, furniture, fixtures, operations and lives of,
or performance of their duties by, Entrade's Personnel, including the policy
numbers, names and addresses of insurers, expiration dates, descriptions and
amounts of coverage and annual premiums (other than those otherwise set forth in
the Entrade Disclosure Letter);
(vi) Other Material Contracts. All other contracts
and commitments of Entrade or any of its Subsidiaries (A) which are not
terminable by Entrade or its Subsidiaries on fewer than 30 days' notice without
penalty; (B) involving payment or receipt by Entrade or any of its Subsidiaries
of more than $75,000; or (C) materially affecting the business of Entrade or any
of its Subsidiaries or involving delivery by Entrade or any of its Subsidiaries
of products at less than standard prices (excluding normal trade allowances);
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(vii) Labor Agreements. All labor contracts,
employment agreements and collective bargaining agreements relating to Entrade's
Personnel;
(viii) Employee Benefits. All employee
profit-sharing, incentive, deferred compensation, welfare, pension, retirement,
group insurance and other employee benefit plans, and agreements maintained for
the benefit of Entrade's Personnel (including all trust agreements), identifying
which plans (if any) provide any present or former Entrade's Personnel with
benefits that are due or payable after termination of employment and the number
of participants in each such plan;
(ix) Compensation. The names of all Entrade's
Personnel whose current aggregate annual rates of compensation including bonuses
are $25,000 or more, together with a summary (containing estimates to the extent
necessary) of existing bonuses, additional compensation (whether current or
deferred) and other like benefits, if any, to be paid to such persons for the
fiscal year ending December 31, 1999;
(x) Powers of Attorney. The names of all persons
holding powers of attorney from Entrade or any of its Subsidiaries;
(xi) Equity Investments. All marketable securities
and other equity investments, and all other notes or other obligations evidenced
by written instruments, owned by Entrade or any of its Subsidiaries;
(xii) Indebtedness. All notes, debentures, bonds,
letters of credit and other instruments evidencing indebtedness (including
capital leases, guarantees and lines of credit) of Entrade or any of its
Subsidiaries;
(xiii) Bank Accounts. The name of each institution in
which Entrade or any of its Subsidiaries has a bank account or safe deposit box,
the number of any such account or box, and the names of all persons authorized
to draw thereon or to have access thereto;
(xiv) Licenses and Permits. All Permits, if any,
required to conduct the business of Entrade and its Subsidiaries, as presently
conducted; and
(xv) Purchase Orders; Backlog; Capital Commitments.
All outstanding purchase orders and supply contracts of Entrade or any of its
Subsidiaries in excess of $10,000 or which extend for a period of six months or
longer; the sales backlog of Entrade and its Subsidiaries as of the date hereof;
and all outstanding commitments of Entrade and its Subsidiaries in respect of
any capital item or capital improvement in excess of $10,000.
(l) Copies of Documents. Entrade and each of its Subsidiaries
have previously delivered or otherwise made available to Nationwide or its
representatives true and complete copies of:
(i) all leases, agreements, contracts, undertakings,
commitments, arrangements and plans referenced in Sections 5(k)(ii), (iv), (vi),
(vii), (viii) and (xiv);
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(ii) all deeds or other evidence of title to owned
real property referenced in Section 5(k)(ii) and copies of any title insurance
policies with respect thereto;
(iii) all Intellectual Properties referenced in
Section 5(k)(iii);
(iv) all policies of insurance referenced in Section
5(k)(v);
(v) all instruments evidencing a power of attorney
referenced in Section 5(k)(x);
(vi) all securities, notes, debentures, bonds,
letters of credit and other instruments of indebtedness referenced in Sections
5(k)(xi) and (xii); and
(vii) all Permits referenced in Section 5(k)(xiv).
(m) Tangible Properties. Except as set forth in the Entrade
Disclosure Letter or the Entrade Reports, (i) Entrade and each of its
Subsidiaries has good and marketable title to all of its respective properties
and assets, real, personal, tangible and intangible (including those reflected
in the Entrade Balance Sheet, except as since sold or otherwise disposed of in
the ordinary course of business, which sale or disposition, in any individual
case or in the aggregate, has not had a materially adverse effect upon Entrade
or its Subsidiaries), free and clear of all Encumbrances of any nature
whatsoever, except for (A) the lien of taxes not yet due and payable, and (B)
such imperfections of title and Encumbrances, if any, as do not materially
detract from the value, or interfere with the present use of the properties or
the Entrade Business, or otherwise materially impair the business operations of
Entrade or any of its Subsidiaries; (ii) Entrade and each of its Subsidiaries
has valid and enforceable leases with respect to any premises leased by it as
referenced in Section 5(k)(ii) hereto, has in all material respects performed
all the obligations required to be performed by it to the date hereof under said
leases and possesses and quietly enjoys said premises under said leases, and
such premises are not subject to any Encumbrances, easements, rights of way,
building or use restrictions, exceptions, reservations or limitations that in
any material respect interfere with or impair the present and continued use
thereof in the usual and normal conduct of the Entrade Business; (iii) neither
Entrade nor any of its Subsidiaries has received notice of violation of any
applicable zoning regulation, ordinance or other law, order, regulation or
requirement relating to the operations of, or owned or leased properties of
Entrade or any of its Subsidiaries and neither Entrade nor any of its
Subsidiaries knows of any such violation; and (iv) neither Entrade nor any of
its Subsidiaries has received notice of any pending or threatened condemnation
proceedings relating to any of the owned or leased properties of Entrade or any
of its Subsidiaries and, so far as known to Entrade or its Subsidiaries, there
are no such pending or threatened proceedings. The plants, structures, tangible
properties and equipment owned, operated or leased by Entrade and its
Subsidiaries which are material to the businesses of Entrade and its
Subsidiaries are in sufficient operating condition and repair for operation in
the ordinary course of their business, ordinary wear and tear excepted and are
in conformity in all material respects with all applicable laws, ordinances,
orders, regulations and other requirements (including applicable zoning,
environmental, occupational safety and health laws and regulations) presently in
effect or presently scheduled to take effect.
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(n) Environmental Matters.
(i) Entrade and each of its Subsidiaries has obtained
all permits, licenses and other authorizations which are required under
Environmental Laws. . Entrade and each of its Subsidiaries is in material
compliance with all terms and conditions of the required permits, licenses and
authorizations, and are also in material compliance with all other provisions of
any applicable Environmental Laws. There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigations, or proceeding pending or, to the best knowledge of
Entrade or its Subsidiaries, threatened against Entrade or any of its
Subsidiaries relating to any Environmental Law.
(ii) To the actual knowledge of Entrade and its
Subsidiaries, there are no Hazardous Materials present on or in the soil, land,
waters (including streams, ponds, ground waters and drinking waters) and ambient
air (including indoor air) at the facilities and properties of Entrade or any of
its Subsidiaries, including any Hazardous Materials contained in barrels, above
or underground storage tanks, landfill, land deposits, dumps, or other
containers, or deposited or located in land, water, sumps, or any other part of
the facilities and properties of Entrade or any of its Subsidiaries, or
incorporated into any structure therein or thereon.
(iii) There has been no Release, or, to the knowledge
of Entrade or its Subsidiaries, threat of Release of any Hazardous Materials at
or from the facilities and properties of Entrade or any of its Subsidiaries,
whether intentional or unintentional.
(o) Intellectual Properties. The Intellectual Properties
referenced in Section 5(k)(iii) and listed in the Entrade Disclosure Letter, are
all those used in the businesses of Entrade and its Subsidiaries. Other than as
disclosed in the Entrade Disclosure Letter or the Entrade Reports no person has
a right to receive a royalty with respect to any of the Intellectual Properties
referenced in Section 5(k)(iii), and neither Entrade nor any of its Subsidiaries
has any licenses granted by or to it or other agreements to which it is a party,
relating in whole or in part to any Intellectual Properties, whether owned by
Entrade or its Subsidiaries or otherwise. No other Intellectual Properties are
required to permit the conduct of Entrade's or any of its Subsidiaries'
businesses as now conducted or presently proposed to be conducted without
conflict with the rights of others. All of the patents, trademarks, trademark
registrations, trade names and copyrights listed in the Entrade Disclosure
Letter are valid and in full force and effect. To the best of the knowledge of
Entrade or its Subsidiaries, neither Entrade nor any of its Subsidiaries is
infringing upon, or otherwise violating, the rights of any third party with
respect to any Intellectual Properties. No proceedings have been instituted
against or claims received by Entrade or any of its Subsidiaries, nor are any
proceedings threatened alleging any such violation, nor does Entrade or any of
its Subsidiaries know of any valid basis for any such proceeding or claim. To
Entrade's or its Subsidiaries' knowledge, there is no infringement or other
adverse claim against any of the Intellectual Properties owned or used by
Entrade or any of its Subsidiaries. The computer software set forth in the
Entrade Disclosure Letter are all those used in the businesses of Entrade and
its Subsidiaries, and the use of such software does not violate or otherwise
infringe upon the rights of any third party.
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(p) Insurance. All policies of insurance (or renewals thereof)
set forth in the Entrade Disclosure Letter are outstanding and duly in force on
the date hereof. Such policies are in the amounts shown in the Entrade
Disclosure Letter, and insure the plants, structures and equipment of Entrade
and its Subsidiaries for their replacement values against loss, theft and
destruction and insure the properties and businesses of Entrade and its
Subsidiaries against such losses and risks as are required by law or any
agreements to which Entrade or any of its Subsidiaries is a party. Except for
the applicable deductible amounts under insurance policies described in the
Entrade Disclosure Letter, neither Entrade nor any of its Subsidiaries is liable
under any such insurance agreement or other such insurance arrangement as a
self-insurer of its business or assets. Neither Entrade nor any of its
Subsidiaries has received notice from any insurer or agent of such insurer of
cancellation or termination of any insurance policy or that substantial capital
improvements or other expenditures will have to be made in order to continue
such insurance and, so far as known to Entrade or its Subsidiaries, no such
cancellation or termination is threatened and no such improvements or
expenditures are required. No claims have been made under any of the insurance
policies of Entrade or any of its Subsidiaries since January 1, 1996 except as
set forth in the Entrade Disclosure Letter or the Entrade Reports.
(q) Labor Matters. Neither Entrade nor any of its Subsidiaries
has any labor contracts, collective bargaining agreements or employment
agreements (oral or written) (other than oral agreements for employment "at
will") with any of Entrade's Personnel or any representative of Entrade's
Personnel. Except as disclosed in the Entrade Disclosure Letter or the Entrade
Reports, Entrade and each of its Subsidiaries is in compliance in all material
respects with all applicable laws respecting employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice and neither Entrade nor any of its Subsidiaries has experienced
any work stoppage or other material labor difficulty involving its employees.
(r) ERISA. There are no present or former Entrade's Personnel
who are entitled to any pension benefit to be paid after termination of
employment other than pursuant to pension or welfare arrangements disclosed in
the Entrade Disclosure Letter or the Entrade Reports. No other benefits
whatsoever are payable to any present or former Entrade's Personnel after
termination of employment. The Entrade Disclosure Letter includes a list of each
Employee Plan that is maintained by Entrade and its Subsidiaries.
(s) Litigation. Except as set forth in the Entrade Disclosure
Letter or the Entrade Reports, there is neither (i) any litigation, proceeding
or arbitral action pending or threatened against (A) Entrade or any of its
Subsidiaries or any of their respective properties, or (B) Entrade's Personnel
in reference to actions taken by them in such capacities, nor (ii) any pending
or threatened governmental investigation against any of the foregoing which, if
adversely determined could, in any one case or in the aggregate, have a material
adverse effect on the Entrade Business. There are no decrees, injunctions or
orders of any court or governmental department or agency outstanding against
Entrade or any of its Subsidiaries.
(t) Compliance with Laws; Permits. Entrade and each of its
Subsidiaries has complied in all material respects with all applicable statutes,
regulations, orders, ordinances and other laws of the United States, all state,
local and foreign governments and other governmental bodies
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and authorities, and agencies of any of the foregoing to which they are subject.
Neither Entrade nor any of its Subsidiaries has received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any of
such statutes, regulations and orders, ordinances, other laws or undertakings,
and Entrade has no reason to anticipate that any past or presently existing
practices, activities or circumstances are likely to result in violations of any
such regulations which could, in any one case or in the aggregate, cause a
material loss to the Entrade Business or otherwise have a material adverse
effect on the Entrade Business. Except for matters generally known to the public
at large, to the best of Entrade's or its Subsidiaries' knowledge, there is not
presently pending any proceeding, hearing or investigation with respect to the
adoption of amendments or modifications to existing laws or ordinances,
regulations or restrictions which, if adopted, would materially adversely affect
the Entrade Business. Entrade and each of its Subsidiaries has duly filed all
reports and returns required to be filed by them with governmental authorities
and obtained all Permits which are required in connection with their businesses
and operations. Entrade and each of its Subsidiaries are in compliance with all
terms and conditions of all required Permits. All Permits are in full force and
effect, and no proceedings for the suspension or cancellation of any Permit is
pending or threatened.
(u) No Brokers. Except for the agreement providing for
compensation to Gilford Securities Incorporated or its nominees as described in
the Entrade Disclosure Letter, which shall be Entrade's sole responsibility,
neither Entrade nor any of its Subsidiaries has entered into any agreement,
arrangement or understanding with any person or firm which will result in the
obligation of Entrade or any of its Subsidiaries to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
(v) Illegal Payments. Neither Entrade nor any of its
Subsidiaries nor, to the best of Entrade's or its Subsidiaries' knowledge, any
employee of Entrade or any of its Subsidiaries has made any payment of funds of
Entrade or any of its Subsidiaries prohibited by applicable law, and no funds of
Entrade or any of its Subsidiaries have been set aside to be used for any
payment prohibited by applicable law.
(w) Transactions with Certain Persons. No officer or director
of Entrade or any of its Subsidiaries, no employee of Entrade or any of its
Subsidiaries and no member of any such person's immediate family is presently a
party to any material transaction with Entrade or any of its Subsidiaries
relating to the businesses of Entrade or any of its Subsidiaries, including,
without limitation, any contract, agreement or other arrangement (A) providing
for the furnishing of services by, (B) providing for the rental of real or
personal property from, or (C) otherwise requiring payments to (other than for
services as officers, directors or employees of Entrade or Subsidiaries) any
such person or corporation, partnership, trust or other entity in which any such
person has a substantial interest as a shareholder, officer, director, trustee
or partner.
(x) Minute Books and Stock Transfer Books. The minute books
and stock transfer books of Entrade and each of its Subsidiaries are correct,
complete and current in all material respects. Any documentary and stock
transfer tax stamps required in connection with the issuance and transfer of the
capital stock of Entrade or any of its Subsidiaries has been duly affixed and
canceled.
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(y) Disclosure. No representation or warranty made by Entrade
in this Agreement or in any Other Entrade Documents, or in the Entrade
Disclosure Letter, or in any of the exhibits or schedules to any of the
foregoing, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
false or misleading.
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS.
(a) No Negotiation. Until such time, if any, as this Agreement
is terminated pursuant to Section 10, the Stockholders and the Acquired
Corporations shall not, directly or indirectly, solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any person or entity (other than Entrade) relating to any
transaction involving the sale of the business or assets (other than in the
ordinary course of business) of either of the Acquired Corporations, or any of
the capital stock of either of the Acquired Corporations, or any merger,
consolidation, business combination, or similar transaction involving either of
the Acquired Corporations.
(b) Nondisclosure. Neither the Acquired Corporations nor any
Stockholder will at any time after the date of this Agreement and prior to the
Closing Date, directly or indirectly, divulge, furnish to or make accessible to
anyone any knowledge or information with respect to any proprietary,
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, device or ideas or know-how, whether patentable or
not, with respect to any proprietary, confidential or secret aspects of the
Acquired Corporations' respective businesses (including, without limitation,
customer lists, supplier lists and pricing arrangements with customers or
suppliers); provided, however, that nothing herein shall prohibit the Acquired
Corporations or the Stockholders from (i) complying with any order or decree of
any court of competent jurisdiction or governmental authority, but the Acquired
Corporations shall give Entrade timely notice of the receipt of any such order
or decree, (ii) disclosing any information which is or becomes generally
available to the public through no breach of this Agreement, or (iii) disclosing
information to the extent such disclosure is made in the ordinary course of
business and in a manner consistent with the prior business practices of the
Acquired Corporations. The provisions of this paragraph are in addition to and
not in substitution for any existing agreements among the parties with respect
to confidential information, which agreements shall continue in effect in
accordance with their respective terms.
(c) Operations in Usual Manner. From and after the date of
this Agreement and until the transactions contemplated hereby are consummated or
this Agreement is terminated in accordance with its terms, each of the Acquired
Corporations and Entrade and its Subsidiaries:
(i) shall continue to conduct its business in the
ordinary course;
(ii) shall use its respective best efforts to
preserve its business organization intact and retain the services of its key
officers, employees, agents and consultants, provided that the undertaking to
use "best efforts" as used in this sub-paragraph (ii) shall not require a party
to pay any money or other consideration or incur any liabilities that would be
unreasonable under the applicable circumstances;
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(iii) shall maintain in full force and effect
insurance policies providing coverages and amounts of coverage comparable to the
coverage and amounts of coverage provided under its policies of insurance in
effect on the date hereof;
(iv) shall not declare or pay any dividends on its
capital stock or make any other distribution with respect thereto or make any
payment on account of the repurchase, redemption or retirement of any shares of
its capital stock or debt securities, except, with respect to Entrade and its
Subsidiaries, to the extent such dividends, distributions, repurchases,
redemptions or retirements are consistent with existing obligations set forth in
the Entrade Disclosure Letter or the Entrade Reports, and except that the
Stockholders shall be entitled to receive Subchapter S distributions
attributable to the S Period as provided in Section 1(e) hereof;
(v) shall not incur or guarantee any additional
indebtedness for borrowed money, grant any salary increase or bonus or enter
into any long-term contract, except, with respect to Entrade and its
Subsidiaries, to the extent set forth in the Entrade Disclosure Letter or the
Entrade Reports, and except as incurred in the ordinary course of business and
not, individually or in the aggregate, material to the business of the
applicable party;
(vi) shall not amend its certificate of
incorporation, by-laws or any other organizational document unless, and only
insofar as, such amendment is necessary to carry out the transactions
contemplated by this Agreement;
(vii) shall take all necessary corporate and other
action and shall use its best efforts to obtain all material consents and
approvals required for consummation of the transactions contemplated by this
Agreement, provided that the undertaking to use "best efforts" as used in this
sub-paragraph (vii) shall not require a party to pay any money or other
consideration or incur any liabilities that would be unreasonable in light of
the nature of the consents or approvals sought;
(viii) shall use its best efforts to cause all of the
conditions set forth in Section
7 or 8 hereof, as applicable, to be satisfied as promptly as practicable;
(ix) shall promptly notify each other in writing upon
the discovery or receipt of notice of any event of default or any event which,
with notice or lapse of time or both, would constitute an event of default under
any material agreement to which it is a party or by which any of its property is
bound or the filing of any material litigation against it or the existence of
any dispute with any person that involves a reasonable likelihood of such
litigation being commenced;
(x) shall not enter into any agreement or instrument
which by its terms or by reasonable inference therefrom would restrict its right
to perform any of its obligations pursuant to this Agreement;
(xi) shall not enter into any other undertaking,
agreement or understanding not in the ordinary course of its business except as
expressly contemplated hereby; and
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(xii) shall provide to the other in writing as soon
as available after each monthly accounting period an unaudited consolidated and
consolidating balance sheet, statement of operation and statement of changes in
financial condition for such monthly period and from the beginning of its fiscal
year to the end of such monthly period.
(d) Agreements with Key Employees. On the Closing Date, Corey
Schlossmann shall execute and deliver to Entrade an employment, non-compete and
nonsolicitation agreement in the form of Exhibit 6(d)(i) hereto ("Schlossmann
Employment Agreement"), which shall amend and supersede any then existing
employment agreements between him and the Acquired Corporations. The Acquired
Corporations and the Stockholders shall use their best efforts to obtain and
deliver to Entrade, on or before the Closing Date, employment, non-compete and
nonsolicitation agreements in the form of Exhibit 6(d)(ii) hereto ("Employment
Agreements"), executed by each of the Acquired Corporations' key employees and
such other employees of the Acquired Corporations as determined by Entrade (such
employees, together with Corey Schlossmann, the "Key Employees"); provided,
however, that delivery of the Employment Agreements shall not be a condition to
Entrade's obligation to consummate the transactions contemplated by this
Agreement, and if after using their best efforts the Acquired Corporations and
the Stockholders fail to obtain executed Employment Agreements from some or all
of such employees, such failure shall not give rise to any liability of the
Stockholders or the Acquired Corporations. As used in this paragraph, "best
efforts" does not require the payment of money or other consideration to such
employees.
(e) Further Assurances. If at any time after the Closing Date
any further assignments, conveyances or assurances in law are necessary or
desirable to vest, perfect or confirm of record in Entrade the title to the
Shares or otherwise to carry out the provisions hereof, the Stockholders and the
proper officers and directors of the Acquired Corporations shall execute and
deliver any and all proper documents, instruments and powers of attorney and
assurances in law, and do all things necessary or proper to vest, perfect or
confirm title to the Shares in Entrade and otherwise to consummate the
transactions contemplated hereby. If at any time after the Closing Date any
further assignments, conveyances or assurances in law are necessary or desirable
to vest, perfect or confirm of record in the Stockholders or either of them the
title to any shares of Entrade's Stock or the Notes or otherwise to carry out
the provisions hereof, the proper officers of Entrade shall execute and deliver
any and all proper documents, instruments and powers of attorney and assurances
in law, and do all things necessary or proper to vest, perfect or confirm title
to the shares of Entrade's Stock in the Stockholders to the extent of their
respective interests therein and to otherwise consummate the transactions
contemplated hereby.
(f) Section 338 Election. Entrade shall not make an election
under Section 338 of the Internal Revenue Code with respect to the transactions
provided for herein.
SECTION 7. CONDITIONS TO OBLIGATIONS OF ENTRADE.
The obligation of Entrade to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, or the
waiver by Entrade, on or prior to the Closing Date of the following conditions:
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(a) Stockholders' and Acquired Corporations' Performance. Each
of the obligations of the Stockholders and the Acquired Corporations to be
performed on or before the Closing Date under the terms of this Agreement shall
have been duly performed by the Closing Date, and on the Closing Date, the
Stockholders and the Acquired Corporations shall have delivered to Entrade
certificates to such effect.
(b) Representations and Warranties Correct. The
representations and warranties made by the Stockholders in Section 3 hereof and
by the Acquired Corporations, Don Haidl and the Haidl Trust in Section 4 hereof
shall be true and correct in all material respects when made, and shall be true
and correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date, and on the
Closing Date, the Acquired Corporations and Stockholders shall have delivered to
Entrade certificates to such effect.
(c) Stock Certificates. On the Closing Date, each Stockholder
shall have delivered to Entrade a certificate or certificates evidencing such
Stockholder's Shares free and clear of all Encumbrances of any nature
whatsoever, together with stock powers duly executed for transfer to Entrade.
(d) United States Marshals Service Dispute. Haidl shall have
executed and delivered to Nationwide and Entrade an indemnification and
assumption agreement in the form attached hereto as Exhibit 7(d) (the "USMS
Indemnification"), with respect to issues raised by the United States Marshals
Service regarding a refund of erroneously charged buyer's premiums and
processing fees in the approximate amount of $300,000.00. The aforesaid
indemnification and assumption of obligations shall be separate from and
cumulative with Haidl's indemnification obligations under Section 9 of this
Agreement.
(e) Release of Corporate Guaranty. Nationwide shall have been
fully and unconditionally released from any and all obligations under or with
respect to any guaranty agreement pursuant to which Nationwide has agreed to
guaranty payment of third party loans to any of the Stockholders, except with
respect to the guaranty agreements executed by PLS and ALG in favor of West
America Bank, pursuant to which the companies guaranteed repayment of a
$512,500.00 loan to Haidl.
(f) City of Industry Lease. Nationwide shall have entered into
a binding amendment to the existing lease of the City of Industry property in
the form attached hereto as Exhibit 7(f), granting Nationwide a right of first
refusal to enter into a new lease of the subject property at the expiration of
the term thereof, and further granting Nationwide a right of first refusal if
the lessor thereunder proposes to sell the subject property.
(g) Opinion of Counsel to the Stockholders and the Acquired
Corporations. There shall have been delivered to Entrade an opinion, dated the
Closing Date and addressed to Entrade, of Parker, Milliken, Clark, O'Hara &
Samuelian, counsel to the Acquired Corporations and the Stockholders, in the
form attached hereto as Exhibit 7(g).
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(h) Approvals and Consents. The Stockholders and the Acquired
Corporations shall have obtained and shall have delivered to Entrade all
requisite approvals and consents from governmental or regulatory bodies or
agencies, whether federal, state, local or foreign, or pursuant to leases,
mortgages, contracts, agreements, licenses or Permits, necessary for the
performance of their respective obligations hereunder, including without
limitation (A) the consent of the City of Benicia to the transfer of the
Nationwide Shares as required by the City of Benicia Development Agreement, and
(B) all of the Approvals set forth in the Nationwide Disclosure Letter.
(i) Resignations. If requested by Entrade at least five days
prior to the Closing Date, the Acquired Corporations shall have delivered to
Entrade written resignations, effective as of the Closing Date, of each person
who is a director and/or officer of the Acquired Corporations.
(j) Financial Condition. On the Closing Date, there shall have
been no material adverse change in the financial condition, business operations
or prospects, financial or otherwise, of the Acquired Corporations since the
date of the Nationwide Balance Sheet and, on the Closing Date, the Acquired
Corporations and the Stockholders shall have delivered to Entrade a certificate
to such effect.
(k) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in form and substance to Entrade and its counsel.
(l) Other Closing Documents. The Acquired Corporations shall
have delivered to Entrade all of the following documents:
(i) certified copies of the resolutions duly adopted
by the Acquired Corporations' respective Boards of Directors authorizing the
execution, delivery and performance of this Agreement and the Other Nationwide
Documents;
(ii) certified copies of the Articles of
Incorporation and By-Laws of each of the Acquired Corporations, as in effect on
the Closing Date; and
(iii) such other documents relating to the
transactions contemplated by this Agreement as Entrade or its counsel shall
reasonably request.
(m) Schlossmann Employment Agreement. Schlossmann shall have
executed and delivered to Entrade the Schlossmann Employment Agreement.
(n) Non-Compete Agreements. Each of the Individual
Stockholders shall have executed and delivered to Entrade a non-compete
agreement (a "Non-Compete Agreement") in the form of Exhibit 7(n) hereto.
(o) Registration Rights Agreement. Entrade and each of the
Stockholders shall have executed and delivered to each other a stock restriction
and registration rights agreement (the
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"Registration Rights Agreement") in the form of Exhibit 7(o) hereto, with
respect to the shares of Entrade's Stock received by the Stockholders hereunder.
(p) JDK Agreement. Haidl shall have entered into an agreement
with JDK Associates, Inc. and Joe Kowal (together, "JDK") in the form of Exhibit
7(p)(i) hereto, pursuant to which JDK agrees to be bound by the Registration
Rights Agreement, and Haidl shall have executed and delivered to Entrade an
Indemnification Agreement with respect to JDK's obligations, in the form of
Exhibit 7(p)(ii) hereto.
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS AND THE
ACQUIRED CORPORATIONS.
The obligations of the Stockholders and the Acquired
Corporations to consummate the transactions contemplated hereby shall be subject
to the fulfillment, or the waiver by the Acquired Corporations and the
Stockholders or their representative, on or prior to the Closing Date of the
following conditions:
(a) Entrade's Performance. Each of the obligations of Entrade
to be performed on or before the Closing Date under the terms of this Agreement
shall have been duly performed by the Closing Date, and on the Closing Date,
Entrade shall have delivered the Acquisition Price to the Stockholders in
accordance with the provisions of Section 1 hereof.
(b) Registration Rights Agreement. Entrade and each of the
Stockholders shall have executed and delivered to each other the Registration
Rights Agreement.
(c) Representations and Warranties Correct. The
representations and warranties made by Entrade in Section 5 hereof shall be true
and correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date, and on the Closing Date,
Entrade shall have delivered to the Stockholders a certificate to such effect.
(d) Approvals and Consents. Entrade shall have obtained and
shall have delivered to the Stockholders and the Acquired Corporations all
requisite approvals and consents from governmental or regulatory bodies or
agencies, whether federal, state, local or foreign, or pursuant to leases,
mortgages, contracts, agreements, licenses or Permits, necessary for the
performance of its obligations hereunder, including without limitation, all of
the Approvals set forth in the Entrade Disclosure Letter.
(e) Financial Condition. On the Closing Date, there shall have
been no material adverse change in the financial condition, business operations
or prospects, financial or otherwise, of Entrade or any of its Subsidiaries
since the date of the Entrade Balance Sheet and, on the Closing Date, Entrade
shall have delivered to the Stockholders and the Acquired Corporations a
certificate to such effect.
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(f) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in form and substance to the Stockholders and the Acquired
Corporations and their counsel.
(g) Other Closing Documents. Entrade shall have delivered to
the Stockholders and the Acquired Corporations all of the following documents:
(i) certified copies of the resolutions duly adopted
by the Board of Directors of Entrade authorizing the execution, delivery and
performance of this Agreement and the Other Entrade Documents;
(ii) certified copies of the Articles of
Incorporation and By-Laws of Entrade, as in effect on the Closing Date; and
(iii) such other documents relating to the
transactions contemplated by this Agreement as the Stockholders and the Acquired
Corporations or their counsel shall reasonably request.
(h) Opinion of Counsel to Entrade. There shall have been
delivered to the Stockholders an opinion, dated the Closing Date and addressed
to the Stockholders, of Duane, Morris & Heckscher LLP, counsel to Entrade, in
the form attached hereto as Exhibit 8(h).
SECTION 9. OBLIGATIONS OF PARTIES AFTER CLOSING.
(a) Directorship. Unless otherwise prohibited by law or
applicable rules of the SEC or the NYSE, Entrade shall, for as long as Don Haidl
owns at least 5% of the issued and outstanding shares of Entrade's Common Stock,
nominate Mr. Haidl, or another person designated in writing by Mr. Haidl and
reasonably acceptable to Entrade (it being agreed by Entrade that Corey
Schlossmann would be an acceptable designee), to serve as a director of Entrade,
and, subject to such prohibitions imposed by law or applicable rules, Entrade
shall recommend such person's election as a director of Entrade to its
shareholders and use its best efforts to cause such person to be elected.
(b) Entrade Stock Options. At the Closing, Entrade shall issue
to Corey Schlossmann an option to purchase 200,000 shares of Entrade's Stock
(the "Options"), under and subject to the terms and conditions of a Nonqualified
Stock Option Agreement having a term of ten (10) years and otherwise
substantially in the form of Exhibit 9(b) hereto (the "Option Agreement"), with
the purchase price of shares of Entrade's Stock issuable thereunder fixed at
$9.00 per share. The Options will vest at the Closing.
(c) Nationwide Balance Sheet. The Stockholders shall take all
necessary action to cause KMPG Peat Marwick LLP ("Peat Marwick") to deliver to
Entrade the Nationwide Balance Sheet in a form that will comply with the
requirements of Regulation SX under the Securities Act, together with the
related report and consent of Peat Marwick, as required under Section 1 of the
Registration Rights Agreement.
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(d) Survival of Representations and Warranties. All
representations and warranties made by the Stockholders in Section 3 hereof, and
all representations and warranties of the applicable parties under Sections 4(b)
and 5(a) hereof (with respect to authority), under Sections 4(c) and 5(b) hereof
(with respect to consents, no conflicts, etc.), or under Sections 4(o) and 5(n)
hereof (relating to environmental matters), shall survive the Closing Date
hereunder, and shall not terminate or expire notwithstanding any notice of any
inaccuracy, breach or failure to perform not waived in writing and
notwithstanding the consummation of the transactions contemplated herein with
knowledge of such inaccuracy, breach or failure. All representations and
warranties of the applicable parties under Sections 4(i) and 5(h) (with respect
to tax matters) shall survive until the expiration of the applicable statutes of
limitations for claims that might arise thereunder. All other representations,
warranties and certifications contained herein shall survive the Closing Date
until the earlier to occur of (i) the second anniversary of the Closing Date and
(ii) thirty (30) days after completion of the second audited fiscal year
financial statement issued by Nationwide after the Closing Date, at which time
they shall expire except for claims previously made with respect to breaches of
such representations, warranties and certifications.
(e) Stockholders' Agreements to Indemnify. Haidl and the Haidl
Trust shall jointly and severally indemnify and hold harmless Entrade and the
Acquired Corporations against and in respect of any and all liabilities, losses,
damages, deficiencies, costs, or expenses (including, without limitation, the
reasonable fees and expenses of counsel) (collectively "Entrade's Losses")
resulting from any misrepresentation or breach of representation or warranty by
Haidl, the Haidl Trust and/or the Acquired Corporations in Sections 3 or 4
hereof or certification with respect thereto in Section 7(b) hereof, or the
nonfulfillment of any agreement, covenant or obligation made by Haidl, the Haidl
Trust and/or the Acquired Corporations in this Agreement, the Other Stockholder
Documents, or the Other Nationwide Documents executed and delivered by Haidl,
the Haidl Trust and/or by the Acquired Corporations in connection herewith.
Schlossmann and the Schlossmann Trust shall jointly and severally indemnify and
hold harmless Entrade and the Acquired Corporations against and in respect of
any and all Entrade's Losses resulting from any misrepresentation or breach of
representation or warranty by Schlossmann and/or the Schlossmann Trust in
Section 3 hereof or certification with respect thereto in Section 7(b) hereof,
or the nonfulfillment of any agreement, covenant or obligation made by
Schlossmann and/or the Schlossmann Trust in this Agreement or the Other
Stockholder Documents executed and delivered by Schlossmann and/or the
Schlossmann Trust in connection herewith.
(f) Entrade's Agreement to Indemnify. Entrade shall indemnify
and hold harmless the Stockholders against and in respect of any and all
liabilities, losses, damages, deficiencies, costs, or expenses (including,
without limitation, the reasonable fees and expenses of counsel) (collectively
"Stockholders' Losses") resulting from any misrepresentation or breach of
representation or warranty in Section 5 hereof or certification with respect
thereto in Section 8(e) hereof, or the nonfulfillment of any agreement, covenant
or obligation made by Entrade in this Agreement or the Other Entrade Documents
executed and delivered by Entrade in connection herewith.
(g) Limitations on Liability of Stockholders. The Stockholders
shall not be liable under this Section 9 for Entrade Losses if such Entrade
Losses in the aggregate are less than $125,000. If the aggregate amount of
Entrade Losses exceed $125,000, then Entrade may only claim
35
<PAGE>
indemnification from the Stockholders for the amount of such Entrade Losses in
excess of the first $125,000. In no event shall the obligation of Haidl and the
Haidl Trust for any Entrade Losses exceed in the aggregate an amount equal to
$10,800,000 plus all amounts (other than interest) paid to the Stockholders
under the Term Notes; provided, however, that nothing contained in this Section
9(g) shall be deemed to affect or otherwise limit the absolute obligation of
Haidl and the Haidl Trust to perform all of their respective covenants and
obligations (i) under this Agreement, (ii) under the Registration Rights
Agreement and the Non-Compete Agreement, and (iii) under the other agreements
referred to in this Agreement. In no event shall the obligation of Schlossmann
and the Schlossmann Trust for any Entrade Losses exceed in the aggregate an
amount equal to $1,080,000 plus all amounts (other than interest) paid to them
under the Term Notes; provided, however, that nothing contained in this Section
9(g) shall be deemed to affect or otherwise limit the absolute obligation of
Schlossmann and the Schlossmann Trust to perform all of their respective
covenants and obligations (i) under this Agreement, (ii) under the Registration
Rights Agreement and the Non-Compete Agreement, and (iii) under the other
agreements referred to in this Agreement.
(h) Limitations on Liability of Entrade. Entrade shall not be
liable under this Section 9 for Stockholders' Losses if such Stockholders'
Losses in the aggregate are less than $125,000. If the aggregate amount of
Stockholders' Losses exceed $125,000, then the Stockholders may only claim
indemnification from Entrade for the amount of such Stockholders' Losses in
excess of the first $125,000. In no event shall the obligation of Entrade for
any Stockholders' Losses exceed in the aggregate $10,800,000 minus all amounts
(other than interest) paid to the Stockholders under the Term Notes; provided,
however, that nothing contained in this Section 9(h) shall be deemed to affect
or otherwise limit the absolute obligation of Entrade to perform all of its
covenants and obligations (i) under the Notes in accordance with their
respective terms, (ii) under this Agreement, (iii) under the Registration Rights
Agreement, and (iv) under the other agreements referred to in this Agreement.
(i) Personal Guaranty of Trust Obligations. Schlossmann hereby
irrevocably and unconditionally guarantees to Entrade the prompt payment,
performance and satisfaction of all of the obligations of the Schlossmann Trust
under this Agreement and the Other Stockholder Documents, and Haidl hereby
irrevocably and unconditionally guarantees to Entrade the prompt payment,
performance and satisfaction of all of the obligations of the Haidl Trust under
this Agreement and the Other Stockholder Documents. The aforesaid guaranties are
guaranties of payment and not of collection. Each of Schlossmann and Haidl
hereby waives notice of the acceptance of the aforesaid guaranties and of
performance or non-performance by the applicable Trust and notice of non-payment
or failure to perform. It is understood and agreed by the parties that the
trustees of the Trusts, acting solely in their capacity as trustees, shall not
be personally liable for the obligations of the Trusts under this Agreement or
the Other Stockholder Documents, except as may be expressly provided in the
applicable Trust instruments.
(j) Claims for Indemnification. If any party hereto believes
it has suffered or incurred any Loss such party (the "Indemnified Party") shall
so notify the party or parties believed to be responsible for such Loss
(collectively, the "Indemnifying Party") promptly in writing describing such
Loss, the amount thereof, if known, and the method of computation of such Loss,
all with reasonable particularity and containing a reference to the provisions
of this Agreement or any
36
<PAGE>
document delivered pursuant hereto in respect of which such Loss shall have
occurred. If any action at law or suit in equity is instituted by or against a
third party with respect to which any party hereto intends to claim any
liability or expense as a Loss hereunder, the Indemnified Party shall promptly
notify the Indemnifying Party of such action or suit. The Indemnifying Party
shall be entitled, at its own expense, to assume control of the defense or
settlement of any matter for which indemnification is sought hereunder and the
parties agree to cooperate in any such defense or settlement and to give each
other full access to all information relevant thereto. The Indemnifying Party
shall not be obligated to indemnify the other party hereunder for any settlement
entered into without the Indemnifying Party's prior written consent, which
consent shall not be unreasonably withheld or delayed.
SECTION 10. TERMINATION; EXPENSES.
(a) Termination. This Agreement may be terminated prior
to the Closing as follows:
(i) at any time by the mutual written consent of
Entrade and the Stockholders;
(ii) by Entrade upon written notice to the
Stockholders if a material breach of a warranty or representation or covenant
made by the Acquired Corporations or any Stockholder shall have occurred and
such breach shall not have been cured, or is not capable of being cured, within
30 days after notice of the existence thereof shall have been given by Entrade
(but in any event prior to the Closing Date);
(iii) by the Stockholders upon written notice to
Entrade if a material breach
of a warranty or representation or covenant made by Entrade shall have occurred
and such breach shall not have been cured, or is not capable of being cured,
within 30 days after notice of the existence thereof shall have been given by
the Stockholders (but in any event prior to the Closing Date);
(iv) by Entrade upon written notice to the
Stockholders if a materially adverse change in the business, financial condition
or prospects of the Acquired Corporations shall have occurred or shall have
become known to Entrade after the date hereof and on or prior to the Closing
Date;
(v) by Entrade upon written notice to the
Stockholders if any material litigation not disclosed in the Nationwide
Disclosure Letter shall be pending or threatened against the Stockholders or the
Acquired Corporations after the date hereof and on or prior to the Closing Date;
(vi) by the Stockholders if any material litigation
not disclosed in the Entrade Disclosure Letter or the Entrade Reports shall be
pending or threatened against Entrade or any of its Subsidiaries after the date
hereof and on or prior to the Closing Date; and
37
<PAGE>
(vii) by either party upon written notice to the
other if the Closing shall not
have occurred by October 15, 1999.
(b) Expenses. Each of the parties to this Agreement shall bear
the expenses incurred by it in connection with the negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, provided, however, that the expenses of the Stockholders and Nationwide
shall be paid by or at the direction of Nationwide subject to the provisions of
Section 1(e) hereof. .
SECTION 11. WAIVER.
Any of the terms or conditions of this Agreement may be waived
at any time and from time to time in writing by the party entitled to the
benefits thereof without affecting any other terms or conditions of this
Agreement.
SECTION 12. NOTICES, ETC.
All notices, requests, demands and other communications
hereunder shall be in writing, and shall be deemed to have been duly given, if
delivered in person or by courier, telegraphed, telexed or by facsimile
transmission or mailed by certified or registered mail, postage prepaid:
If to the Acquired
Corporations: Nationwide Auction Systems
13005 East Temple Avenue
City of Industry, CA 91746
Telecopier: (626) 961-4041
Attn: Don Haidl, President
If to Haidl or the Haidl
Trusts: c/o Don Haidl
3420 Via Oporto, Suite 204
Newport Beach, CA 92663-3938
If to Schlossmann or the
Schlossmann Trust: c/o Corey Schlossmann
6719 Sale Avenue
West Hills, CA 91307
38
<PAGE>
With a copy, with respect
to each of the above, to: Parker, Milliken, Clark, O'Hara
& Samuelian
ARCO Center, 27th Floor
333 South Hope Street
Los Angeles, CA 90071
Telecopier: (213) 683-6669
Attn: Richard D. Robins, Esquire
If to Entrade: Entrade Inc.
500 Central Avenue
Northfield, IL 60093
Telecopier: (847) 441-6959
Attn: Mark Santacrose, President and
Chief Executive Officer
With a copy to: Duane, Morris & Heckscher, LLP
One Liberty Place
Philadelphia, PA 19103
Telecopier: (215) 979-1020
Attention: Sheldon M. Bonovitz, Esquire
Any party may, by written notice to the other, change the address to which
notices to such party are to be delivered or mailed.
SECTION 13. ENTIRE AGREEMENT; AMENDMENT.
This Agreement and the other agreements referred to herein and entered
into in connection herewith set forth the entire agreement and understanding of
the parties in respect of the transactions contemplated hereby and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intention has
been made by the Stockholders, the Acquired Corporations, or Entrade which is
not embodied in this Agreement or the other agreements referred to herein and
entered into in connection herewith, the Exhibits hereto, or the written
statements, certificates or other documents delivered pursuant hereto, and
neither the Stockholders and the Acquired Corporations nor Entrade shall be
bound by or liable for any alleged representation, promise, inducement or
statement of intention not so set forth. This Agreement may be amended or
modified only by a written instrument executed by Entrade, the Acquired
Corporations and the Stockholders or by their successors and assigns.
SECTION 14. GENERAL.
This Agreement: (i) shall be construed and enforced in accordance with
the laws of the State of Delaware, without giving effect to the choice of law
principles thereof; (ii) shall inure to the benefit of and be binding upon the
successors and assigns of Entrade, the Acquired Corporations and Stockholders,
nothing in this Agreement, expressed or implied, being intended to confer upon
any other person any rights or remedies hereunder; and (iii) may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same
39
<PAGE>
instrument. A facsimile of an executed copy of this Agreement shall have the
same force and effect as an original executed copy. No party may assign his or
its rights hereunder without the prior written consent of the other parties
hereto. The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 15. DEFINED TERMS.
As used in this Agreement, the following terms shall have the meanings
set forth below:
Affiliate. An individual, corporation, partnership, trust,
joint venture or other entity or person that is in control of, controlled by or
under common control with the applicable party.
Approvals. The governmental and regulatory approvals required
prior to the consummation of the transactions contemplated in this Agreement.
Closing. The closing of the purchase and sale of the Shares
pursuant to this Agreement.
Closing Date. The date on which the Closing shall take place.
Non-Compete Agreement. The Non-Compete Agreement to be entered
into by the Individual Stockholders pursuant to Section 7(j) hereof, in the form
of Exhibit 7(j) hereto.
Other Nationwide Documents. As defined in Section 4(b) of this
Agreement.
Other Entrade Documents. As defined in Section 5(a) of this
Agreement.
Other Stockholder Documents. As defined in Section 3(b) of
this Agreement.
Registration Rights Agreement. The Registration Rights
Agreement to be entered into among Entrade and the Stockholders on the Closing
Date pursuant to Sections 7(k) hereof, in the form of Exhibit 7(k) hereto.
Stockholders. The persons listed on Exhibit l(a) hereto who
collectively own all of the issued and outstanding Common Stock of the Acquired
Corporations.
Subsidiaries. Any corporation or other organization, whether
incorporated or unincorporated, of which a party directly or indirectly owns or
controls at least eighty percent (80%) of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is a
general partner or manager. References in this Agreement to "Subsidiaries of
Entrade" or "Entrade and each of its Subsidiaries" shall mean the Entrade
Subsidiaries entrade.com, Inc. and ARTRA Group Incorporated, which are both
Pennsylvania corporations.
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<PAGE>
Shares. The shares of Common Stock of the Acquired
Corporations being conveyed and acquired by Entrade hereunder, representing all
of the issued and outstanding shares of Common Stock of the Acquired
Corporations.
Tax. As defined in Section 4(i) of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
ENTRADE INC.
By: /s/ John G. Hamm
-------------------------------
Title: Executive Vice President
PUBLIC LIQUIDATION SYSTEMS, INC.
By: /s/ Don Haidl
-------------------------------
Title: President/CEO
ASSET LIQUIDATION GROUP, INC.
By: /s/ Don Haidl
-------------------------------
Title: President/CEO
STOCKHOLDERS:
/s/ Don Haidl
-----------------------------------
DON HAIDL
/s/ Corey P. Schlossmann
-----------------------------------
COREY P. SCHLOSSMANN
CAPITAL DIRECT 1999 TRUST
By:/s/ Peggy Haidl
-----------------------------------
PEGGY HAIDL, Trustee
CORE CAPITAL IV TRUST
By:/s/ Peggy Haidl
-----------------------------------
PEGGY HAIDL, Trustee
42
<PAGE>
CLOSING LETTER
The undersigned parties agree that the Stock Purchase
Agreement ("SPA") dated as of October 15, 1999 by and among ENTRADE INC., DON
HAIDL, COREY P. SCHLOSSMANN, PEGGY HAIDL as trustee of the CAPITAL DIRECT 1999
TRUST and as trustee of the CORE CAPITAL IV TRUST, PUBLIC LIQUIDATION SYSTEMS,
INC. and ASSET LIQUIDATION GROUP, INC. is amended and modified by this Closing
Letter as provided below.
This Closing Letter is being delivered by each of the parties
to the SPA in order to facilitate the closing of the transactions contemplated
in the SPA. This Closing Letter is deemed delivered concurrently with the
delivery of the SPA by the parties thereto and the terms of this Closing Letter
shall supplement and supercede any provisions in the SPA to the contrary. To the
extent of any inconsistency in the provisions of the SPA and this Closing
Letter, the provisions of this Closing Letter shall control. The definitions
contained in the SPA are incorporated herein by this reference.
1. Associates Commercial Corporation and Associates Leasing, Inc.
(together "Associates") currently does business as a consignor with Nationwide.
Associates has filed UCC-1 financing statements in the States of California and
Missouri. Although the intent of the financing statements is to provide
Associates with security interests in goods consigned or bailed to Nationwide by
Associates, the current filed financing statements are broader and cover the
inventory, equipment and other items reflected on the example attached hereto as
Exhibit 1 to this Closing Letter.
2. Associates has provided a letter to Nationwide, a copy of which is
attached hereto as Exhibit 2. Entrade and Nationwide on the one hand and Haidl
on the other hand will each use their best efforts to cause Associates to file
modified UCC's in accordance with Exhibit 2 to this Closing Letter.
3. Nationwide currently has outstanding various bonds (the "Bonds")
which are set forth on the Schedule attached as Exhibit 3. Haidl has personally
guaranteed most of such Bonds.
4. Entrade is willing to proceed to close the transactions contemplated
by the SPA if Haidl agrees to indemnity and hold Entrade and Nationwide harmless
as provided in paragraph 5 below. Haidl is willing to proceed to close the
transactions contemplated by the SPA if Entrade and Nationwide agree to remove
Haidl as a guarantor on the Bonds and hold Haidl harmless as provided in
paragraph 6 below.
5. Haidl agrees that he will indemnity and hold harmless Entrade from
any Entrade Losses resulting from Associates' not filing the modified UCC's as
provided in paragraph 2 and Associates thereafter being deemed to have a
security interest in assets owned by Nationwide as a result of any of the UCC-1
financing statements referred to in Exhibit 1 to this Closing Letter. This
indemnity will apply notwithstanding any reference to the Associates UCC-1's
referenced in the Nationwide Disclosure Letter.
1
<PAGE>
6. Entrade and Nationwide jointly and severally covenant to Haidl that
promptly after the Closing, they will use their best efforts to obtain releases
of Haidl as a guarantor (i) from any of the Bonds for which Haidl is a
guarantor, (ii) from his guaranty to Imperial Bank, and (iii) from his guaranty
to Regions Bank. Any losses or costs suffered by Haidl as a result of a breach
of this covenant shall not be limited by any provision otherwise limiting losses
as set forth in the SPA.
7. The covenants, representations and warranties contained in
Paragraphs 5 and 6 of this closing letter shall not be subject to the $125,000
thresholds which are set forth in Sections 9(g) and 9(h) of the SPA.
8. The parties have agreed that the $14,000,000 of Term Notes shall be
dated October 15, 1999, but interest at 8% per annum will be calculated on such
amount for the period from October 1, 1999 through October 15, 1999 and such
amount (the "15 Day Interest Amount") will be paid by Entrade as the obligor
under the Term Notes and, unless waived by the Stockholders, the Notes will be
modified as necessary to provide for such interest payment. To the fullest
extent possible, the 15 Day Interest Amount shall be deemed earned over the life
of the Notes and, in any event, no payment under the Notes shall be made to the
extent it exceeds any applicable usury limit. The amount of interest calculated
in the preceding sentence shall by paid at the same time as and be in addition
to the first Note interest payment due January 1, 2000.
9. The parties agree that with respect to the proviso contained in
Section 9(h) of the SPA relating to Limitation on Liability of Entrade, the
reference to the absolute obligation of Entrade to perform all of its covenants
and obligations under the Notes means that the Notes constitute obligations and
liabilities of Entrade independent of the SPA and are not subject to any
limitation on Entrade's liability pursuant to Section 9(h) of the SPA. Thus, for
example, any non-payment of interest or principal under the Notes can give rise
to a claim for any amounts due on account of a breach or non-performance under
the Notes to the extent provided in the Notes and there is no offset for the
first $125,000 of losses or any limitation on the liability of Entrade based on
Section 9(h) of the SPA.
10. This Closing Letter and each provision hereof was negotiated by
each of the parties and neither this closing letter nor any provision of it
shall be interpreted for or against any party on the basis the party or its
attorney drafted the closing letter or any provision thereof. This Closing
Letter may be executed in two or more counterparts each of wich shall be deemed
an original but all of which together shall constitute one and the same
instrument. A facsimile of an executed copy of this Closing Letter shall have
the same force and effect as an original executed copy.
2
<PAGE>
ENTRADE INC.
By: /s/ Mark Santacrose
--------------------------
Title: President
PUBLIC LIQUIDATION SYSTEMS, INC.
By: /s/ Don Haidl
--------------------------
Title: President/CEO
ASSET LIQUIDATION GROUP, INC.
By: /s/ Don Haidl
--------------------------
Title: President/CEO
STOCKHOLDERS:
/s/ Don Haidl
- -------------------------------
DON HAIDL
/s/ Corey P. Schlossmann
- -------------------------------
COREY P. SCHLOSSMANN
CAPITAL DIRECT 1999 TRUST
By: /s/ Peggy Haidl
- -------------------------------
PEGGY HAIDL, Trustee
CORE CAPITAL IV TRUST
By: /s/ Peggy Haidl
- -------------------------------
PEGGY HAIDL, Trustee
3
Exhibit 10.1
As of
$4,320,000 October 15, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, Entrade Inc., a Pennsylvania corporation
("Payor"), hereby promises to pay to the order of DON HAIDL ("Payee") at 3420
Via Oporto, Suite 204, Newport Beach California 92663-3928, or at such other
address as Payee may specify to Payor in writing, in lawful money of the United
States of America and in immediately available funds ("Good Funds"), Four
Million Three Hundred Twenty Thousand dollars ($4,320,000.00) on November 29,
1999, subject to the provisions of Section 1 hereof. Payor hereby further
promises to pay to Payee interest on the principal amount hereof outstanding
from time to time, in Good Funds and at the same address, at an annual rate of
eight percent (8%) on the date on which the principal amount hereof is due and
payable.
This Note is one of a series of Promissory Notes in the
aggregate principal amount of $18,800,000 the "Closing Notes" delivered pursuant
to a Stock Purchase Agreement (the "Stock Purchase Agreement") among Payor,
Public Liquidation Systems, Asset Liquidation Group, Inc., Payee, Peggy Haidl,
as Trustee of the Capital Direct 1999 Trust and of the Core Capital IV Trust,
and Corey P. Schlossmann, in partial consideration of the purchase by Payor of
all of the outstanding shares of the capital stock of Public Liquidation
Systems, Inc. and Asset Liquidation Group, Inc. (together, the "Company") owned
by Peggy Haidl, as Trustee of the Capital Direct 1999 Trust and of the Core
Capital IV Trust, Corey P. Schlossmann and Payee.
1. Prepayment.
1.1 Payor may prepay all or any portion of the principal amount of this
Note at any time and from time to time; provided that the amount of such
prepayment shall be not less than $50,000.
1.2 Payor shall prepay this Note if (i) Payor becomes obligated to
prepay any of the other Closing Notes, in which event Payor shall prepay the
same percentage of the principal amount hereof that it pays of each other
Closing Note or (ii) Payor receives the proceeds of any debt or equity
financing, or any combination thereof, in excess of $4,800,000 (the "New
Financing") or the proceeds of any sale of its assets in excess of $4,800,000
(an "Asset Sale"), in either of which events Payor shall prepay the principal
amount hereof and all accrued interest thereon immediately upon its receipt of
such proceeds or (iii) Payor does not receive a commitment for the New Financing
or an Asset Sale on or prior to November 15, 1999.
1.3 Any optional or mandatory prepayment shall be applied, first, to
the payment of all accrued and unpaid interest on the amount so prepaid to the
date of such prepayment and then to the remaining installments of principal due
hereunder in the inverse order of their maturity.
<PAGE>
2. Conversion
2.1 If Payor receives the New Financing, Payor shall immediately notify
Payee and Payee may, in lieu of accepting the prepayment of the entire principal
amount hereof and all accrued interest thereon in Good Funds, elect to accept as
payment of up to 20% of the principal amount hereof securities of the same class
and series and with the same terms as the securities of Payor issued as part of
the New Financing (the "New Financing Securities"). If Payor receives the New
Financing and Payee elects to receive New Financing Securities in partial
payment hereof, Payee shall immediately notify Payor and specify the principal
amount hereof, which shall not exceed 20% of the original principal amount
hereof, to be paid thereby (the "Elected Portion"). If Payee elects to receive
New Financing Securities for the Elected Portion, Payor shall issue and deliver
to Payee New Financing Securities in an amount equal to the Elected Portion
divided by the price at which such New Financing Securities were issued in the
New Financing. Payor shall pay the balance of the principal amount hereof and
all interest accrued on the entire principal amount hereof in Good Funds.
2.2 If Payor does not receive the New Financing or consummate an Asset
Sale or is required to prepay this Note pursuant to clause (iii) of Section 1.2
hereof, Payor may, in lieu of paying the principal amount hereof and all accrued
interest thereon in Good Funds, issue to Payee a number of shares of its Common
Stock equal to the principal amount hereof then outstanding and all interest
accrued and unpaid hereon divided by the lesser of (i) $17.00 or (ii) 85% of the
average of the closing prices of such Common Stock on the New York Stock
Exchange on the last five trading days ending on the date on which such payment
would otherwise be due hereunder.
3. Default
If Payor fails to make any prepayment or payment of principal or
interest when due hereunder or an Event of Default shall occur under any of the
other Closing Notes, then the entire outstanding principal balance hereof
(including accrued but unpaid interest thereon) shall be immediately due and
payable without presentment, demand, protest or other notice and Payee may
proceed to protect and enforce Payee's rights either by suit in equity or by
action at law, or both, whether for the specific performance of any covenant,
condition or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or proceed to enforce the payment of this Note or to
enforce any other legal or equitable right of Payee hereunder.
4. Waivers.
Payor, for itself, its legal representatives, successors and assigns,
expressly waives, to the extent not specifically provided for herein,
presentment, protest, demand, notice of dishonor, notice of nonpayment, notice
of maturity, notice of protest, presentment for the purpose of accelerating
maturity and diligence in collection.
2
<PAGE>
5. Attorneys' Fees.
If it should become necessary or advisable to employ counsel to collect
this Note, Payor agrees to pay the reasonable attorneys' fees and costs of the
holder hereof, whether or not suit is brought. Further, all attorneys' fees
incurred by Payee in enforcement of a judgment are recoverable separately from
any attorneys' fees as aforementioned. In addition, this post-judgment
attorneys' fees provision is intended to be severable from the other provisions
of this Note and is further intended to survive any judgment and is not to be
deemed merged into such judgment.
6. Amendments.
This Note may only be changed, modified, amended or terminated by a
writing signed by both parties.
7. Governing Law.
This Note shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware applicable to
instruments made and to be performed entirely in such jurisdiction without
giving effect to the conflicts of laws principles thereof.
ENTRADE, INC.
By:/s/ Mark F. Santacrose
----------------------------------
President
3
Exhibit 10.2
As of
$480,000 October 15, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, Entrade Inc., a Pennsylvania corporation
("Payor"), hereby promises to pay to the order of COREY P. SCHLOSSMANN ("Payee")
at 13005 East Temple Avenue, City of Industry, California 91746, or at such
other address as Payee may specify to Payor in writing, in lawful money of the
United States of America and in immediately available funds ("Good Funds"), Four
Hundred Eighty Thousand dollars ($480,000.00) on November 29, 1999, subject to
the provisions of Section 1 hereof. Payor hereby further promises to pay to
Payee interest on the principal amount hereof outstanding from time to time, in
Good Funds and at the same address, at an annual rate of eight percent (8%) on
the date on which the principal amount hereof is due and payable.
This Note is one of a series of Promissory Notes in the
aggregate principal amount of $18,800,000 the "Closing Notes" delivered pursuant
to a Stock Purchase Agreement (the "Stock Purchase Agreement") among Payor,
Public Liquidation Systems, Asset Liquidation Group, Inc., Payee and Peggy
Haidl, as Trustee of the Capital Direct 1999 Trust and of the Core Capital IV
Trust, and Don Haidl in partial consideration of the purchase by Payor of all of
the outstanding shares of the capital stock of Public Liquidation Systems, Inc.
and Asset Liquidation Group, Inc. (together, the "Company") owned by Peggy
Haidl, as Trustee of the Capital Direct 1999 Trust and of the Core Capital IV
Trust, Don Haidl and Payee.
1. Prepayment.
1.1 Payor may prepay all or any portion of the principal amount of this
Note at any time and from time to time; provided that the amount of such
prepayment shall be not less than $50,000.
1.2 Payor shall prepay this Note if (i) Payor becomes obligated to
prepay any of the other Closing Notes, in which event Payor shall prepay the
same percentage of the principal amount hereof that it pays of each other
Closing Note or (ii) Payor receives the proceeds of any debt or equity
financing, or any combination thereof, in excess of $4,800,000 (the "New
Financing") or the proceeds of any sale of its assets in excess of $4,800,000
(an "Asset Sale"), in either of which events Payor shall prepay the principal
amount hereof and all accrued interest thereon immediately upon its receipt of
such proceeds or (iii) Payor does not receive a commitment for the New Financing
or an Asset Sale on or prior to November 15, 1999.
<PAGE>
1.3 Any optional or mandatory prepayment shall be applied, first, to
the payment of all accrued and unpaid interest on the amount so prepaid to the
date of such prepayment and then to the remaining installments of principal due
hereunder in the inverse order of their maturity.
2. Conversion
2.1 If Payor receives the New Financing, Payor shall immediately notify
Payee and Payee may, in lieu of accepting the prepayment of the entire principal
amount hereof and all accrued interest thereon in Good Funds, elect to accept as
payment of up to 20% of the principal amount hereof securities of the same class
and series and with the same terms as the securities of Payor issued as part of
the New Financing (the "New Financing Securities"). If Payor receives the New
Financing and Payee elects to receive New Financing Securities in partial
payment hereof, Payee shall immediately notify Payor and specify the principal
amount hereof, which shall not exceed 20% of the original principal amount
hereof, to be paid thereby (the "Elected Portion"). If Payee elects to receive
New Financing Securities for the Elected Portion, Payor shall issue and deliver
to Payee New Financing Securities in an amount equal to the Elected Portion
divided by the price at which such New Financing Securities were issued in the
New Financing. Payor shall pay the balance of the principal amount hereof and
all interest accrued on the entire principal amount hereof in Good Funds.
2.2 If Payor does not receive the New Financing or consummate an Asset
Sale or is required to prepay this Note pursuant to clause (iii) of Section 1.2
hereof, Payor may, in lieu of paying the principal amount hereof and all accrued
interest thereon in Good Funds, issue to Payee a number of shares of its Common
Stock equal to the principal amount hereof then outstanding and all interest
accrued and unpaid hereon divided by the lesser of (i) $17.00 or (ii) 85% of the
average of the closing prices of such Common Stock on the New York Stock
Exchange on the last five trading days ending on the date on which such payment
would otherwise be due hereunder.
3. Default
If Payor fails to make any prepayment or payment of principal or
interest when due hereunder or an Event of Default shall occur under any of the
other Closing Notes, then the entire outstanding principal balance hereof
(including accrued but unpaid interest thereon) shall be immediately due and
payable without presentment, demand, protest or other notice and Payee may
proceed to protect and enforce Payee's rights either by suit in equity or by
action at law, or both, whether for the specific performance of any covenant,
condition or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or proceed to enforce the payment of this Note or to
enforce any other legal or equitable right of Payee hereunder.
4. Waivers.
Payor, for itself, its legal representatives, successors and assigns,
expressly waives, to the extent not specifically provided for herein,
presentment, protest, demand, notice of dishonor, notice
2
<PAGE>
of nonpayment, notice of maturity, notice of protest, presentment for the
purpose of accelerating maturity and diligence in collection.
5. Attorneys' Fees.
If it should become necessary or advisable to employ counsel to collect
this Note, Payor agrees to pay the reasonable attorneys' fees and costs of the
holder hereof, whether or not suit is brought. Further, all attorneys' fees
incurred by Payee in enforcement of a judgment are recoverable separately from
any attorneys' fees as aforementioned. In addition, this post-judgment
attorneys' fees provision is intended to be severable from the other provisions
of this Note and is further intended to survive any judgment and is not to be
deemed merged into such judgment.
6. Amendments.
This Note may only be changed, modified, amended or terminated by a
writing signed by both parties.
7. Governing Law.
This Note shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware applicable to
instruments made and to be performed entirely in such jurisdiction without
giving effect to the conflicts of laws principles thereof.
ENTRADE, INC.
By:/s/ Mark F. Santacrose
----------------------------------
President
3
Exhibit 10.3
As of
$12,600,000 October 15, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, Entrade Inc., a Pennsylvania corporation
("Payor"), hereby promises to pay to the order of DON HAIDL ("Payee") at 3420
Via Oporto, Suite 204, Newport Beach, California 92663-3938, or at such other
address as Payee may specify to Payor in writing, in lawful money of the United
States of America and in immediately available funds, TWELVE MILLION SIX HUNDRED
THOUSAND dollars ($12,600,000.00), in three installments as follows: $3,150,000
on April 1, 2000, $3,150,000 on October 1, 2000 and $6,300,000 on October 1,
2001. Payor hereby further promises to pay to Payee interest on the principal
amount hereof outstanding from time to time, in like money and at the same
address, at an annual rate of eight percent (8%) in quarterly installments in
arrears commencing on January 1, 2000, and continuing on the 1st day of each
April, July, October, and January thereafter until the principal amount hereof
is paid in full.
This Note is one of a series of Promissory Notes in the
aggregate principal amount of $18,800,000 delivered pursuant to a Stock Purchase
Agreement (the "Stock Purchase Agreement") among Payor, Public Liquidation
Systems, Inc., Asset Liquidation Group, Inc., Payee, Peggy Haidl, as Trustee of
the Capital Direct 1999 Trust and of the Core Capital IV Trust, and Corey P.
Schlossmann, in partial consideration of the purchase by Payor of all of the
outstanding shares of the capital stock of Public Liquidation Systems, Inc. and
Asset Liquidation Group, Inc. (together, the "Company") owned by Peggy Haidl, as
Trustee of the Capital Direct 1999 Trust and of the Core Capital IV Trust, Corey
P. Schlossmann and Payee. Payor has also issued and delivered to Payee, Peggy
Haidl, as Trustee of the Capital Direct 1999 Trust and of the Core Capital IV
Trust, and Corey P. Schlossmannn, as additional consideration under the Stock
Purchase Agreement, 1,570,000 shares of its Common Stock and has agreed to
register the sale of such shares under a Stock Restriction and Registration
Rights Agreement, dated the date hereof, among Payor, Payee, Peggy Haidl, as
Trustee of the Capital Direct 1999 Trust and of the Core Capital IV Trust, and
Corey P. Schlossmann (the "Registration Rights Agreement"). This Note is the
absolute and unconditional obligation of Payor and is not subject to offset or
deduction.
1. Prepayment.
1.1 Payor may prepay all or any portion of the principal amount of this
Note at any time and from time to time; provided that the amount of such
prepayment shall be not less than $50,000.
<PAGE>
1.2 Payor shall prepay this Note if (i) Payor or any member of the
consolidated (as defined for purposes of generally accepted accounting
principles) group of companies of which Payor is a member (a "Consolidated
Affiliate"), other than the Company, incurs or otherwise becomes liable to a
creditor which is not Payor or any Consolidated Affiliate for any indebtedness
either for borrowed money for or as a deferred payment of all or any portion of
the purchase price paid or payable as consideration for any acquisition of
another business by merger, consolidation, purchase of securities, purchase of
assets or otherwise, whether directly or as a guarantor or otherwise, or Payor
or any Consolidated Affiliate subjects any of its assets to any encumbrance to
secure any such indebtedness, whether or not it is otherwise liable therefor
(all of the foregoing are referred to as "Acquisition Debt") or (ii) Payor or
any Consolidated Affiliate, other than the Company, receives funds from the
Company that it utilizes, directly or indirectly, as all or any portion of the
purchase price paid or payable as consideration for any acquisition of another
business by merger, consolidation, purchase of stock, purchase of assets or
otherwise ("Company Funded Consideration"). The amount of such required
prepayment shall be equal to twenty-five percent of the principal amount of the
Acquisition Debt or Company Funded Consideration. If it is a Consolidated
Affiliate that incurs the Acquisition Debt or receives the Company Funded
Consideration, then, prior to, and as a condition of, such incurrence or
receipt, either (a) such Consolidated Affiliate shall become jointly and
severally liable as a Payor hereunder with respect to any prepayment obligation
of Payor that matures as the result of such incurrence or receipt pursuant to an
instrument in form and substance reasonably satisfactory to Payee or (b) Payor
shall deliver to Payee a certificate executed on behalf of Payor by its chief
executive officer or chief financial officer demonstrating to the reasonable
satisfaction of Payee the ability of Payor to comply fully with its prepayment
obligation that matures as a result of such incurrence or receipt.
1.3 Payor shall also prepay this Note on such date as it receives the
proceeds of any public offering of its Common Stock pursuant to a registration
statement filed and effective under the Securities Act of 1933, as amended. The
amount of such required prepayment shall be the product obtained by multiplying
the then outstanding principal amount hereof by a faction, the numerator of
which is the lesser of $30,000,000 or the net proceeds of such offering to
Payor, after deducting underwriters = discounts or commissions if any, and all
of the expenses of such offering, and the denominator of which is $30,000,000.
1.4 Notwithstanding Sections 1.2 and 1.3, Payor shall not be required
to prepay any portion of the principal amount hereof upon (i) the incurrence of
any Acquisition Debt or (ii) the receipt of net proceeds from a public offering
of its Common Stock of less than $30,000,000 or (iii) the receipt by Payor or
any Consolidated Affiliates, other than the Company, of Company Funded
Indebtedness if, in the case of (i), (ii) or (iii), the Company so elects by
written notice to Payee, in which event the provisions of Section 5 of the
Registration Rights Agreement shall apply.
1.5 Any optional or mandatory prepayment shall be applied, first, to
the payment of all accrued and unpaid interest on the amount so prepaid to the
date of such prepayment and then to the remaining installments of principal due
hereunder in the inverse order of their maturity.
2
<PAGE>
2. Covenants
2.1 So long as any portion of the principal amount of or interest on
this Note remains outstanding and unpaid,
2.1.1 Payor shall provide to Payee written notice of the
occurrence of any of the following events not later than fifteen calendar days
following the later of such occurrence or Payors knowledge thereof: (i) the
Internal Revenue Service or any other federal, state or local taxing authority
shall allege any default by Payor or any subsidiary of Payor in the payment of
any tax or make any assessment in respect thereof and such default or assessment
is reasonably expected to have a material adverse effect on the financial
position, operations, assets or business of Payor; or (ii) any litigation or
proceeding shall be brought against Payor or any Consolidated Affiliate before
any court or administrative agency which, if successful, is reasonably expected
to have a material adverse effect on the financial position, operations, assets
or business of Payor or any Consolidated Affiliate.
2.1.2 The indebtedness represented by this Note shall not be
subordinated or rendered junior in right of payment to any other indebtedness of
Payor.
2.2 If an Event of Default or an event which, with notice or lapse of
time or both, would become an Event of Default hereunder occurs and so long as
such Event of Default continues, uncured and unwaived, Payor shall not declare,
pay or make any dividend or distribution (in cash, property or obligations) on
any shares of its capital stock then outstanding or on any warrants, options or
other rights with respect to any class of its capital stock or apply or permit
any of its subsidiaries to apply any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree, or permit
any of its subsidiaries to agree, to purchase or redeem, or set aside funds to
purchase or redeem, any shares of any class of its capital stock then
outstanding or any warrants, options or other rights with respect to any class
of its capital stock unless, in each case, the Company demonstrates to the
reasonable satisfaction of Payee that the taking of such action would not impair
the business, assets, liabilities or financial condition of Payor or the ability
of Payor to make any payment of principal or interest when due hereunder.
3. Default
If any of the following events (each, an "Event of Default") shall
occur:
3.1 Payor shall fail to pay any prepayment or any installment of
principal or interest within ten calendar days following the due date thereof;
or
3
<PAGE>
3.2 (i) a decree or order by a court having jurisdiction in the
premises shall have been entered for relief in respect of Payor or any
Consolidated Affiliate under Title 11 of the United States Code, as now
constituted or as hereafter amended (the "Bankruptcy Code"), or under any other
applicable Federal or State law, or (ii) a receiver, custodian, liquidator,
assignee, trustee, sequestrator or other similar official of Payor or any
Consolidated Affiliate or of any substantial part of its assets or property
shall have been appointed; or (iii) Payor or any Consolidated Affiliate shall
file a petition or answer or consent seeking relief under the Bankruptcy Code,
or under any other applicable Federal or State law or (iv) Payor or any
Consolidated Affiliate shall make an assignment for the benefit of creditors or
admit in writing its inability to pay its debts generally as they become due or
take action in furtherance of any such action and, with respect to (i) or (ii),
either (a) Payor or such Consolidated Affiliate shall consent to such decree,
order or appointment or (b) any such decree, order or appointment shall continue
unstayed and in effect for a period of sixty (60) consecutive calendar days;
unless, if any of the foregoing events occurs by or with respect to a
Consolidated Affiliate, such event does not and will not impair the business,
assets, liabilities or financial condition of Payor or the ability of Payor to
make any payments of principal or interest when due hereunder; or
3.3 the Company shall incur any obligation for borrowed money to a
creditor that is not Payor or a Consolidated Affiliate, whether directly or as a
guarantor or otherwise, or subject any of its assets to any encumbrance to
secure any such indebtedness, whether or not it is otherwise liable therefor,
without the prior written consent of Payee; provided, however, that Payee shall
not unreasonably withhold or delay such consent nor shall prepayment of all or
any portion of the Note be a condition of such consent if, in each case, such
indebtedness is solely for the benefit of the Company and is not for the benefit
of Payor or any other Consolidated Affiliate; or
3.4 any representation made by Payor under any of the following
provisions of the Stock Purchase Agreement, namely Sections 5(a) through 5(f),
inclusive, paragraphs (i), (ii), (vii), (ix), (x), (xii), (xiii) (xiv) or (xv)
(insofar as such paragraph (xv) applies to any of the other provisions of the
Stock Purchase Agreement referred to in this Section 3.4) of Section 5(g),
Section 5(n), Section 5(o), Section 5(s) or Section 5(t), shall prove to have
been false or misleading in any material respect when made unless (a) such
misrepresentation is based upon a misrepresentation made to Payor by a third
party, (b) Payor demonstrates to the reasonable satisfaction of Payee that it
has contractual or other recourse against such third party that, if successfully
pursued, could reasonably be expected to provide full compensation to Payor for
the misrepresentation by such third party, (c) Payor initiates and diligently
pursues such recourse, (d) Payor keeps Payee fully informed as to the progress
thereof; provided, however that, if, notwithstanding the foregoing, Payee
determines that such misrepresentation creates an imminent danger that Payor
will fail to make any payment of principal or interest when due under this Note,
it shall so notify Payor, in which event such misrepresentation shall be an
Event of Default hereunder; or
4
<PAGE>
3.5 any material default shall occur and be continuing for forty-five
calendar days following notice thereof from Payee to Payor in the due observance
or performance by Payor of any material covenant, agreement or condition of
Payor contained herein or in the Registration Rights Agreement; or
3.6 any material default shall occur and be continuing for forty-five
calendar days following notice thereof from Payee to Payor in the due observance
or performance by Payor of the provisions of Section 9 in the Stock Purchase
Agreement; or
3.7 Payor or any Consolidated Affiliate shall suspend or discontinue
its business for thirty calendar days or more, other than such a discontinuance
as the result of the sale of the business for fair market value, and, if such
event occurs with respect to a Consolidated Affiliate, such business shall not
be resumed and continued by Payor or any other Consolidated Affiliate, then, the
entire outstanding principal balance hereof (including accrued but unpaid
interest thereon) shall be immediately due and payable without presentment,
demand, protest or other notice and Payee may proceed to protect and enforce
Payee=s rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in this Note or in aid of the exercise of any power granted in this Note, or
proceed to enforce the payment of this Note or to enforce any other legal or
equitable right of Payee hereunder.
4. Waivers.
Payor, for itself, its legal representatives, successors and assigns,
expressly waives, to the extent not specifically provided for herein,
presentment, protest, demand, notice of dishonor, notice of nonpayment, notice
of maturity, notice of protest, presentment for the purpose of accelerating
maturity and diligence in collection.
5. Attorneys= Fees.
If it should become necessary or advisable to employ counsel to collect
this Note, Payor agrees to pay the reasonable attorneys= fees and costs of the
holder hereof, whether or not suit is brought. Further, all attorneys= fees
incurred by Payee in enforcement of a judgment are recoverable separately from
any attorneys= fees as aforementioned. In addition, this post-judgment
attorneys= fees provision is intended to be severable from the other provisions
of this Note and is further intended to survive any judgment and is not to be
deemed merged into such judgment.
6. Amendments.
This Note may only be changed, modified, amended or terminated by a
writing signed by both parties.
5
<PAGE>
7. Governing Law.
This Note shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware applicable to
instruments made and to be performed entirely in such jurisdiction without
giving effect to the conflicts of laws principles thereof.
ENTRADE, INC.
By:/s/John Hamm
---------------------------
Executive Vice President
6
Exhibit 10.4
As of
$1,400,000 October 15, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, Entrade Inc., a Pennsylvania corporation
("Payor"), hereby promises to pay to the order of COREY P. SCHLOSSMANN ("Payee")
at 13005 East Temple Avenue, City of Industry, California 91746, or at such
other address as Payee may specify to Payor in writing, in lawful money of the
United States of America and in immediately available funds, ONE MILLION FOUR
HUNDRED THOUSAND dollars ($1,400,000.00), in three installments as follows:
$350,000 on April 1, 2000, $350,000 on October 1, 2000 and $700,000 on October
1, 2001. Payor hereby further promises to pay to Payee interest on the principal
amount hereof outstanding from time to time, in like money and at the same
address, at an annual rate of eight percent (8%) in quarterly installments in
arrears commencing on January 1, 2000, and continuing on the 1st day of each
April, July, October, and January thereafter until the principal amount hereof
is paid in full.
This Note is one of a series of Promissory Notes in the
aggregate principal amount of $18,800,000 delivered pursuant to a Stock Purchase
Agreement (the "Stock Purchase Agreement") among Payor, Public Liquidation
Systems, Inc., Asset Liquidation Group, Inc., Payee, Peggy Haidl, as Trustee of
the Capital Direct 1999 Trust and of the Core Capital IV Trust, and Don Haidl,
in partial consideration of the purchase by Payor of all of the outstanding
shares of the capital stock of Public Liquidation Systems, Inc. and Asset
Liquidation Group, Inc. (together, the "Company") owned by Peggy Haidl, as
Trustee of the Capital Direct 1999 Trust and of the Core Capital IV Trust, Don
Haidl and Payee. Payor has also issued and delivered to Payee, Peggy Haidl, as
Trustee of the Capital Direct 1999 Trust and of the Core Capital IV Trust, and
Don Haidl, as additional consideration under the Stock Purchase Agreement,
1,570,000 shares of its Common Stock and has agreed to register the sale of such
shares under a Stock Restriction and Registration Rights Agreement, dated the
date hereof, among Payor, Payee, Peggy Haidl, Trustee of the Capital Direct 1999
Trust and of the Core Capital IV Trust, and Don Haidl (the "Registration Rights
Agreement"). This Note is the absolute and unconditional obligation of Payor and
is not subject to offset or deduction.
1. Prepayment.
1.1 Payor may prepay all or any portion of the principal amount of this
Note at any time and from time to time; provided that the amount of such
prepayment shall be not less than $50,000.
1.2 Payor shall prepay this Note if (i) Payor or any member of the
consolidated (as defined for purposes of generally accepted accounting
principles) group of companies of which Payor is a member (a "Consolidated
Affiliate"), other than the Company, incurs or otherwise becomes liable to
<PAGE>
a creditor which is not Payor or any Consolidated Affiliate for any indebtedness
either for borrowed money for or as a deferred payment of all or any portion of
the purchase price paid or payable as consideration for any acquisition of
another business by merger, consolidation, purchase of securities, purchase of
assets or otherwise, whether directly or as a guarantor or otherwise, or Payor
or any Consolidated Affiliate subjects any of its assets to any encumbrance to
secure any such indebtedness, whether or not it is otherwise liable therefor
(all of the foregoing are referred to as "Acquisition Debt") or (ii) Payor or
any Consolidated Affiliate, other than the Company, receives funds from the
Company that it utilizes, directly or indirectly, as all or any portion of the
purchase price paid or payable as consideration for any acquisition of another
business by merger, consolidation, purchase of stock, purchase of assets or
otherwise ("Company Funded Consideration"). The amount of such required
prepayment shall be equal to twenty-five percent of the principal amount of the
Acquisition Debt or Company Funded Consideration. If it is a Consolidated
Affiliate that incurs the Acquisition Debt or receives the Company Funded
Consideration, then, prior to, and as a condition of, such incurrence or
receipt, either (a) such Consolidated Affiliate shall become jointly and
severally liable as a Payor hereunder with respect to any prepayment obligation
of Payor that matures as the result of such incurrence or receipt pursuant to an
instrument in form and substance reasonably satisfactory to Payee or (b) Payor
shall deliver to Payee a certificate executed on behalf of Payor by its chief
executive officer or chief financial officer demonstrating to the reasonable
satisfaction of Payee the ability of Payor to comply fully with its prepayment
obligation that matures as a result of such incurrence or receipt.
1.3 Payor shall also prepay this Note on such date as it receives the
proceeds of any public offering of its Common Stock pursuant to a registration
statement filed and effective under the Securities Act of 1933, as amended. The
amount of such required prepayment shall be the product obtained by multiplying
the then outstanding principal amount hereof by a faction, the numerator of
which is the lesser of $30,000,000 or the net proceeds of such offering to
Payor, after deducting underwriters' discounts or commissions, if any, and all
of the expenses of such offering, and the denominator of which is $30,000,000.
1.4 Notwithstanding Sections 1.2 and 1.3, Payor shall not be required
to prepay any portion of the principal amount hereof upon (i) the incurrence of
any Acquisition Debt or (ii) the receipt of net proceeds from a public offering
of its Common Stock of less than $30,000,000 or (iii) the receipt by Payor or
any Consolidated Affiliates, other than the Company, of Company Funded
Indebtedness if, in the case of (i), (ii) or (iii), the Company so elects by
written notice to Payee, in which event the provisions of Section 5 of the
Registration Rights Agreement shall apply.
1.5 Any optional or mandatory prepayment shall be applied, first, to
the payment of all accrued and unpaid interest on the amount so prepaid to the
date of such prepayment and then to the remaining installments of principal due
hereunder in the inverse order of their maturity.
2. Covenants
2.1 So long as any portion of the principal amount of or interest on
this Note remains outstanding and unpaid,
2
<PAGE>
2.1.1 Payor shall provide to Payee written notice of the
occurrence of any of the following events not later than fifteen calendar days
following the later of such occurrence or Payor's knowledge thereof: (i) the
Internal Revenue Service or any other federal, state or local taxing authority
shall allege any default by Payor or any subsidiary of Payor in the payment of
any tax or make any assessment in respect thereof and such default or assessment
is reasonably expected to have a material adverse effect on the financial
position, operations, assets or business of Payor; or (ii) any litigation or
proceeding shall be brought against Payor or any Consolidated Affiliate before
any court or administrative agency which, if successful, is reasonably expected
to have a material adverse effect on the financial position, operations, assets
or business of Payor or any Consolidated Affiliate.
2.1.2 The indebtedness represented by this Note shall not be
subordinated or rendered junior in right of payment to any other indebtedness of
Payor.
2.2 If an Event of Default or an event which, with notice or lapse of
time or both, would become an Event of Default hereunder occurs and so long as
such Event of Default continues, uncured and unwaived, Payor shall not declare,
pay or make any dividend or distribution (in cash, property or obligations) on
any shares of its capital stock then outstanding or on any warrants, options or
other rights with respect to any class of its capital stock or apply or permit
any of its subsidiaries to apply any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree, or permit
any of its subsidiaries to agree, to purchase or redeem, or set aside funds to
purchase or redeem, any shares of any class of its capital stock then
outstanding or any warrants, options or other rights with respect to any class
of its capital stock unless, in each case, the Company demonstrates to the
reasonable satisfaction of Payee that the taking of such action would not impair
the business, assets, liabilities or financial condition of Payor or the ability
of Payor to make any payment of principal or interest when due hereunder.
3. Default
If any of the following events (each, an "Event of Default") shall
occur:
3.1 Payor shall fail to pay any prepayment or any installment of
principal or interest within ten calendar days following the due date thereof;
or
3.2 (i) a decree or order by a court having jurisdiction in the
premises shall have been entered for relief in respect of Payor or any
Consolidated Affiliate under Title 11 of the United States Code, as now
constituted or as hereafter amended (the "Bankruptcy Code"), or under any other
applicable Federal or State law, or (ii) a receiver, custodian, liquidator,
assignee, trustee, sequestrator or other similar official of Payor or any
Consolidated Affiliate or of any substantial part of its assets or property
shall have been appointed; or (iii) Payor or any Consolidated Affiliate shall
file a petition or answer or consent seeking relief under the Bankruptcy Code,
or under any other applicable Federal or State law or (iv) Payor or any
Consolidated Affiliate shall make an assignment for the benefit of
3
<PAGE>
creditors or admit in writing its inability to pay its debts generally as they
become due or take action in furtherance of any such action and, with respect to
(i) or (ii), either (a) Payor or such Consolidated Affiliate shall consent to
such decree, order or appointment or (b) any such decree, order or appointment
shall continue unstayed and in effect for a period of sixty (60) consecutive
calendar days; unless, if any of the foregoing events occurs by or with respect
to a Consolidated Affiliate, such event does not and will not impair the
business, assets, liabilities or financial condition of Payor or the ability of
Payor to make any payments of principal or interest when due hereunder; or
3.3 the Company shall incur any obligation for borrowed money to a
creditor that is not Payor or a Consolidated Affiliate, whether directly or as a
guarantor or otherwise, or subject any of its assets to any encumbrance to
secure any such indebtedness, whether or not it is otherwise liable therefor,
without the prior written consent of Payee; provided, however, that Payee shall
not unreasonably withhold or delay such consent nor shall prepayment of all or
any portion of the Note be a condition of such consent if, in each case, such
indebtedness is solely for the benefit of the Company and is not for the benefit
of Payor or any other Consolidated Affiliate; or
3.4 any representation made by Payor under any of the following
provisions of the Stock Purchase Agreement, namely Sections 5(a) through 5(f),
inclusive, paragraphs (i), (ii), (vii), (ix), (x), (xii), (xiii), (xiv) or (xv)
(insofar as such paragraph (xv) applies to any of the other provisions of the
Stock Purchase Agreement referred to in this Section 3.4) of Section 5(g),
Section 5(n), Section 5(o), Section 5(s) or Section 5(t), shall prove to have
been false or misleading in any material respect when made unless (a) such
misrepresentation is based upon a misrepresentation made to Payor by a third
party, (b) Payor demonstrates to the reasonable satisfaction of Payee that it
has contractual or other recourse against such third party that, if successfully
pursued, could reasonably be expected to provide full compensation to Payor for
the misrepresentation by such third party, (c) Payor initiates and diligently
pursues such recourse, (d) Payor keeps Payee fully informed as to the progress
thereof; provided, however that, if, notwithstanding the foregoing, Payee
determines that such misrepresentation creates an imminent danger that Payor
will fail to make any payment of principal or interest when due under this Note,
it shall so notify Payor, in which event such misrepresentation shall be an
Event of Default hereunder; or
3.5 any material default shall occur and be continuing for forty-five
calendar days following notice thereof from Payee to Payor in the due observance
or performance by Payor of any material covenant, agreement or condition of
Payor contained herein or in the Registration Rights Agreement; or
3.6 any material default shall occur and be continuing for forty-five
calendar days following notice thereof from Payee to Payor in the due observance
or performance by Payor of the provisions of Section 9 in the Stock Purchase
Agreement; or
3.7 Payor or any Consolidated Affiliate shall suspend or discontinue
its business for thirty calendar days or more, other than such a discontinuance
as the result of the sale of the business for fair market value, and, if such
event occurs with respect to a Consolidated Affiliate, such business shall not
be resumed and continued by Payor or any other Consolidated Affiliate,
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then, the entire outstanding principal balance hereof (including accrued but
unpaid interest thereon) shall be immediately due and payable without
presentment, demand, protest or other notice and Payee may proceed to protect
and enforce Payee's rights either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, condition or
agreement contained in this Note or in aid of the exercise of any power granted
in this Note, or proceed to enforce the payment of this Note or to enforce any
other legal or equitable right of Payee hereunder.
4. Waivers.
Payor, for itself, its legal representatives, successors and assigns,
expressly waives, to the extent not specifically provided for herein,
presentment, protest, demand, notice of dishonor, notice of nonpayment, notice
of maturity, notice of protest, presentment for the purpose of accelerating
maturity and diligence in collection.
5. Attorneys' Fees.
If it should become necessary or advisable to employ counsel to collect
this Note, Payor agrees to pay the reasonable attorneys' fees and costs of the
holder hereof, whether or not suit is brought. Further, all attorneys' fees
incurred by Payee in enforcement of a judgment are recoverable separately from
any attorneys' fees as aforementioned. In addition, this post-judgment
attorneys' fees provision is intended to be severable from the other provisions
of this Note and is further intended to survive any judgment and is not to be
deemed merged into such judgment.
6. Amendments.
This Note may only be changed, modified, amended or terminated by a
writing signed by both parties.
7. Governing Law.
This Note shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware applicable to
instruments made and to be performed entirely in such jurisdiction without
giving effect to the conflicts of laws principles thereof.
ENTRADE, INC.
By:/s/John Hamm
---------------------------
Executive Vice President
5
Exhibit 10.5
ENTRADE INC.
500 Central Avenue
Northfield, IL 60093
As of
October 15, 1999
Dear Corey:
This letter is intended to set forth the terms and conditions under
which Entrade Inc., a Pennsylvania corporation ("Entrade"), and Asset
Liquidation Group, Inc. and Public Liquidation Systems, Inc., both California
corporations and wholly owned subsidiaries of Entrade (together, "Nationwide"),
are offering to employ you as an executive officer of Nationwide, effective as
of the closing date of the acquisition of Nationwide by Entrade (the "Closing
Date"). Entrade hereby irrevocably and unconditionally guarantees the prompt
payment, performance and satisfaction of all of the obligations of Nationwide
hereunder.
Parties: Entrade, Nationwide and Corey P.
Schlossmann ("you").
Position: You will be an executive officer
of Nationwide, reporting to the Nationwide
Board of Directors.
Compensation: Your base salary ("base
salary") will be at a rate not less than
$162,000 per year, payable in accordance
with Nationwide's usual payroll policies.
You will be entitled to receive such
increases in your base salary as may be
approved by the Nationwide Board of
Directors.
Stock Options: You will be granted an option
to acquire 200,000 shares of the
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Common Stock of Entrade, at $9.00 per share,
effective on the Closing Date. The option
shall be fully vested as of the grant date
and will be immediately exercisable as to
all 200,000 shares on the grant date. The
terms and conditions of the option shall
otherwise be in accordance with the
Non-Qualified Stock Option Agreement by and
between you and Entrade, of even date
herewith.
Reimbursement of Business Expenses:
Nationwide will reimburse you for all
documented business-related expenses that
you incur in connection with the performance
of your responsibilities to Nationwide.
Other Benefits: You will be eligible to
participate in all Nationwide employee
benefit plans including any group health,
dental, pension, long-term disability,
short-term disability, 401(k), and group
life insurance plans in effect from time to
time.
Vacation Allowance: You will have an annual
vacation allowance of four calendar weeks.
Bonus: While you are in the employ of
Nationwide, you may be entitled to such
bonus awards as determined from time to time
by the Nationwide Board of Directors.
Additional Options: While you are in the
employ of Nationwide, you may be granted
such
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additional stock option awards as determined
from time to time by Entrade's Board of
Directors.
Board Nomination: While you are in the
employ of Nationwide, you will serve on the
Board of Directors of Nationwide.
Term: The initial term of your employment
shall commence as of the Closing Date and
end on the day prior to the third
anniversary of the Closing Date (the
"Initial Term"). Unless sooner terminated
pursuant to the terms hereof, commencing on
the third anniversary of the Closing Date,
and on each anniversary of the Closing Date
thereafter, the term of your employment
shall automatically be extended for one
additional year ("extended term") unless,
not later than ninety (90) days preceding
such date, you or Nationwide shall give
written notice to the other that you or it
does not wish to extend the term of
employment for such additional one year
period.
Termination: If at any time during the
Initial Term, Nationwide should terminate
your employment for reasons other than Cause
(hereinafter defined) or if you terminate
your employment for Good Reason (hereinafter
defined), you or your estate will be
entitled post-termination to a continuation
of your base salary, at its then current
rate, through and until the later of (i) the
end of the Initial Term, or (ii) a period of
six (6)
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months from the date of the notice of
termination (which date shall be deemed and
hereafter referred to as the "effective date
of termination"). If Nationwide elects not
to renew the term of your employment for any
additional one year period for any reason
other than Cause, or if your employment
shall be terminated during any extended term
either by Nationwide for any reason other
than Cause or by you for Good Reason, you
shall be entitled post-termination to a
continuation of your base salary then in
effect through and until the later of (i)
the end of the current extended term, or
(ii) a period of six (6) months after the
effective date of termination. Upon any
termination described in this Section, you
will be entitled to continue to participate
in all of the employee benefit plans and
programs in which you were participating
prior to the termination of your employment
during the period in which you are entitled
to a continuation of your base salary as
herein provided. If at any time following
the first twelve (12) months of the term of
this Agreement the Board of Directors of
Nationwide determines, in its sole
discretion, that your Outside Business
(hereinafter defined) activities are
interfering with the performance of your
duties hereunder, Nationwide shall so notify
you in writing. Unless you discontinue your
Outside Business activities effective within
sixty calendar days following the date of
your receipt of such notice and so notify
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Nationwide, then at the option of Nationwide
this Agreement shall terminate and be of no
further force or effect as of such sixtieth
calendar day. In such event, Nationwide
shall pay to you your compensation, expense
reimbursements, accrued vacation and other
benefits accrued through the effective date
of such termination and shall have no
further obligations to you under this
Agreement except to the extent provided
below under "Indemnification."
Duties: As an executive officer of
Nationwide, you shall perform such duties as
are consistent with your position and as you
shall be directed to perform by the Board of
Directors. In addition, you shall have the
discretion to perform such other duties that
are required by the laws of the
jurisdictions in which Nationwide operates
or by the contracts and agreements to which
Nationwide is subject. You acknowledge that
your office will require your primary
efforts and attention, and that you shall
not, during the Initial Term or any
extension, engage in any other business
activity, whether or not such other business
activity is for your own behalf or for any
other person, firm, corporation or other
entity (together, a "Person") and whether or
not such other Person is in competition with
Nationwide or Entrade. Notwithstanding the
foregoing, you shall be allowed to manage
and oversee passive investments in
noncompeting businesses, and you may
continue to retain an
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interest in Brentwood Management Group and
in the accounting practice of Gordon,
Fishburn & Schlossmann, LLP and to perform
services for their respective clients and to
receive and retain compensation therefor
(your "Outside Business"), provided that
your Outside Business does not require more
than ten percent (10%) of your business time
or otherwise interfere with the performance
of your duties for Nationwide
Cause: Your employment may be terminated at
any time for Cause, which is hereby defined
as (i) conduct, at any time, which has
involved criminal dishonesty, conviction of
any felony, or conviction of any lesser
crime or offense involving the property of
Nationwide or Entrade, or any of their
respective subsidiaries or affiliates, or
misappropriation of any money or other
assets or properties of Nationwide or
Entrade, or that of their respective
subsidiaries or affiliates, (ii) any willful
violation of specific, lawful written
directions from Nationwide's Board of
Directors that are consistent with your
duties described above, (iii) any material
breach of any covenant or agreement
contained in this Agreement, unless the same
is promptly remedied to Nationwide's
reasonable satisfaction, or (iv) a material
violation of any policy regarding substance
abuse as may be promulgated by Nationwide
from time to time.
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Good Reason: Good Reason includes any of the
following:
i. Failure by Entrade or Nationwide to
perform its material obligations under this
Agreement, unless the same is promptly
remedied to your reasonable satisfaction;
ii. Failure by the Nationwide Board of
Directors at any time to elect you as an
executive officer of Nationwide, or your
removal at any time from such office;
iii. Failure to ensure your appointment
or election as a member of the Board of
Directors of Nationwide throughout the term
of your employment;
iv. Material diminution in your duties
with Nationwide, or assignment to you of
duties that are inconsistent in any material
respect with your position as an executive
officer of Nationwide, unless the same is
promptly remedied to your reasonable
satisfaction;
v. Your death or disability;
Non-Disclosure. You acknowledge that in the
course of performing services for
Nationwide, you will obtain knowledge of
Entrade's and Nationwide's business plans,
products, processes, software, know-how,
trade secrets, formulas, methods, models,
prototypes, discoveries, inventions,
improvements, disclosures, names and
positions of employees and/or other
proprietary and/or confidential information
(collectively, the "Confidential
Information"). You agree to keep the
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Confidential Information secret and
confidential and not to publish, disclose or
divulge it to any other party, and you agree
not to use any of the Confidential
Information for your own benefit or to the
detriment of the companies, whether or not
such Confidential Information was discovered
or developed by you. You also agree not to
divulge, publish or use any proprietary
and/or confidential information of others
that Nationwide is obligated to maintain in
confidence. The provisions of this paragraph
shall survive any termination of this
Agreement.
Non-Solicitation. You agree that for a
period of one (1) year following the date of
termination of your employment hereunder,
you will not, directly or indirectly, for
yourself or on behalf of any third party, at
any time or in any manner, solicit, hire,
contract for services or otherwise employ,
directly or indirectly, any of the employees
of Entrade or Nationwide or their affiliates
or call upon, solicit, divert, accept or
take away from Entrade, Nationwide or their
affiliates, directly or indirectly, any
account, customer or client to whom Entrade,
Nationwide or their affiliates rendered
services during the course of your
employment by Nationwide; provided, however,
that nothing contained in this paragraph
shall prevent you from soliciting any such
client or customer solely for purposes of
providing accounting, tax preparation and
related
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financial services similar in nature to the
services you presently provide clients
through your Outside Business.
Non-Competition. You agree that, during your
employment by Nationwide and, if you make
the election under sub-section (i) below,
for the applicable period following the date
of termination of your employment hereunder,
neither you nor any corporation or other
entity in which you may be interested as a
partner, trustee, director, officer,
executive, employee, agent, shareholder,
lender of money or guarantor, or for which
you perform services in any capacity
(including as a consultant or independent
contractor) shall at any time during such
period be engaged, directly or indirectly,
in any Competitive Business (as that term is
hereinafter defined). Nothing herein
contained shall be deemed to prevent you
from (i) investing in or acquiring two per
cent or less of any class of securities of
any company if such class of securities is
listed on a national securities exchange or
is quoted on the Nasdaq Stock Market or (2),
at any time following the date of
termination of your employment hereunder,
providing any third party with accounting,
tax preparation and related financial
services similar in nature to the services
you presently provide clients through your
Outside Business. For purposes hereof, the
term "Competitive Business" shall mean any
business that engages in any respect in the
sale of real or
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personal property through public or private
auctions (via internet or otherwise), any
business that engages in any respect in the
sale (by auction or otherwise) of motor
vehicles, or any business which engages in
any other activities that are competitive
with the business or proposed business of
Entrade or Nationwide or their affiliates at
the time of termination of your employment
hereunder. If you violate any provision of
this covenant, the post-termination
restrictive period set forth herein (to the
extent applicable) shall be extended for the
duration of any such violation, so that
Entrade and Nationwide enjoy the full term
of such restrictive period. Upon any
termination of your employment by Nationwide
under circumstances that would otherwise
entitle you to receive payment of your Base
Salary ("Severance Payment")for any period
beyond the date of such termination
("Restrictive Period"), you shall have the
option to elect either (i) or (ii) below by
written notice thereof to the Board of
Directors of Nationwide within ten (10) days
following the date of termination of your
employment. In the event no such election is
made within such time period, you will be
deemed to have elected option (i) below:
(i) Nationwide shall pay you the
Severance Payment, to the extent and
in the manner provided for under the
applicable provisions of this
Agreement, in which event you shall
remain subject to the
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non-competition covenants hereof for
the Restrictive Period; or
(ii) you shall forfeit any right to the
Severance Payment, in which event
the foregoing non-competition
covenant shall terminate from and
after the date of such termination.
Company Documentation. You shall hold in a
fiduciary capacity for the benefit of
Nationwide all documentation, disks,
programs, data, records, drawings, manuals,
reports, sketches, blueprints, letters,
notes, notebooks and all other writings,
electronic data, graphics and tangible
information and materials of a secret,
confidential or proprietary information
nature relating to Nationwide, Entrade or
their respective businesses that are in your
possession or under your control.
Injunctive Relief. You acknowledge that your
compliance with the foregoing covenants is
necessary to protect the good will and other
proprietary interests of Entrade and
Nationwide and that you as an employee of
Nationwide will be conversant with its
affairs, its trade secrets and other
proprietary information. You acknowledge
that a breach of any of the foregoing
covenants will result in irreparable and
continuing damage to Entrade and Nationwide
for which there will be no adequate remedy
at law; and you agree that in the event of
any
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breach of the aforesaid covenants, Entrade
and/or Nationwide and their respective
successors and assigns shall be entitled to
injunctive relief and to such other and
further relief as may be proper.
Governing Law;
Arbitration: This Agreement shall be
governed by, and construed and enforced in
accordance with, the internal laws of the
State of California, applicable to
agreements made and to be performed entirely
therein, exclusive of its choice of law
provisions. You, Entrade and Nationwide each
agree that any controversy or claim arising
out of or relating to your employment by
Nationwide, or the termination of that
employment, will be settled by binding
arbitration in accordance with the terms and
conditions of that certain Arbitration
Agreement of even date herewith by and
between you, Entrade and Nationwide, a copy
of which is attached hereto and made a part
hereof as Exhibit A (the "Arbitration
Agreement"). You acknowledge and agree that
the Arbitration Agreement constitutes a
material aspect of this Agreement.
Indemnification: Nationwide will indemnify
you to the fullest extent permitted by law,
and will advance to you defense costs to the
fullest extent permitted by law, in
connection with any and all actions, suits
and proceedings to which you may at any time
be made or threatened to be made a party by
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reason of (i) the commencement of your
employment with Nationwide or the fact that
you are or were at any time serving or
designated to serve as a director, officer
or employee of Entrade or Nationwide or any
of its subsidiaries or affiliated entities
or in any other capacity at the request or
on behalf of Entrade or Nationwide or any of
its subsidiaries or affiliated entities, or
(ii) any act or nonact on your part in
connection therewith. The obligations of
Nationwide under this Paragraph are absolute
and unconditional, will survive your death
or disability, and will survive the
termination of your employment with
Nationwide for any reason (whether such
termination is during your term of
employment or after the expiration of the
term of your employment).
Attorneys' Fees: The prevailing party will
be entitled to recover from the other all
attorneys' fees and other costs and expenses
in connection with enforcing this Agreement.
Binding Effect: This Agreement supersedes
all prior negotiations and represents the
entire agreement of the parties, and our
signatures hereon will bind us hereto. It is
understood and agreed that this Agreement
expressly supersedes any employment
agreement you may have had with Nationwide
prior to the Closing Date. The guaranty of
Entrade contained herein is a guaranty of
payment and not of collection. Entrade
hereby waives notice of the acceptance of
this guaranty and
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of performance or non-performance by
Nationwide, demand for payment or
performance from Nationwide and notice of
non-payment or failure to perform. This
Agreement inures to the benefit of Entrade
and Nationwide, their respective successors
and assigns and will be binding upon, and
enforceable against, Entrade and Nationwide
and their respective successors, including
any successor by merger or consolidation and
any entity or entities that acquire all or
substantially all of Entrade's or
Nationwide's assets, and, unless Entrade or
Nationwide make other arrangements
satisfactory to you for the performance of
its obligations under this Agreement,
Entrade or Nationwide will obtain the
express written assumption of this Agreement
by each of its successors. This Agreement
and the obligations created hereunder may
not be assigned by you, but all your rights
hereunder will inure to the benefit of, and
be enforceable by, you and your heirs,
legatees, executors, and personal
representatives and, to the extent that they
are entitled to receive any compensation,
benefit, payment or reimbursement under any
provision of this Agreement, your spouse and
any other beneficiaries; provided, however,
that after your acceptance of this
Agreement, you will have the right at any
time to amend, modify or terminate this
Agreement and any provision hereof
(including any provision of this Agreement
granting any rights to your spouse or any
other beneficiary) without the consent or
approval of your spouse or any other
beneficiary.
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If the foregoing is acceptable to you, please sign and return a copy to
me.
Sincerely,
/s/ John Hamm
-------------------------
John Hamm
Executive Vice President
ACKNOWLEDGED:
/s/ Corey Schlossmann
- -------------------------
COREY SCHLOSSMANN
Dated: October 15, 1999
----------------------------
15
Exhibit 10.6
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of October 15, 1999, is made by and between
Entrade Inc. (the "Company"), a Pennsylvania corporation, and Corey P.
Schlossmann (the "Employee"), an employee of Asset Liquidation Group, Inc. and
Public Liquidation Systems, Inc., wholly-owned subsidiaries of the Company (the
"Subsidiary").
Recitals:
WHEREAS, the Company wishes to afford the Employee the opportunity to
purchase shares of the Company's Common Stock; and
WHEREAS, the Company wishes to carry out the relevant terms of the
Employee's Employment Agreement to set forth the terms of the grant the
nonqualified stock option provided for therein to the Employee as an inducement
to the Employee to commence and remain in the service of the Subsidiary and as
an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates to the
contrary:
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the no par value Common Stock of the Company.
"Committee" shall mean the Board of Directors of the Company or the
committee appointed by the Board of Directors of the Company for purposes of
administering this Agree ment.
"Employment Agreement" shall mean the Employment Agreement dated the
date hereof between the Employee and the Subsidiary.
"Option" shall mean the nonqualified stock option granted under this
Agreement to purchase shares of Common Stock.
"Secretary" shall mean the Secretary of the Company.
"Termination of Employment" shall mean the time when the
employee-employer relation ship between the Employee and the Subsidiary is
terminated for any reason, including, but not
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by way of limitation, a termination by resignation, discharge, death, disability
(within the meaning of Section 22(e)(3) of the Code) or retirement, but
excluding any termination where there is a simultaneous reemployment by the
Subsidiary. For purposes of this Agreement, "retirement" shall mean a separation
from service by reason of the Employee's retirement at or after the Employee's
earliest permissible retirement date pursuant to and in accordance with his
employer's established plan, policy or practice. The Committee, in its absolute
discretion, shall determine the effect of all other matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question whether a Termination of Employment resulted from a discharge for
cause, and all questions of whether particular leaves of absence constitute
Terminations of Employment.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In consideration of the Employee's agreement to remain in the employ of
the Subsidiary and for other good and valuable consideration, on the date hereof
the Company irrevocably grants to the Employee the Option to purchase any part
or all of an aggregate of 200,000 shares of the Company's Common Stock upon the
terms and conditions set forth in this Agreement.
Section 2.2 - Purchase Price
The purchase price of the shares of Common Stock covered by the Option
shall be $9.00 per share, without commission or other charge.
ARTICLE III
EXERCISABILITY OF OPTIONS
Section 3.1 - Commencement of Exercisability
Subject to Section 3.2, the Option shall become exercisable in full
commencing on the date hereof. The Option shall remain exercisable until such
time when the Option may no longer be exercised pursuant to the provisions of
Section 3.2.
Section 3.2 - Expiration of Option
The Option may not be exercised to any extent by anyone after the first
to occur of the following events:
(a) The expiration of ten years from the date the Option was granted;
(b) The date of the Employee's Termination of Employment if such
Termination of Employment resulted from (i) a discharge for cause, if the
"cause" for discharge is an act or
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omission of the Employee enumerated in Section 5.6 hereof, or (ii) the voluntary
resignation of the Employee;
(c) The expiration of three months from the date of the Employee's
Termination of Employment other than for cause as provided in Section 3.2(b) or
the voluntary resignation of the Employee, unless such Termination of Employment
results from his retirement, death or disability (within the meaning of Section
22(e)(3) of the Code), but in no event later than the expiration date set forth
in Section 3.2(a) hereof; or
(d) The expiration of one year from the date of the Employee's
Termination of Employment by reason of his retirement, death or disability
(within the meaning of Section 22(e)(3) of the Code), but in no event later than
the expiration date set forth in Section 3.2(a) hereof.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Employee, only the Employee may exercise the
Option or any portion thereof. After the death of the Employee, the Option or
any portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.2 hereof, be exercised by the Employee's personal
representative or by any person empowered to do so under the Employee's will or
under the then applicable laws of descent and distribution.
Section 4.2 - Partial Exercise
The Option may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
3.2 hereof; provided, however, that each partial exercise shall be for whole
shares only.
Section 4.3 - Manner of Exercise
The Option or any portion of the Option may be exercised solely by
delivery to the Secretary or his office of all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.2
hereof:
(a) Notice in writing signed by the Employee or such other person then
entitled to exercise the Option, or any portion thereof, stating that the Option
or portion is thereby exercised, such notice complying with all applicable rules
established by the Committee;
(b) Full cash payment for the shares with respect to which the Option
or portion is thereby exercised and which are to be delivered to the Employee
pursuant to such exercise; provided, however, that at the discretion of the
Committee, payment may be made in whole or in part in shares of Common Stock of
the Company, which Common Stock will be valued at its
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then fair market value. The Employee may also, upon prior notification to the
Company and subject to Section 4.4 hereof, enter into an agreement with the
Company's transfer agent or a brokerage firm of national standing whereby the
Employee will simultaneously exercise the Option, or portion thereof, and sell
the shares acquired thereby through such transfer agent or brokerage firm and
the transfer agent or brokerage firm executing the sale will remit to the
Company from the proceeds of sale the exercise price of the shares as to which
the Option has been exercised;
(c) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with the
Securities Act of 1933, as amended, and any other federal or state securities
laws or regulations. The Committee may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and issuing
stop-transfer orders to transfer agents and registrars;
(d) In the event that the Option or any portion thereof shall be
exercised pursuant to Section 4.1 hereof by any person other than the Employee,
appropriate proof of the right of such person to exercise the Option; and
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of Common Stock deliverable upon the exercise of the Option,
or any portion thereof, may be either previously authorized but unissued shares
or issued shares that have been reacquired by the Company. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
Common Stock purchased upon the exercise of the Option or portion thereof prior
to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Common Stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental or regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from any state or
federal govern mental agency that the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish, in its absolute
discretion, for reasons of administrative convenience.
(e) In the discretion of the Committee, the satisfaction to counsel for
the Company that the issuance of shares of Common Stock or other securities or
property of the Company and
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other forms of payment hereunder will be in compliance with applicable federal,
state, local and foreign legal, securities exchange and other applicable
requirements.
Section 4.5 - Rights as Shareholder
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration
The Committee shall have the power to interpret this Agreement and to
adopt such rules for the administration, interpretation and application of this
Agreement as are consistent therewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determina tions made by the
Committee in good faith shall be final and binding upon the Employee, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Option. In its absolute discretion, the Board of
Directors of the Company may at any time and from time to time exercise any and
all rights and duties of the Committee under this Agreement.
Section 5.2 - Options Not Transferable
Neither the Option nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Employee or the
Employee's successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
Section 5.3 - Withholding
All amounts which, under federal, state or local law, are required to
be withheld from the amount payable with respect to any Option shall be withheld
by the Company. Whenever the Company proposes or is required to issue or
transfer shares of Common Stock, the Company shall have the right to require the
recipient to remit to the Company an amount sufficient to satisfy any federal,
state or local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares.
-5-
<PAGE>
Section 5.4 - No Right of Continued Employment
Nothing in this Agreement shall confer upon the Employee any right to
continue in the employ of the Company or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge the Employee at any time for any reason
whatsoever, with or without cause.
Section 5.5 Adjustments.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by the
Option as well as the price per share of Common Stock covered by the Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consider ation." Such adjustment shall
be made by the Committee, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Committee. The Committee may, in the exercise of its discretion in such
instances, declare that the Option shall terminate as of a date fixed by the
Committee and give the Employee the right to exercise his Option as to all or
any part of the shares of Common Stock covered by the Option.
(c) Sale or Merger. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Com mittee, in the exercise of its sole
discretion, may take such action as it deems desirable, including, but not
limited to: (i) causing the Option to be assumed or an equivalent option to be
substituted by the successor corporation or a parent or subsidiary of such
successor corporation, or (ii) declaring that the Option shall terminate at a
date fixed by the Committee provided that the Employee is given notice and
opportunity to exercise the then exercisable portion of his Option prior to such
date.
Section 5.6 Forfeiture.
Notwithstanding anything to the contrary in this Agreement, if the
Committee finds, by a majority vote, after full consideration of the facts
presented on behalf of both the Company and the Employee, that the Employee has
been engaged in fraud, embezzlement, theft or commission of a felony in the
course of his employment or retention by the Company or any subsidiary of
-6-
<PAGE>
the Company or that the Employee has willfully disclosed confidential
information of the Compa ny or any subsidiary of the Company and that such
disclosure materially damaged the Company or any subsidiary of the Company, the
Employee shall forfeit all unexercised Options and all exer cised Options under
which the Company has not yet delivered the certificates. The decision of the
Committee in interpreting and applying the provisions of this Section 5.6 shall
be final. No decision of the Committee, however, shall affect the finality of
the discharge or termination of the Employee by the Company or any subsidiary of
the Company in any manner.
Section 5.7 No Prohibition on Corporate Action.
No provision of this Agreement shall be construed to prevent the
Company or any officer or director thereof from taking any action deemed by the
Company or such officer or director to be appropriate or in the Company's best
interest, whether or not such action could have an adverse effect on the Option
granted hereunder, and neither the Employee nor his estate, personal
representative or beneficiary shall have any claim against the Company or any
officer or director thereof as a result of the taking of such action.
Section 5.8 Indemnification.
With respect to the administration of this Agreement, the Company shall
indemnify each present and future member of the Committee and the Board against,
and each member of the Committee and the Board shall be entitled without further
action on his part to indemnity from the Company for, all expenses (including
the amount of judgments and the amount of approved settlements made with a view
to the curtailment of costs of litigation, other than amounts paid to the
Company itself) reasonably incurred by him in connection with or arising out of,
any action, suit or proceeding in which he may be involved by reason of his
being or having been a member of the Committee or the Board, whether or not he
continues to be such member at the time of incurring such expenses; provided,
however, that such indemnity shall not include any expenses incurred by any such
member of the Committee or the Board (i) in respect of matters as to which he
shall be finally adjudged in any such action, suit or proceeding to have been
guilty of gross negligence or willful misconduct in the performance of his duty
as such member of the Committee or the Board; or (ii) in respect of any matter
in which any settlement is effected for an amount in excess of the amount
approved by the Company on the advice of its legal counsel; and provided further
that no right of indemnification under the provisions set forth herein shall be
available to or enforceable by any such member of the Committee or the Board
unless, within 60 days after institution of any such action, suit or proceeding,
he shall have offered the Company in writing the opportunity to handle and
defend same at its own expense. The foregoing right of indemnifi cation shall
inure to the benefit of the heirs, executors or administrators of each such
member of the Committee or the Board and shall be in addition to all other
rights to which such member may be entitled as a matter of law, contract or
otherwise.
Section 5.9 - Shares To Be Reserved
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
-7-
<PAGE>
Section 5.11 - Notices
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary and any notice to be
given to the Employee shall be addressed to the Employee at the address given
beneath his signature hereto. By a notice given pursuant to this Section 5.11,
either party may hereafter designate a different address for notices to be given
to him or it hereunder. Any notice that is required to be given to the Employee
shall, if the Employee is then deceased, be given to the Employee's personal
representa tive if such representative has previously informed the Company of
his status and address by written notice under this Section 5.11. Any notice
shall have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in the United
States mail or sent by overnight courier (with charges prepaid).
Section 5.12 - Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.
Section 5.13 - Pronouns
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
IN WITNESS THEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
Attest: ENTRADE INC.
/s/ John G. Hamm By:/s/ Mark Santacrose
- ---------------- ----------------------
Secretary President
/s/ Corey P. Schlossmann
------------------------
Corey P. Schlossmann
6719 Sale Avenue
------------------------
West Hills, CA 91307
Address
Employee's Taxpayer
Identification Number:
###-##-####
------------------------
-8-
Exhibit 10.7
STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
This Stock Restriction and Registration Rights Agreement, dated as of
October 15, 1999, is by and among Entrade Inc., a Pennsylvania corporation (the
"Company"), Don Haidl ("Haidl"), Peggy Haidl, as Trustee of the Capital Direct
1999 Trust [the "Haidl Trust"], Corey P. Schlossmann ("Schlossmann") and Peggy
Haidl, as Trustee of Core Capital IV Trust [the "Schlossmann Trust" and,
together with Haidl, the Haidl Trust and Schlossmann and their respective
successors and assigns hereunder, each a "Holder" and, together, the "Holders").
Pursuant to a Stock Purchase Agreement, dated as of October 15, 1999,
among the Company, Haidl, Schlossmann, the Haidl Trust, the Schlossmann Trust,
Public Liquidation Systems, Inc. and Asset Liquidation Group, Inc., both Nevada
corporations referred to herein, together, as "Nationwide," Haidl, Schlossmann,
the Haidl Trust and the Schlossmann Trust have sold to the Company all of the
outstanding shares of the capital stock of Nationwide and, in consideration
therefor, have received 1,570,000 shares of the Common Stock of the Company (the
"Company Shares"), $6,000,000 in cash and promissory notes of the Company in the
aggregate principal amount of $18,800,000 (the "Company Notes"). The Company
Notes include notes due within forty-five days following the date hereof (the
"Short Term Notes") in the aggregate principal amount of $4,800,000, all or a
portion of which may be satisfied by the issuance to the Payees thereunder of
shares of the Common Stock of the Company (the "Short-Term Note Shares") and
other notes in the aggregate principal amount of $14,000,000 due in installments
over the two-year period following the date hereof (the "Long-Term Notes").
In order to induce the Holders to accept the Company Shares and the
Short Term Notes as partial consideration for the outstanding shares of the
capital stock of Nationwide, the Company has agreed to register the resale of
the Company Shares and the Short Term Note Shares by the Holders, subject to
restrictions on the number of Company Shares that may be resold prior to May 31,
2000. These restrictions are based upon the market price of the Company Shares.
Pursuant to the Company Notes, if the Company or any member of the
consolidated (as defined for purposes of generally accepted accounting
principles) group of companies of which the Company is a member (a "Consolidated
Affiliate"), other than Nationwide, incurs or otherwise becomes liable for any
indebtedness either for borrowed money for or as a deferred payment of all or
any portion of the purchase price paid or payable as consideration for any
acquisition of another business by merger, consolidation, purchase of stock,
purchase of assets or otherwise, whether directly or as a guarantor or
otherwise, or subjects any of its assets to any encumbrance to secure any such
indebtedness, whether or not it is otherwise liable therefor (all of the
foregoing are referred to as "Acquisition Debt") or receives funds from
Nationwide that it
<PAGE>
utilizes, directly or indirectly as all or any portion of the purchase price
payable as consideration for any such acquisition ("Nationwide Funded
Indebtedness"), the Company must prepay a portion of the Company Notes or remove
the restrictions referenced in the preceding paragraph with respect to a portion
of the Company Shares.
In consideration of the premises and of the mutual covenants and
agreements hereinafter set forth, the parties hereto do hereby agree as follows.
1. Initial Registration.
Not later than December 1, 1999, or such later date that is not more
than five calendar days following delivery to the Company of the audited
financial statements of Nationwide as of December 31, 1998, and for the calendar
year then ended compliant in form with the requirements of Regulation SX under
the Securities Act of 1933, as amended (the "Act"), and the related report and
consent of KPMG Peat Marwick LLP, the Company shall prepare and file a
registration statement (the "Initial Registration Statement") under the Act with
respect to the sale by the Holders of the Company Shares and the Short Term Note
Shares. The Company shall use its best efforts to cause the Initial Registration
Statement to become effective under the Act within sixty calendar days following
the filing thereof and to maintain the Initial Registration Statement in effect
until the second anniversary of the date hereof. The Company shall pay all of
the expenses of the preparation, filing and maintenance of the effectiveness of
the Initial Registration Statement, including, without limitation, legal and
accounting fees and disbursements, Blue Sky fees, filing fees and all other
filing and miscellaneous expenses.
2. Piggyback Registration.
If at any time or times prior to the fifth anniversary of the date
hereof when the Initial Registration Statement is not effective, the Company
files a registration statement pursuant to the Act on a form on which the sale
of the Company Shares and the Short Term Note Shares, if any, might be covered
(a "Piggyback Registration Statement"), the Company, at its own expense, will
offer to the Holders the opportunity to register the sale of the Company Shares
and the Short Term Note Shares, if any, under such Piggyback Registration
Statement. In the event of any proposed Piggyback Registration Statement, the
Company shall furnish the Holders with no less than thirty (30) days written
notice prior to the proposed filing thereof. Such notice shall continue to be
given by the Company to the Holders until the earlier of (a) such time as all of
the Company Shares and the Short Term Note Shares, if any, have been sold by the
Holders or (b) the fifth anniversary of the date hereof. The Holders shall give
written notice within twenty (20) days of receipt of the Company's notice of
intention to file the Piggyback Registration Statement of their intention to
have the Company Shares and the Short Term Note Shares, if any, included
therein. If the registration of which the Company gives notice under this
Section 2 is for a registered public offering involving an underwriting, the
Company will so advise the Holders as a part of the written notice given to
them. In such event the right of any Holder to registration
2
<PAGE>
pursuant to this Section 2 will be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Company Shares and the
Short Term Note Shares, if any, in the underwriting to the extent provided
herein. All Holders proposing to distribute their Company Shares through such
underwriting will (together with the Company and any other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form and on customary terms, subject to this Agreement, with the
underwriter or underwriters selected for such underwriting by the Company and
shall bear their proportionate share of all underwriting discounts and
commissions. Notwithstanding any other provision of this Section 2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be sold for the account of security holders, the Company will be
required to include in the relevant offering and registration made under this
Section 2 only so many, if any, of such Company Shares and Short Term Note
Shares, if any, as such underwriter believes in good faith would not materially
adversely affect the distribution of the securities to be offered and registered
(the shares so included to be apportioned pro rata among all security holders to
be included in the registration statement, but not the Company, according to
their respective holdings of shares); provided, however, that the Company shall
use its best efforts to cause the underwriter to include, as not less than 20%
of the total number of shares to be included in the relevant offering and
registration, Company Shares and Short Term Note Shares, if any, to be sold by
the Holders. In addition, if the offering price of the shares in any such
underwritten offering is greater than $10.00 per share (as equitably adjusted to
reflect stock splits, reverse stock splits, stock dividends or other
recapitalizations) and if the underwriter determines that marketing factors
require that the selling security holders refrain from selling their shares in
such offering for a period of time, the Holders shall not sell any Company
Shares or the Short Term Note Shares, if any, under such Piggyback Registration
Statement for such period, not longer than 180 calendar days, as may be agreed
by all selling securityholders under the Piggyback Registration Statement. The
Company shall use its best efforts to maintain the effectiveness of any
Piggyback Registration Statement for at least six months following the date such
Piggyback Registration Statement becomes effective under the Act.
3. Blue Sky Qualification.
In connection with any registration under Sections 1 or 2 of this
Agreement, the Company shall, at its own expense, take all such action as may be
reasonably necessary to cause the Company Shares and the Short Term Note Shares,
if any, to be registered or qualified for sale in such states as may be
reasonably be requested by the Holders; provided, however, that the Company
shall not be obligated pursuant to this Section 3, to qualify to do business as
a foreign corporation in any jurisdiction in which it would not otherwise be
required to do so by reason of its business operations or consent generally to
service of process in any such jurisdiction.
4. Rule 144.
Notwithstanding the foregoing, the Company shall not be obligated to
include any Company Shares or Short Term Note Shares, if any, in a Piggyback
Registration Statement
3
<PAGE>
pursuant to Section 2 if the Company has furnished to the Holder or Holders of
such Company Shares and Short Term Note Shares, if any, at the Company's expense
an opinion of counsel for the Company reasonably acceptable to such Holder to
the effect that all of the Company Shares and Short Term Note Shares, if any,
owned by such Holder may be sold by such Holder pursuant to Rule 144, or any
successor thereto, under the Act within the immediately subsequent three-month
period.
5. Restrictions on Sales under Registration Statements.
Until May 31, 2000, the Holders shall not sell in the aggregate more
than the number of Company Shares determined as provided hereinafter (the
"Saleable Company Shares") under the Initial Registration Statement or any
Piggyback Registration Statement. The number of Saleable Company Shares shall
initially be 400,000. If at any time following the date hereof, the reported
closing price for the Common Stock of the Company, as reported by the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System, or, if
the Common Stock is listed or admitted to unlisted trading privileges on a
national securities exchange, the last reported sale price on such exchange for
the Common Stock of the Company, (the "Base Closing Price"), has equaled or
exceeded $20.00 per share on any ten consecutive trading days, then the number
of Saleable Company Shares shall thereafter be increased by 100,000 and shall
increase by an additional 100,000 each time that the Base Closing Price
increases by an additional $10.00 over $20.00. For the purposes hereof, the Base
Closing Price shall be equitably adjusted to take into account the effects of
stock splits, reverse stock splits, stock dividends and other recapitalizations.
If the Initial Registration Statement or any Piggyback Registration Statement
relates to a public offering by the Company of its securities yielding net
proceeds to the Company, after underwriting discounts or commissions and all
other offering expenses, of $30,000,000 or more, the number of Saleable Company
Shares shall increase by 15% of the Company Shares which are not then Saleable
Company Shares.
If at any time prior to May 31, 2000, the Company or any Consolidated
Affiliate other than Nationwide incurs any Acquisition Debt or receives
Nationwide Funded Indebtedness or net proceeds from a public offering of the
Common Stock of the Company, after underwriting discounts or commissions and all
other offering expenses, of less than $30,000,000 and, in any such case, elects
not to make a prepayment under the Company Note, the number of Saleable Company
Shares shall increase by an amount determined by dividing one-half of the
principal amount of such Acquisition Debt, one-half of such Nationwide Funded
Indebtedness or one-half of such net proceeds, as the case may be, by the Base
Closing Price on the date of the incurrence of such Acquisition Debt or the
receipt of such Nationwide Funded Indebtedness or net proceeds, as the case may
be.
Notwithstanding anything to the contrary contained above, the
provisions of this Section 5 shall not limit the number of Short Term Note
Shares that may be sold by the Holders under the Initial Registration Statement
on any Piggyback Registration Statement.
4
<PAGE>
6. Reciprocal Indemnification.
6.1 Indemnification by the Company. Whenever pursuant to
Sections 1 or 2 hereof a registration statement is filed under the Act with
respect to the Company Shares or Short Term Note Shares, if any, or such a
registration statement is amended or supplemented, the Company agrees that it
will indemnify and hold harmless each Holder of Company Shares and Short Term
Note Shares, if any, included therein (such Holder being hereinafter called the
"Distributing Holder"), and each person, if any, who controls (within the
meaning of the Act) the Distributing Holder against any losses, claims, damages
or liabilities, joint or several, to which the Distributing Holder or any
controlling person thereof may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any such registration statement or
any preliminary prospectus or final prospectus constituting a part thereof or
any amendment or supplement thereto, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (iii) any other
violation by the Company of the Act or the rules and regulations promulgated
thereunder; and the Company will reimburse the Distributing Holder and each
controlling person thereof for any legal or other expenses reasonably incurred
by the Distributing Holder or any controlling person thereof in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus, final
prospectus or amendments or supplements thereto in reliance upon and in
conformity with information furnished by such Distributing Holder specifically
for use in the preparation thereof.
6.2 Indemnification by Distributing Holders. Each Distributing
Holder, severally and not jointly, agrees, as a condition of the inclusion of
his Company Shares and Short Term Note Shares, if any, in such registration
statement, that he will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed such registration statement and
such amendments and supplements thereto, and each person, if any, who controls
the Company (within the meaning of the Act) against any losses, claims, damages
or liabilities to which the Company or any such director, officer or controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon (i) any untrue or
alleged untrue statement of any material fact contained in such registration
statement, notification, preliminary prospectus, final prospectus, or amendments
or supplements thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or (iii) any other violation by such
Distributing Holder of the Act or the rules and regulations promulgated
thereunder, but in the case of (i) or (ii), however, to the extent, and only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the registration statement, preliminary
prospectus, final prospectus or amendments
5
<PAGE>
or supplements thereto in reliance upon and in conformity with information
furnished in writing by such Distributing Holder specifically for use in the
preparation thereof; and will reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
6.3 Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 6.
6.4 In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; and, after notice so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party under this
Section XI for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
7. Notices, Etc.
All notices, requests, demands and other communications hereunder shall
be in writing, and shall be deemed to have been duly given, if delivered in
person or by courier, telegraphed, telexed or by facsimile transmission or
mailed by certified or registered mail, postage prepaid:
If to any Holder to him at his address in the stock record books of the
Company:
with a copy to: Parker, Milliken, Clark, O'Hara & Samuelian
ARCO Center, 27th Floor
333 South Hope Street
Los Angeles, CA 90071
Telecopier: (213) 683-6669
Attn: Richard D. Robins, Esq.
If to the Company: Entrade, Inc.
500 Central Avenue
Northfield, IL 60093
Telecopier: (847) 441-6959
Attn: Peter R. Harvey, President and Chief
Operating Officer
with a copy to: Duane, Morris & Heckscher, LLP
One Liberty Place
Philadelphia, PA 19103
Telecopier: (215) 979-1020
Attn: Sheldon M. Bonovitz, Esq.
Any party may, by written notice to the other, change the address to which
notices to such party are to be delivered or mailed.
6
<PAGE>
8. Entire Agreement; Amendment.
This Agreement sets forth the entire agreement and understanding of the
parties in respect of the transactions contemplated hereby and supersedes all
prior agreements, arrangements and understandings relating to the subject matter
hereof. This Agreement may be amended or modified only by a written instrument
executed by the Company and the Holders or by their successors and assigns.
9. General.
This Agreement: (i) shall be construed and enforced in accordance with
the laws of the State of Delaware, without giving effect to the choice of law
principles thereof; (ii) shall inure to the benefit of and be binding upon the
successors and assigns of the Company and the Holders, nothing in this
Agreement, expressed or implied, being intended to confer upon any other person
any rights or remedies hereunder; and (iii) may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. A facsimile of an
executed copy of this Agreement shall have the same force and effect as an
original executed copy. No party may assign his or its rights hereunder without
the prior written consent of the other parties hereto; provided, however, that,
without the consent of the Company, any Holder may assign his rights hereunder
in connection with an assignment of his Company Shares to the extent of any such
assignment. This section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
ENTRADE, INC.
By: /s/Mark F. Santacrose
----------------------------------
Mark F. Santacrose, President
HOLDERS:
/s/Don Haidl
--------------------------------------
Don Haidl
/s/ Corey P. Schlossmann
--------------------------------------
Corey P. Schlossmann
CAPITAL DIRECT 1999 TRUST
By: /s/Peggy Haidl
----------------------------------
Peggy Haidl, Trustee
CORE CAPITAL IV TRUST
By: /s/Peggy Haidl
----------------------------------
Peggy Haidl, Trustee
8
