ASSET PURCHASE AGREEMENT
THIS AGREEMENT made as of the 20th day of March, 2000.
BETWEEN:
▇▇▇▇▇▇'▇ AUCTION HOUSE OF SCOTTSDALE, LLC, a limited liability company
formed under the laws of Arizona and having its head office at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, with
attention to ▇▇▇▇▇▇ Friend, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(the "Vendor")
OF THE FIRST PART
AND:
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (WASHINGTON), INC., a company incorporated under the
laws of the State of Washington and having its registered office at
31635 36th Avenue SW, Federal Way, Washington, 98023-2105, with
attention to ▇▇▇▇▇ ▇▇▇▇▇, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(the "Purchaser")
OF THE SECOND PART
AND:
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a company incorporated under the laws of
Florida and having its head office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, with attention to ▇▇▇▇▇ ▇▇▇▇▇, Facsimile
(▇▇▇) ▇▇▇-▇▇▇▇
(the "Parent Company")
OF THE THIRD PART
WHEREAS:
A. The Vendor carries on the business of the auction of antiques and other
furniture and equipment;
B. The Vendor has agreed to sell, and the Purchaser has agreed to purchase,
subject to certain exceptions, all of the property, assets, and undertaking
of the Vendor's business, as a going concern;
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C. The Purchaser is the wholly owned subsidiary of the Parent Company;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises
and the covenants, agreements, representations, warranties, and payments set
forth in this Agreement, the parties covenant and agree as follows:
1. INTERPRETATION
1.1 Where used in this Agreement, each of the following words will have the
following meanings:
(a) "Assets" means all properties and assets normally and necessarily used in
the Business, as a going concern, including without limitation:
(i) the Goodwill;
(ii) the Equipment;
(iii) the Material Contracts;
(iv) the Intangible Property, including Licenses and Permits; and
(v) all of the Vendor's right, title, and interest in and to all other
personal property and assets, tangible or intangible, used by the
Vendor or to which the Vendor is entitled in connection with the
Business,
but does not include:
(vi) cash on hand or in banks; and
(vii) the Receivables;
(b) "Business" means the business currently carried on by the Vendor for the
auction of antiques and other furniture and equipment;
(c) "Closing" means the completion of the sale and purchase of the Assets and
the payment of or provision for the Purchase Price, all as provided in this
Agreement;
(d) "Closing Date" means March 20, 2000;
(e) "Equipment" means all machinery, equipment, automobiles, trucks, office
equipment, furniture, furnishings, tools, stores, and supplies of all kinds
used in connection with the Business and leased or owned by the Vendor,
including the machinery, equipment, and other property described in
Schedule "A";
(f) "Goodwill" means the goodwill of the Business, together with the
Purchaser's exclusive right to represent itself as carrying on the business
in continuation of and in succession to the Vendor and the right to use any
words indicating that the Business is so carried on, including the right to
use the Name as part of the name of or in connection with the Business or
any part thereof carried on or to be carried on by the Purchaser and all
lists of
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customers, documents, records, correspondence, and other information
related to the Assets;
(g) "Indebtedness" means any and all of the Vendor's trade accounts, debts,
duties, endorsements, guarantees, liabilities, obligations,
responsibilities, and undertakings assumed, created, incurred, or made,
whether voluntary or involuntary, however incurred or made or arising,
whether due or not due (except accrued employees' salaries which are not
yet due and obligations of the Vendor under Material Contracts), absolute,
inchoate, or contingent, liquidated or unliquidated, determined or
undetermined, direct or indirect, express or implied, and whether the
Vendor may be liable individually or jointly with others;
(h) "Intangible Property" means all of the Vendor right and interest to all
registered and unregistered trade marks, trade or brand names, copyrights,
designs, inventions, patents, licenses, authorities, restrictive covenants,
and other rights used in connection with the Business, including without
limitation the Intangible Property described in Schedule "B";
(i) "Material Contracts" means the benefit of all contracts, engagements, or
commitments, whether written or oral, to which the Vendor is entitled in
connection with the Business, including without limitation its right,
title, and interest in, to, and under the material agreements and contracts
described in Schedule "C";
(j) "Name" means the name "▇▇▇▇▇▇'▇ Auction House of Scottsdale" or any
variation;
(k) "Person" means an individual, corporation, body corporate, limited
liability company, partnership, joint venture, society, association, trust,
or unincorporated organization, or any trustee, executor, administrator, or
other legal representative;
(l) "Purchase Price" means the purchase price for the Assets set forth in
section 3.1;
(m) "Real Estate Purchase" means the purchase by the Purchaser of certain real
estate and the building thereon owned by C&C Capital Investment, Inc.
pursuant to an agreement of purchase and sale dated March 20, 2000;
(n) "Receivables" means all accounts receivable, trade accounts, notes
receivable, and other debts owing to the Vendor as of the Closing Date in
connection with or arising out of the Business or otherwise, and the full
benefit of all securities for these accounts, notes, or debts;
(o) "Shares" means 30,625 shares of common stock of the Parent Company to be
issued to the Vendor pursuant to section 3.1(b) hereof;
(p) "Statements" means the Vendor's financial statements for the financial year
ended December 31, 1999, a copy of which is attached as Schedule "D"; and
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(q) "Warrant"means the share purchase warrant to be issued to the Vendor
pursuant to section 3.1(b) hereof, entitling the Vendor to purchase up to
150,000 shares of common stock of the Parent Company at the price of $8.00
per share for one year from the Closing Date.
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this Agreement, including the preamble and the Schedules,
as supplemented or amended from time to time;
(b) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent, or intent of this Agreement or any provision hereof;
(c) the singular of any term includes the plural and vice versa, the use of any
term is equally applicable to any gender and, where applicable, a body
corporate, the word "or" is not exclusive and the word "including" is not
limited (whether or not non-limited language, such as "without limitation"
or "but not limited" to words of similar import, is used with reference
thereto);
(d) any accounting term not otherwise defined has the meanings assigned to it
in accordance with generally accepted accounting principles applicable in
the United States;
(e) any reference to a statute includes and is a reference to that statute and
to the regulations made under that statute, with all amendments made to
that statute and in force from time to time, and to any statute or
regulations that may be passed which has the effect of supplementing or
superseding that statute or those regulations;
(f) except as otherwise provided, any dollar amount referred to in this
Agreement is in U.S. funds; and
(g) any other term defined within the text of this Agreement has the meaning so
ascribed.
1.3 The following are the Schedules to this Agreement:
Schedule Description
-------- -----------
A List of Equipment
B List of Intangible Property
C List of Material Contracts
D Financial Statements of the Vendor
E Terms of Employment
F Accredited Investor Questionnaire
G Management Consulting Agreement
H Warrant Certificate
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2. PURCHASE AND SALE
2.1 On the terms and subject to the conditions of and based on the
representations and warranties contained in this Agreement, the Vendor agrees to
sell, convey, transfer, assign, and deliver to the Purchaser, and the Purchaser
agrees to purchase, acquire, and accept from the Vendor, the Assets belonging to
or used in the Business, as a going concern, as and from the Closing Date.
2.2 The parties acknowledge that the purchase and sale provided for in section
2.1 is restricted to the Assets only and without limiting the generality of the
foregoing, the Purchaser is not acquiring any assets other than the Assets nor
is the Purchaser purchasing any business of the Vendor other than the Business.
2.3 Except as provided in the list of Material Contracts set forth as Schedule
"C", the Purchaser and the Parent Company are not assuming any liability or
obligation of the Vendor of whatever nature whether now in existence or arising
hereafter.
3. PURCHASE PRICE
3.1 The Purchase Price of the Assets is the sum of $500,000, which the
Purchaser will satisfy and pay on the Closing Date as follows:
(a) $255,000 in the form of a wire transfer to Chicago Title Insurance Company
(the "Title Company"), Esplanade Office, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, in accordance with wire transfer instructions to
be furnished in writing by the Title Company not less than two business
days before the Closing Date, made payable in U.S. funds;
(b) the balance of $245,000 by issuing to the Vendor the Shares at a deemed
price of $8.00 per Share and the Warrant.
3.2 The Vendor acknowledges that there will be restrictions on the transfer of
the Shares and any shares of the Parent Company's common stock issued to the
Vendor on the exercise of the Warrant (the "Warrant Shares") as follows:
(a) Restrictions on Transfer. The Vendor agrees that it will not sell, assign,
pledge, give, transfer, or otherwise dispose of the Shares or the Warrant
Shares or any interest therein, or make any offer or attempt to do any of
the foregoing, except pursuant to a registration of the Shares or the
Warrant Shares under the United States Securities Act of 1933 (the
"Securities Act") and all applicable state securities laws or in a
transaction that is exempt from the registration provisions of the
Securities Act and all applicable state securities laws.
Any attempted sale, assignment, or other transfer of the Shares or the
Warrant Shares without compliance with the provisions of this Agreement
will be void.
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(b) Legend. The following legend will be affixed on the certificates
representing the Shares and the Warrant Shares to be issued to the Vendor
and the Parent Company will affix this legend on each share certificate
subsequently issued to the Vendor:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION UNDER ALL APPLICABLE UNITED STATES
FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION
THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE
EVIDENCED BY AN OPINION OF THE HOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT
FROM ANY PROPOSED TRANSFER OR ASSIGNMENT."
3.3 Piggy-Back Registration Rights.
(a) Notice of Registration. If at any time during the 12 months following the
Closing Date the Parent Company determines to register any of its
securities in an offering, other than a registration relating solely to
employee benefit plans or a registration relating solely to a Securities
and Exchange Commission (the "Commission") Rule 145 transaction, the Parent
Company will:
(i) promptly give to the Vendor written notice thereof; and
(ii) subject to section 3.3(b), include in such registration (and any
related qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities (as
defined below) specified in a written request or requests made within
20 days after receipt of such written notice from the Parent Company,
by the Vendor. "Registrable Securities" means:
(A) all Shares of the Parent Company's common stock acquired by the
Vendor pursuant to this Agreement;
(B) any common stock or other securities of the Parent Company issued
or issuable with respect to, or in exchange for or in replacement
of the Shares or such additional shares upon any stock split,
stock dividend, recapitalization, or similar event; provided,
however, that shares of common stock or other securities will
only be treated as Registrable Securities for the purposes of
this section 3.3 if and so long as they have not been sold
pursuant to Rule 144 under the Securities Act or pursuant to an
effective Registration Statement under the Securities Act, or
otherwise to or through
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a broker or dealer or underwriter in a public distribution or a
public securities transaction.
(b) Underwriting. If the registration of which the Parent Company gives notice
is for a registered public offering involving an underwriting, the Parent
Company will so advise the Vendor as a part of the written notice given
pursuant to section 3.3(a) hereof. In such event, the right of the Vendor
to registration pursuant to section 3.3 will be conditioned upon the
Vendor's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein.
The Vendor proposing to distribute its securities through such underwriting
will (together with the Parent Company) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Corporation. Notwithstanding any other provision of
this section 3.3, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten,
the managing underwriter may limit the Registrable Securities and other
securities to be distributed through such underwriting, for the account of
the Vendor to 20% of the total number of shares to be distributed. The
Parent Company will so advise the Vendor distributing its securities
through such underwriting of such limitations and, subject to the foregoing
rights of the investors, the number of shares of Registrable Securities, if
any, that may be included in the registration (and underwriting, if any).
(c) Right to Terminate Registration. The Parent Company will have the right to
terminate or withdraw any registration initiated by it under section 3.3
prior to the effectiveness of such registration whether or not the Vendor
has elected to include securities in such registration. The Registration
Expenses (as defined below) of such withdrawn registration will be borne by
the Parent Company in accordance with section 3.4 hereof.
3.4 Expenses of Registration. All Registration Expenses incurred in connection
with registration pursuant to section 3.3 will be borne by the Parent Company.
"Registration Expenses" means all expenses, except as otherwise stated below,
incurred by the Parent Company in complying with section 3.3 hereof, including,
all registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Parent Company, blue sky fees and
expenses, fees to issue the Shares, and the expense of any special audits
incident to or required by any such registration.
3.5 Registration Procedures. In the case of any registration effected by the
Parent Company pursuant to section 3.3, the Parent Company will keep the Vendor
advised in writing as to the initiation of the registration and as to the
completion thereof. At its expense the Parent Company will:
(a) prepare and file with the Commission a registration statement with respect
to such securities and use its best efforts to cause such registration
statement to become and remain effective for at least six months or, if
earlier, until the distribution described in the registration statement has
been completed;
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(b) prepare and file with the Commission during the period specified in section
3.5(a) such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement;
(c) furnish to the Vendor participating in such registration and to the
underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as the Vendor and such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) furnish, at the request of the Vendor requesting registration of
Registrable Securities at the time such securities are delivered to the
underwriters (if any) for sale in connection with a registration pursuant
to section 3.3:
(i) an opinion, dated such date, of the counsel representing the Parent
Company for the purposes of such registration, in form and substance
as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and to the Vendor requesting
registration of Registrable Securities; and
(ii) a letter dated the date of commencement of the offering and a
"bring-down" letter dated as of the closing date of such offering,
from the independent accountants of the Parent Company, in form and
substance as is customarily given by independent accountants to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Vendor requesting registration of
Registrable Securities.
3.6 Non-Transferable Registration Rights. The rights to cause the Parent
Company to register securities granted the Vendor under section 3.3 may not be
assigned.
3.7 Indemnification for Registration.
(a) The Vendor will indemnify the Parent Company, each of its directors and
officers, each underwriter, if any, of the Parent Company's securities
covered by such a registration statement, and each person who controls the
Parent Company or such underwriter within the meaning of section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or
any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Parent Company and such directors,
officers, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such
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untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Parent Company by the Vendor and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability
of the Vendor under this subsection (b) will be limited to the proportion
of any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of the shares sold by the Vendor
under such registration statement bears to the total public offering price
of all securities sold thereunder, but not to exceed the proceeds received
by the Vendor from the sale of Registrable Securities covered by such
registration statement.
(b) If the Parent Company is entitled to indemnification under this section
3.7, the Parent Company will give notice to the Vendor promptly after the
Parent Company has actual knowledge of any claim as to which indemnity may
be sought, and will permit the Vendor to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Vendor, who will conduct the defense of such claim or litigation resulting
therefrom, will be approved by the Parent Company (whose approval will not
unreasonably be withheld), and the Parent Company may participate in such
defense at the Vendor's expense, and provided further that the failure of
the Parent Company to give notice as provided herein will not relieve the
Vendor of its obligations under section 3.7 unless the failure to give such
notice is materially prejudicial to the Vendor's ability to defend such
action and provided further, that the Vendor will not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses but will bear the expense of such defense nevertheless.
The Parent Company will furnish such information regarding itself or the
claim in question as the Vendor may reasonably request in writing and as
will be reasonably required in connection with the defense of such claim
and litigation resulting therefrom. The Vendor, in the defense of any such
claim or litigation, will not, except with the consent of the Parent
Company, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Parent Company of a release from all liability
in respect to such claim or litigation. Notwithstanding the other
provisions of this Agreement, the Vendor will not be obligated to indemnify
the Parent Company for amounts paid by the Parent Company in settlement of
any loss, claim, damage, liability or action if such settlement is effected
without the consent of the Vendor (which consent has not been unreasonably
withheld).
(c) If the indemnification provided for paragraphs (a) through (b) of this
section 3.7 is unavailable or insufficient to hold harmless the Parent
Company under such paragraphs in respect of any losses, claims, damages,
liabilities, expenses or actions in respect thereof referred to therein,
then the Vendor will in lieu of indemnifying the Parent Company contribute
to the amount paid or payable by the Parent Company as a result of such
losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Parent Company, the
underwriters, and the Vendor of such Registrable Securities, respectively,
in connection with the statements or omissions that resulted in such
losses, claims, damage, liabilities, expenses or actions in respect thereof
as well as any
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other relevant equitable considerations, including the failure to give any
notice under paragraph (b). The relative fault will be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Parent
Company, on the one hand, or the underwriters or the Vendor of such
Registrable Securities, on the other, and to the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Parent Company and the Vendor agree that it
would not be just and equitable if contributions pursuant to this
subsection were determined by pro rata allocation or by any other method of
allocation which did not take account of the equitable considerations
referred to above in this subsection. The amount paid or payable by the
Parent Company as a result of the losses, claims, damages, liabilities or
action in respect thereof, referred to above in this subsection, will be
deemed to include any legal or other expenses reasonably incurred by the
Parent Company in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection, the
Vendor will not be required to contribute any amount in excess of the
lesser of (i) the proportion that the public offering price of shares sold
by the Vendor under such registration statement bears to the total public
offering price of all securities sold thereunder, but not to exceed the
proceeds received by the Vendor for the sale of Registrable Securities
covered by such registration statement and (ii) the amount of any damages
that the Vendor would have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission. No person guilty of
fraudulent misrepresentations (within the meaning of section 11(f) of the
Securities Act), will be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation
(d) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
(if any) entered into in connection with an underwritten public offering of
the Registrable Securities are in conflict with the foregoing provisions,
the provisions in such underwriting agreement will control.
3.8 Information by Vendor. The Vendor, where its Registrable Securities are
included in any registration, will furnish to the Parent Company such
information regarding the Vendor, the Registrable Securities held by it, and the
distribution proposed by the Vendor that the Parent Company may reasonably
request in writing and as will be required in connection with any registration,
qualification or compliance referred to in section 3.3.
4. VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser and the Parent Company as
follows, with the intent that the Purchaser and the Parent Company will rely on
these representations and warranties in entering into this Agreement, and in
concluding the purchase and sale contemplated by this Agreement:
4.1 Status of Vendor. The Vendor is a limited liability company duly formed
under the laws of the State of Arizona, is validly existing and in good standing
regarding the filing of annual returns, and has the power and capacity to own
and dispose of the Assets, to carry on the Business
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now being conducted by it, to enter into this Agreement, and carry out its terms
to the full extent.
4.2 Ownership of Vendor. On the Closing Date, the only members of the Vendor
will be F&F Capital Investment, Inc. and Stockbridge Realty Investor - Arizona,
Inc., both of whom are "accredited investors" within the meaning of the
Accredited Investor Questionnaire attached hereto as Schedule "F".
4.3 Authority to Sell. All necessary company action on the Vendor's part has
duly and validly authorized the signing and delivery of this Agreement and the
completion of the transaction contemplated by this Agreement, and this Agreement
constitutes a legal, valid, and binding obligation of the Vendor enforceable
against the Vendor in accordance with its terms except as may be limited by laws
of general application affecting the rights of creditors.
4.4 Sale will Not Cause Default. Neither the signing nor delivery of this
Agreement, nor the completion of the purchase and sale contemplated in this
Agreement, will:
(a) violate any of the terms and provisions of the Vendor's Articles of
Organization or Operating Agreement, or any judgment, order, decree,
statute, by-law, regulation, covenant, restriction, or any Material
Contract or agreement applicable to the Vendor or any of the Assets
(subject to the obligation to obtain consents, if any, in the Material
Contracts);
(b) give any person the right to terminate, cancel, or remove any of the
Assets, save to the extent that the consent of third parties is required to
assign the Material Contracts; or
(c) result in any fees, duties, taxes, assessments, or other amounts relating
to any of the Assets becoming due or payable.
4.5 Assets. The Vendor owns and possesses and has a good and marketable title
to the Assets and, on Closing, the Assets will be free and clear of all liens,
charges, mortgages, pledges, security interests or encumbrances whatsoever.
4.6 Books and Records. The Vendor's books and records fairly and correctly set
out and disclose in all material respects, in accordance with generally accepted
accounting principles, the Vendor's financial position, and the Vendor has
accurately recorded all of its material financial transactions relating to the
Business in those books and records.
4.7 Financial Statements. The Vendor's Statements for the financial year ended
December 31, 1999, a copy of which is attached as Schedule "D", have been
prepared in accordance with generally accepted accounting principles in the
United States applied on a basis consistent with those of previous financial
years and present fairly and correctly the Vendor's assets, liabilities (whether
accrued, absolute, contingent, or otherwise), and financial condition as of the
date of the Statements, and the sale and earnings of the Vendor's operations
during the periods covered by the Statements. The Vendor's Statements are
in-house accounts and are not audited financial statements. When and if the
Vendor compiles audited financial statements, the Vendor will provide those
statements to the Purchaser.
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4.8 Material Change. Since the date of the balance sheet included in the
Statements there has not been:
(a) any material change in the financial condition of the Business, its
liabilities, or the Assets, other than changes in the ordinary course of
business, none of which has been materially adverse; or
(b) any damage, destruction, loss, or other event (whether or not covered by
insurance) materially and adversely affecting the Assets or the Business.
4.9 Litigation. There is no litigation or administrative or government
proceeding or inquiry pending or, to the Vendor's knowledge, threatened against
or relating to the Vendor, the Business, or any of the Assets, and the Vendor
does not know of or have reasonable grounds for believing that there is any
basis for any action, proceeding, or inquiry, except for a potential claim by
▇▇. ▇▇▇▇▇▇ in respect of a diamond ring purchased through one of the Vendor's
auctions.
4.10 Conformity with Laws. The Vendor has not breached any statute, by-law,
regulation, covenant, restriction, plan, or permit, and the Vendor will not
transfer any government licenses and permits to the Purchaser or to any Person
and the Purchaser will be responsible for obtaining its own permits and
licenses.
4.11 No Collective Agreement. The Vendor is not a party to any collective
agreement relating to the Business with any labour union or other association of
employees and no part of the Business has been certified as a unit appropriate
for collective bargaining.
4.12 Employee Plans and Benefits; Employees and Independent Contractors. Except
as set forth in Schedule "E", neither the Vendor nor any member of a "controlled
group" (within the meaning of Section 4971(e)(2)(B) of the Internal Revenue
Code) that includes the Vendor (hereinafter referred to as an "ERISA Affiliate")
is a party to or participates in or has any liability or contingent liability
with respect to:
(a) any "employee welfare benefit plan" or "employee pension plan" (as
those terms are respectively defined in ERISA Sections 3(1) and 3(2))
or a Multiemployer Plan (referred to collectively as the "Plans"); or
(b) any retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or
hospitalization program, or any other fringe benefit arrangements for
any employee, director, consultant, or agent, whether pursuant to a
contract, arrangement, custom, or informal understanding, which does
not constitute an "employee benefit plan," as defined in Section 3(3)
of ERISA (referred to collectively as "Compensation Arrangements");
13
The Vendor has provided the Purchaser with complete and accurate copies of any
written Plans and Compensation Arrangements (or related insurance policies),
including any amendments thereto, along with copies of any employee handbooks or
similar documents describing the Plans and Compensation Arrangements. Any
unwritten Plans or Compensation Arrangements also are listed in Schedule "E",
and complete descriptions thereof have been furnished to the Purchaser. Except
as disclosed in Schedule "E", neither the Vendor nor any ERISA Affiliate is a
party to or has in effect or will have in effect after the date of this
Agreement any plan or arrangement that will become a Plan or Compensation
Arrangement.
4.13 Terms of Employment. The name and position of each present employee of the
Vendor, the duration of the employment of each employee with the Vendor, and the
Vendor's remuneration and benefit obligations and accrued vacation pay of each
employee is accurately set out in Schedule "E", and the Vendor will have paid
the full amounts of salaries, pensions, bonuses, commissions, and other
remuneration of any nature, including severance pay and unpaid earned wages of
the Vendor's employees and salespersons, as at the Closing Date up to the most
recent pay day, and there is no employee who cannot be dismissed on less than
two months' notice without further liability, except as disclosed in the List of
Material Contracts attached as Schedule "C".
4.14 List of Material Contracts. Schedule "C" contains a true and correct
listing of each written or oral Material Contract, including without limitation,
the following types:
(a) contracts or commitments out of the ordinary course of business;
(b) contracts or commitments involving an obligation to pay in the aggregate
$10,000 or more or of a duration greater than one year;
(c) contracts or commitments affecting ownership of or title to or any interest
in the Assets;
(d) contracts or commitments for the Intangible Property;
(e) except as required by statute or regulation, contracts or commitments for
bonuses, incentive compensation, pensions, group insurance, or employee
welfare plans, all of which are fully funded as determined by an
independent and reputable firm of actuaries employed by the Vendor; and
(f) employment contracts or commitments other than unwritten employment
contracts of indefinite duration entered into in the ordinary course of the
Business.
4.15 No Defaults. Except as otherwise expressly disclosed in this Agreement,
there has been no material default in any term, condition, provision, or
obligation to be performed under any Material Contract, each of which is in good
standing and in full force and effect, unamended.
4.16 Condition of Equipment. To the Vendor's best knowledge, all the Equipment
is in normal operating condition and in a state of reasonable maintenance and
repair per the Purchaser's right of inspection, and are being sold "as is". The
Equipment represents all machinery and
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equipment owned by the Vendor and used by the Vendor in the operation of the
Business.
4.17 No Infringement. To the best of the Vendor's knowledge, no copyright,
franchise or license, patent right, trade ▇▇▇▇, trade name, or other of the
Vendor's Intangible Property used in or relating to the Business in any way
infringes on the right of any Person under or regarding any patent, trade ▇▇▇▇,
trade name, copyright, or other industrial or intellectual property.
4.18 Use of Name. The Vendor has not:
(a) granted the right or license to any Person to use the Name;
(b) received notice from any Person that the Vendor's use of the Name infringes
the rights of any other Person; and
(c) assigned any rights to the Name or any other Intangible Property to any
other Person.
4.19 No Lien Indebtedness. The Vendor has no Indebtedness to any Person which
might, by operation of law or otherwise, now or hereafter, constitute a lien,
charge, or encumbrance on any of the Assets, except for encumbrances which will
be discharged on or following Closing on conditions satisfactory to the
Purchaser's counsel acting reasonably. There are no security interests in, or
financing statements filed or recorded in any jurisdiction relating to, any of
the Assets.
4.20 No Liability for Indebtedness. There is no Indebtedness of any kind
whatsoever, whether or not determined or determinable relating to the Business,
for which the Purchaser may become liable on or after the Closing Date, and
there has been no material increase in the Indebtedness since the date of the
balance sheet included in the Statements.
4.21 No Other Agreement. There is no written or oral agreement, option,
understanding, or commitment, or any right or privilege capable of becoming an
agreement, for the purchase of the Business or any of the Assets from the
Vendor, other than purchase orders accepted by the Vendor in the ordinary course
of the operation of the Business.
4.22 Tax Matters. All tax returns required to be filed by the Vendor with any
governmental entity have been filed when due; all taxes of any kind have been
paid timely; there are no tax liens filed against the Assets; and all taxes
required to be withheld by the Vendor have, in fact, been withheld and remitted
timely to the appropriate governmental entity.
4.23 Accuracy of Representations. No certificate furnished by or on behalf of
the Vendor to the Purchaser and the Parent Company at the Closing Date regarding
the Vendor's representations, warranties, or covenants in this Agreement will
contain any untrue statement of a material fact or omit to state a material fact
known to the maker of the certificate necessary to make the statements contained
in the certificate not misleading.
4.24 Schedules Accurate. To the Vendor's best knowledge, all information set out
in the Schedules to this Agreement is complete and accurate in every material
respect.
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4.25 Other Representations and Warranties. The Vendor acknowledges that no
representations or warranties have been made to it concerning the business of
the Purchaser or the Parent Company, the Shares, and the Warrant, except as
specifically set forth in this Agreement.
5. VENDOR'S COVENANTS
5.1 Conduct of Business. Until the Closing Date, the Vendor will conduct the
Business diligently and only in the ordinary course and will use its best
efforts to preserve the Assets intact, to keep available to the Purchaser its
present employees, and to preserve for the Purchaser its relationship with its
suppliers, customers, and others having business relations with it.
5.2 Access by Purchaser. The Vendor will give to the Purchaser and the Parent
Company and their officers, counsel, accountants, and other representatives full
access, during normal business hours throughout the period before the Closing
Date, to all of the Assets and of the Vendor's properties, books, contracts,
commitments, and records relating to the Business, and will furnish to the
Purchaser and the Parent Company during this period all information that they
may reasonably request.
5.3 Insurance. From this date until the Closing Date, the Vendor will obtain
and maintain in full force and effect policies of insurance adequate to insure,
subject to a reasonable deductible, the replacement value of the Assets.
5.4 Procure Consents. The Purchaser and the Vendor will cooperate regarding any
consents that may be required to validly assign the Material Contracts to the
Purchaser.
5.5 Covenant of Indemnity. The Vendor will indemnify and hold harmless each of
the Purchaser and the Parent Company from and against:
(a) any and all Indebtedness existing at or arising before, up to, or after the
Closing Date;
(b) any and all damage or deficiencies resulting from any misrepresentation,
breach of warranty, or non-fulfillment of any covenant on the Vendor's part
under this Agreement or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished to the
Purchaser and the Parent Company; and
(c) any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and legal and other expenses incident to any of the foregoing.
5.6 Pay Employees. The Vendor will pay to all employees in the Business all
wages, salaries, bonuses, severance pay, pay in lieu of notice, and vacation pay
and will pay all source deductions up to and including the Closing Date.
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5.7 Termination of Employees. Upon completion of the Management Consulting
Agreement attached as Schedule "G", the Vendor will terminate the employment of
all of its employees and will indemnify and save harmless the Purchaser from and
against all claims by any employee of the Vendor for wages, salaries, bonuses,
pension or other benefits, severance pay, notice or pay in lieu of notice, and
vacation pay for any period before the termination of the Management Consulting
Agreement.
5.8 Steps to Transfer Assets. The Vendor will, before the Closing Date, take or
cause to be taken all proper steps, actions, and corporate proceedings on its
part to the extent required by applicable law (including the approval of the
sale by the Vendor's managers and members) to enable it to vest a good and
marketable title in the Purchaser to the Assets, free and clear of all liens,
mortgages, encumbrances, equities, or claims of every nature and kind.
5.9 Care of Assets. From the signing of this Agreement to the Closing Date, the
Vendor will take reasonable care to protect and safeguard the Assets and do all
necessary repairs and maintenance to the assets that the Vendor uses in the
operations of the Business, and will not sell or dispose of any of the Assets
except in the ordinary course of business.
5.10 Purchase of Members' Interest. The Vendor agrees to cause Stockbridge
Realty Investor - Arizona, Inc. to purchase all membership interest of ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the Vendor before the Closing Date.
5.11 Tax Filings. The Vendor will, from the signing of this Agreement to the
Closing Date, make all necessary tax, government, and other filings in a timely
fashion.
5.12 Adverse Development. The Vendor will, from the signing of this Agreement to
the Closing Date, promptly advise the Purchaser and the Parent Company regarding
any development which materially affects the Business or the Assets, in either
case taken as a whole, but no such advice will cure any breach of any
representation or warranty made by the Vendor in this Agreement.
6. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser and the Parent Company represent and warrant to the Vendor as
follows, with the intent that the Vendor will rely on these representations and
warranties in entering into this Agreement, and in concluding the purchase and
sale contemplated in this Agreement:
6.1 Status of Purchaser. The Purchaser is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of
Washington, and has the power and capacity to enter into this Agreement and to
carry out its terms.
6.2 Status of Parent Company. The Parent Company is a corporation duly
incorporated and in good standing under the laws of the State of Florida, is
validly existing, and has the power and capacity to enter into this Agreement
and to carry out its terms. The Parent Company's shares of common stock are
quoted for trading on the National Association of
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Securities Dealers Over-the-Counter Bulletin Board.
6.3 Authority to Purchase. All necessary corporate action on the part of each
of the Purchaser and the Parent Company has duly and validly authorized the
signing and delivery of this Agreement and the completion of the transaction
contemplated by this Agreement, and this Agreement constitutes a legal, valid,
and binding obligation of the Purchaser and the Parent Company enforceable
against them in accordance with its terms, except as limited by laws of general
application affecting the rights of creditors.
6.4 Inspection. The Purchaser represents that its representatives have examined
the premises in which the Business is now being conducted by the Vendor and has
inspected the physical condition of all the Assets. The Purchaser covenants that
it will accept a conveyance of the Assets in their present state and condition,
subject to reasonable use to the Closing Date.
6.5 Other Representations and Warranties. The Purchaser acknowledges that no
representations or warranties have been made to it concerning the Business or
the Assets except as specifically set forth in this Agreement.
7. PURCHASER'S COVENANTS
7.1 Offer Employment. The Purchaser covenants with the Vendor to offer, as of
the date of termination of the management consulting agreement to be entered
into between the Purchaser and Arizona Realty Consultants, LCC, employment to
former employees of the Vendor to be selected by the Purchaser in its discretion
on terms and conditions acceptable to the Purchaser.
7.2 Consents. The Purchaser will, at the Vendor's request, sign and deliver all
applications for consent and all assumption agreements, provide all information
necessary to obtain the consents referred to in section 5.4, and assist and
co-operate with the Vendor in obtaining those consents.
7.3 Assumption of Material Contracts. The Purchaser agrees to assume all of the
Vendor's obligations and liabilities under the Material Contracts identified in
Schedule "C" as of the Closing Date.
7.4 Indemnity. The Purchaser and the Parent Company will jointly and severally
indemnify and hold harmless the Vendor from and against:
(a) any and all covenants, provisions, debts, or obligations of or under the
Material Contracts arising from and after the Closing Date;
(b) any and all debts arising out of whatever contracts, transactions, or
business relationships are entered into by the Purchaser from and after the
Closing Date;
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(c) any and all damage or deficiencies resulting from any misrepresentation,
breach of warranty, or non-fulfillment of any covenant on the part of the
Purchaser or the Parent Company under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to the Vendor; and
(d) any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and legal and other expenses incident to any of the foregoing.
7.5 Proceeds of Auction. The Purchaser agrees to pay to the Vendor 50% of the
proceeds that may be received in respect of the auction to be held in
Scottsdale, Arizona by the Purchaser on March 24, 25, and 26, 2000. For the
purposes of this section, "proceeds" is defined as the gross sales of the
auction, less payments to consignees (25%) plus 10% of the auction purchaser's
purchase price, less sales commission (20% )that applies to the net proceeds
after payment to the consignor.
$100 Gross Sales Proceeds
($75) Payment to consignee (25%)
-----
$25 Net Proceeds after Payment to consignor
+ $10 Purchaser's 10% commission on sale price
-----
$35 Net proceeds before commission
($5) Commissions to sales people: 20% of net proceeds
---- after payment to consignee
$30 Proceeds to be split
If there is any disagreement between the parties as to the amount to be paid to
the Vendor hereunder, the matter will be referred for final determination to the
Purchaser's independent auditor.
7.6 Adverse Development. The Purchaser and the Parent Company will, from the
signing of this Agreement to the Closing Date, promptly advise the Vendor and
any related third parties regarding any development that materially affects the
Purchaser or the Parent Company's business or the terms of this Agreement, in
either case taken as a whole, but no such advice will cure any breach of any
representation or warranty made by the Purchaser in this Agreement.
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS
8.1 Representations, Warranties, and Covenants of Vendor. All statements
contained in any certificate or other instrument delivered by or on behalf of
the Vendor under this Agreement will be deemed to be the Vendor's
representations and warranties. All of the Vendor's representations, warranties,
covenants, and agreements in this Agreement will, unless otherwise expressly
stated, survive the Closing Date and any investigation at any time made by or on
behalf of the Purchaser and the Parent Company and, subject to section 8.2, will
continue in full force and effect for the benefit of the Purchaser and the
Parent Company.
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8.2 Limitation on Vendor's Indemnity. No claim by the Purchaser or the Parent
Company under the covenant of indemnity contained in section 5.5 or for damages
or other relief regarding the Vendor's breach of warranty under this Agreement
will be valid unless:
(a) the Purchaser or the Parent Company gives to the Vendor written notice of
the claim before the expiration of six months after the Closing Date; and
(b) the aggregate amount of any and all claims made under section 5.5 exceeds
$5,000, it being understood that once such amount is exceeded, the
aggregate of all such claims (including such $5,000 amount and any amount
in excess thereof), will be payable to the Purchaser by the Vendor.
8.3 Purchaser's Representations, Warranties, and Covenants. All
representations, warranties, covenants, and agreements of the Purchaser and the
Parent Company in this Agreement will, unless otherwise expressly stated,
survive the Closing Date and any investigation at any time made by or on behalf
of the Vendor and will continue in full force and effect for the Vendor's
benefit.
8.4 Limitation on Purchaser's Indemnity. No claim by the Vendor under the
covenant of indemnity contained in section 7.4 or for damages or other relief
regarding breach of warranty by the Purchaser or the Parent Company under this
Agreement will be valid unless:
(a) the Vendor gives to the Purchaser and the Parent Company written notice of
the claim before the expiration of six months after the Closing Date; and
(b) the aggregate amount of any and all claims made under section 7.4 exceeds
$5,000, it being understood that once such amount is exceeded, the
aggregate of all such claims (including such $5,000 amount and any amount
in excess thereof), will be payable to the Vendor by the Purchaser.
9. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
All obligations of the Purchaser and the Parent Company under this Agreement are
subject to the fulfillment at or before the Closing Date of the following
conditions:
9.1 Purchaser's Due Diligence. The Purchaser will have completed due diligence
in respect of the Assets satisfactory to the Purchaser in its sole discretion.
9.2 Vendor's Representations and Warranties. The Vendor's representations and
warranties contained in this Agreement and in any certificate or document
delivered under this Agreement will be true at and as of the Closing Date if the
Vendor made the representations and warranties at and as of that time.
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9.3 Vendor's Covenants. The Vendor will have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by it before or at the Closing Date.
9.4 Vendor's Certificate. The Vendor will have delivered to the Purchaser and
the Parent Company a certificate of the Vendor's Manager, as a manager of the
Vendor and not in his personal capacity, dated the Closing Date and certifying
in such detail specified by the Purchaser and the Parent Company the fulfillment
of the conditions set forth in sections 9.2 and 9.3.
9.5 Opinion of Counsel. The Purchaser will have received from the Vendor's
legal counsel an opinion dated the Closing Date that, among other things, the
Vendor has taken all necessary steps and corporate proceedings to validly
transfer the Assets to the Purchaser, and that, to the knowledge of legal
counsel but without investigation, there are no claims, actions, or proceedings,
pending or threatened against or affecting the Assets or the transfer of the
Assets to the Purchaser.
9.6 Regulatory Approval. The Purchaser and the Parent Company will have
obtained all approvals that may be required from all securities regulatory
authorities having jurisdiction over the affairs of the Purchaser and the Parent
Company.
9.7 No Adverse Affect. Before the Closing Date, the Vendor will not have
experienced any event or condition or have taken any action of any kind
adversely affecting the Assets or the Business to materially reduce the value of
the Assets or the Business to the Purchaser.
9.8 Concurrent Purchases. Concurrently on the Closing Date, the Purchaser will
have completed the Real Estate Purchase and neither the transaction contemplated
by this Agreement nor the Real Estate Purchase will close unless the other
transaction closes concurrently.
9.9 Consents of Third Parties. The Vendor will have obtained all consents or
approvals required to be obtained to sell, assign, or transfer the Assets,
provided that the Vendor has not waived the need for any consents or approvals.
The foregoing conditions are for the exclusive benefit of the Purchaser and the
Parent Company and they may waive any condition in whole or in part before or at
the Closing Date by delivering to the Vendor a signed written waiver.
10. CONDITIONS PRECEDENT TO THE VENDOR'S OBLIGATIONS
All of the Vendor's obligations under this Agreement are subject to the
fulfillment, before or at the Closing Date, of the following conditions:
10.1 Vendor's Due Diligence. The Vendor will have completed due diligence in
respect of the Shares and the Warrant to be granted to the Vendor on the Closing
Date, satisfactory to the Vendor in its sole discretion.
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10.2 Purchaser's Representations and Warranties. The representations and
warranties of the Purchaser and the Parent Company contained in this Agreement
will be true at and as of the Closing Date as though they made the
representations and warranties at and as of that time.
10.3 Purchaser's Covenants. The Purchaser and the Parent Company will have
performed and complied with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by them before or at the
Closing Date.
10.4 Consents of Third Parties. The Vendor will have obtained all consents or
approvals required to be obtained to sell, assign, or transfer the Assets,
provided that the Vendor may only rely on this condition if the Vendor warrants
in writing that it has diligently used its best efforts to procure all consents
or approvals and the Purchaser and the Parent Company have not waived the need
for any consents or approvals.
The foregoing conditions are for the Vendor's exclusive benefit and the Vendor
may waive any condition in whole or in part before or at the Closing Date by
delivering to the Purchaser and the Parent Company a signed written waiver.
11. CLOSING
11.1 Time of Closing. Subject to the terms and conditions of this Agreement, the
purchase and sale of the Assets will close on the Closing Date.
▇▇.▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇. The Closing will take place at the offices of the Title
Company, Chicago Title Insurance Company, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
11.3 Documents to be Delivered by the Vendor. At the Closing, the Vendor will
deliver or cause to be delivered to the Purchaser and the Parent Company:
(a) all bills of sale, transfer, and assignments in form and content
satisfactory to the Purchaser's counsel, appropriate to effectively vest a
good and marketable title to the Assets in the Purchaser to the extent
contemplated by this Agreement, and immediately registrable in all places
where registration of these instruments is required;
(b) possession of the Assets;
(c) the certificate of the Vendor's Manager under section 9.4;
(d) signed releases of or evidence to the Purchaser's reasonable satisfaction
for the discharge of any and all Indebtedness and encumbrances which may be
enforceable against any of the Assets being purchased or trust conditions
agreed on by counsel for the Vendor and the Purchaser discharging the same;
22
(e) certified copies of documentation of the Vendor's members to the extent
required under applicable law that are required to be passed to authorize
the signing, delivery, and implementation of this Agreement and of all
documents to be delivered by the Vendor under this Agreement;
(f) all lists of customers, outstanding orders for the purchase and sale of
Inventory, brochures, samples, price lists, files, records, documents, and
other information related to the Business, and all licenses, authorities,
and other rights used in connection with the Business included in the
Assets;
(g) the Accredited Investor Questionnaire in the form attached as Schedule "F";
and
(h) signed resignations of each of ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as managers and
members of the Vendor.
11.4 Documents to be Delivered by the Purchaser. At the Closing, the Purchaser
and the Parent Company will deliver or cause to be delivered:
(a) a wire transfer in U.S. funds payable to the Vendor or as directed by the
Vendor in the total amount set out in subsection 3.1(a);
(b) a certificate evidencing ownership of the Shares;
(c) a certificate representing the Warrant in the form attached as Schedule
"H"; and
(d) a signed management consulting agreement between the Purchaser and Arizona
Realty Consultants, LCC in the form attached as Schedule "G".
12. BULK SALES
The parties waive compliance with any applicable bulk sales provisions of the
Uniform Commercial Code as enacted and in force in the State of Arizona. The
Vendor agrees to indemnify the Purchaser and the Parent Company against any
claims by creditors alleging an interest in the Assets arising under applicable
bulk sales provisions.
13. TERMINATION
This Agreement is binding as to both parties and will not be terminated or any
party's interest rescinded but for a material breach of its terms.
14. RISK OF LOSS
From the date of this Agreement to the Closing Date, the Assets will be and
remain at the Vendor's risk. If any of the Assets are lost, damaged, or
destroyed before the Closing Date and are not replaced by the Vendor, the
Purchaser and the Parent Company may terminate this Agreement on
23
written notice to the Vendor or elect by notice in writing to the Vendor to
complete the purchase to the extent possible without reduction of the Purchase
Price, in which event all proceeds of any insurance or compensation for any
loss, damage, or destruction will be paid to the Purchaser and all of the
Vendor's right and claim to any amounts not paid by the Closing Date will be
assigned to the Purchaser by written assignment in form and substance
satisfactory to the Purchaser's counsel.
15. NON-DISCLOSURE
The parties and their respective directors, officers, shareholders, employees,
and associates each agree that they will not, either during the currency of the
transaction contemplated by this Agreement or at any time thereafter:
(a) disclose the terms of this Agreement or any Confidential Information (as
defined below) to any other person, unless expressly authorized by the
other party in writing;
(b) use any Confidential Information for its own purposes or for any purpose
other than those of the other party; and
(c) make any copies, summaries, or other reproductions of any of the
Confidential Information without the other party's prior written consent.
"Confidential Information" means any non-public information (received in any
form) regarding one party and its businesses and affairs that the other party
may obtain or have access to during its association with that party.
Each party will comply with any directions that any other party may make to
ensure the safeguarding or confidentiality of all Confidential Information and
the terms of this Agreement.
16. RESTRICTIVE COVENANT
So long as ▇. ▇▇▇▇▇ Friend is employed by or under contract with the Purchaser
or an affiliate of the Purchaser, the Vendor, ▇. ▇▇▇▇▇ Friend, and the managers,
members, and employees of the Vendor (collectively, the "Vendor Group") will not
directly or indirectly engage in or carry on, individually or in partnership or
in conjunction with any one or more persons, firms, associations, syndicates, or
corporations, as principal, agent, employee, director, officer, shareholder of
any corporation, guarantor, creditor, or in any manner whatsoever, within
Arizona, any business that is the same as or similar to, in whole or in part,
the business of the Purchaser and its affiliates. The Vendor Group acknowledge
that they have considered this provision and that this provision is, regarding
their interests and those of the Purchaser and its affiliates, reasonable as to
all of the circumstances of the transactions contemplated by this Agreement.
On termination of the employment or association of ▇. ▇▇▇▇▇ Friend with the
Purchaser or any of its affiliates, this restrictive covenant will not apply to
▇. ▇▇▇▇▇ Friend, except that he will not, for and during a period of two years
after the date of such termination, consign for sale in Arizona any antique
equipment, furniture, inventory, or other antique goods with or through any
third party,
24
other than the Purchaser or its affiliates. Despite the foregoing, ▇▇▇▇▇▇ Friend
may continue, from and after the Closing Date, to buy and sell antiques for his
own personal account as a hobby only and not as a business in competition with
the Purchaser or its affiliates.
The Vendor Group acknowledge and agree that a breach of this section 16 would
result in damages to the Purchaser and its affiliates and that they could not
adequately be compensated for such damages by monetary award. Accordingly, the
Vendor Group agree that the Purchaser and its affiliates will be entitled to
injunctive or other equitable relief to prevent or cure any breach or threatened
breach of section 16 of this Agreement by the Vendor Group. Resort to such
equitable relief, however, will not be construed to be a waiver of any other
right or remedy that the Purchaser and its affiliates may have for damages or
otherwise.
17. FURTHER ASSURANCES
The parties will sign all other documents and do all other things necessary to
carry out and give effect to the intent of this Agreement.
18. SET-OFF
If after the Closing, under this Agreement or any document delivered under this
Agreement, the Vendor or the Purchaser or the Parent Company becomes obligated
to pay any sum of money to the other, then this sum may, at either party's
election and without limiting or waiving any right or remedy of either party
under this Agreement, be set-off against and will apply to any sum of money or
security owed by either party to the other until this amount has been completely
set-off.
19. NOTICE
Any notices to be given by either party to the other will be sufficiently given
if delivered personally or transmitted by facsimile or if sent by registered
mail, postage prepaid, to the parties at their respective addresses shown on the
first page of this Agreement, or to any other addresses as the parties may
notify to the other from time to time in writing. This notice will be deemed to
have been given at the time of delivery, if delivered in person or transmitted
by facsimile, or within five business days from the date of posting if mailed.
20. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties and there
are no representations or warranties, express or implied, statutory or
otherwise, and no terms, conditions, or agreements collateral to this Agreement
other than as expressly set forth or referred to in this Agreement. This
Agreement supersedes all letters of intent or agreements made between the
parties before the date of this Agreement.
21. TIME OF THE ESSENCE
Time will be of the essence of this Agreement.
25
22. APPLICABLE LAW
This Agreement will be governed by and interpreted in accordance with the laws
of the State of Arizona.
23. SUCCESSORS AND ASSIGNS
This Agreement will enure to the benefit of and be binding on the parties and
their respective heirs, executors, administrators, successors, and assigns.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
▇▇▇▇▇▇'▇ AUCTION HOUSE OF )
SCOTTSDALE, LLC by )
Stockbridge Realty Investors - )
Arizona, Inc. )
)
/s/ ▇▇▇▇▇▇ Friend ) c/s
-------------------------------------- )
Authorized Signatory )
)
-------------------------------------- )
Authorized Signatory )
THE CORPORATE SEAL OF )
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ )
(WASHINGTON), INC. was affixed )
in the presence of: )
)
/s/ [Illegible] ) c/s
-------------------------------------- )
Authorized Signatory )
)
-------------------------------------- )
Authorized Signatory )
26
THE CORPORATE SEAL OF )
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. )
was affixed in the presence of: )
)
)
/s/ [Illegible] ) c/s
-------------------------------------- )
Authorized Signatory )
)
-------------------------------------- )
Authorized Signatory )
The provisions of section 16 of this Agreement are acknowledged and agreed to by
▇. ▇▇▇▇▇ Friend and ▇▇▇▇▇▇ Friend.
/s/ ▇. ▇▇▇▇▇ FRIEND /s/ ▇▇▇▇▇▇ FRIEND
--------------------------------- ---------------------------------
▇. ▇▇▇▇▇ FRIEND ▇▇▇▇▇▇ FRIEND
SCHEDULE "A"
Fixed Asset Depreciation Schedule - Equipment List
(▇▇▇▇▇▇'▇ Auction House)
Net book
Date Method Basis Value
---- ------ ----- -----
1. Furniture & Fixtures
o Safe ▇▇▇▇▇▇▇▇ ▇▇/▇▇ ▇▇-▇ 7,875.00 7,875.00
2. Computer Equipment
o Computer - Dell Laptop 3/31/99 SL-6 3,004.07
o Computer - CIS 8/10/99 SL-5 3,085.00
o Computer 3/31/97 SL-6 1,711.73
o Computer, TV's etc. 2/18/98 SL-7 1,485.11
--------
TOTALS 9,285.91 7,465.19
3. Office Equipment
o Microwave 2/11/98 SL-7 617.78
o Chairs 2/12/98 SL-7 670.16
o Tables for Auction 2/18/98 SL-7 79.47
o Lions for office 2/22/98 SL-7 1,000.00
o Lamps plus 3/1/98 SL-7 74.64
o Glass shelves 3/22/98 SL-7 580.14
o Fax Machine 6/11/99 SL-7 2,643.11
--------
TOTALS 5,665.30 4,601.79
4. Computer Software
o Software 3/31/99 SL-5 8,000.00
o BCS Software 6/2/99 SL-5 903.00
o CID Premier Computer 6/11/99 SL-5 1,439.63
--------
TOTALS: 10,342.63 8,855.98
GRAND TOTALS: 33,168.84 28,797.96
SCHEDULE "B"
List of Intangible Property
1. The name, "▇▇▇▇▇▇'▇ Auction House", and the goodwill associated therewith.
SCHEDULE "C"
▇▇▇▇▇▇'▇ Auction House
Verbal and Written Contract Liabilities as of March 14, 2000
No. Party Purpose Term Approx. Amount
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
1 Mountain Telecommunications T1Line 2/2003 $1,100/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
2 Dancris Internet Service for 1.5 T1 3/2003 600/mo.
Line
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
3 ▇▇▇ Cable(1) TV advertising 4/2000 1,920
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
4 KTVK TV(1) TV advertising 4/2000 1,320
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
5 KPHO TV(1) TV advertising 4/2000 2,760
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
6 KSAZ TV(1) TV advertising 4/2000 1,080
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
7 KPNX TV(1) TV advertising 4/2000 3,128
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
8 KNXV TV(1) TV advertising 4/2000 1,800
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
9 ▇▇▇▇▇▇▇'▇ Media Directory National listing of Balance due 400
all media
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
10 US West Centrax Phone Service 12/▇▇▇▇ ▇▇▇/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
11 US West Yellow Pages 2/2001 200/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
12 Tori Parking lot sweeping Month-to-month 70/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
13 The Hartford Insurance Liability Insurance Month-to-month
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
14 Safeguard Security monitoring Month-to-month 90/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
15 Waste Management Trash removal Month-to-month 75/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
16 Airtouch Paging Pager Month-to-month 15/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
17 Airtouch Cellular ▇▇▇▇▇ Cell Phone 1/▇▇▇▇ ▇▇▇/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
18 Cellular One ▇▇▇▇ Cell Phone 1/2000 90/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
19 Cleaning Services Cleaning Month-to-month 800/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
20 Landscape Services Landscaping Month-to-month 500/mo.
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
21 C&C Capital (verbal) Building lease Month-to-month
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
22 ▇▇▇▇▇ ▇▇▇▇▇▇(1) Employment
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
23 Export Tyre Holding Co.(1) Admin. Service
Agreement
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
24 ▇▇▇▇ ▇▇▇▇▇▇ Appraisal Consultant
Agreement
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
25 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Non compete agreement
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
26 ▇▇▇▇▇ ▇▇▇▇▇▇ Non compete agreement
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
-2-
27 Various Consignment Contracts Various Various
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
28 Telecheck Check Authorization
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
29 City of Scottsdale License Information
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
30 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Consignment Agreement
(termination)
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
31 ▇▇▇▇▇ ▇▇▇▇▇▇/State of Arizona Real Estate License*
------------- ---------------------------------- ----------------------- ---------------------- ----------------------
* State of Arizona Department of Real Estate - Real Estate Self Employed
Broker License for ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ Real Estate
(1) Indicates a Material Contract that will not be assumed by the Purchaser at
Closing.
SCHEDULE "D"
▇▇▇▇▇▇'▇ AUCTION HOUSE OF SCOTTSDALE
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets
Cash $ 33,089
Accounts Receivable - Trade 15,782
Consigner Advances 1,500
Employee advance - C ▇▇▇▇▇▇ 411
Inventories 1,700
Prepaid Insurance 1,271
--------
Total Current Assets 53,753
--------
Fixed Assets
Office Furniture and Equipment 36,939
Less: Accum Depreciation (4,686)
--------
Net Fixed Assets 32,253
Other Assets
Deposits 850
--------
Total Other Assets 850
--------
TOTAL ASSETS $ 86,856
=========
LIABILITIES
Current Liabilities
Accounts Payable Trade $ 14,446
Consignments Payable 59,876
Sales Tax Payable 779
Accounts Payable I/C 205,921
Accrued Expenses 5,961
Payroll Withholding 4,236
--------
Total Current Liabilities 291,219
--------
EQUITY
-2-
Capital - F & F Capital 120,233
Capital - ▇▇▇▇▇▇ (1,955)
Capital - Stockbridge Realty 100,000
Draws - ▇▇▇▇▇▇ 11,997
Net Income (Loss) - Current Yr. (434,638)
---------
Total Equity (204,363)
---------
TOTAL LIABILITIES AND EQUITY $ 86,856
=========
-3-
▇▇▇▇▇▇'▇ AUCTION HOUSE OF SCOTTSDALE
Statement of Operations
January 1, 1999 to December 31, 1999
Income
Auction Proceeds $ 37,904 $ 1,685,085
Commission Income 3,772 163,270
Appraisal Income 0 1,412
Administrative Fees 2 2
House Sales (Net) 0 21,493
Broker Commission Income 0 3,310
---------- -------------
Total Income 41,678 1,874,572
---------- -------------
Cost of Sales
Expenses of Sales 1,054 6,682
Consigner Payments 28,264 1,294,015
---------- -------------
Cost of Sales 29,318 1,300,697
---------- -------------
Gross Income $ 12,360 $ 573,875
---------- -------------
Operating Expenses
Office Expense 5,206 43,323
Payroll Taxes & Ins. 1,861 24,577
Utilities 591 5,993
Insurance 3,728 15,746
Travel & Entertainment 2,038 5,438
Computer Expense 86 7,463
Freight In 0 373
Commissions Expense 5,503 14,024
Consulting Expense 99 12,439
Referral Fees 7,216 7,216
Admin. Service Fee 0 1,100
Freight Out 20 915
Salaries and Wages 16,770 146,564
Salaries and Wages 8,308 154,241
Mgr/Membs 42,945 329,490
Advertising 3,000 9,300
Appraisal Services 174 1,788
Vehicle 499 23,920
Auction Merch Deliveries 0 4,496
Bad Debt 859 3,257
Contract Services 437 2,651
Depreciation 0 4,136
Legal and Accounting 128 13,194
Taxes, Licenses and Fees 0 1,036
Personal Property Taxes 3,302 24,267
Credit Card Fees/Telecheck 0 3,125
-4-
Seminars & Conventions 6,950 77,533
Rent 2,686 41,573
Postage and Courier 203 935
Supplies 500 5,562
Repair & Maintenance 0 1,923
Security 0 3,162
Referral Fee 1,959 13,068
Telephone 0 450
---------- -------------
Contributions 108,625 969,638
---------- -------------
Total Operating Expenses $(106,056) $(434,638)
=========== =============
Net Income (Loss)
SCHEDULE "E"
Employee Listing
(▇▇▇▇▇▇'▇ Auction House)
Name Position Date of Current Commission Available
Hire Rate of Pay Vacation
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. Administrative 6/1/99 $2,600.00/mo N/A 0
Assistant
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Accountant Closing $3,000.00/mo N/A 0
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
Friend, Andy Chief Operating Closing $6,000.00/mo N/A 0
Officer
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
Friend, ▇▇▇▇▇ Account Executive 5/6/87 $6,701.16/mo 20% of Auction 0
House comm.
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇ Accountant Closing $3,000.00/mo N/A 0
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ L General Manager 1/6/97 $6,701.16/mo N/A 168 hours
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. General Help 8/30/99 $11.00/hr N/A 0
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. Account Executive 2/8/99 $8,000.00/mo $1,000 monthly 40 hours
guaranteed draw
against comm. *
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇ Account Executive 12/1/99 $2,000.00/mo $800 monthly 0
guaranteed draw
against comm.*
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇, ▇▇▇▇▇▇▇ ▇. Account Executive 5/1/96 $4,250.00/mo 20% of Auction 0
House comm.
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. General Help 4/28/87 $3,328.00/mo N/A 0
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Clerical Support 6/21/99 $2,500.00/mo N/A 0
------------------------------ ----------------------- -------------- ------------------ --------------------- ----------------
* Both of these individuals receive the amount stated along with their
monthly salary compensation checks. They are not eligible for commission
payments until their earned commissions exceed the amount stated. The
commissions for ▇▇▇▇▇▇ and ▇▇▇▇▇▇ are 20%.
All of the above employees of the Vendor are covered by a group insurance
plan.
All of the above employee plans are subject to a vacation pay plan that
gives no vacation during the first full year of employment. In the second
year of employment, an employee receives one week; in the third year, two
weeks and in the sixteenth year, 3 weeks. Part-time employees receive no
benefits at all.
SCHEDULE "F"
INVESTOR QUESTIONNAIRE
The undersigned (the "Purchaser"), in connection with the acquisition of
securities (the "Securities") of ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the Company") pursuant
to that certain asset purchase agreement ("Agreement") among the Purchaser, the
Company, and ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (Washington), Inc. dated March o, 2000, makes the
following representations and warranties:
The Purchaser understands that the Company is relying on this information
in determining to offer securities to the undersigned in a manner exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Act"), and applicable state securities laws.
1. Qualified Investor
The Purchaser represents and warrants that the Purchaser falls within the
category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED
INVESTOR THAT YOU, THE PURCHASER, SATISFY, BY PLACING AN "X" ON THE APPROPRIATE
LINE BELOW.
_____ Category 1. A bank, as defined in Section 3(a)(2) of the
Act, whether acting in its individual or fiduciary capacity;
or
_____ Category 2. A savings and loan association or other
institution as defined in Section 3(a) (5) (A) of the Act,
whether acting in its individual or fiduciary capacity; or
_____ Category 3. A broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
_____ Category 4. An insurance company as defined in Section 2(13)
of the Act; or
_____ Category 5. An investment company registered under the
Investment Company Act of 1940; or
_____ Category 6. A business development company as defined in
Section 2(a) (48) of the Investment Company Act of 1940; or
_____ Category 7. A small business investment company licensed by
the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; or
_____ Category 8. A plan established and maintained by a state,
its political subdivision or any agency or instrumentality
of a state or its political subdivisions, for the benefit of
its employees, with assets in excess of US$5,000,000; or
-2-
_____ Category 9. An employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 in which
the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a
bank, savings and loan association, insurance company or
registered investment advisor, or an employee benefit plan
with total assets in excess of US$5,000,000 or, if a
self-directed plan, the investment decisions are made solely
by persons who are accredited investors; or
_____ Category 10. A private business development company as
defined in Section 202(a) (22) or the Investment Advisors
Act of 1940; or
_____ Category 11. An organization described in Section 501(c)(3)
of the Internal Revenue Code, a corporation, a Massachusetts
or similar business trust, or a partnership, not formed for
the specific purpose of acquiring the Shares, with total
assets in excess of US$5,000,000; or
_____ Category 12. A director, executive officer or general
partner of the Company; or
_____ Category 13. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of
this purchase exceeds US$1,000,000; or
_____ Category 14. A natural person who had an individual income
in excess of US$200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
US$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year; or
_____ Category 15. A trust, with total assets in excess of
US$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in SEC Rule
506(b)(2)(ii); or
_____ Category 16. An entity in which all of the equity owners are
accredited investors.
If you are not an accredited investor, please so indicate by placing
an "X" on the following line: _____
2. Purchasing Entirely for Own Account
The Purchaser represents and warrants that it is acquiring the Securities
solely for its own account for investment and not with a view to or for sale or
distribution of the Securities or any portion thereof and without any present
intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof in any transaction other than
a transaction complying with the registration requirements of the Act and
applicable state securities or "blue sky" laws, or pursuant to an exemption
therefrom. The Purchaser also represents that the entire legal and beneficial
interest of the Securities that it is purchasing is being purchased for, and
will
-3-
be held for, the Purchaser's account only, and neither in whole nor in part for
any other person or entity.
3. Information Concerning the Company
The Purchaser acknowledges that it has received all information that it
deems necessary and appropriate to enable it to evaluate the financial risk
inherent in making an investment in the securities (the "Disclosure Documents")
and the documents and materials submitted therewith, which include a description
of the risks inherent in an investment in the Company. The Purchaser further
acknowledges that it has received satisfactory and complete information
concerning the business and financial condition of the Company in response to
all inquiries in respect thereof.
4. Economic Risk and Suitability
The Purchaser represents and warrants as follows:
(a) The Purchaser realizes that its purchase of the Securities involves a high
degree of risk and will be a highly speculative investment, and that it is
able, without impairing its financial condition, to hold the Securities for
an indefinite period of time.
(b) The Purchaser has carefully considered and has, to the extent it believes
such discussion necessary, discussed with its professional legal, tax, and
financial advisors the suitability of an investment in the Company for the
particular tax and financial situation of the Purchaser and that the
Purchaser and/or its advisors have determined that the Securities are a
suitable investment for the Purchaser.
(c) The financial condition and investment of the Purchaser are such that it is
in a financial position to hold the Securities for an indefinite period of
time and to bear the economic risk of, and withstand a complete loss of,
the purchase price.
(d) The Purchaser alone, or with the assistance of professional advisors, has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its purchase of the
Securities, or has a pre-existing personal or business relationship with
the Company or any of its officers, directors, or controlling persons of a
duration and nature that enables it to be aware of the character, business
acumen, and general business and financial circumstances of the Company or
that other person.
(e) The Purchaser has carefully read the Disclosure Documents and the documents
and materials submitted therewith, and the Company has made available to
the Purchaser or its advisors all information and documents requested by
the Purchaser relating to investment in the Securities, and has provided
answers to the Purchaser's satisfaction to all of the Purchaser's questions
concerning the Company.
(f) If the Purchaser is a partnership, trust, corporation, or other entity: (1)
it was not organized for the purpose of acquiring the Securities (or all of
its equity owners are "accredited
-4-
investors" as defined in Section 1 above); (2) it has the power and
authority to execute and comply with the terms of the asset purchase
agreement and the person executing said documents on its behalf has the
necessary power to do so; (3) its principal place of business and principal
office are located within the state set forth in its address below; and (4)
all of its trustees, partners and/or shareholders, whichever the case may
be, are bona fide residents of said state.
(g) The Purchaser understands that neither the Company nor any of its officers
or directors has any obligation to register the Securities under any
federal or state securities act or law.
(h) The Purchaser has relied solely on the Disclosure Documents and the
documents and materials submitted therewith, advice of its representatives,
if any, and independent investigations made by the Purchaser and/or its
purchaser representatives, if any, in making the decision to purchase the
Securities subscribed for herein and acknowledges that no representations
or agreements other than those set forth in the Disclosure Documents have
been made to the Purchaser in respect thereto.
(i) All information that the Purchaser has provided concerning itself is
correct and complete as of the date set forth below, and if there is any
material change in that information, it will immediately provide that
information to the Company.
(j) The Purchaser confirms that it has received no general solicitation or
general advertisement and has attended no seminar or meeting (whose
attendees have been invited by any general solicitation or general
advertisement) and has received no advertisement in any newspaper,
magazine, or similar media, broadcast on television, or radio regarding the
offering of the Securities.
(k) The Purchaser is a resident of the United States and has an office at the
address indicated below.
5. Restricted Securities
The Purchaser acknowledges that the Company has hereby disclosed to the
Purchaser in writing that:
(a) The Securities that the Purchaser is purchasing have not been registered
under the Act, or the securities laws of any state of the United States,
and the Securities must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such
registration is available; and
(b) The Company will make a notation in its records of the above described
restrictions on transfer and of the legend described below.
6. Legend
The Purchaser agrees that all of the Securities will have endorsed thereon
a legend to the
-5-
following effect:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT."
IN WITNESS WHEREOF, the undersigned has executed this questionnaire as of
March ___, 2000.
(Signature)
▇▇▇▇▇▇'▇ Auction House of Scottsdale, LLC
-----------------------------------------
(Print Name)
-----------------------------------------
(Address)
-----------------------------------------
(City/State/Zip Code)
-----------------------------------------
(Area Code/Telephone Number)
SCHEDULE "G"
MANAGEMENT CONSULTING AGREEMENT
This Agreement dated this 20th day of March, 2000 is made
BETWEEN:
ARIZONA REALTY CONSULTANTS, INC., a company incorporated under the
laws of Arizona and having its head office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, with attention to
▇▇▇▇▇▇ Friend, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(the "Manager/Consultant")
OF THE FIRST PART
AND:
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (WASHINGTON), INC., a company incorporated under the
laws of the State of Washington and having its registered office at
331635 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, with
attention to ▇▇▇▇▇ ▇▇▇▇▇, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(the "Company")
OF THE SECOND PART
WHEREAS:
▇. ▇▇▇▇▇▇'▇ Auction House of Scottsdale, LLC, an affiliate of the
Manager/Consultant, has sold its assets and name to the Company under the terms
of an Asset Purchase Agreement ("Asset Agreement") dated March 20, 2000 and;
B. The Manager/Consultant has agreed to continue to operate and manage the
Company's auction business (▇▇▇▇▇▇'▇ Auction House of Scottsdale) for a limited
period of time, specifically for its knowledge and expertise of the auction and
sale currently scheduled for March 24, 2000 and;
C. The Company will pay for the Manager/Consultant's costs, certain fees
for services, and overhead associated with the operation of the auction business
for such time.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises
and the covenants, agreements, representations, warranties, and payments set
forth in this Agreement, the parties covenant and agree as follows:
2
1. Consultation/Management Services. The Company hereby employs the
Manager/Consultant to perform the following services in accordance with the
terms and conditions set forth in this agreement:
The Manager/Consultant will employ those individuals listed in
Schedule "A" at those salaries and/or rates of pay listed therein on behalf of
the Company. In addition, the following three individuals will perform services
under this Agreement for the benefit of the Company and as detailed by Schedule
"A": ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇.
The Manager/Consultant will continue to operate the Company's auction
business in the State of Arizona at the current Scottsdale location.
The Manager/Consultant, from and after the date of March 20, 2000,
will cause to be paid all reasonable expenses associated with the cost of doing
business as an auction in ▇▇▇▇▇▇'▇ Auction House of Scottsdale in Scottsdale
Arizona at its current address, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of
Maricopa, State of Arizona.
The Manager/Consultant will consult with certain officers and
employees of the Company concerning matters relating to the management and
organization of the auction business in Arizona, its financial policies, and
generally any matter arising out of day to day operation of the Company's
auction business in Arizona.
The Manager/Consultant will cause certain reports and accountings to
be disclosed to the Company on a weekly basis or at the reasonable request of
the Company, and will provide the Company with copies of all receipts and
vouchers in respect of all non-payroll expenses incurred in the performance of
its services hereunder.
2. Term of the Agreement. This agreement will begin on March 20, 2000 and
will be effective on a month to month basis at the will of either party. With
five days notice in writing, either by certified mail or personal delivery,
either party may cancel this agreement.
3. Time Devoted by Manager/Consultant. It is anticipated that the
Manager/Consultant and its employees will spend whatever time necessary in
fulfilling its obligations under this contract. The particular amount of time
may vary from day to day or week to week.
4. Place Where Services Will Be Rendered. The Manager/Consultant will
perform most services in accordance with this Agreement at the ▇▇▇▇▇ Drive
location as well as the offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
5. Payment to Consultant. Upon signing and commencement of the term of this
agreement, the Company shall deliver to the Manager/Consultant a wire transfer
in the amount of $50,000 representing a retainer to be used by the
Manager/Consultant for the operation and management of the auction business,
which includes paying all expenses similar to those itemized in the December 31,
1999 Financial Statement (Schedule D to the Asset Purchase Agreement of ▇▇▇▇▇▇'▇
Auction House of Scottsdale and Able ▇▇▇▇▇▇▇▇.▇▇▇, Inc.) Upon
3
depletion of the initial retainer, the retainer shall be replenished at the
request of the Manager/Consultant. In addition, the Manager/Consultant will pay
$11,000 a month for the three individuals listed above in Section 2 of this
Agreement which will be paid from Company's retainer.
The Manager/Consultant shall draw from that retainer all reasonable
expenses, including employee payroll and other employee benefits as well as day
to day operating expenses for the auction business.
The Manager/Consultant's draws shall be based on actual cost of
expenses and payroll per Schedule "A" to this Agreement, not on any hourly or
time requirement. The Manager/Consultant reserves the right to hire additional
temporary, part-time or full-time employees with the prior consent of the
Company based upon the staffing needs of the Company's auction business.
6. Confidential Information.
All reports, documents, customer lists, concepts, and products,
together with any business contracts or any business opportunities prepared,
produced, developed, or acquired by the Manager/Consultant, directly or
indirectly, in connection with the performance of its services hereunder
(collectively, the "Work Product") will belong exclusively to the Company or any
of its affiliates, as appropriate (collectively, the "Companies"), which will be
entitled to all rights, interest, profits, or benefits in respect thereof,
except as otherwise provided by the Asset Purchase Agreement between ▇▇▇▇▇▇'▇
Auction House of Scottsdale, LLC and the Company.
No copies, summaries, or other reproductions of any Work Product will
be made by the Manager/Consultant without the express written permission of the
Company, provided that the Manager/Consultant is permitted to maintain one copy
of the Work Product for its own use during the term of this Agreement.
The Manager/Consultant and any of its managers, members, agents,
employees, or consultants (collectively, the "Associates") will not disclose any
information, documents, or Work Product developed by the Manager/Consultant or
to which the Manager/Consultant may have access by virtue of its performance of
its services to any person not expressly authorized in writing by the Company
for that purpose. The Manager/Consultant will comply with any directions the
Company may make to ensure the safeguarding or confidentiality of all such
information, documents, and the Work Product.
The Manager/Consultant and the Associates will not, either directly or
indirectly as a manager, member, shareholder, director, officer, employee,
agent, consultant, or associate of any person, make any use of any confidential
information for the purpose of soliciting the business of any customer or former
customer of the Companies, or for the purpose of appropriating any business
opportunity whatsoever available to, or which might be available to the
Companies.
4
The Manager/Consultant acknowledges and agrees that the confidential
information is and will be of a special and unique character, the loss of which
cannot be reasonably, readily, or accurately calculated in monetary terms.
Accordingly, the Companies will be entitled to injunctive or other equitable
relief to prevent or cure any breach or threatened breach of this Agreement by
the Manager/Consultant or any of the Associates. Resort to such equitable
relief, however, will not be construed to be a waiver of any other right or
remedy that the Companies may have for damages or otherwise.
The Manager/Consultant agrees that during the term of this Agreement
and for a period of two years following the date of termination of this
Agreement, neither the Manager/Consultant nor any of the Associates will:
(a) encourage or entice any persons who are or become employees or
consultants of the Companies at any time during or after the term of
this Agreement or who were employees or consultants of the Company at
any time within the 30 days preceding the date of this Agreement to
seek employment or service with persons other than the Companies; or
(b) offer employment or service contracts directly or indirectly to any
persons who are or become employees or consultants of the Companies at
any time during or after the term of this Agreement or who were
employees or consultants of the Companies at any time within the 30
days preceding the date of this Agreement;
(c) in this section, letters (a) and (b) do not apply to the following:
i) those employees or other Associates that were ▇▇▇▇▇▇'▇ Auction
House of Scottsdale employees prior to March 20, 2000 who are
terminated upon termination of this Agreement and not rehired by
the Companies; and
ii) those employees or other Associates that were subsequently hired
by the Company and are so employed for a period less than 6
months from March 20,2000.
The Manager/Consultant and the Associates acknowledge and agree that a
breach of this section 6 would result in damages to the Company for which the
Company could not adequately be compensated by monetary award. Accordingly, the
Manager/Consultant and the Associates agree that the Company will be entitled to
injunctive or other equitable relief to prevent or cure any breach or threatened
breach of section 6 of this Agreement by the Manager/Consultant and the
Associates. Resort to such equitable relief, however, will not be construed to
be a waiver of any other right or remedy that the Company may have for damages
or otherwise. The remedies afforded to the Companies by this Agreement will be
cumulative and not alternative and will be in addition to and not in
substitution for any other rights and remedies available to them at law or in
equity, including the remedy of injunctive relief.
5
7. Termination of Employees. Upon completion of this Agreement and the
termination of Manager/Consultant's services, the Manager/Consultant will
terminate all employees to whom the Company has made permanent offers of
employment. Those employees not hired by the Company shall no longer provide
services to the Company and the Manager/Consultant agrees to indemnify and hold
harmless the Company from and against all claims by any such employee of the
Manager/Consultant for any wages, salaries, bonuses, pension or other benefits,
severance pay, notice or pay in lieu of notice and vacation pay for any period
before or after the termination date.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
written on the first page of this Agreement.
THE CORPORATE SEAL OF )
ARIZONA REALTY )
CONSULTANTS, INC. was affixed ) c/s
in the presence of: )
)
/s/ ▇▇▇▇▇▇ Friend )
-------------------------------------- )
Authorized Signatory )
)
-------------------------------------- )
Authorized Signatory )
THE CORPORATE SEAL OF )
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ )
(WASHINGTON), INC. was affixed ) c/s
in the presence of: )
)
)
-------------------------------------- )
Authorized Signatory )
)
/s/ [Illegible] )
-------------------------------------- )
Authorized Signatory )
SCHEDULE "A"
Employee Listing
(▇▇▇▇▇▇'▇ Auction House)
Name Position Date of Current Commission Available
Hire Rate of Pay Vacation
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. Administrative 6/1/99 $2,600.00/mo N/A 0
Assistant
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Accountant Closing $3,000.00/mo N/A 0
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
Friend, Andy Chief Operating Closing $6,000.00/mo N/A 0
Officer
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
Friend, ▇▇▇▇▇ Account 5/6/87 $6,701.16/mo 20% of Auction 0
Executive House comm.
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇ Accountant Closing $3,000.00/mo N/A 0
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ L General Manager 1/6/97 $6,701.16/mo N/A 168 hours
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇ ▇. General Help 8/30/99 $11.00/hr N/A 0
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. Account 2/8/99 $8,000.00/mo $1,000 monthly 40 hours
Executive guaranteed draw
against comm. *
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇, ▇▇▇▇ Account 12/1/99 $2,000.00/mo $800 monthly 0
Executive guaranteed draw
against comm.*
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇, ▇▇▇▇▇▇▇ ▇. Account 5/1/96 $4,250.00/mo 20% of Auction 0
Executive House comm.
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. General Help 4/28/87 $3,328.00/mo N/A 0
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Clerical Support 6/21/99 $2,500.00/mo N/A 0
------------------------------- ---------------------- ------------- ------------------ --------------------- ----------------
* Both of these individuals receive the amount stated along with their
monthly salary compensation checks. They are not eligible for commission
payments until their earned commissions exceed the amount stated. The
commissions for ▇▇▇▇▇▇ and ▇▇▇▇▇▇ are 20%.
All of the above employees of the Vendor are covered by a group insurance
plan.
All of the above employee plans are subject to a vacation pay plan that
gives no vacation during the first full year of employment. In the second
year of employment, an employee receives one week; in the third year, two
weeks and in the sixteenth year, 3 weeks. Part-time employees receive no
benefits at all.
SCHEDULE "H"
THIS WARRANT AND THE SHARES DELIVERABLE ON EXERCISE OF THE WARRANT HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT
MAY NOT BE EXERCISED UNLESS THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE
1933 ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY STATE OR AN EXEMPTION
FROM THOSE REGISTRATION REQUIREMENTS IS AVAILABLE.
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
NON-TRANSFERABLE WARRANT
A. TO PURCHASE SHARES OF COMMON STOCK
150,000 Common Shares Void after
Par Value of U.S. $0.001 March 20, 2001.
This is to certify that, for value received, ▇▇▇▇▇▇'▇ AUCTION HOUSE OF
SCOTTSDALE, LLC. (the "Warrant Holder"), of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, has the right to purchase from ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc., a Florida corporation (the "Company"), on and subject to the terms and
conditions hereinafter referred to, 150,000 fully paid and non-assessable shares
of common stock of the Company having a par value of US$0.001 per share (the
"Shares"), or any greater or lesser number of shares that may be determined by
application of the anti-dilution provisions of this Warrant. The Shares may be
purchased at a price of US$8.00 per Share at any time up to 5:00 p.m. local time
in Seattle, Washington, on March 20, 2001. The right to purchase the Shares may
be exercised in whole or in part by the Warrant Holder only at the price set
forth above (the "Exercise Price") within the time set forth above by:
(a) completing and signing the attached Subscription Form for the number of
Shares that the Warrant Holder wishes to purchase, in the manner therein
indicated;
(b) surrendering this Warrant Certificate, together with the completed
Subscription Form, to Interwest Transfer Company, Inc., ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇,
▇▇▇. ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, (the "Transfer Agent");
(c) delivering an investor questionnaire and/or similar documents acceptable to
the Company demonstrating that the sale of the shares to be purchased is
exempt from registration under the Securities Act of 1933, as amended (the
"1933 Act"), and any state securities law; and
(d) paying the appropriate Exercise Price, in United States funds, for the
number of Shares subscribed for, either by certified cheque or bank draft
or money order payable to the Company in Vancouver, British Columbia, or
any other address that the Company may advise by written notice to the
address of the Warrant Holder.
2
This Warrant and the Shares issuable on exercise of the Warrant have not been
registered under the 1933 Act or the securities laws of any state of the United
States, and this Warrant may not be exercised unless the Shares are registered
under the 1933 Act and the securities laws of all applicable states of the
United States or an exemption from registration requirements is available.
On surrender and payment, the Company will issue to the Warrant Holder, or to
any other person or persons that the Warrant Holder may direct, the number of
the Shares subscribed for and will deliver to the Warrant Holder, at the address
set forth on the Subscription Form, a certificate or certificates evidencing the
number of Shares subscribed for. If the Warrant Holder subscribes for a number
of Shares that is less than the number of Shares permitted by this Warrant, the
Company will forthwith cause to be delivered to the Warrant Holder a further
Warrant Certificate in respect of the balance of the Shares referred to in this
Warrant Certificate not then being subscribed for. The Shares so purchased will
be deemed to be issued as of the close of business on the date on which this
Warrant has been exercised by payment to the Company of the Exercise Price. No
fractional shares will be issued on the exercise of this Warrant.
In the event of any subdivision of the common shares of the Company (as those
common shares are constituted on the date hereof) into a greater number of
common shares while this Warrant is outstanding, the number of Shares
represented by this Warrant will thereafter be deemed to be subdivided in like
manner and the Exercise Price adjusted accordingly, and any subscription by the
Warrant Holder for Shares hereunder will be deemed to be a subscription for
common shares of the Company as subdivided.
In the event of any consolidation of the common shares of the Company (as those
common shares are constituted on the date hereof) into a lesser number of common
shares while this Warrant is outstanding, the number of Shares represented by
this Warrant will thereafter be deemed to be consolidated in like manner and the
Exercise Price adjusted accordingly, and any subscription by the Warrant Holder
for Shares hereunder will be deemed to be a subscription for common shares of
the Company as consolidated.
In the event of any capital reorganization or reclassification of the common
shares of the Company or the merger or amalgamation of the Company with another
corporation at any time while this Warrant is outstanding, the Company will
thereafter deliver, at the time of purchase of the Shares hereunder, the number
of common shares the Warrant Holder would have been entitled to receive in
respect of the number of the Shares so purchased had the right to purchase been
exercised before the capital reorganization or reclassification of the common
shares of the Company or the merger or amalgamation of the Company with another
corporation.
If at any time while this, or any replacement, Warrant is outstanding:
(a) the Company proposes to pay any dividend of any kind on its common shares
or make any distribution to the holders of its common shares;
(b) the Company proposes to offer for subscription pro rata to the holders of
its common shares any additional shares of stock of any class or other
rights;
3
(c) the Company proposes any capital reorganization or classification of its
common shares or the merger or amalgamation of the Company with another
corporation; or
(d) there is a voluntary or involuntary dissolution, liquidation, or winding-up
of the Company,
the Company must give to the Warrant Holder at least seven days prior written
notice (the "Notice") of the date on which the books of the Company are to close
or a record is to be taken for the dividend, distribution, or subscription
rights, or for determining rights to vote with respect to the reorganization,
reclassification, consolidation, merger, amalgamation, dissolution, liquidation,
or winding-up. The Notice will specify, in the case of any dividend,
distribution, or subscription rights, the date on which holders of common shares
of the Company will be entitled to exchange their common shares for securities
or other property deliverable on any reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution, liquidation, or
winding-up, as the case may be. Each Notice will be delivered by hand, addressed
to the Warrant Holder at the address of the Warrant Holder set forth above or at
any other address that the Warrant Holder may from time to time specify to the
Company in writing.
The holding of this Warrant Certificate or the Warrants represented hereby does
not constitute the Warrant Holder a member of the Company.
Nothing contained herein confers any right on the Warrant Holder or any other
person to subscribe for or purchase any Shares of the Company at any time
subsequent to 5:00 p.m. local time in Seattle, Washington, on March 20, 2001,
and from and after that time, this Warrant and all rights hereunder will be
void.
The Warrants represented by this Warrant Certificate are non-transferable. Any
common shares issued pursuant to this Warrant will bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION UNDER ALL APPLICABLE UNITED STATES
FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION
THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE
EVIDENCED BY AN OPINION OF THE HOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT
FROM ANY PROPOSED TRANSFER OR ASSIGNMENT."
Time will be of the essence hereof.
4
This Warrant Certificate is not valid for any purpose until it has been signed
by the Company.
IN WITNESS WHEREOF, the Company has caused its common seal to be hereto affixed
and this Warrant Certificate to be signed by one of its directors as of the 20th
day of March, 2000.
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
Per:
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Director
SUBSCRIPTION FORM
To: ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company")
And to: The directors of the Company
Pursuant to the Share Purchase Warrant made the 20th day of March, 2000, the
undersigned subscribes for and agrees to purchase __________ shares of common
stock of the Company having a par value of US$0.001 (the "Shares"), at a price
of US$8.00 per Share for the aggregate sum of US$_________ (the "Subscription
Funds"), and encloses herewith: (i) a certified cheque, bank draft, or money
order payable to the Company in full payment of the Shares; and (ii) a completed
accredited investor questionnaire (attached as Schedule A).
The undersigned requests that:
(a) the Shares be allotted to the undersigned;
(b) the name and address of the undersigned as shown below be entered in the
registers of members and allotments of the Company;
(c) the Shares be issued to the undersigned as fully paid and non-assessable
common shares of the Company; and
(d) a share certificate representing the Shares be issued in the name of the
undersigned.
Dated this _______ day of ______________, 200__.
DIRECTION AS TO REGISTRATION:
(Name and address exactly as you wish them to appear on your share certificate
and in the register of members.)
Full Name(1): ------------------------------------------------------------------
Full Address: ------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Signature of Subscriber(1): ----------------------------------------------------
If the name above differs from Signature of Subscriber guaranteed by:
the name of the Subscriber, then
please complete the following
guarantee: ----------------------------------------
Authorized Signature Number
(1) NOTE: The signature to this subscription form must correspond with the name
as recorded on the Warrant Certificate in every particular without alteration or
enlargement or any change
2
whatever. The signature of the person signing this power must be guaranteed in a
manner satisfactory to the Company's transfer agent.
Schedule "A"
INVESTOR QUESTIONNAIRE
The undersigned (the "Purchaser"), in connection with the acquisition of
securities (the "Securities") of ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the Company") pursuant
to the share purchase warrant dated March 20, 2000, makes the following
representations and warranties:
The Purchaser understands that the Company is relying on this information
in determining to offer securities to the undersigned in a manner exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Act"), and applicable state securities laws.
1. Qualified Investor
The Purchaser represents and warrants that the Purchaser falls within the
category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED
INVESTOR THAT YOU, THE PURCHASER, SATISFY, BY PLACING AN "X" ON THE APPROPRIATE
LINE BELOW.
_____ Category 1. A bank, as defined in Section 3(a)(2) of the
Act, whether acting in its individual or fiduciary capacity;
or
_____ Category 2. A savings and loan association or other
institution as defined in Section 3(a) (5) (A) of the Act,
whether acting in its individual or fiduciary capacity; or
_____ Category 3. A broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; or
_____ Category 4. An insurance company as defined in Section 2(13)
of the Act; or
_____ Category 5. An investment company registered under the
Investment Company Act of 1940; or
_____ Category 6. A business development company as defined in
Section 2(a) (48) of the Investment Company Act of 1940; or
_____ Category 7. A small business investment company licensed by
the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; or
_____ Category 8. A plan established and maintained by a state,
its political subdivision or any agency or instrumentality
of a state or its political subdivisions, for the benefit of
its employees, with assets in excess of US$5,000,000; or
-2-
_____ Category 9. An employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 in which
the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a
bank, savings and loan association, insurance company or
registered investment advisor, or an employee benefit plan
with total assets in excess of US$5,000,000 or, if a
self-directed plan, the investment decisions are made solely
by persons who are accredited investors; or
_____ Category 10. A private business development company as
defined in Section 202(a) (22) or the Investment Advisors
Act of 1940; or
_____ Category 11. An organization described in Section 501(c)(3)
of the Internal Revenue Code, a corporation, a Massachusetts
or similar business trust, or a partnership, not formed for
the specific purpose of acquiring the Shares, with total
assets in excess of US$5,000,000; or
_____ Category 12. A director, executive officer or general
partner of the Company; or
_____ Category 13. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of
this purchase exceeds US$1,000,000; or
_____ Category 14. A natural person who had an individual income
in excess of US$200,000 in each of the two most recent years
or joint income with that person's spouse in excess of
US$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year; or
_____ Category 15. A trust, with total assets in excess of
US$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in SEC Rule
506(b)(2)(ii); or
_____ Category 16. An entity in which all of the equity owners are
accredited investors.
If you are not an accredited investor, please so indicate by placing an "X"
on the following line: _____
2. Purchasing Entirely for Own Account
The Purchaser represents and warrants that it is acquiring the Securities
solely for its own account for investment and not with a view to or for sale or
distribution of the Securities or any portion thereof and without any present
intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof in any transaction other than
a transaction complying with the registration requirements of the Act and
applicable state securities or "blue sky" laws, or pursuant to an exemption
therefrom. The Purchaser also represents that the entire legal and beneficial
interest of the Securities that it is purchasing is being purchased for, and
will
3
be held for, the Purchaser's account only, and neither in whole nor in part for
any other person or entity.
3. Information Concerning the Company
The Purchaser acknowledges that it has received all information that it
deems necessary and appropriate to enable it to evaluate the financial risk
inherent in making an investment in the securities (the "Disclosure Documents")
and the documents and materials submitted therewith, which include a description
of the risks inherent in an investment in the Company. The Purchaser further
acknowledges that it has received satisfactory and complete information
concerning the business and financial condition of the Company in response to
all inquiries in respect thereof.
4. Economic Risk and Suitability
The Purchaser represents and warrants as follows:
(a) The Purchaser realizes that its purchase of the Securities involves a high
degree of risk and will be a highly speculative investment, and that it is
able, without impairing its financial condition, to hold the Securities for
an indefinite period of time.
(b) The Purchaser has carefully considered and has, to the extent it believes
such discussion necessary, discussed with its professional legal, tax, and
financial advisors the suitability of an investment in the Company for the
particular tax and financial situation of the Purchaser and that the
Purchaser and/or its advisors have determined that the Securities are a
suitable investment for the Purchaser.
(c) The financial condition and investment of the Purchaser are such that it is
in a financial position to hold the Securities for an indefinite period of
time and to bear the economic risk of, and withstand a complete loss of,
the purchase price.
(d) The Purchaser alone, or with the assistance of professional advisors, has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its purchase of the
Securities, or has a pre-existing personal or business relationship with
the Company or any of its officers, directors, or controlling persons of a
duration and nature that enables it to be aware of the character, business
acumen, and general business and financial circumstances of the Company or
that other person.
(e) The Purchaser has carefully read the Disclosure Documents and the documents
and materials submitted therewith, and the Company has made available to
the Purchaser or its advisors all information and documents requested by
the Purchaser relating to investment in the Securities, and has provided
answers to the Purchaser's satisfaction to all of the Purchaser's questions
concerning the Company.
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(f) If the Purchaser is a partnership, trust, corporation, or other entity: (1)
it was not organized for the purpose of acquiring the Securities (or all of
its equity owners are "accredited investors" as defined in Section 1
above); (2) it has the power and authority to execute and comply with the
terms of the asset purchase agreement and the person executing said
documents on its behalf has the necessary power to do so; (3) its principal
place of business and principal office are located within the state set
forth in its address below; and (4) all of its trustees, partners and/or
shareholders, whichever the case may be, are bona fide residents of said
state.
(g) The Purchaser understands that neither the Company nor any of its officers
or directors has any obligation to register the Securities under any
federal or state securities act or law.
(h) The Purchaser has relied solely on the Disclosure Documents and the
documents and materials submitted therewith, advice of its representatives,
if any, and independent investigations made by the Purchaser and/or its
purchaser representatives, if any, in making the decision to purchase the
Securities subscribed for herein and acknowledges that no representations
or agreements other than those set forth in the Disclosure Documents have
been made to the Purchaser in respect thereto.
(i) All information that the Purchaser has provided concerning itself is
correct and complete as of the date set forth below, and if there is any
material change in that information, it will immediately provide that
information to the Company.
(j) The Purchaser confirms that it has received no general solicitation or
general advertisement and has attended no seminar or meeting (whose
attendees have been invited by any general solicitation or general
advertisement) and has received no advertisement in any newspaper,
magazine, or similar media, broadcast on television, or radio regarding the
offering of the Securities.
(k) The Purchaser is a resident of the United States and has an office at the
address indicated below.
5. Restricted Securities
The Purchaser acknowledges that the Company has hereby disclosed to the
Purchaser in writing that:
(a) The Securities that the Purchaser is purchasing have not been registered
under the Act, or the securities laws of any state of the United States,
and the Securities must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption from such
registration is available; and
(b) The Company will make a notation in its records of the above described
restrictions on transfer and of the legend described below.
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6. Legend
The Purchaser agrees that all of the Securities will have endorsed thereon
a legend to the following effect:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS OR COMPLIANCE WITH AN
APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT."
IN WITNESS WHEREOF, the undersigned has executed this questionnaire as of
_____________________________, ___________.
(Signature)
▇▇▇▇▇▇'▇ Auction House of Scottsdale, LLC
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