EXHIBIT 10.3
EXECUTION COPY
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Investment Agreement
dated as of
February 18, 2000
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TABLE OF CONTENTS
Page
ARTICLE I The Transactions 5
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Section 1.1. The Transactions to be Effected in Multiple Closings 5
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Section 1.2. Prior Payment; Closings 5
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Section 1.3. Deliveries 6
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ARTICLE II Representations and Warranties of the Company 6
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Section 2.1. Organization, Qualifications and Corporate Power 7
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Section 2.2. Authorization of Agreements; No Conflicts 7
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Section 2.3. Validity 8
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Section 2.4. Capitalization and Related Matters 8
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Section 2.5. Officers. 8
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Section 2.6. Other Agreements 8
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Section 2.7. Governmental Approvals 9
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Section 2.8. Business Plan 9
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Section 2.9. Offering of the Preferred Shares 9
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Section 2.10. Brokers or Finders 9
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ARTICLE III Purchaser and Parent Representations and Warranties 9
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Section 3.1. Investor Qualifications 9
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Section 3.2. Investment. 10
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Section 3.3. Rule 144. 10
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Section 3.4. No Public Market 10
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Section 3.5. Access to Data 10
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Section 3.6. Authorization of Purchaser 10
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Section 3.8. Brokers or Finders 11
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Section 3.9. Tax Consequences 11
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Section 3.10. Company Information 11
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ARTICLE IV Conditions to Closing 12
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Section 4.1. Conditions to Purchaser's Obligations to First Closing 12
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Section 4.2. Conditions to Company's Obligation to First Closing 13
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Section 4.3. Conditions to Purchaser's Obligation to Second Closing 14
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Section 4.4. Conditions to the Company's Obligation to Second Closing 14
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Section 4.5. Conditions to Purchaser's Obligation to Third Closing 15
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Section 4.6. Conditions to the Company's Obligation to Third Closing 15
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Section 4.7. Conditions to Purchaser's Obligation to Fourth Closing 16
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Section 4.8. Conditions to the Company's Obligation to Fourth Closing 16
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ARTICLE V Reporting and Inspection 17
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Section 5.1. Financial Statements and Other Information 17
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Section 5.2. Inspection Rights 18
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ARTICLE VI Additional Covenants 18
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Section 6.1. Board of Directors 18
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Section 6.2. 18
Expenses 18
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Section 6.3. Share Plans 18
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Section 6.4. Annual Budget 18
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Section 6.5. Compensation of Directors and Executive Officers 19
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ARTICLE VII Miscellaneous 19
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Section 7.1. Amendments 19
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Section 7.2. Survival of Representations and Warranties 19
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Section 7.3. Successors and Assigns 19
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Section 7.4. Severability 19
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Section 7.5. Descriptive Headings 19
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Section 7.6. Notices 19
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Section 7.7. Governing Law 21
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Section 7.8. Exhibits and Schedules 21
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Section 7.9. Final Agreement 21
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Section 7.10. Execution in Counterparts 21
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Section 7.11. JURISDICTION; VENUE; FORUM NON CONVENIENS 21
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Section 7.12. WAIVER OF JURY TRIAL 22
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Section 7.13. Survival of Covenants 22
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Section 7.14. Approval of Distribution of Parent Warrant 22
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Section 7.15. Guarantee of Purchaser's Obligations 23
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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
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INVESTMENT AGREEMENT
This Investment Agreement (this "Agreement") dated as of
February 18, 2000 is between XxxxxXxxxxxx.xxx Inc., a Cayman Islands company
(the "Company"), Entrade Inc., a Pennsylvania corporation ("Parent"), and
xxxxxxx.xxx, 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").
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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.
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(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, 00 X. Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx.
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
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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
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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.
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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 "XxxxxXxxxxxx.xxx 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.
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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
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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.
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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.
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(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:
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(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
14
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
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
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
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
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
19
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:
xxxxxxx.xxx, Inc.
000 Xxxxxxxxxx Xxxx
Xxxxx 000
Xx. Xxxxxx, XX 00000
Attention: Xxx Xxxxx
Telephone number: 847/000-0000
Fax number: 847/000-0000
with a copy in the case of a notice to Purchaser to:
Duane, Morris & Heckscher LLP
000 X. Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Telephone number: 312/000-0000
Fax number: 312/000-0000
If to Parent:
Entrade Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone number: (000) 000-0000
Fax number: (000) 000-0000
with a copy in the case of a notice to Parent to:
Duane, Morris & Heckscher LLP
000 X. Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Telephone number: 312/000-0000
Fax number: 312/000-0000
20
If to the Company:
XxxxxXxxxxxx.xxx Inc.
00/X., 00 Xxxxxxxxx, X.X.X.
Xxxxxxx, Xxxx Xxxx
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
00 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Telephone number: 312/000-0000
Fax number: 312/000-0000
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
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 Xxxxxx, Xxxxx
Xxxxxx Xxxxxx and Xxxx Xxxx Xx as compensation for services provided by them to
the Company.
22
Section 7.15. Guarantee of Purchaser's Obligations. Parent
hereby guarantees the performance by Purchaser of its obligations under Article
IV.
23
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the __ day of February, 2000.
XXXXXXXXXXXX.XXX INC.
By: _______________________________
Name:
Title:
XXXXXXX.XXX, INC.
By: _______________________________
Name:
Title:
ENTRADE INC.
By: _______________________________
Name:
Title:
SCHEDULE I TO
INVESTMENT AGREEMENT
CAPITALIZATION TABLE
Holders of Common Shares Number of Common Shares
------------------------ -----------------------
Xxxxx Xxxxxx Xxxxxx 885,000
Yik Fan Xxxxxx 1,180,000
Chen Xxxx Xx 881,000
Xxxxxxx Xxxx 4,000
Woo Xxxx Xxx 10,000
Xxxxxx Xxxxxx 20,000
Xxxxxxxxx X. Xxxxxxxx 20,000
----------
Total 3,000,000
=========
Holders of Preferred Shares Number of Preferred Shares
--------------------------- --------------------------
xxxxxxx.xxx, Inc. 511,667
Woo Xxxx Xxx 20,000*
Xxxxxxxxx X. Xxxxxxxx 5,000*
Xxxx X. Xxxxx 5,000*
Xxxx X. Xxxxx 5,000*
-----------
Total 546,667
===========
* Being sold contemporaneously with the First Closing pursuant to separate
subscription agreements.
SCHEDULE II TO
INVESTMENT AGREEMENT
OFFICERS
Officer Position
------- --------
Yik Fan Xxxxxx Chairman of the Board and Chief Operating
Officer
Xxxxx Xxxxxx Xxxxxx Chief Executive Officer
Chen Xxxx Xx President, Chief Technology Officer and
Secretary
