EXHIBIT 10.13
INVESTMENT AGREEMENT
This Investment Agreement between Virtual Realty Network, Inc. (hereinafter
referred to as the "Investee Company" and "VRN") with offices at 000 Xxx
Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxx Xxxxx, XX 00000 and American Growth Fund I
LP, a California Limited Partnership (hereinafter referred to as "Investor")
is entered into this 21st day of March, 1995.
WHEREAS, the Investee Company owns and operates a certain business which
manufactures and markets mortgage banking related technology products and is
seeking financing and management expertise for the primary purpose of obtaining
an Initial Public Offering ("IPO"), and;
WHEREAS, the Investor is a Limited Partnership which offers such financing and
management expertise;
THEREFORE, IT IS AGREED between these parties as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF INVESTEE COMPANY
The Investee Company hereby represents and warrants to lnvestor as follows:
1.1 Execution of Agreement
----------------------
A. This Agreement has been duly executed and delivered by Investee
Company and is a legal, valid and binding obligation of Investee
Company in accordance with its terms.
1.2 Investee Company's Organization and Authority
---------------------------------------------
A. The lnvestee Company is a duly authorized Corporation originally
incorporated in the State of Nevada.
B. The Investee Company is a Corporation in good standing and has full
authority to enter into this Agreement.
C. Xxxxxxx X. Xxxxxx, as the President of VRN, warrants all shares in the
Corporation are free from encumbrances, either current or pending and
has authorized the transaction outlined herein.
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1.3 Accuracy of Due Diligence Information
-------------------------------------
A. All due diligence information previously furnished to the Investor,
including but not limited to financial statements, tax returns,
accounting reports, legal opinions, marketing and sales information,
customer lists and banking information is true and correct and does not
misstate or omit a material fact in order to make the information false
or misleading.
1.4 Title to the Assets: Liens and Encumbrances
-------------------------------------------
A. Investee Company has good and marketable title to all of the Assets,
free and clear of all liens, claims, charges and encumbrances, other
than for those items listed on Exhibit B.
1.5 Agreement Not Subject to Encumbrances or Third Party Approval
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A. The execution and delivery of this Agreement by Investee Company and
the consummation of the transactions contemplated hereunder will not
result in the creation or imposition of any valid lien, charge or
encumbrance on any of the Stock, Assets or Proprietary Rights of the
lnvestee Company and will not require the authorization, consent or
approval of any third party, including any government subdivision or
regulatory agency, except such consents as have been obtained prior to
closing.
1.6 No other Commitments
---------------------
A. With the exception of Intel Corporation, the Investee Company has made
no commitment and is under no obligation to obtain additional
financing or public underwriting during the term of this Agreement with
any third party.
1.7 Claims and Litigation
---------------------
A. The Investee Company represents that, to the best of the Investee
Company's knowledge, VRN is not subject to or involved in any claims,
litigation, arbitration or legal proceedings which might result in any
material adverse change in the condition, value, or title of the Stock
being conveyed hereunder.
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1.8 Covenant of Confidentiality
---------------------------
A. As the contents of this Agreement may be construed as potential "Inside
Information" by the Securities and Exchange Commission, the Investee
Company covenants and warrants that it will treat this Agreement as
confidential and will not disclose its contents at any time to any
person, business or corporate entity without express written permission
of the lnvestor. Written permission will be given by the Investor only
to those persons with a "need to know" basis.
B. Investee Company also covenants that it will not disclose to any third
party information on the Limited Partners of the Investor without the
express written permission of each Limited Partner.
1.9 Consents of Government Agencies
-------------------------------
A. Investee Company covenants and warrants that it will promptly take all
steps on its part necessary for it to obtain all consents of
governmental agencies required to be obtained by Investor prior to
closing for the transfer of the Stock and Issuance of the Note and will
cooperate with Investor in such respect.
1.10 Accuracy of Representations and Warranties
------------------------------------------
A. No representations made by Investee Company contains or will contain
any untrue statement of a material fact or omits or will omit or
misstate a material fact necessary in order to make the statement
contained therein not misleading, including, but not limited to,
Investee Company's ability to have available all those shares of Stock
and Warrants and the Corporate Promissory Note to issue the total
value of which it is obligated to transfer to Investor at closing.
1.11 Agreement will Not Cause Breach or Violation
--------------------------------------------
A. Investee Company covenants that the consummation of the transactions
contemplated by this Agreement will not result in or constitute any of
the following: (i) a breach of any term or provision of this
Agreement; (ii) a default or an event that, with notice or lapse of
time or both, would be a default, breach, or violation of the articles
of incorporation or bylaws of the Investee Company or any lease,
license, promissory note, conditional sales contract, commitment
indenture, mortgage, deed of trust, or other agreement, instrument, or
arrangement to which Investee Company is a party or by which their
property is bound; (iii) an event that would permit any party to
terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of Investee
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Company; or (iv) the creation or imposition of any lien, charge, or
encumbrance on any of the assets of the Investee Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Investee Company as follows:
2.1 Execution of Agreement
----------------------
A. This Agreement has been duly executed and delivered by the lnvestor and
constitutes legal, valid and binding obligations of the Investor
enforceable in accordance with its terms. Those persons executing this
Agreement on behalf of the Investor have been duly authorized to do so.
2.2 Ability to Perform
------------------
A. lnvestor specifically warrants and represents that it has the present
ability to perform all Investor's obligations hereunder to Investee
Company.
2.3 Authority Granted
-----------------
A. Investor has granted to the person executing this Agreement on its
behalf the authority to do so and hereby consents to all of its terms.
2.4 Covenant of Confidentiality
---------------------------
A. As the contents of this Agreement may be construed as potential "Inside
Information" by the Securities and Exchange Commission, Investor
covenants and warrants that it will treat this Agreement and all Due
Diligence information on the Investee Company as confidential and will
not disclose its contents at any time to any person, business or
corporate entity without a "need to know" unless express written
permission is given by the Investee Company.
ARTICLE III
PERFORMANCE OBLIGATIONS OF INVESTOR
The Investor agrees and covenants to perform the following duties in accordance
with this Agreement
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3.1 Loan Amount
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A. In exchange for the Note and Stock considerations outlined herein,
Investor will place on deposit cleared funds of $200,000 to be used by
the Investee Company for accounting, legal, investment banking and
other fees associated with further evaluation and procurement of a
Nasdaq listing and Initial Public Offering underwriting. Investee
company expenditures and releases of the funds must be approved by the
Investor prior to release of the funds.
3.2 Management Services
-------------------
A. Through American Growth Capital Corporation, the Managing General
Partner of the Investor, the Investor hereby agrees to provide Investee
Company with all appropriate management and guidance services required
by the Investee Company until the closing of the Investee Company's
Initial Public Offering or for five (5) years after the closing date of
this Agreement, whichever event occurs earlier.
ARTICLE IV
PERFORMANCE OBLIGATIONS OF INVESTEE COMPANY
The Investor agrees and covenants to perform the following duties in
accordance with this Agreement:
4.1 Note
----
A. Investee Company will deliver to Investor the Corporate Promissory Note
hereto attached as Exhibit "A" at the date of closing.
4.2 Shares
------
A. The Investee Company will transfer to the Investor's Limited Partners
250,000 shares of Class "A" Common Stock. within 9O days of the date of
closing, or as instructed by the Investor shares will be issued to each
Limited Partner in the pro-rata ownership percentage held by each
Limited Partner of Record. The Class "A" stock is "Piggybacked" and is
so designated as to have the first option of liquidation and/or
transfer at the time of the Initial or Secondary Public Offering,
subject to SEC and Underwriting restrictions placed at the time of the
Offering, and is non-dilutable and will consist of 5% of the Company's
equity. No additional issues of piggybacked shares or warrants will
have liquidation preference over the shares and warrants issued under
this agreement.
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4.3 Warrants
--------
A. The Investee Company will distribute to the Investor's United Partners
175,000 Class A Warrants Convertible to Class "A" Common @$.70 per
share. Warrants are exercisible for five (5) years from the date of
issue. The Class "A" stock is "Piggybacked" and is so designated as to
have the first option of liquidation and/or transfer at the time of the
Initial or Secondary Public Offering, subject to SEC and Underwriting
restrictions placed at the time of the Offering, and is non-dilutable
and will consist of 3.5% of the Company's equity. No additional issues
of piggybacked shares or warrants will have liquidation preference over
the share and warrants issued under this agreement.
4.4 Board Of Directors
------------------
A. Effective at the Closing Date, the Investee Company will increase its'
Board of Directors to five (5) members, one (1) of which shall be
appointed by the Investor for two non-revocable one (1) year term from
the Close of the Agreement.
4.5 Investment Banking Services
---------------------------
A. The Investee Company agrees to use American Growth Capital Corporation;
the Managing General Partner of the Investor, as its non-exclusive
investment banking consultant until the closing of the Investee
Company's Initial Public or Secondary Offering or for five (5) years
after the closing date of this Agreement, whichever event occurs
earlier.
B. PLACEMENT FEES ON ADDITIONAL FORMATION - If and only if AGCC shall have
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produced a commitment of a lender or investor which shall have been
accepted in writing ("accepted commitment"), it being understood that
such acceptance is wholly within VRN's discretion and may be refused
for any reason whatsoever, then AGCC shall be deemed to have earned the
applicable placement fee(s), as set forth below, and VRN shall pay such
a fee to AGCC in cash on (i) the date it shall have received the
proceeds of such loan or investment ("funding date") or (ii) if VRN
shall for any reason whatsoever, fail to accept funding against an
accepted commitment, on the expiration date of the accepted commitment
If a funding against an accepted commitment shall not have occurred as
a result of withdrawal by a lender or investor, then VRN shall have no
obligation to pay the respective placement fee. This schedule is
exclusive of negotiated broker dealer fees and commissions.
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(a) Senior Term Debt: 1.5% (.015) of the face amount.
(b) Subordinate or Convertible Debt: 5.0% (.050) of the face amount.
(c) Preferred Stock: 6.0% (.060) of the subscribed
amount.
(d) Common Stock: 8.0% (.080) of the subscribed
amount.
For purposes of this Agreement, "face amount" and "subscribed amount"
shall mean the initial committed amount of the loan/investment before
deduction or offset of any closing, legal or other professional fees
and costs.
C. ANNOUNCEMENT BY AGCC - If any financing involving proceeds to the
--------------------
Company of $1,000,000 or more is contemplated by this Agreement is
completed, AGCC may, at its option and expense, place a conventional
announcement in newspapers and periodicals of its choice stating that
AGCC has acted as financial advisor to VRN in respect of the
financing; provided that such announcement is in compliance with the
Securities Act of 1933.
D. NO AGENCY - AGCC understands and acknowledges that this letter shall
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not create or imply any agency agreement between the parties, and AGCC
shall not, nor shall AGCC have the right to, commit VRN, its officers,
directors and shareholders in any manner except as shall have been
specifically authorized in writing by VRN.
ARTICLE 5
CLOSING
5.1 Closing Date.
------------
A. Closing Date of this Agreement shall be March 22, 1995.
5.2 Obligations.
-----------
A. The obligation of Investor to complete the transaction contemplated
hereunder is subject to the satisfaction, at or before the closing, of
all the conditions set out below in this Article 5. Investor may waive
any or all of these conditions in
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whole or in part without prior notice; provided, however, that no such waiver of
a condition shall constitute a waiver by Investor of any of its other remedies,
at law or in equity, if Investee Company shall be in default of any of their
representations, warranties, or covenents under this Agreement.
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5.3 Accuracy of Investee Company's Representations and Warranties
-------------------------------------------------------------
A. Except as otherwise permitted by this Agreement, all representations
and warranties by the parties to this Agreement or in any written
statement that shall be delivered by either party to the other under
this Agreement shall be true on and as of the closing date as though
made at that time.
5.4 Performance by Investee Company
-------------------------------
A. Investee Company shall have performed, satisfied, and complied with all
covenents, agreements, and conditions required by this Agreement to be
performed or complied with by them on or before closing including
delivering possession of the Note, Stock and Warrants, in the same
condition existing as of the date of this Agreement.
5.5 Opinion of lnvestee Company's Counsel
-------------------------------------
A. Investor shall have received from counsel for the Investee Company, an
opinion dated the closing date, in form and substance satisfactory to
Investor and its counsel, that:
(i) Investee Company has all necessary corporate power to enter into
this Agreement and to operate its business as now operated.
(ii) This Agreement has been duly and validly authorized and, when
executed and delivered by Investee Company will be valid and
binding on Investee Company and enforceable in accordance with
its terms, except as limited by bankruptcy and insolvency laws
and by other laws affecting the rights of creditors generally;
(iii) Except as set forth in this Agreement, such counsel does not know
of any suit, action, arbitration, or legal, administrative, or
other proceeding or governmental investigation pending or
threatened against or affecting Investee Company, and
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ARTICLE VI
MISCELLANEOUS
6.1 Survival of Representation
--------------------------
A. All representations, warranties, covenants by the parties to this
Agreement shall be applicable and effective thereafter.
6.2 Indemnities
-----------
A. Each party making a covenant, agreement, representation or warranty in
this Agreement, or any schedule, exhibit, or other document delivered
under this Agreement, shall indemnify and hold harmless any party for
whose benefit such covenant, agreement, representation or warranty is
made from and against any and all loss, damage, liability, tax, expense
(including without limitation, reasonable attorney's fees and court
costs) resulting from any breach, misrepresentation or non-performance
of any such covenant, agreement, representation or warranty. The
indemnity obligations set forth in this Section 6.2 shall survive the
closing date.
6.3 Notices
-------
A. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly
given if mailed by certified or registered mail, return receipt
requested, postage prepaid as follows:
Investor: American Growth Capital Corporation for American Growth Fund
1 LP, 00000 Xxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx, XX 00000
Investee Company: Virtual Realty Network, inc.
6.4 Multiple Originals
------------------
A. This Agreement may be executed in one or more counterparts and each
counterpart shall be deemed to be an original.
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6.5 Complete Agreement: Modification and Termination
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A. This Agreement together with all Exhibits hereto contains a complete
statement of the Investment Agreement between the parties and
supersedes any existing agreements between them and cannot be changed
or terminated except in writing.
6.6 Waiver
------
A. The failure of any party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered to be a waiver
or to deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver
must be in writing.
6.7 Assignment
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A. This Agreement shall be binding and inure to the benefit of the parties
to it, their heirs, successors, and assigns. This Agreement shall not
be assignable by any party without the written consent of the other but
such consent shall not be unreasonably withheld.
6.8 Governing Law and Venue
-----------------------
A. Irrespective of the place of execution or performance, the validity,
performance, construction and effect of this Agreement shall be
governed by, and construed in accordance with the laws of Orange
County in the State of California. Any controversy, claim or action
arising out of or related to this Agreement shall be brought in the
courts of the State of California for the County of Orange or the
United States District Court for the Central District of California,
the parties hereby waiving any other venue to which they may be
entitled by virtue of domicile, residence, or otherwise.
6.9 Severability
------------
A. If any provision of this Agreement is invalid, unenforceable or
inapplicable to any person or circumstance to which it is intended to
be applicable, such invalidity shall not affect the remainder of the
Agreement
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6.10 Attorney's Fees
---------------
A. Should either party hereto file suit to enforce the terms of this
Agreement or to be compensated in damages for the other party's breach
of Agreement, or for declaratory relief to determine the rights and
duties of parties under this Agreement, the prevailing party shall be
awarded reasonable attorney's fees in addition to all allowable costs
of bringing such action.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the date first above written.
INVESTOR:
--------
American Growth Capital Corporation, Managing General Partner for American
Growth Fund I LP
By: /s/ XXXXX XXXXXX
-----------------------------
Xxxxx Xxxxxx, President
INVESTEE COMPANY:
----------------
Virtual Realty Network, Inc.
By: /s/ XXXXXXX X. XXXXXX
-----------------------------
Xxxxxxx X. Xxxxxx, President
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CORPORATE PROMISSORY NOTE
-----------------------------------
EXHIBIT "A" TO INVESTMENT AGREEMENT
March 22, 1995 $200,000
For value received as stated in the Investment Agreement, Virtual Realty Network
promises to pay to American Growth Fund I LP the sum of Two Hundred Thousand
($200,000) with interest from the date of this note on the unpaid principal to
be paid quarterly at an annual rate of two (2%) over Prime as reported by the
2nd District cost of funds.
American Growth Fund I LP reserves the right under this Note to file UCC-1's in
the appropriate jurisdictions to further secure the Promissory Note.
Principal payment on maturity is due upon the first closing of Virtual Realty
Network's proposed Initial or Secondary Public Offering or March 21, 1997,
whichever event occurs earlier.
This Note is additionally collateralized by those assets listed on Exhibit "B".
Virtual Realty Network, Inc.
/s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx, President
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EXHIBIT "B"
ASSETS SECURED BY PROMISSORY NOTE DATED March 22, 1995
1. Software rights to "Software Today" software as owned by the Corporation and
as developed by Xxxxx Xxxxxx, Xxxxxx Grade and Xxxx Xxxxxxx.
2. Accounts receivable, current and future.
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CORPORATE PROMISSORY NOTE
-----------------------------------
EXHIBIT "A" TO INVESTMENT AGREEMENT
March 22, 1995 $100,000
For value received as stated in the Investment Agreement, Virtual Realty
Network promises to pay to American Growth Fund I LP the sum of One Hundred
Thousand ($100,000) with interest from the date of this note on the unpaid
principal to be paid quarterly at an annual rate of two (2%) over Prime as
reported by the 2nd District cost of funds.
American Growth Fund I LP reserves the right under this Note to file UCC-1's in
the appropriate jurisdictions to further secure the Promissory Note.
Principal payment on maturity is due upon the first closing of Virtual Realty
Network's proposed Initial or Secondary Public Offering or March 21, 1997,
whichever event occurs earlier.
This Note is additionally collateralized by those assets listed on Exhibit "B".
Virtual Realty Network; Inc.
/s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx, President
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Addendum
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To
--
Investment Agreement
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The following is an addendum to the Investment Agreement, dated March 21, 1995,
signed by the undersigned parties:
1. The Investment agreement is amended to provide American Growth Fund I
LP, a California Limited Partnership with the right to convey their
250,000 common shares and 175,000 warrants issued thereunder to Series A
Preferred Shares upon the same terms and conditions, basis and valuation as
lntel Corporation is making their investment in Virtual Realty Network, Inc.
2. All other terms and conditions of the Investment Agreement to remain the
same.
IN WITNESS WHEREOF, the parties have executed and delivered this addendum on
March 31, 1995.
INVESTOR:
--------
American Growth Capital Corp, Managing General Partner for American Growth Fund
I LP
By: /s/ XXXXX XXXXXX
--------------------------------
Xxxxx Xxxxxx, President
INVESTEE:
--------
Virtual Realty Network, Inc.
By: /s/ XXXXXXX XXXXXX
-------------------------------
Xxxxxxx Xxxxxx, President
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