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): January 26, 2000
ENTRADE INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 1-15303 52-2153008
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Central Avenue, Northfield, Illinois 60093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 441-6650
Not applicable
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
Private Placement. On January 28, 2000, Entrade Inc. completed the sale
of an aggregate of 48,493 shares of its common stock, no par value (the
"Shares"), for an aggregate consideration of $2,000,000 to an unaffiliated
institutional accredited investor. Net proceeds were $2,000,000. The Shares were
sold pursuant to an exemption from registration under the Securities Act of
1933, as amended (the "Act"), pursuant to Regulation D promulgated thereunder.
See Exhibit 10.1 hereto for further information.
ATM Service Agreement. On January 26, 2000, Entrade entered into an
agreement with Warren Rothstein, Thomas Settineri and Gary Levi to acquire 15%
of the issued and outstanding shares of ATM Service, Ltd., for shares of Entrade
common stock equal to the greater of 352,941 shares, or that number determined
by dividing $6,000,000 by the average closing price for Entrade common stock for
the five days preceding the closing date. ATM Service, which is an Entrade
licensee, provides a channel for wholesale redistribution of consumer oriented
goods under the name ATMCenter.com. The transaction is subject to various
conditions, including Entrade shareholder approval. See Exhibit 10.2 hereto for
further information.
Asbestos Litigation. Since 1983, Artra Group Incorporated, which has
been a wholly owned subsidiary of Entrade since September 1999, has responded to
significant product liability claims relating to the use of asbestos in the
manufacture of products by various companies, including a former Artra
subsidiary. Reports from local counsel indicate, as of December 31, 1999,
pending claims asserted by approximately 45,000 plaintiffs (excluding loss of
consortium claims), and it is probable that there are a significant number of
additional claims that remain unasserted. Artra has no reasonable basis on which
to quantify the potential cost to it of the pending claims and any unasserted
claims.
Artra's primary insurance carriers paid approximately $13,000,000 in
disposition of the product liability claims from 1983 through September 1998,
when Artra's primary insurance carriers asserted that Artra's primary insurance
coverage for the claims had been exhausted. Since September 1998, certain of
Artra's excess insurance carriers, under a reservation of the right to deny
coverage liability at a subsequent date, have, under a temporary agreement which
expired on January 31, 2000, assumed the defense of the claims and paid defense,
settlement and indemnity costs relating to the claims of approximately
$17,500,000 through December 31, 1999. Although Artra is engaged in negotiations
with its excess insurance carriers regarding their payment of these defense,
settlement and indemnity costs subsequent to January 31, 2000, we can provide no
assurance that Artra will be able to conclude an agreement with the excess
carriers.
Because of the expiration of the temporary agreement and the uncertain
conclusion of Artra's negotiations with the excess insurance carriers, Artra may
have to advance some or all of these costs, which could have a material adverse
effect on Artra's financial condition, and seek reimbursement of these costs
from the excess insurance carriers through litigation or otherwise. If Artra
were unable to conclude a permanent agreement with its excess insurance
carriers, a court could also determine that Artra is responsible for a portion
of the defense and indemnity costs associated with the product liability claims.
Such a finding would also have a material adverse effect on Artra's financial
condition.
Artra's financial condition could also be materially adversely affected
to the extent that its existing insurance coverage and any other insurance
coverage to which it might become entitled in the future is not sufficient to
respond to the product liability claims. Although Artra believes that its
remaining insurance coverage as of December 31, 1999 relating to the claims is
not less than $185,000,000, Entrade can provide no assurance that the coverage
will be adequate to cover Artra's responsibility for the claims. In the event
Artra were unable to satisfy the claims through a combination of insurance
coverage and its own assets, it is possible that Artra could be forced to seek
protection under the federal bankruptcy laws. In such event, Entrade could lose
its entire investment in Artra. It is also possible that the plaintiffs
asserting the claims against Artra could attempt to pursue legal action against
Entrade. Entrade believes that no valid legal basis exists for the imposition of
Artra's liability for the claims against Entrade, and Entrade would vigorously
defend against any attempt to impose such liability.
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TradeTextile.com Agreement. On February 18, 2000, entrade.com, a wholly
owned subsidiary of Entrade, entered into an agreement to acquire 1,011,667
shares of Series A Convertible Preferred Shares, par value $.001 per share of
TradeTextile.com ("Series A Preferred"), a warrant to acquire 288,778 shares of
Series A Preferred and a warrant to acquire 333,609 shares of Series A Preferred
in exchange for $3,500,000, a warrant to acquire up to 75,000 shares of Entrade
common stock and the license to TradeTextile.com of entrade.com's software
technology. Pursuant to the terms of the agreement, entrade.com will own 35% of
TradeTextile.com on a fully-diluted basis and assuming the full exercise of its
warrants to purchase Series A Preferred of TradeTextile.com. TradeTextile.com
will provide business-to-business e-commerce for the trading of yarns, fabrics,
garments, raw materials, chemicals, and textile quotas, initially targeting the
Chinese textile industry. See Exhibit 10.3 hereto for further information.
The TruckCenter.com Agreement. On February 10, 2000, Entrade agreed
with Associates Commercial Corporation to organize a new entity to be known as
TruckCenter.com to create a business-to-business e-commerce marketplace for the
sale of trucks and related services, including financing, certification,
warranty and third party inspection. Entrade will invest $3,000,000 and be the
sole owner of TruckCenter.com, but Associates Commercial Corporation will have
an option to purchase a 50% interest. The target date for the launch of the
TruckCenter.com website is March 23, 2000. For the six-month period following
the launch, Associates has agreed to list truck inventory on the website and not
on any other website unaffiliated with Associates, and Associates will provide
the ability to apply for financing services to purchasers. Entrade agreed that
TruckCenter.com would list Associates' truck inventory free of any listing fee
(but not free of transaction fees) during such six-month period. Each party
agreed to devote three full time equivalent people to develop the site until the
earlier of July 1, 2000 and the date that is 60 days after the website is
launched. See Exhibit 10.4 hereto for further information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not Applicable.
(b) Not applicable.
(c) Exhibits:
Exhibit No. Exhibit Description
10.1 Subscription and Investment Representation
Agreement entered into by A.T. Kearney on
January 28, 2000 and accepted by the Company
on January 28, 2000. (1)
10.2 Stock Purchase Agreement dated January 26,
2000 among Entrade, Inc., Warren Rothstein,
Thomas Settineri and Gary Levi.
10.3 Investment Agreement dated as of February
18, 2000 among entrade.com, Inc. and
TradeTextile.com.
10.4 Term Sheet dated as of February 10, 2000
between Entrade and Associates Commercial
Corporation.
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-96523) filed with
the Securities and Exchange Commission on February 10, 2000.
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SIGNATURE
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/Mark F. Santacrose
---------------------------------
Mark F. Santacrose, President
Date: March 2, 2000 and Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Description
10.1 Subscription and Investment Representation
Agreement entered into by A.T. Kearney on
January 28, 2000 and accepted by the Company
on January 28, 2000. (1)
10.2 Stock Purchase Agreement dated January 26,
2000 among Entrade, Inc., Warren Rothstein,
Thomas Settineri and Gary Levi.
10.3 Investment Agreement dated as of February
18, 2000 among entrade.com, Inc. and
TradeTextile.com.
10.4 Term Sheet dated as of February 10, 2000
between Entrade and Associates Commercial
Corporation.
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-96523) filed with
the Securities and Exchange Commission on February 10, 2000.
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated January 26, 2000 by and among
ENTRADE INC., a Pennsylvania corporation ("Entrade"), and WARREN ROTHSTEIN,
THOMAS SETTINERI, and GARY LEVI, individuals (each a "Stockholder" and,
together, the "Stockholders").
R E C I T A L S:
WHEREAS, each Stockholder owns that number of shares of the Common
Stock of ATM Service, Ltd., d/b/a ATMCenter.com, a New York corporation
("ATMCenter") set forth opposite such Stockholder's name on Exhibit l(a) hereto,
representing in the aggregate 15% of the issued and outstanding shares of
capital stock of ATMCenter (the "Shares"); and
WHEREAS, Entrade desires to acquire 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 ATMCenter 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 issue to the Stockholders an aggregate
number of fully paid and non-assessable shares of Entrade's Common Stock
("Entrade's Stock") equal to the greater of (i) 352,941, or (ii) that number
determined in accordance with the following formula: (x) $6,000,000 divided by
(y) the average closing share price for Entrade's Stock traded on the New York
Stock Exchange for the five (5) business days preceding the Closing Date. The
shares of Entrade's Stock issuable to the Stockholders as aforesaid are
hereinafter referred to as the "Acquisition Price." No fractional shares of
Entrade's Stock and no scrip or certificates therefor will be issued in
connection with the exchange. Any Stockholder who would otherwise be entitled to
receive a fraction of a share of Entrade Common Stock shall receive, in lieu
thereof, a check for cash in an amount equal to such fraction of a share
multiplied by the average closing price per share determined in accordance with
the foregoing provisions.
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(c) Payment of the Acquisition Price. On the Closing Date, the
shares of Entrade's Stock representing the Acquisition Price (the "Entrade
Shares") shall be issued in the names of and 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 duly endorsed for
transfer to Entrade in accordance with Section 7(c) hereof.
SECTION 2. THE CLOSING.
The closing of the acquisition and conveyance of the Shares
(the "Closing") shall take place at the offices of Duane, Morris & Heckscher,
LLP, One Liberty Place, Philadelphia, Pennsylvania, at 10:00 a.m. (local time)
on the first business day following the day on which the last to be fulfilled or
waived of the conditions set forth in Articles 7 and 8 hereof shall be fulfilled
or waived in accordance therewith or (b) at such other time and place as the
parties may agree (the "Closing Date").
SECTION 3. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
STOCKHOLDERS.
Each Stockholder hereby severally represents and warrants to
Entrade as follows:
(a) Share Ownership. Such Stockholder is the beneficial and
record owner of the Shares set forth opposite his name on Exhibit l(a) hereto,
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 other agreements,
documents and/or instruments 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 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.
(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
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any order, writ, injunction, decree, statute, rule or regulation applicable to
such Stockholder or such Stockholder's Shares.
(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 ATMCenter or to enter into any
agreement with respect thereto.
(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.
(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 ATMCENTER.
Except as set forth in the disclosure letter delivered to
Entrade at or prior to the execution hereof (the "ATMCenter Disclosure Letter"),
the Stockholders, jointly and severally, represent and warrant to Entrade as
follows:
(a) No Other Agreements to Sell Assets or Business. ATMCenter
has no understanding with or obligation, absolute or contingent, to any other
person 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) Consents, No Conflicts, Etc. Neither the execution and
delivery of this Agreement or the Other Stockholder Documents, the consummation
of the transactions contemplated herein or therein, nor compliance by the
Stockholders with any of the provisions hereof or thereof will: (i) violate or
conflict with the certificate of incorporation, by-laws or other organizational
documents of ATMCenter, (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 ATMCenter is a party, or by which ATMCenter or any of its
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
ATMCenter, (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ATMCenter or any of its 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.
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(c) Organization, Good Standing and Capitalization of
ATMCenter. ATMCenter is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. ATMCenter has all
requisite corporate power to carry on its 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. ATMCenter's authorized capital consists exclusively of 2,000
shares of Common Stock, of which 2,000 shares are issued and outstanding. All of
the outstanding shares of capital stock of ATMCenter 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 ATMCenter's capital stock, and
ATMCenter has no 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. ATMCenter holds no capital stock, options, warrants,
calls or other equity interests or any convertible securities in any other
enterprise.
(d) Financial Statements. ATMCenter has delivered to Entrade a
true and complete copy of the unaudited, management prepared balance sheet of
the company dated as of November 30, 1999 (hereinafter, the "Balance Sheet").
The foregoing financial statements fairly present the financial condition,
results of operations, assets, liabilities, changes in stockholders' equity and
cash flow of ATMCenter as of the dates and for the periods indicated.
(e) Absence of Undisclosed Liabilities and Obligations. Except
as and to the extent reflected or reserved against in the Balance Sheet or the
Exhibits thereto, as of November 30, 1999 (the "Balance Sheet Date"), ATMCenter
had no material liabilities or obligations (whether accrued, absolute,
contingent or otherwise).
(f) Absence of Certain Changes or Events. Since the Balance
Sheet Date there has not been any:
(i) change in the condition (business, financial or
otherwise), assets, liabilities, earnings or business of ATMCenter (the
"Business"), 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 ATMCenter taken as a whole;
(ii) (A) change in the number of shares of capital
stock of ATMCenter 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 ATMCenter's capital stock, or (C) payment
to any ATMCenter stockholder or any Affiliate (as defined in Section 15 hereof)
of any ATMCenter stockholder (whether in cash, securities, property or
otherwise) in respect of any service fee, management fee or similar overhead
charge;
(iii) mortgage, pledge or subjection to any
Encumbrance of any of ATMCenter's 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;
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(iv) material liability incurred by ATMCenter, except
liabilities incurred in the ordinary course of business or which would not in
the aggregate have a material adverse effect on the financial condition of
ATMCenter;
(v) borrowing of any money by ATMCenter or
guaranteeing of any indebtedness of others;
(vi) lending of any money or otherwise pledging the
credit of ATMCenter;
(vii) failure to operate the business of ATMCenter in
the ordinary course so as to seek to preserve the businesses intact, to keep
available to ATMCenter the services of ATMCenter's Personnel, and to preserve
the goodwill of ATMCenter's suppliers, customers and others having business
relations with them; or
(viii) other event or condition of any character
which individually or in the aggregate has materially adversely affected, or any
event or condition known to ATMCenter or 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 ATMCenter.
(g) Tax Matters. ATMCenter has duly filed all tax reports and
returns required to be filed by it (if any), including all United States, state,
local and foreign tax returns and reports. All tax returns and reports of
ATMCenter filed prior to the date hereof (if any) are accurate and complete in
all material respects and were prepared in conformity with all applicable laws
and regulations. ATMCenter has: (i) paid in full all Taxes (as hereinafter
defined) due and owing on any such returns and reports or any assessment,
deficiency notice, 30-day letter or similar notice received by it 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. All Taxes which ATMCenter 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. ATMCenter is not 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 ATMCenter that has not been paid. There are no material Tax liens upon
any property or assets of ATMCenter. 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 ATMCenter 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."
(h) Tangible Properties. Except as set forth on the ATMCenter
Disclosure Letter, ATMCenter has good and marketable title to all of its
respective properties and assets, real, personal, tangible and intangible
(including those reflected in the 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 ATMCenter), free and clear of all Encumbrances of
any nature whatsoever, except for (A) the lien of taxes not yet due and
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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 business of ATMCenter, or otherwise materially impair the
business operations of ATMCenter.
(i) Intellectual Properties. The ATMCenter Disclosure Letter
contains accurate lists and summary descriptions of (i) 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 ATMCenter; and (B) all computer software (including
without limitation, all computer programs, data bases and documentation) owned
in whole or in part or used by ATMCenter. The Intellectual Properties referred
to above are all those used in the business of ATMCenter. Other than as
disclosed in the ATMCenter Disclosure Letter, no person has a right to receive a
royalty with respect to any of the Intellectual Properties referred to above,
and ATMCenter has no 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 ATMCenter or otherwise. No other Intellectual Properties are
required to permit the conduct of ATMCenter's business 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 referred to above are valid and in full force and effect. To the best
of the knowledge of The Stockholders, ATMCenter is not 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 ATMCenter, nor are any proceedings threatened alleging any such
violation, nor do ATMCenter or the Stockholders know of any valid basis for any
such proceeding or claim. To ATMCenter's and the Stockholders' knowledge, there
is no infringement or other adverse claim against any of the Intellectual
Properties owned or used by ATMCenter.
(j) Litigation. There is neither (i) any litigation,
proceeding or arbitral action pending or threatened against (A) ATMCenter or any
of its properties, or (B) the Stockholders with respect to the Shares, nor (ii)
any pending or threatened governmental investigation against any of the
foregoing nor (iii) any valid basis known to ATMCenter or the Stockholders for
any such litigation, proceeding or investigation which, if adversely determined
could, in any one case or in the aggregate, have a material adverse effect on
the business or prospects of ATMCenter. There are no decrees, injunctions or
orders of any court or governmental department or agency outstanding against
ATMCenter or against the Stockholders with respect to the Shares.
(k) Compliance with Laws; Permits. To the best knowledge of
the Stockholders, ATMCenter 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 and authorities, and agencies of any of the foregoing to which it is
subject. To the best knowledge of the Stockholders, ATMCenter has not 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
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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 or otherwise have a material adverse
effect on the business of ATMCenter. To the best knowledge of the Stockholders,
ATMCenter has duly filed all reports and returns required to be filed by it with
governmental authorities and obtained all Permits which are required in
connection with its business and operations. To the best knowledge of the
Stockholders, ATMCenter is in compliance with all terms and conditions of all
required Permits. To the best knowledge of the Stockholders, all Permits are in
full force and effect, and no proceedings for the suspension or cancellation of
any Permit is pending or threatened.
(l) No Brokers. Neither ATMCenter nor any Stockholder has
entered into any agreement, arrangement or understanding with any person or firm
which will result in the obligation of ATMCenter, Entrade, or any Stockholder to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
(m) Transactions with Certain Persons. Neither the
Stockholders, any officer or director of ATMCenter, any employee of ATMCenter or
member of any such person's immediate family is presently a party to any
material transaction with ATMCenter relating to the business of ATMCenter,
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 ATMCenter) 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.
(n) Disclosure. No representation or warranty made by
ATMCenter or the Stockholders in this Agreement or in any Other ATMCenter
Document or Other Stockholder Document, or any Exhibit hereto or thereto
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 .
Entrade hereby represents and warrants to the Stockholders as
follows:
(a) Organization and Good Standing. Entrade is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power to carry on
its business as it is now being conducted.
(b) Authority; Execution and Delivery. Entrade has full power
and authority to enter into this Agreement and all other agreements, documents
and instruments contemplated to be executed by it in connection herewith (the
"Other Entrade Documents"). The execution, delivery and performance of this
Agreement and the Other Entrade Documents by Entrade have been duly and
effectively authorized by its Board of Directors. No other corporate proceedings
on the part of Entrade is required to authorize this Agreement or the Other
Entrade Documents; and this Agreement and the Other Entrade Documents have been
duly executed and delivered by Entrade, and constitute legal,
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valid and binding obligations enforceable against Entrade in accordance with its
terms, except as enforceability thereof 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) No Brokers. Entrade has not entered into any agreement,
arrangement or understanding with any person or firm which will result in the
obligation of ATMCenter, Entrade, or any Stockholder to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
(d) Consents, No Conflicts, Etc. Neither the execution and
delivery of this Agreement or the Other Entrade Documents, the consummation by
Entrade 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 any provision of its articles of incorporation or by-laws, (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Entrade or any of its assets or properties, or (iii) require the
consent, approval, permission or other authorization of or by or filing or
qualification with any court, arbitrator or governmental, administrative, or
self regulatory authority.
(e) SEC Documents. Entrade has filed all forms, reports and
documents required to be filed by it with the Securities and Exchange Commission
(the "SEC") since August 19, 1999 (collectively, the "Entrade Reports"). As of
their respective dates, the Entrade Reports, and any such reports, forms and
other documents filed by Entrade with the SEC after the date of this Agreement
(i) complied, or will comply, as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder and (ii) did not, or will 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 (ii) 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 Entrade Report filed prior to the date of this
Agreement that specifically corrected such misstatement or omission in the
applicable Entrade Report.
(f) Absence of Undisclosed Liabilities and Obligations. Except
as and to the extent reflected or reserved against in the Entrade Reports, as of
the respective dates thereof Entrade had no liabilities or obligations (whether
accrued, absolute, contingent or otherwise) of a nature required to be reflected
in a corporate balance sheet prepared in accordance with GAAP or disclosed in
the notes thereto.
(g) Disclosure. No representation or warranty made by Entrade
in this Agreement or the Other Entrade Documents 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.
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<PAGE>
SECTION 6. CERTAIN COVENANTS AND AGREEMENTS.
(a) Access to Information Before Closing. Entrade may, prior
to the Closing Date, make, or cause to be made, such investigation of
ATMCenter's financial, legal, tax, accounting or other condition as it deems
necessary or advisable. The Stockholders shall use their best efforts to cause
ATMCenter to permit Entrade and its authorized representatives, including legal
counsel, investment bankers and independent accountants, upon reasonable notice
to have full access to the properties and relevant books and records of
ATMCenter at reasonable business hours, and to cause ATMCenter to furnish, or
cause to be furnished, to Entrade such financial and operating data and other
information and copies of documents with respect to the products, services,
operations and properties of ATMCenter as Entrade shall from time to time
request. No investigation made by Entrade or its representatives, except to the
extent of actual knowledge by Entrade of any inaccuracy or breach of the
representations and warranties of the Stockholders contained herein, shall
affect any of such representations and warranties in this Agreement or the
liability of the Stockholders with respect thereto. In the event the
transactions contemplated by this Agreement shall not be consummated, Entrade
will return to ATMCenter all documents, work papers and other materials obtained
from ATMCenter relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, and Entrade will treat in
confidence all such information. Entrade shall have completed its due diligence
investigation of ATMCenter, including, but not limited to, financial, legal, tax
and accounting due diligence, by that date which is fourteen (14) days following
the date of this Agreement ("Review Period End Date"). If such investigation and
the information obtained in connection therewith has not been satisfactory to
Entrade in its sole discretion, Entrade shall have the option to terminate this
Agreement as provided in Section 10(a)(v) hereof.
(b) 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 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 carry out the
provisions hereof. 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 any of them the title
to any shares of Entrade's Stock, 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 Entrade Shares in the Stockholders to the extent of its
interests therein.
(c) Meeting of Entrade Stockholders. Entrade shall take all
action necessary in accordance with applicable law and its Articles of
Incorporation and Bylaws to convene a meeting of its shareholders as promptly as
practicable to consider and vote upon the approval of this Agreement and the
issue of the Entrade Shares to the Stockholders. The Board of Directors of
Entrade shall recommend such approval, and Entrade shall take all lawful action
to solicit such approval, including, without limitation, timely mailing the
Proxy Statement/Prospectus (hereinafter defined); provided, however, that such
recommendation or solicitation is subject to any action (including any
withdrawal or change of its recommendation) taken by, or upon authority of, the
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<PAGE>
Board of Directors of Entrade in the exercise of its good faith judgment as to
its fiduciary duties to its shareholders imposed by law.
(d) Registration Statement. Entrade and the Stockholders shall
cooperate and promptly prepare and Entrade shall file with the SEC as soon as
practicable a Registration Statement on Form S-4 (the "Form S-4") under the
Securities Act, with respect to the Entrade Shares, which shall also serve as
the proxy statement with respect to the meeting of the shareholders of Entrade
to approve this Agreement (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Entrade shall use all reasonable efforts, and the Stockholders shall cooperate
with Entrade, to have the Form S-4 declared effective by the SEC as promptly as
practicable, and to keep the Form S-4 effective as long as is necessary to
consummate the transactions contemplated hereunder. Entrade shall, as promptly
as practicable, provide copies of any written comments received from the SEC
with respect to the Form S-4 to the Stockholders and advise the Stockholders of
any verbal comments with respect to the Form S-4 received from the SEC. Entrade
shall use its best efforts to obtain, prior to the effective date of the Form
S-4, all necessary state securities law or "blue sky" permits or approvals
required to carry out the transactions described in this Agreement. Entrade
agrees that the Proxy Statement/Prospectus and each amendment or supplement
thereto at the time of mailing thereof and at the time of the meeting of
shareholders of Entrade, or, in the case of the Form S-4 and each amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
Entrade in reliance upon and in conformity with written information concerning
the Stockholders furnished to Entrade by the Stockholders specifically for use
in the Proxy Statement/Prospectus or any amendment or supplement thereto. The
Stockholders agree that the written information concerning the Stockholders
provided by them for inclusion in the in the Proxy Statement/Prospectus and each
amendment or supplement thereto at the time of mailing thereof and at the time
of the meeting of shareholders of Entrade, or, in the case of written
information concerning ATMCenter or the Stockholders provided for inclusion in
the Form S-4 or any amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Entrade will advise the Stockholders promptly of the time
when the Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification of
Entrade's Stock issuable in connection with the transactions contemplated by
this Agreement for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Proxy Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional information.
The filing fee in connection with the filing of the Form S-4 with the SEC and
the expenses incurred in connection with printing and mailing the Form S-4 shall
be borne by Entrade.
(e) Listing Application. E ntrade shall promptly prepare and
submit to the NYSE a listing application covering the shares of Entrade's Stock
issuable in the transactions contemplated
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by this Agreement, and shall use reasonable efforts to obtain, prior to the
Closing Date, approval for such listing of such Entrade's Stock, subject to
official notice of issuance.
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:
(a) Stockholders' Performance. Each of the obligations of the
Stockholders 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 shall have delivered to Entrade certificates to
such effect.
(b) Representations and Warranties Correct. The
representations and warranties made by the Stockholders in Sections 3 and 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 Stockholders shall have delivered to Entrade certificates
to such effect.
(c) Operations in Usual Manner. During the period from and
after the date of this Agreement through the Closing, ATMCenter shall have:
(i) continued to conduct its business in the ordinary
course;
(ii) not declared or paid any dividends on its
capital stock or made any other distribution with respect thereto or made any
payment on account of the repurchase, redemption or retirement of any shares of
its capital stock or debt securities;
(iii) not incurred or guaranteed any additional
indebtedness for borrowed money, granted any salary increase or bonus or entered
into any long-term contract, other than in the ordinary course of business and
when such transactions are not, individually or in the aggregate, material to
ATMCenter;
(iv) not amended its certificate of incorporation,
by-laws or any other organizational document unless, and only insofar as, such
amendment was necessary to carry out the transactions contemplated by this
Agreement;
(v) promptly notified Entrade 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 ATMCenter is a party or by which any of its property
is bound or the filing of any material litigation against ATMCenter or the
existence of any dispute with any person that involves a reasonable likelihood
of such litigation being commenced;
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(vi) provided to Entrade in writing as soon as
available after each monthly accounting period an unaudited balance sheet,
statement of operation and statement of changes in financial condition for such
monthly period and from the beginning of ATMCenter's fiscal year to the end of
such monthly period; and
the Stockholders shall have delivered to Entrade certificates to such effect.
(d) Form S-4 Effective. The Form S-4 shall have become
effective, and no stop order suspending effectiveness of the Form S-4 shall have
been issued, no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness thereof shall have been initiated and be continuing, or, to
the knowledge of Entrade, threatened, and all necessary approvals under state
securities laws relating to the issuance or trading of the Entrade's Stock to be
issued to the Stockholders in connection with the transactions contemplated by
this Agreement shall have been received.
(e) 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, duly endorsed for transfer to Entrade or accompanied by stock powers
duly executed for transfer to Entrade and with all requisite documentary or
stock transfer tax stamps affixed or paid for by such Stockholder.
(f) Approvals and Consents. This Agreement and the
transactions described herein shall have been approved in the manner required by
applicable law or by the applicable regulations of any stock exchange or other
regulatory body, as the case may be, and by the holders of the issued and
outstanding shares of capital stock of Entrade, and the Stockholders shall have
obtained or caused ATMCenter to 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 its obligations hereunder.
(g) 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 ATMCenter since the date of the Balance
Sheet and, on the Closing Date, the Stockholders shall have delivered to Entrade
a certificate to such effect.
(g) 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.
(h) Other Closing Documents. The Stockholders shall have
delivered to Entrade all of the following documents:
(i) certified copies of the Certificate of
Incorporation and By-Laws of ATMCenter, as in effect on the Closing Date; and
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(ii) such other documents relating to the
transactions contemplated by this Agreement as Entrade or its counsel shall
reasonably request.
(j) Shareholders' Agreement. ATMCenter and each of
its stockholders shall have executed and delivered to Entrade a Shareholders'
Agreement ("Shareholders' Agreement") in the form of Exhibit 7(k) hereto.
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS.
The obligations of Stockholders to consummate the transactions
contemplated hereby shall be subject to the fulfillment, or the waiver by 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 to the Stockholders a certificate to such effect.
(b) 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.
(c) Form S-4 Effective. The Form S-4 shall have become
effective and no stop order suspending effectiveness of the Form S-4 shall have
been issued, no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness thereof shall have been initiated and be continuing, or, to
the knowledge of Entrade, threatened, and all necessary approvals under state
securities laws relating to the issuance or trading of the Entrade's Stock to be
issued to the Stockholders in connection with the transactions contemplated by
this Agreement shall have been received.
(d) Approvals and Consents. This Agreement and the
transactions described herein shall have been approved in the manner required by
applicable law or by the applicable regulations of any stock exchange or other
regulatory body, as the case may be, and by the holders of the issued and
outstanding shares of capital stock of Entrade, and Entrade shall have obtained
and shall have delivered to the Stockholders all other 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.
(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 as reflected in the Entrade
Reports and, on the Closing Date, Entrade shall have delivered to the
Stockholders a certificate to such effect.
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<PAGE>
(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 their respective
counsel.
(g) Other Closing Documents. Entrade shall have delivered to
the Stockholders all of the following documents:
(i) certified copies of the resolutions duly adopted
by Entrade's Board of Directors authorizing the execution, delivery and
performance of this Agreement and the Other Entrade Documents;
(ii) certified copies of the Certificate 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 or their
respective counsel shall reasonably request.
(h) Shareholders' Agreement. Entrade shall have executed and
delivered to ATMCenter and each of its stockholders the Shareholders' Agreement.
SECTION 9. OBLIGATIONS OF PARTIES AFTER CLOSING.
(a) Survival of Representations and Warranties. All
representations, warranties, covenants, stipulations, certifications,
indemnities and agreements contained herein or in any document delivered
pursuant hereto shall survive the consummation of the transactions described in
this Agreement.
(b) Stockholders' Agreement to Indemnify. The Stockholders
shall jointly and severally indemnify and hold harmless Entrade 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 "Losses") resulting from any misrepresentation or breach
of representation or warranty 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 the Stockholders in this Agreement or the Other
Stockholder Documents executed and delivered by the Stockholders in connection
herewith.
(c) Entrade's Agreement to Indemnify. Entrade shall indemnify
and hold harmless the Stockholders against and in respect of any and all 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.
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<PAGE>
(d) 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 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 to participate, at its own expense, in 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.
(e) Restrictions on Transfer of the Entrade Shares. Prior to
the first anniversary of the Closing Date, the Stockholders shall not sell,
transfer or otherwise dispose of (other than to pledge and borrow against the
Entrade Shares), in the aggregate, more than the number of Entrade Shares
determined as provided hereinafter (the "Saleable Entrade Shares"). The number
of Saleable Entrade Shares during the first three month period following the
Closing Date shall be equal to one- twelfth (1/12) of the Entrade Shares, which
number shall increase in each subsequent three month period by an additional
one-twelfth (1/12) of the Entrade Shares, provided that the aggregate number of
Saleable Entrade Shares shall not exceed one-third (1/3) of the Entrade Shares
during the one year period following the Closing Date. The Stockholders
acknowledge that any certificate evidencing the Entrade Shares shall bear a
legend setting forth the aforesaid restrictions on transfers. The restrictions
provided for herein shall terminate and have no further effect on the first
anniversary of the Closing Date, and from and after that date the Stockholders
shall have the right to exchange their certificates representing the Entrade
Shares for certificates without the aforesaid legend. The Stockholders further
acknowledge that the restrictions provided for herein are in addition to any and
all other restrictions on transfers that may be applicable to the Entrade Shares
or the Stockholders under federal or state securities laws or regulations or
under the rules of the NYSE.
(f) Restrictions on Entrade License Agreements. For so long as
Entrade continues to hold at least five percent (5%) of the outstanding shares
of ATMCenter capital stock, entrade.com, Inc. (a wholly owned subsidiary of
Entrade), shall not enter into any license of the "entrade transaction software"
(as that term is defined in that certain Software License Agreement by and
between entrade.com, Inc. and ATMCenter dated as of September, 1999) with any of
the persons or entities listed on Exhibit 9(f) hereto, without first obtaining
ATMCenter's written consent.
SECTION 10. TERMINATION; EXPENSES.
(a) Termination. This Agreement may be terminated prior to the Closing
as follows:
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(i) at any time by the mutual written consent of
Entrade and the Stockholders;
(ii) by either Entrade or the Stockholders if the
approval of Entrade's shareholders as required by Section 6(d) shall not have
been obtained at a meeting duly convened therefor or at any adjournment thereof,
or by the Stockholders if the Form S-4 has not become effective within 75 days
following the date of this Agreement (provided that, if the SEC elects to review
the Form S-4, such 75-day period shall be automatically extended to 120 days);
(iii) by Entrade upon written notice to the
Stockholders if a material breach of a warranty or representation or covenant
made by ATMCenter 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);
(iv) 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);
(v) by Entrade upon written notice to the
Stockholders on or before the Review Period End Date if Entrade's due diligence
investigation and the information obtained in connection therewith shall not
have been satisfactory to Entrade as provided in Section 7(j) hereof;
(vi) by Entrade upon written notice to the
Stockholders if a materially adverse change in the business or financial
condition of ATMCenter shall have occurred or shall have become known to
Entrade, or if any material litigation shall be instigated or threatened against
ATMCenter, after the date hereof and on or prior to the Closing Date;
(vii) by the Stockholders upon written notice to
Entrade if a materially adverse change in the business or financial condition of
Entrade shall have occurred or shall have become known to the Stockholders, or
if any material litigation shall be instigated or threatened against Entrade,
after the date hereof and on or prior to the Closing Date (provided that
fluctuations in the public share price of Entrade's Stock, absent other material
considerations, shall not be deemed a material adverse change in its business or
financial condition);
(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.
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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 Stockholders: c/o ATMCenter.com
220 White Plains Road
Tarrytown, NY 10591
Telecopier: (914) 631-6500
with a copy to: Astor Weiss Kaplan & Rosenblum LLP
200 South Broad Street, Sixth Floor
Philadelphia, PA 19102
Telecopier: (215) 790-0509
Attn: G. David Rosenblum, Esquire
If to Entrade: Entrade Inc.
500 Central Avenue
Northfield, IL 60093
Telecopier: (847) 441-6959
Attn: Mark Santacrose, President and
Chief Operating 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
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<PAGE>
been made by the Stockholders 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 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 or 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 Commonwealth of Pennsylvania, 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 and the 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 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:
ATMCenter's Personnel. As defined in Section 4(f)(vii) of this
Agreement.
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.
Entrade's Stock. The shares of Entrade's Common Stock to be
issued to the Stockholders under Section l(b) of this Agreement.
Balance Sheet Date. November 30, 1999.
Business. As defined in Section 4(f)(i) of 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.
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Encumbrances. A claim, lien, pledge, option, charge,
encumbrance, security interest or any right of any third party.
Losses. As defined in Section 9(e) of this Agreement.
Stockholders. The persons listed on Exhibit l(a) hereto.
Shares. The shares of Common Stock of ATMCenter being conveyed
and acquired by Entrade hereunder, representing 15% of the issued and
outstanding shares of Common Stock of ATMCenter.
Tax. As defined in Section 4(g) of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
ENTRADE INC.
By:____________________________________
Title:
STOCKHOLDERS:
_______________________________________
WARREN ROTHSTEIN
_______________________________________
THOMAS SETTINERI
_______________________________________
GARY LEVI
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EXHIBIT 10.3
EXECUTION COPY
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Investment Agreement
dated as of
February 18, 2000
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I The Transactions 5
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Section 1.1. The Transactions to be Effected in Multiple Closings 5
----------------------------------------------------
Section 1.2. Prior Payment; Closings 5
-----------------------
Section 1.3. Deliveries 6
----------
ARTICLE II Representations and Warranties of the Company 6
---------------------------------------------
Section 2.1. Organization, Qualifications and Corporate Power 7
------------------------------------------------
Section 2.2. Authorization of Agreements; No Conflicts 7
-----------------------------------------
Section 2.3. Validity 8
--------
Section 2.4. Capitalization and Related Matters 8
----------------------------------
Section 2.5. Officers. 8
--------
Section 2.6. Other Agreements 8
----------------
Section 2.7. Governmental Approvals 9
----------------------
Section 2.8. Business Plan 9
-------------
Section 2.9. Offering of the Preferred Shares 9
--------------------------------
Section 2.10. Brokers or Finders 9
------------------
ARTICLE III Purchaser and Parent Representations and Warranties 9
---------------------------------------------------
Section 3.1. Investor Qualifications 9
-----------------------
Section 3.2. Investment. 10
----------
Section 3.3. Rule 144. 10
--------
Section 3.4. No Public Market 10
----------------
Section 3.5. Access to Data 10
--------------
Section 3.6. Authorization of Purchaser 10
--------------------------
Section 3.8. Brokers or Finders 11
------------------
Section 3.9. Tax Consequences 11
----------------
Section 3.10. Company Information 11
-------------------
ARTICLE IV Conditions to Closing 12
---------------------
Section 4.1. Conditions to Purchaser's Obligations to First Closing 12
------------------------------------------------------
Section 4.2. Conditions to Company's Obligation to First Closing 13
---------------------------------------------------
Section 4.3. Conditions to Purchaser's Obligation to Second Closing 14
------------------------------------------------------
Section 4.4. Conditions to the Company's Obligation to Second Closing 14
--------------------------------------------------------
Section 4.5. Conditions to Purchaser's Obligation to Third Closing 15
-----------------------------------------------------
Section 4.6. Conditions to the Company's Obligation to Third Closing 15
-------------------------------------------------------
Section 4.7. Conditions to Purchaser's Obligation to Fourth Closing 16
------------------------------------------------------
Section 4.8. Conditions to the Company's Obligation to Fourth Closing 16
--------------------------------------------------------
2
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ARTICLE V Reporting and Inspection 17
------------------------
Section 5.1. Financial Statements and Other Information 17
------------------------------------------
Section 5.2. Inspection Rights 18
-----------------
ARTICLE VI Additional Covenants 18
--------------------
Section 6.1. Board of Directors 18
------------------
Section 6.2. 18
Expenses 18
--------
Section 6.3. Share Plans 18
-----------
Section 6.4. Annual Budget 18
-------------
Section 6.5. Compensation of Directors and Executive Officers 19
------------------------------------------------
ARTICLE VII Miscellaneous 19
-------------
Section 7.1. Amendments 19
----------
Section 7.2. Survival of Representations and Warranties 19
------------------------------------------
Section 7.3. Successors and Assigns 19
----------------------
Section 7.4. Severability 19
------------
Section 7.5. Descriptive Headings 19
--------------------
Section 7.6. Notices 19
-------
Section 7.7. Governing Law 21
-------------
Section 7.8. Exhibits and Schedules 21
----------------------
Section 7.9. Final Agreement 21
---------------
Section 7.10. Execution in Counterparts 21
-------------------------
Section 7.11. JURISDICTION; VENUE; FORUM NON CONVENIENS 21
-----------------------------------------
Section 7.12. WAIVER OF JURY TRIAL 22
--------------------
Section 7.13. Survival of Covenants 22
---------------------
Section 7.14. Approval of Distribution of Parent Warrant 22
------------------------------------------
Section 7.15. Guarantee of Purchaser's Obligations 23
------------------------------------
</TABLE>
<PAGE>
SCHEDULES
I Capitalization Table
II Officers
EXHIBITS
A Company Warrants
B Software License Agreement
C Instrument of Assignment of Parent Warrant
D Parent Warrant
E Registration Rights Agreement
F Memorandum of Association and Articles of Association
<PAGE>
23
INVESTMENT AGREEMENT
This Investment Agreement (this "Agreement") dated as of
February 18, 2000 is between TradeTextile.com Inc., a Cayman Islands company
(the "Company"), Entrade Inc., a Pennsylvania corporation ("Parent"), and
entrade.com, Inc., a Delaware corporation and wholly-owned subsidiary of Parent
("Purchaser").
RECITAL
WHEREAS, the parties desire to enter into a series of
transactions pursuant to which (i) Purchaser will acquire from the Company
1,011,667 (the "Purchased Shares") Series A Convertible Preferred Shares, par
value U.S. $.001 per share, of the Company (the "Preferred Shares"), and the
Company Warrants (as hereinafter defined), (ii) the Company and Purchaser will
enter into the License Agreement (as hereinafter defined) pursuant to which
Purchaser will transfer certain intellectual property rights to the Company,
(iii) Purchaser will make aggregate cash payments to the Company, U.S.
$3,500,000, which includes $100,000 previously paid to the Company, (iv)
Purchaser will assign to the Company the Parent Warrant (as hereinafter defined)
and (v) the Company and Purchaser will enter into the Registration Rights
Agreement (as hereinafter defined) (the transactions contemplated by clauses
(i), (ii), (iii), (iv) and (v) being collectively referred to as the
"Transactions").
5
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
The Transactions
Section 1.1. The Transactions to be Effected in Multiple
Closings. Except for the payment of U.S. $100,000 by Parent to the Company on
behalf of Purchaser, which was made on or about January 21, 2000, the
Transactions will be effected in multiple closings (the "Closings"), as set
forth in this Article I.
Section 1.2. Prior Payment; Closings. (a) The parties hereby
acknowledge and agree that Parent has paid to the Company cash in the amount of
U.S. $100,000 prior to the date hereof and that the Company has no obligation to
return to Parent any portion thereof, such U.S. $100,000 constituting a portion
of the U.S. $3,500,000 contemplated by clause (iii) of the recital to this
Agreement.
(b) Subject to the satisfaction or waiver of the conditions
set forth in Sections 4.1 and 4.2, the first Closing shall be held on February
18, 2000, or such other date as may be agreed to in writing by the Company and
Purchaser (the "First Closing"). At the First Closing, Purchaser shall (i) pay
to the Company cash in the amount of U.S. $900,000, (ii) enter into the Software
License Agreement (the "License Agreement"), between the Company and Purchaser,
in substantially the form attached hereto as Exhibit B pursuant to which
Purchaser will transfer certain intellectual property rights to the Company,
(iii) execute the Instrument of Assignment (the "Instrument of Assignment"), in
substantially the form attached hereto as Exhibit C ,which assigns to the
Company the warrant to purchase 75,000 shares of Common Stock, par value U.S.
$.01 per share, of Parent (the "Parent Warrant") dated as of February 18, 2000
and attached hereto as Exhibit D and (iv) enter into the Registration Rights
Agreement (the "Registration Rights Agreement"), between the Company and
Purchaser, in substantially the form attached hereto as Exhibit E. At the First
Closing, the Company shall (i) issue to Purchaser 511,667 Preferred Shares, (ii)
issue to Purchaser two warrants to purchase Preferred Shares (the "Company
Warrants"), in substantially the forms, attached hereto as Exhibit A-1 and
Exhibit A-2, (iii) enter into the License Agreement, and (iv) enter into the
Registration Rights Agreement.
(c) The second Closing shall take place on the date specified
in a written notice delivered in accordance with Section 7.6 by the Company to
Purchaser; provided, however, that, except as otherwise agreed, such closing
date shall not be more than 2 business days prior to the date Purchaser has
received such notice; and provided, further, that the closing conditions set
forth in Sections 4.3 and 4.4 have been satisfied or waived (the "Second
Closing"). At the Second Closing, Purchaser shall pay to the Company cash in the
amount of U.S. $500,000 and the Company shall issue to Purchaser 100,000
Preferred Shares.
5
<PAGE>
(d) The third Closing shall take place on the date specified
in a written notice delivered in accordance with Section 7.6 by the Company to
Purchaser; provided, however, that, except as otherwise agreed, such closing
date shall not be more than 2 business days prior to the date Purchaser has
received such notice; and provided, further, that the closing conditions set
forth in Sections 4.5 and 4.6 have been satisfied or waived (the "Third
Closing"). At the Third Closing, Purchaser shall pay to the Company cash in the
amount of U.S. $1,000,000 and the Company shall issue to Purchaser 200,000
Preferred Shares.
(e) The fourth Closing shall take place on the date specified
in a written notice delivered in accordance with Section 7.6 by the Company to
Purchaser; provided, however, that, except as otherwise agreed, such closing
date shall not be more than 2 business days prior to the date Purchaser has
received such notice; and provided, further, that the closing conditions set
forth in Sections 4.7 and 4.8 have been satisfied or waived (the "Fourth
Closing"). At the Fourth Closing, Purchaser shall pay to the Company cash in the
amount of U.S. $1,000,000 and the Company shall issue to Purchaser 200,000
Preferred Shares.
(f) Unless otherwise agreed by the Company and Purchaser, each
of the Closings shall take place at 10:00 a.m., Chicago time, at the office of
Sidley & Austin, Bank One Plaza, 10 S. Dearborn Street, Chicago, Illinois.
Section 1.3. Deliveries. Whenever the Company is required to
issue Preferred Shares to Purchaser pursuant to this Article I, the Company
shall cause appropriate entries to be made in the Register of Members of the
Company in respect of such Preferred Shares and to be delivered to Purchaser
certificates, duly executed by the Company and registered in the name of
Purchaser, evidencing such Preferred Shares. Unless otherwise specified by
Purchaser, all Preferred Shares to be issued at any Closing shall be evidenced
by a single certificate. Whenever after the date hereof Purchaser is required to
make a payment of cash to the Company, Purchaser shall make such payment by wire
transfer of immediately available funds to an account which has been designated
in writing by the Company.
ARTICLE II
Representations and Warranties of the Company
6
<PAGE>
The Company hereby represents and warrants to Purchaser that:
Section 2.1. Organization, Qualifications and Corporate Power.
(a) The Company is a company duly incorporated, validly
existing and in good standing under the laws of the Cayman Islands, and is duly
licensed or qualified to transact business as a foreign entity and is in good
standing in each other jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where the failures to be so
licensed or qualified, individually and in the aggregate, could not reasonably
be expected to have a material adverse effect on the financial condition,
results of operations, business or property of the Company (a "Material Adverse
Effect"). The Company has the power and authority to own and hold its properties
and to carry on its business as now conducted and as proposed to be conducted.
The Company has full power and authority to execute, deliver and perform this
Agreement, the License Agreement, the Registration Rights Agreement and the
Company Warrants, and to issue and sell the Preferred Shares contemplated hereby
and under the Company Warrants. The Company is in compliance with all of the
terms and provisions of the Company's Memorandum and Articles of Association
attached hereto as Exhibit F (the "Charter").
(b) The Company does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other company or (B) any participating
interest in any partnership, limited liability company, joint venture or other
non-corporate business enterprise or (ii) control, directly or indirectly, any
other entity.
Section 2.2. Authorization of Agreements; No Conflicts. (a)
The execution, delivery and performance by the Company of this Agreement, the
License Agreement, the Registration Rights Agreement and the issuance and sale
of the Preferred Shares and the Company Warrants (i) have been duly authorized
by all requisite corporate action, (ii) will not violate (w) any provision of
law, (x) any order of any court or other agency of government, (y) the Charter,
or (z) any provision of any indenture, agreement or other instrument to which
the Company or any of its respective properties or assets is bound, (iii) will
not conflict with, result in a breach of or constitute a default under any such
order, indenture, agreement or other instrument, and (iv) will not result in the
creation or imposition of any lien, charge, restriction, claim or encumbrance of
any nature whatsoever upon any of the properties or assets of the Company,
except for such exceptions to clauses (ii)(z), (iii) and (iv) which,
individually and in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(b) The Purchased Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable and will be free and clear of all liens, charges, restrictions,
claims and encumbrances. The Preferred Shares issuable upon the exercise of the
Company Warrants have been duly authorized and, when issued in accordance with
the Company Warrants, will be validly issued, fully paid and nonassessable and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances. The issuance or sale of the Purchased Shares, the Company Warrants
7
<PAGE>
and the Preferred Shares issuable upon the exercise of the Company Warrants, are
not, and will not be, subject to any preemptive right of shareholders of the
Company or to any right of first refusal or other right in favor of any person.
Section 2.3. Validity. This Agreement has been duly executed
and delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms. The License Agreement, the
Registration Rights Agreement and the Company Warrants, when executed and
delivered in accordance with this Agreement, will constitute its legal, valid
and binding obligation of the Company, enforceable in accordance with its
respective terms.
Section 2.4. Capitalization and Related Matters. At the time
of (and after giving effect to) the First Closing, 3,000,000 Common Shares, par
value $.001 per share, of the Company (the "Common Shares"), and 546,667
Preferred Shares of the Company will be validly issued and outstanding, fully
paid and nonassessable. At the time of (and after giving effect to) the First
Closing, the holders of record of shares and holders of subscriptions, warrants,
options, convertible securities, and other rights (contingent or other) to
purchase or otherwise acquire shares of the Company, and the number of such
shares held by each, will be as set forth in the Capitalization Table attached
as Schedule I, other than an agreement with Sidley & Austin pursuant to which
Sidley & Austin may elect within 30 days of the First Closing to receive
securities of the Company as payment for its legal fees (which Sidley & Austin
has indicated that it does not intend to so elect). The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class of shares of the Company are as set forth in the Charter. The Company
has no obligation (contingent or other) to purchase, redeem or otherwise acquire
any of its shares or any interest therein or to pay any dividend or make any
other distribution in respect thereof. There are no voting trusts or agreements,
shareholders agreements, pledge agreements, buy-sell agreements, rights of first
refusal, preemptive rights or proxies relating to any securities of the Company
except for this Agreement.
Section 2.5. Officers. Set forth in Schedule II is a list of
the names of the officers of the Company as of the date hereof, together with
the current title or job classification of each such person.
Section 2.6. Other Agreements. (a) The Company is not a party
to or otherwise bound by any agreement, contract, commitment or arrangement,
written or oral, involving a commitment by the Company of more than U.S.
$10,000.
(b) The Company has in all material respects performed all the
obligations required to be performed by it to date under any lease, agreement or
contract now in effect to which the Company is a party or by which it or its
property may be bound other than for such exceptions to the foregoing, which,
individually and in the aggregate, would not have a Material Adverse Effect.
8
<PAGE>
Section 2.7. Governmental Approvals. Subject to the accuracy
of the representations and warranties of Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Company of this Agreement, the
License Agreement, the Registration Rights Agreement, the Company Warrants, the
issuance and sale of the Purchased Shares or the issuance of the Preferred
Shares upon the exercise of the Company Warrants.
Section 2.8. Business Plan. The "TradeTextile.com Business
Plan" dated December 6, 1999 was prepared by management of the Company and
reflects management's plans as of such date for the Company's operations.
Section 2.9. Offering of the Preferred Shares. Neither the
Company nor any person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the Preferred
Shares or any security of the Company similar thereto has taken or will take any
action (including, without limitation, any offer, issuance or sale of any
security of the Company under circumstances which might require the integration
of such security with the Preferred Shares under the Securities Act of 1933, as
amended (the "Securities Act") or the rules and regulations of the Securities
and Exchange Commission (the "Commission") thereunder) so as to subject the
offering, issuance or sale of any of the Preferred Shares to the registration
provisions of the Securities Act.
Section 2.10. Brokers or FindersThe Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
ARTICLE III
Purchaser and Parent Representations and Warranties
In order to induce the Company to enter into this Agreement
and issue, sell and deliver the Preferred Shares and the Company Warrants
contemplated hereby, Purchaser and Parent hereby, jointly and severally,
represent and warrant as follows:
Section 3.1. Investor Qualifications. Purchaser is an
"accredited" investor as such term is defined in Regulation D promulgated
pursuant to the Securities Act. Purchaser, by reason of Purchaser's business or
financial experience, directly or indirectly, is capable of evaluating the
merits and risks of Purchaser's investment in the Company, and has the capacity
to protect Purchaser's own interests in connection with the purchase of the
Preferred Shares.
9
<PAGE>
Section 3.2. Investment. Purchaser is acquiring or will be
acquiring the Preferred Shares for investment for Purchaser's own account, not
as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof. Purchaser understands that the issuance and sale
of the Preferred Shares has not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act that depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of such Purchaser's
representations as expressed herein. Purchaser has not been formed for the
specific purpose of acquiring the Preferred Shares.
Section 3.3. Rule 144. Purchaser acknowledges that the
Securities must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser is
aware of the provisions of Rule 144 promulgated under the Securities Act, which
permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including (except as limited by Rule
144(k)), among other things, the existence of a public market for the shares,
the availability of certain current public information about the Company, the
resale occurring not less than one year after a party has purchased and paid for
the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three-month period
not exceeding specified limitations.
Section 3.4. No Public Market. Purchaser understands that no
public market now exists for any of the securities issued by the Company, that
the Company has made no assurances that a public market will ever exist for the
Preferred Shares and that, even if such a public market exists at some future
time, the Company may not then be satisfying the current public information
requirements of Rule 144.
Section 3.5. Access to Data. Purchaser has had the opportunity
to ask questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of this transaction, as well
as to obtain any information requested by Purchaser. Any questions raised by
Purchaser concerning the transaction have been answered to the satisfaction of
Purchaser. Purchaser's decision to enter into the transactions contemplated
hereby is based in part on the answers to such questions as Purchaser has raised
concerning the transaction and on Purchaser's own evaluation of the risks and
merits of the purchase and the Company's proposed business activities.
Section 3.6. Authorization of Purchaser. (a) All corporate or
partnership action, if applicable, on the part of Purchaser, its directors and
its sole shareholder necessary for the authorization, execution, delivery and
performance of this Agreement, the License Agreement, the Registration Rights
Agreement and the Instrument of Assignment by Purchaser has been taken. This
Agreement, the License Agreement, the Registration Rights Agreement and the
Instrument of Assignment when executed and delivered by Purchaser, will
10
<PAGE>
constitute valid and legally binding obligations of Purchaser, enforceable in
accordance with their respective terms.
Section 3.7. Authorization; Validity of Parent. (a) All
corporate or partnership action, if applicable, on the part of Parent, its
directors and its shareholders necessary for the authorization, execution,
delivery and performance of the Parent Warrant has been taken. The Parent
Warrant when executed and contributed by Parent to Purchaser constituted, and
when the Parent Warrant is assigned by Purchaser to the Company pursuant to the
Instrument of Assignment is executed and delivered by Purchaser to the Company,
will constitute valid and legally binding obligations of Parent, enforceable in
accordance with its respective terms.
(b) The shares of Common Stock of Parent issuable upon
exercise of the Parent Warrant have been duly authorized and, when issued in
accordance with the Parent Warrant, will be validly issued, fully paid and
nonassessable and will be free and clear of all liens, charges, restrictions,
claims and encumbrances. The issuance or sale of the Parent Warrant and the
Common Stock issuable upon exercise of the Parent Warrant, are not, and will not
be, subject to any preemptive right of shareholders of Parent or to any right of
first refusal or other right in favor of any person.
Section 3.8. Brokers or FindersPurchaser and Parent have not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by Purchaser or Parent, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement.
Section 3.9. Tax Consequences. Purchaser and Parent have
reviewed with their own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. Purchaser and Parent are relying solely on such advisors and not on
any statements or representations of the Company or any of its agents and
understands that Purchaser and Parent (and not the Company) shall be responsible
for their own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
Section 3.10. Company Information. Purchaser and Parent
acknowledge that the Company believes that the information disclosed to
Purchaser and Parent concerning the Company and the information provided to
Purchaser or Parent pursuant to and in connection with this Agreement and the
transactions contemplated hereby, is confidential and/or proprietary to the
Company (the "Confidential Information"). Purchaser and Parent agree not to
disclose Confidential Information to any third parties and to keep the
Confidential Information confidential, using the same standard of care in
safeguarding the Confidential Information as Purchaser and Parent employ in
protecting their own proprietary information which they desire not to
disseminate or publish. Each of Purchaser and Parent will instruct its
respective directors, officers, employees, and representatives, if any, to keep
such Confidential Information confidential.
11
<PAGE>
ARTICLE IV
Conditions to Closing
Section 4.1. Conditions to Purchaser's Obligations to First
Closing. The obligation of Purchaser to effect the transactions contemplated by
Section 1.2(b) to occur at the First Closing is subject to the fulfillment to
the reasonable satisfaction of Purchaser at or prior to the First Closing of
each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement or any
agreement, instrument or certificate delivered pursuant hereto shall be true,
correct and complete on and as of the date of the First Closing, and the Company
shall have delivered to Purchaser a certificate of the Chief Executive Officer
of the Company, dated as of the date of the First Closing, to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the date of the First Closing shall have been performed or complied
with and the Company shall have delivered to Purchaser a certificate of the
Chief Executive Officer of the Company, dated as of the date of the First
Closing, to that effect.
(c) Secretary's Certificate. At the First Closing, the Company
shall have delivered to Purchaser copies of the Charter, and copies of each of
the following, in each case certified as of the date of the First Closing by the
Secretary of the Company:
(i) resolutions of the Company, authorizing and approving, as
appropriate, this Agreement, the License Agreement, the Company
Warrants, the Registration Rights Agreement and the transactions
contemplated hereby and thereby, and the issuance and sale of the
Purchased Shares and the Preferred Shares issuable upon exercise of the
Company Warrants; and
(ii) the signatures and incumbency of the officers of the
Company authorized to execute and deliver the documents to which the
Company is a party.
(d) Consents. At the First Closing, the Company shall have
delivered to Purchaser copies of all consents and approvals of third parties
required under any agreements or otherwise in connection with the execution,
delivery or performance by the Company of this Agreement or any of the other
agreements or documents contemplated hereby.
12
<PAGE>
(e) License Agreement, Company Warrants and Registration
Rights Agreement. At the First Closing, the Company shall have executed and
delivered to Purchaser the License Agreement, the Company Warrants and the
Registration Rights Agreement.
(f) Good Standing. At the First Closing, the Company shall
have delivered to Purchaser a certificate of good standing of the Company issued
as of a recent date by the Cayman Islands Registrar of Companies.
Section 4.2. Conditions to Company's Obligation to First
Closing. The obligation of the Company to effect the transactions contemplated
by Section 1.2(b) to occur at the First Closing is subject to the fulfillment to
the reasonable satisfaction of the Company at or prior to the First Closing of
each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Purchaser and Parent contained in this
Agreement or any agreement, instrument or certificate delivered pursuant hereto
shall be true, correct and complete on and as of the date of the First Closing,
and each of Purchaser and Parent shall have delivered to the Company a
certificate of an executive officer of Purchaser or Parent, as the case may be,
dated as of the date of the First Closing, to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by Purchaser and
Parent on or prior to the date of the First Closing shall have been performed or
complied with and Purchaser and Parent shall have delivered to the Company a
certificate of an executive officer of Purchaser or Parent, dated as of the date
of the First Closing, to that effect.
(c) Purchaser Secretary's Certificate. At the First Closing,
Purchaser shall have delivered to the Company copies of the Certificate of
Incorporation of Purchaser, as amended, and copies of each of the following, in
each case certified as of the date of the First Closing by the Secretary of
Purchaser:
(i) resolutions of Purchaser, authorizing and approving, as
appropriate, this Agreement, the License Agreement, the Instrument of
Assignment, the Registration Rights Agreement and the transactions
contemplated hereby and thereby; and
(ii) the signatures and incumbency of the officers of
Purchaser authorized to execute and deliver the documents to which
Purchaser is a party.
(d) Parent Secretary's Certificate. At the First Closing,
Parent shall have delivered to the Company copies of the Articles of
Incorporation of Parent, as amended, and copies of each of the following, in
each case certified as of the date of the First Closing by the Secretary of
Parent:
13
<PAGE>
(i) resolutions of Parent, authorizing and approving, as
appropriate, the Parent Warrant and the transactions contemplated
hereby and thereby, and the issuance and sale of the shares of Common
Stock of Parent issuable upon exercise of the Parent Warrant; and
(ii) the signatures and incumbency of the officers of Parent
authorized to execute and deliver the documents to which Parent is a
party.
(e) License Agreement, Instrument of Assignment, Parent
Warrant and Registration Rights Agreement. At the First Closing, Purchaser shall
have executed and delivered to the Company the License Agreement, the Instrument
of Assignment and the Registration Rights Agreement and Purchaser shall have
delivered to the Company the Parent Warrant.
(f) Good Standing. At the First Closing, Purchaser shall have
delivered to the Company a certificate of good standing of Purchaser issued as
of a recent date by the Secretary of State of the State of Delaware.
Section 4.3. Conditions to Purchaser's Obligation to Second
Closing. The obligation of Purchaser to effect the transactions contemplated by
Section 1.2(c) to occur at the Second Closing is subject to the fulfillment to
the reasonable satisfaction of Purchaser at or prior to the Second Closing of
the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in Sections 2.1, 2.2,
2.3 and 2.4 of this Agreement shall be true, correct and complete on and as of
the date of the Second Closing and the Company shall have delivered to Purchaser
a certificate of the Chief Executive Officer of the Company, dated the date of
the Second Closing to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the date of the Second Closing shall have been performed or complied
with and the Company shall have delivered to Purchaser a certificate of an
executive officer of the Company, dated as of the date of the Second Closing, to
that effect.
(c) Key Management. The Company shall have retained employees
to filled the following positions: (i) Chief Executive Officer; (ii) Chief
Technology Officer; (iii) Chief Operating Officer; (iv) General Manager -
Shanghai Operations; and (v) Director of Marketing - Hong Kong Operations.
Section 4.4. Conditions to the Company's Obligation to Second
Closing. The obligation of the Company to effect the transactions contemplated
by Section 1.2(c) to occur at the Second Closing is subject to the fulfillment
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<PAGE>
to the reasonable satisfaction of the Company at or prior to the Second Closing
of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in Section 3.6 of this
Agreement shall be true, correct and complete on and as of the date of the
Second Closing and Purchaser shall have delivered to the Company a certificate
of an executive officer of Purchaser, dated the date of the Second Closing to
that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by Purchaser on or
prior to the date of the Second Closing shall have been performed or complied
with and Purchaser shall have delivered to the Company a certificate of an
executive officer of Purchaser, dated as of the date of the Second Closing, to
that effect.
Section 4.5. Conditions to Purchaser's Obligation to Third
Closing. The obligation of Purchaser to effect the transactions contemplated by
Section 1.2(d) to occur at the Third Closing is subject to the fulfillment to
the reasonable satisfaction of Purchaser at or prior to the Third Closing of the
following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in Sections 2.1, 2.2,
2.3 and 2.4 of this Agreement shall be true, correct and complete on and as of
the date of the Third Closing and the Company shall have delivered to Purchaser
a certificate of the Chief Executive Officer of the Company, dated the date of
the Third Closing to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the date of the Third Closing shall have been performed or complied
with and the Company shall have delivered to Purchaser a certificate of an
executive officer of the Company, dated as of the date of the Third Closing, to
that effect.
(c) Website Operational. The Company shall have an operational
website.
Section 4.6. Conditions to the Company's Obligation to Third
Closing. The obligation of the Company to effect the transactions contemplated
by Section 1.2(d) to occur at the Third Closing is subject to the fulfillment to
the reasonable satisfaction of the Company at or prior to the Third Closing of
the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in Section 3.6 of this
Agreement shall be true, correct and complete on and as of the date of the Third
Closing and Purchaser shall have delivered to the Company a certificate of an
15
<PAGE>
executive officer of Purchaser, dated the date of the Third Closing to that
effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by Purchaser on or
prior to the date of the Third Closing shall have been performed or complied
with and Purchaser shall have delivered to the Company a certificate of an
executive officer of Purchaser, dated as of the date of the Third Closing, to
that effect.
Section 4.7. Conditions to Purchaser's Obligation to Fourth
Closing. The obligation of Purchaser to effect the transactions contemplated by
Section 1.2(e) to occur at the Fourth Closing is subject to the fulfillment to
the reasonable satisfaction of Purchaser at or prior to the Fourth Closing of
the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in Sections 2.1, 2.2,
2.3 and 2.4 of this Agreement shall be true, correct and complete on and as of
the date of the Fourth Closing and the Company shall have delivered to Purchaser
a certificate of the Chief Executive Officer of the Company, dated the date of
the Fourth Closing to that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the date of the Fourth Closing shall have been performed or complied
with and the Company shall have delivered to Purchaser a certificate of an
executive officer of the Company, dated as of the date of the Fourth Closing, to
that effect.
(c) First Transaction. The Company shall have processed at
least one order over its website.
Section 4.8. Conditions to the Company's Obligation to Fourth
Closing. The obligation of the Company to effect the transactions contemplated
by Section 1.2(e) to occur at the Fourth Closing is subject to the fulfillment
to the reasonable satisfaction of the Company at or prior to the Fourth Closing
of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in Section 3.6 of this
Agreement shall be true, correct and complete on and as of the date of the
Fourth Closing and Purchaser shall have delivered to the Company a certificate
of an executive officer of Purchaser, dated the date of the Fourth Closing to
that effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by Purchaser on or
prior to the date of the Fourth Closing shall have been performed or complied
with and Purchaser shall have delivered to the Company a certificate of an
16
<PAGE>
executive officer of Purchaser, dated as of the date of the Fourth Closing, to
that effect.
ARTICLE V
Reporting and Inspection
The Company hereby covenants and agrees:
Section 5.1. Financial Statements and Other Information. The
Company will deliver to Purchaser:
(a) as soon as available after the end of each fiscal month
the Company, and in any event within 30 days thereafter, (i) an
unaudited balance sheet of the Company as at the end of such month;
(ii) an unaudited statement of operations of the Company for such month
and for the fiscal year of the Company to the end of such month; and
(iii) an unaudited statement of cash flows of the Company for such
month and for the fiscal year to the end of such month, all in
reasonable detail, subject to changes resulting from normal year-end
audit adjustments, certified by the principal financial officer of the
Company (the "Principal Financial Officer");
(b) as soon as available after the end of each fiscal quarter
of the Company, and in any event within 45 days thereafter, (i) an
unaudited balance sheet of the Company as at the end of such quarter;
(ii) an unaudited statement of operations of the Company for such
quarter and for the fiscal year of the Company to the end of such
quarter; and (iii) an unaudited statement of cash flows of the Company
for such quarter and for the fiscal year to the end of such quarter,
all in reasonable detail, subject to changes resulting from normal
year-end audit adjustments, certified by the Principal Financial
Officer;
(c) as soon as available after the end of each fiscal year of
the Company, and in any event within 120 days thereafter, a reviewed
balance sheet of the Company, and the related reviewed statements of
operations, shareholders' equity and cash flows of the Company for such
fiscal year (collectively, the "Annual Statements"), setting forth in
each case in comparative form the figures for the previous fiscal year
(if any), certified by the Principal Financial Officer; provided,
however, that if Purchaser notifies the Company that it requires such
Annual Statements for such fiscal year sooner than 120 days after the
end of such fiscal year, the Company shall cooperate with Purchaser and
use its best efforts to provide such Annual Statements to Purchaser by
the date requested; and
(d) with reasonable promptness, such other data, reports and
information as from time to time Purchaser may reasonably request and
such data, press releases, reports and information as the Company may
from time to time furnish to holders of its securities.
17
<PAGE>
Section 5.2. Inspection Rights. The Company will permit an
authorized representative of Purchaser to visit and inspect the properties of
the Company, including its books and to discuss its affairs, finances and
accounts with its officers, all at such reasonable times and as often as such
person may reasonably request, all upon reasonable prior written notice to the
Company.
ARTICLE VI
Additional Covenants
The Company hereby covenants and agrees:
Section 6.1. Board of Directors. The Board of Directors shall
consist of at least one (1) member but not more than seven (7) members.
Section 6.2. Expenses. The Company shall bear its own expenses
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby. The Company shall pay any and all reasonable legal fees of
Purchaser and Parent with respect to this Agreement and the transactions
contemplated hereby not in excess of an aggregate of $75,000.
Section 6.3. Share Plans. The Company shall not grant any
options, share appreciation rights, performance shares or units, or restricted
shares without the prior approval of a majority of the Board of Directors;
provided, further, that if the recipient of any such grant is a director or
executive officer of the Company, such majority shall include the affirmative
vote of at least one director elected by the holders of the Preferred Shares (a
"Preferred Director").
Section 6.4. Annual Budget . In addition to the approval of
the Board of Directors, the annual operating budget of the Company prepared for
each fiscal year of the Company (the "Annual Budget") shall be subject to
approval of Purchaser. No later than sixty (60) days before the end of the
fiscal year preceding the fiscal year for which an Annual Budget applies, the
Annual Budget shall be submitted to Purchaser for approval, disapproval or
modification. The Company shall not make any capital expenditures provided for
in an Annual Budget until the subject Annual Budget has received the required
approval of Purchaser; provided, however, that Purchaser shall give prompt
notice of any such approval, disapproval or modification. In the event that
Purchaser disapproves of such Annual Budget, the Company and Purchaser shall use
their best efforts to make such modification that will enable Purchaser to
approve such Annual Budget. Until such modification has been agreed to, the
Company shall be permitted to make capital expenditures not in excess of an
aggregate of U.S. $50,000 for such year.
18
<PAGE>
Section 6.5. Compensation of Directors and Executive Officers.
The annual compensation package, including, without limitation, salary, grants
of share options, share appreciation rights, performance shares or units, or
restricted shares, and other benefits, of each executive officer, director and
individuals related to each executive officer or director, shall be subject to
approval of a majority of the Board of Directors (which majority shall include
the affirmative vote of at least one Preferred Director); provided, however,
that such approval shall not be required for a base salary for fiscal year ended
December 31, 2000 not in excess of U.S.$100,000 for each of the officers listed
in Schedule II. Once an annual compensation package is approved pursuant to this
Section 6.5, any changes, modifications or amendments to such annual
compensation package in excess of 10% of the base salary of such annual
compensation package shall require the approval of a majority of the Board of
Directors (which majority shall include at least one Preferred Director).
ARTICLE VII
Miscellaneous
Section 7.1. Amendments. This Agreement may not be amended,
modified or supplemented except by a written instrument signed by each of the
parties hereto.
Section 7.2. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this
Agreement, the consummation of any Closing, and any investigation made at any
time by or on behalf of Purchaser or Parent.
Section 7.3. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not.
Section 7.4. Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 7.5. Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement.
Section 7.6. Notices. Any notices required, desired or
permitted to be given hereunder, shall be delivered personally, sent by
overnight courier or mailed, registered or certified mail, return receipt
requested, to the following addresses (or to such other address as each party
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<PAGE>
may specify in a notice given hereunder) or transmitted by facsimile
transmission (with such transmission promptly confirmed by writing delivered
personally, by overnight courier or mailed as provided in this Section 7.6) and
shall be deemed to have been received on the day of personal delivery, one
business day after delivery to the overnight courier service, three business
days after such mailing or, in the case of facsimile transmission, when
received:
If to Purchaser:
entrade.com, Inc.
521 Fellowship Road
Suite 130
Mt. Laurel, NJ 08054
Attention: Ben Kafka
Telephone number: 847/441-6650
Fax number: 847/441-6959
with a copy in the case of a notice to Purchaser to:
Duane, Morris & Heckscher LLP
227 W. Monroe, Suite 3400
Chicago, Illinois 60606
Attention: Eric M. Fogel
Telephone number: 312/499-6729
Fax number: 312/499-6701
If to Parent:
Entrade Inc.
500 Central Avenue
Northfield, IL 60093
Telephone number: (847) 441-8850
Fax number: (847) 441-6959
with a copy in the case of a notice to Parent to:
Duane, Morris & Heckscher LLP
227 W. Monroe, Suite 3400
Chicago, Illinois 60606
Attention: Eric M. Fogel
Telephone number: 312/499-6729
Fax number: 312/499-6701
20
<PAGE>
If to the Company:
TradeTextile.com Inc.
16/F., 10 Knutsford, T.S.T.
Kowloon, Hong Kong
Telephone number: 011/852/2721-1750
Fax number: 011/852/2311-4481
with a copy in the case of a notice to the Company to:
Sidley & Austin
Bank One Plaza
10 S. Dearborn Street
Chicago, Illinois 60603
Attention: Frederick C. Lowinger
Telephone number: 312/853-7000
Fax number: 312/853-7036
Section 7.7. Governing Law. THE VALIDITY, MEANING AND EFFECT
OF THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF ILLINOIS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
Section 7.8. Exhibits and Schedules. All Exhibits and
Schedules hereto are an integral part of this Agreement.
Section 7.9. Final Agreement. This Agreement, together with
those documents which are exhibits hereto, constitute the final agreement of the
parties concerning the matters referred to herein and therein, and supersedes
all prior and contemporaneous agreements and understandings, including, without
limitation, the Term Sheet dated as of December 17, 1999 between the Company and
Parent.
Section 7.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts together shall
constitute one instrument.
Section 7.11. JURISDICTION; VENUE; FORUM NON CONVENIENS. (A)
EACH OF THE COMPANY, PURCHASER AND PARENT HEREBY IRREVOCABLY SUBMITS IN ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, WHETHER ARISING
IN CONTRACT, TORT, EQUITY OR OTHERWISE, TO THE EXCLUSIVE JURISDICTION OF ANY
21
<PAGE>
STATE OR FEDERAL COURT LOCATED IN THE STATE OF ILLINOIS AND WAIVES ANY AND ALL
OBJECTIONS TO JURISDICTION THAT IT MAY HAVE UNDER THE LAWS OF THE UNITED STATES
OR OF ANY STATE.
(B) EACH OF THE COMPANY, PURCHASER AND PARENT WAIVES ANY
OBJECTION THAT IT MAY HAVE (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS) TO THE LOCATION OF THE COURT
IN WHICH ANY PROCEEDING IS COMMENCED IN ACCORDANCE WITH THIS SECTION 7.11.
Section 7.12. WAIVER OF JURY TRIAL. EACH OF THE COMPANY,
PURCHASER AND PARENT WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN ANY OF THE PARTIES HERETO
ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 7.13. Survival of Covenants. The covenants of the
Company set forth in Section 5.1(a) and Article 6 shall terminate and be of no
further force or effect as to Purchaser upon the Company's firm commitment
underwritten public offering of its Common Shares under the Act resulting in
proceeds of at least U.S. $15,000,000 (after deduction of underwriters
commissions and expenses) (a "Qualified IPO"), or upon any merger, acquisition
or consolidation in which all or substantially all of the assets, or the capital
shares, of the Company are sold or transferred. The covenants of the Company set
forth in Article 5 (other than Section 5.1(a)) shall survive a Qualified IPO to
the extent such obligations are consistent with the Company's disclosure
obligations under (a) the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder, (b) the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder, and (c) the
requirements of any national securities exchange or automated quotation system
on which the Company's securities are listed. Other covenants contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closings and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of any of the parties.
Section 7.14. Approval of Distribution of Parent Warrant. The
Purchaser hereby approves and authorizes the distribution by the Company, at any
time after the First Closing, of the Parent Warrant to Yik Fan Cheung, Allan
Chiwan Cheung and Chen Jian Xu as compensation for services provided by them to
the Company.
22
<PAGE>
Section 7.15. Guarantee of Purchaser's Obligations. Parent
hereby guarantees the performance by Purchaser of its obligations under Article
IV.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the __ day of February, 2000.
TRADETEXTILE.COM INC.
By: _______________________________
Name:
Title:
ENTRADE.COM, INC.
By: _______________________________
Name:
Title:
ENTRADE INC.
By: _______________________________
Name:
Title:
<PAGE>
SCHEDULE I TO
INVESTMENT AGREEMENT
CAPITALIZATION TABLE
Holders of Common Shares Number of Common Shares
- ------------------------ -----------------------
Allan Chiwan Cheung 885,000
Yik Fan Cheung 1,180,000
Chen Jian Xu 881,000
Weidong Wang 4,000
Woo Ping Fok 10,000
Steven Kaplan 20,000
Frederick C. Lowinger 20,000
----------
Total 3,000,000
=========
Holders of Preferred Shares Number of Preferred Shares
- --------------------------- --------------------------
entrade.com, Inc. 511,667
Woo Ping Fok 20,000*
Frederick C. Lowinger 5,000*
Imad I. Qasim 5,000*
John P. Simon 5,000*
-----------
Total 546,667
===========
* Being sold contemporaneously with the First Closing pursuant to separate
subscription agreements.
<PAGE>
SCHEDULE II TO
INVESTMENT AGREEMENT
OFFICERS
Officer Position
- ------- --------
Yik Fan Cheung Chairman of the Board and Chief Operating
Officer
Allan Chiwan Cheung Chief Executive Officer
Chen Jian Xu President, Chief Technology Officer and
Secretary
EXHIBIT 10.4
TERM SHEET
This term sheet is executed by Associates Commercial Corporation
("Associates") and Entrade Inc. ("Entrade") and sets forth a summary of terms
regarding the formation and initial operation of an entity tentatively
identified as TruckCenter.com, although the ultimate name of the entity is
subject to availability.
TruckCenter.com has been organized as a Delaware corporation and a
wholly owned subsidiary of Entrade. Entrade and Associates will discuss the
content of the operational documentation of TruckCenter.com in an effort to meet
the tax and corporate needs of both Entrade and Associates. The proposed initial
stock structure of TruckCenter.com is a single class of common shares as
follows: 1,000,000 authorized common shares at a par value of $0.001 with
180,000 issued initially to Entrade and 20,000 reserved for issuance upon
conversion of the convertible promissory notes described below. Initial funding
for TruckCenter.com will be in the amount of $3,000,000 and will be provided
solely by Entrade. TruckCenter.com will issue two convertible promissory notes
each in the amount of $1,500,000 for an aggregate of $3,000,000. Each note will
earn interest at the applicable federal rate for short-term obligations as
provided in Section 1274 of the Internal Revenue Code and will be convertible at
the option of the holder into 10,000 shares of common stock of TruckCenter.com.
Associates will have the option, exercisable on the later of April 1,
2000 or 30 days after the website is launched, to purchase from Entrade 90,000
shares (representing 50% of the then issued and outstanding shares) of
TruckCenter.com for its par value of $0.001 per share. Associates will also have
the option, exercisable within sixty days after the website is launched, to
purchase one of the two convertible debentures from Entrade for $3,000,000. The
entity would be controlled by a governing board representing Associates, Entrade
and any third party investor, based upon the interests of each party in the
entity. Associates and Entrade will jointly cooperate in obtaining any necessary
tax and regulatory licenses and approvals.
The target date for the launch of the TruckCenter.com website is March
23, 2000. For the six-month period following March 23, 2000 provided that the
website remains live and operational, (i) Associates agrees that it will list
truck inventory on the TruckCenter.com website and not on any other website,
except as further provided in this paragraph, (ii) it will provide the ability
to apply for wholesale and retail financing services to purchasers who acquire
items through TruckCenter.com, and (iii) in any press release that Entrade or
TruckCenter.com releases in conjunction with the launch of the TruckCenter.com
website, Entrade and TruckCenter.com may refer to Associates' role as a customer
of Truckcenter's disposition services and a provider of such wholesale and
retail financing services. Entrade will submit all press releases referring to
Associates to Associates for review and approval prior to release. The website
will be considered "launched" on the date that it becomes accessible by the
general public as a live and operational website. The website will be considered
"live and operational" during any period in which the website functions as
previously described by Entrade. Nothing contained in this provision will
<PAGE>
prohibit Associates from listing any inventory on any website operated by
Associates or by Arrow Trucks or offering to sell or selling its truck inventory
in any non-internet manner or forum. Entrade also acknowledges that certain
parties not controlled by Associates may from time to time place Associates
inventory on their websites without Associates' authorization and agrees that
Associates will not be responsible for any such posting and any such posting is
not a violation by Associates of the terms of this agreement.
In exchange for this agreement, TruckCenter.com will list Associates'
truck inventory on the TruckCenter.com website free of any listing fee (but not
free of transaction fees that Truckcenter imposes on transactions consummated
through such website) for the six-month period following launch of such website.
The fee charged by TruckCenter.com to The Associates is subject to negotiation,
but will not exceed 2.5% of the gross sales price of the item sold or such lower
transaction fee as TruckCenter.com may offer to any third party provider of
items to be sold on the TruckCenter.com website.
As its contribution to TruckCenter.com, Entrade agrees to license its
transactional software to TruckCenter.com and to provide 200 people hours of
development time to develop enabling e-commerce marketplace technology. For the
six-month period following launch of the TruckCenter.com website, Entrade agrees
not to license its transactional software to any other party developing or
operating a website with a principal purpose of competing with the
Truckcenter.com website in the marketing of commercial trucks or trailers, it
being understood that this limitation shall in no way affect the business
conducted by Entrade's Nationwide Auction Systems subsidiary. Entrade will
provide any development time beyond the first 200 hours at its standard hourly
fee. Entrade's standard hourly fee is listed on Schedule A to this agreement. In
exchange for the license and the development time, TruckCenter.com will pay
Entrade a transaction fee to be negotiated between Entrade and Associates (but
not in excess of2.5% of the gross sales price of any trucks sold through the
TruckCetner.com website); provided, however, that, for transactions consummated
within the first six months after website launch, TruckCenter.com will have no
obligation to pay any such transaction fee.
Associates will list TruckCenter.com on the Associates website for the
six-month period following the date the website is launched. Through the later
of April 30, 2000 and 30 days after the website is launched, Associates will
also introduce the services provided by TruckCenter.com to certain select
members of Associates' dealer network as selected by Associates.
The parties recognize that they will need to devote substantial
resources in a short period of time to ensure a prompt launch of the
TruckCenter.com website. For the initial phase of development up to the earlier
of April 30, 2000 or the date the website is launched each of Entrade and
Associates will provide three full-time people (or the equivalent of three
full-time people). If Associates exercises its option to acquire an equity
interest in Truckcenter.com, Entrade and Associates will review the staffing
requirements after the website is launched. For Entrade, these people may come
from Entrade Inc. or its subsidiaries, entrade.com and Nationwide, or
third-party consultants retained by Entrade; for Associates, these may include
<PAGE>
relevant experts within Associates' organization. If Associates and
TruckCenter.com so agree, Associates may provide such resources by leasing
certain of its employees to TruckCenter.com. Future commitments of resources
will be determined during the initial development phase.
Associates acknowledges that Entrade will make efforts to enlist future
partners that could provide additional services or items that could be provided
to customers of TruckCenter.com, which partners may be competitors of Associates
in one or more markets or industries.
This term sheet is intended to be a binding agreement with respect to
the development of the website, the granting to Associates of the option to
acquire the equity interest as outlined above and the listing of truck inventory
by Associates and, by executing this term sheet, the parties intend to be
legally bound hereby. This agreement does not in any way legally bind Associates
to invest in or acquire any interest in Truckcenter.com. This contract is not
assignable by Associates (except to an affiliate of Associates) or Entrade
without the prior written consent of the other party. Each of the parties agrees
that, unless required by law, it will not disclose the terms of this Term Sheet
or the fact that the parties are discussing the creation of TruckCenter.com.
ENTRADE INC.
By: _____________________
Its _____________
Dated:___________
ASSOCIATES COMMERCIAL CORPORATION:
By: _____________________
Its _____________
Dated: _________
