EXHIBIT 99.1
[ENTRADE INC. LOGO]
February 17, 2005
Xxx Xxxxx
Xxxxx X. Xxxxxxxxxxx
Capital Direct 1999 Trust
Core Capital IV Trust
c/o Xxxxx X. Xxxxxxxxxxx
00000 Xxxx Xxxxxx Xxxxxx
Xxxx xx Xxxxxxxx, XX 00000
Xxxxx Xxxxx
0000 Xxxxxxxx Xxx
Xxx Xxxxx, XX, 00000
Re: Purchase and Sale of Entrade Promissory Notes
Gentlemen:
This letter will serve to memorialize our mutual understanding with respect to
the proposed purchase and restructuring of those certain promissory notes made
by Entrade Inc, a Pennsylvania corporation ("Entrade") set forth on Exhibit A
hereto (the "Notes") by Xxxxx Xxxxx or his designee ("Buyer") from Xxx Xxxxx
("Xxxxx"), Xxxxx X. Xxxxxxxxxxx ("Schlossmann"), the Capital Direct 1999 Trust
and the Core Capital IV Trust, both California trusts (collectively, the
"Trusts" and together with Xxxxx and Xxxxxxxxxxx, collectively, the "Sellers").
Background
Entrade is the maker of each of the Notes. The Notes were issued pursuant to
that Collateral and Subordination Agreement, dated as of July 17, 2001, by and
among Sellers, Entrade, Public Liquidation Systems, Inc. and Asset Liquidation
Group, Inc., both Nevada corporations doing business as Nationwide Auction
Systems ("Nationwide"), and Artra Group Incorporated, a Pennsylvania corporation
and wholly owned subsidiary of Entrade ("Artra") (the "Collateral and
Subordination Agreement").
As security for the payment of the Notes and pursuant to that Pledge Agreement
dated October 1, 2002, (as amended, the "Pledge Agreement"), Entrade granted to
Sellers a security interest in all of the capital stock of Nationwide (the
"Pledged Collateral;" although the parties acknowledge that the Pledged
Collateral under the Pledge Agreement includes other collateral as well).
Pursuant to a Subordination Agreement, dated as of
July 17, 2001 (the "Subordination Agreement"), by and among Entrade, Sellers and
Xxxxx, all of the obligations of Entrade under the Notes are senior to the
obligations of Entrade to Artra and Entrade is currently prohibited from making
any payments to Artra.
Entrade has defaulted in the payment of the principal due and payable under the
Notes and of all interest due under the Notes through the date hereof, as a
result of which (i) the entire principal balance of the Notes, together with
interest accrued and unpaid thereon, is now due and payable; and (ii) Sellers
may foreclose upon the Pledged Collateral.
Entrade is currently engaged in a private placement of its securities (the
"Private Placement"). Pursuant to the Private Placement, Entrade is issuing to
subscribers promissory notes in the amount invested (the "Private Placement
Notes") as well as other consideration as described in the corresponding private
placement memorandum, a copy of which has been delivered to Buyer and Sellers.
Transaction
Sellers have agreed to sell and assign to Buyer, and Xxxxx has agreed to
purchase from Sellers, and without recourse to Sellers, all but $5,000,000
principal due under the Notes (the Note Purchase"). The $5,000,000 retained by
the Sellers are referred to as the "Retained Notes".) As consideration for the
Note Purchase, Buyer will deliver a cash payment to Sellers in the total amount
of $2,500,000 (the "Purchase Price"). Concurrently with the Note Purchase,
Sellers will assign all of their rights respecting the Pledged Collateral to
Buyer, including, without limitation, the Sellers' rights under the Pledge
Agreement, the Collateral and Subordination Agreement, the Subordination
Agreement, and all related documents and instruments.
Immediately following the Note Purchase, Buyer and Entrade would enter into a
note restructuring agreement (the "Note Restructuring Agreement"), pursuant to
which Entrade would issue to Buyer an amended and restated note in substitution
of the Notes (the "Xxxxx Note") in the principal amount of $5,612,405.90, in the
form of the Amended and Restated Promissory Note attached hereto as Exhibit B.
Upon issuance of the Xxxxx Note, Buyer would cancel and deliver to Entrade the
Entrade promissory notes set forth on Exhibit C.
Concurrently with the issuance of the Xxxxx Note, Entrade will issue to Buyer a
warrant to purchase 500,000 shares of common stock of Entrade at an exercise
price of $0.10 per share (the "Warrant").
Immediately following the Note Purchase, Sellers and Entrade will enter into a
separate agreement with respect to the treatment of the Retained Notes. Sellers
would agree to forgive any other amounts owed to them as reflected on the books
and records of Nationwide.
In connection with the transactions contemplated hereby, Entrade and Xxxxxxx
would enter into a mutually acceptable release for any and all actions relating
the Notes.
[Signatures being on the next page]
Please indicate your agreement with the foregoing by signing where indicated
below.
Sincerely,
Entrade Inc.
By: ___________________________
Xxxxx X. Xxxxxx, President
Buyer: Sellers:
_______________________________ _____________________________
Xxxxx Xxxxx Xxx Xxxxx
______________________________
Xxxxx X. Xxxxxxxxxxx
Capital Direct 199 Trust
By: __________________________
Core Capital IV Trust
By: __________________________
EXHIBIT A
PROMISSORY NOTES
Amended and Restated Promissory Note dated October 1, 2000 made by Entrade Inc.
and payable to Xxx Xxxxx in the original principal amount of $7,161,941*
Promissory Note dated July 21, 2001 made by Entrade Inc. and payable to Xxx
Xxxxx in the original principal amount of $337,809*
Promissory Note dated July 21, 2001 made by Entrade Inc. and payable to Capital
Direct 1999 Trust in the original principal amount of $937,883*
* $5,000,000 aggregate principal being retained by Sellers.
EXHIBIT B
AMENDED AND RESTATED SECURED PROMISSORY NOTE
$5,612,405.90 FEBRUARY 15, 2005
The undersigned ("MAKER"), ENTRADE INC., a Pennsylvania corporation for
value received, and intending to be legally bound hereby, promises to pay to the
order of XXXXX XXXXX ("PAYEE"), at [ADDRESS] or at such other place or places as
Payee may designate in writing, the principal sum of FIVE MILLION SIX HUNDRED
TWELVE THOUSAND FOUR HUNDRED FIVE DOLLARS AND 90/100 ($5,612,405.90), plus
interest from the date hereof on the unpaid principal amount from time to time
outstanding hereunder, at ten percent (10%) per annum, with all principal and
interest owed hereunder payable in full on February 15, 2006 (the " MATURITY
DATE").
This Note is issued pursuant to a Note Restructuring Agreement (the "Note
Restructuring Agreement"), dated the date hereof, between Maker and Payee, in
substitution for a series of Promissory Notes issued to Xxx Xxxxx, Xxxxx X.
Xxxxxxxxxxx, Core Capital IV Trust and Capital Direct 1999 Trust (the "Seller
Notes") more fully described in the Note Restructuring Agreement. This Note is
the absolute and unconditional obligation of Maker and is not subject to offset
or deduction.
All interest and principal shall be due and payable on the Maturity Date.
Interest shall be calculated based upon a year consisting of 365 days and
charged for the actual number of days elapsed.
In connection with this Note, Maker will issue to Payee a 5-year warrant
to purchase 500,000 shares of Maker's common stock at an exercise price of $0.10
per share (the "WARRANT").
Payment of this Note is secured by a first priority pledge of one hundred
percent (100%) of the issued and outstanding stock of Asset Liquidation Group,
Inc., a Nevada corporation and Public Liquidation Systems, Inc., a Nevada
corporation each doing business as Nationwide Auction Systems.
This Note may be prepaid by Maker at any time. In the event that Maker
completes a full subscription of its current private placement or commences a
public offering of its securities which yield to Maker gross proceeds of not
less than Twenty Million Dollars and No/ 100 ($20,000,000), then notwithstanding
anything to the contrary contained herein, the Payee shall have the right to
demand prepayment of this Note, which amount shall be the outstanding principal
balance of the Note, plus all interest accrued but unpaid up to the date of
prepayment.
It is expressly agreed by Maker that time is of the essence hereof, and it
shall be an "EVENT OF DEFAULT" hereunder if:
(i) Maker shall fail to pay any amount of principal or interest due
hereunder and such failure shall continue for seven (7) days after Payee
notifies Maker thereof in writing; or
(ii) Maker is or becomes insolvent or generally fails to pay, or
admits in writing its inability to pay, debts as they become due, or Maker
applies for, consents to or acquiesces in the appointment of a trustee,
receiver or other custodian for Maker or any of its property, or makes a
general assignment for the benefit of creditors, or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Maker or for a substantial part of Maker's
property and is not discharged within ninety (90) days, or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law is commenced in respect of Maker, and if such
case or proceeding is not commenced in respect of Maker, it is consented
to or acquiesced in by Maker or remains for ninety (90) days undismissed,
or Maker takes any action to authorize, or in the furtherance of, any of
the foregoing; or
(iii) There shall be an Event of Default pursuant to any other
document executed in conjunction herewith.
Upon the occurrence and during the continuation of an Event of Default
hereunder, the interest rate hereunder shall be increased to fifteen percent
(15%) per annum and at the option of Xxxxx, the entire unpaid principal balance
hereunder, together with all accrued interest thereon, shall become immediately
due and payable. In addition, Xxxxx shall be entitled to exercise all rights of
Payee hereunder and under applicable law, including the right to collect from
Maker all sums due under this Note.
In addition to the other sums payable hereunder, Xxxxx agrees to pay to
the holder, within fifteen (15) days of demand, all reasonable attorneys' fees
and costs that may be incurred by the holder of this Note in enforcing any of
the terms hereof after an Event of Default.
Except as otherwise provided in this Note, Maker hereby waives notice of
non-payment, notice of dishonor, and protest of any dishonor, and agrees that
its liabilities shall be unconditional without regard to the liability of any
other party and shall not in any manner be affected by any indulgence, extension
of time, renewal, waiver or modification granted or consented to by the holder
hereof. Further, Maker consents to any and all extensions of time, renewals,
waivers, or modifications that may be granted by the holder hereof with respect
to the payment or other provisions of this Note, and agrees that additional
makers, endorsers, guarantors or sureties may become parties hereto without
notice to Maker and without affecting its liability hereunder.
The holder hereof shall not by any act of omission or commission be deemed
to waive any of its right or remedies hereunder unless such waiver is in writing
and signed by the holder hereof, and then only to the extent specifically set
forth therein. The waiver of any event shall not be construed as a waiver of any
other right or remedy, nor shall any single or partial exercise of any right or
remedy preclude any other or further exercise thereof or of any other right or
remedy.
Whenever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note is deemed to be invalid or unenforceable under such law,
such provision shall be ineffective only to the extent of such invalidity or
unenforceability without affecting the validity or enforceability of any other
provision of this Note.
Maker (and the undersigned representative of Maker, if any) represents
that Maker has full power and authority and legal right to execute and deliver
this Note and this Note shall be binding on Maker and its respective successors
and assigns.
This Note shall be governed by and construed according to the internal
laws of the State of Illinois without regard to principals of conflicts of law.
IN WITNESS WHEREOF, Xxxxx has duly executed this Amended and Restated
Secured Promissory Note as of the date first above written.
ENTRADE INC.
By:________________________
President
EXHIBIT C
CANCELLED XXXXX NOTES
Promissory Note Dated January 7, 2002 made by Entrade Inc to Xxxxx Xxxxx in the
original principal amount of $500,000
Promissory Note Dated May 1, 2002 made by Entrade Inc to Xxxxx Xxxxx in the
original principal amount of $500,000
Promissory Note dated February 18, 2004 made by Entrade Inc. to Xxxxx Xxxxx in
the original principal amount of $2,000,000
