EXHIBIT A
FINANCIAL SUPPORT AGREEMENT
This agreement (the "AGREEMENT") is entered into this 21st day of June, 2000 by
and between Tangible Asset Galleries, Inc., a Nevada corporation ("TANGIBLE"),
and Xxxxxxxx.xxx, Inc., a Delaware corporation ("GAVELNET").
RECITALS
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WHEREAS, Tangible and Gavelnet have entered into an agreement and plan of
reorganization dated June 21, 2000 (the "MERGER AGREEMENT"), and upon closing,
provides, among other terms, that Gavelnet would be a wholly owned subsidiary of
Tangible; and
WHEREAS, pursuant to the Merger Agreement and concurrently with the execution of
this Agreement, Gavelnet has executed (i) a secured, non-negotiable promissory
note (the "NOTE", in the form attached hereto as EXHIBIT A) and (ii) a security
agreement in favor of Tangible (the "SECURITY AGREEMENT", in the form attached
hereto as EXHIBIT B); also concurrently with the execution of this Agreement,
all of the secured creditors of Gavelnet have executed an intercreditor
agreement (in the form attached hereto as EXHIBIT C) that provides for the first
and priority security interest of Tangible in all the assets of Gavelnet; and
WHEREAS, Gavelnet desires to borrow from Tangible and Tangible desires to lend
to Gavelnet such amounts as may be reasonably necessary for the ongoing
operations of Gavelnet and the reduction of accounts payable and other current
liabilities of Gavelnet. (Certain capitalized terms used in this Agreement have
the meaning given to them in the Merger Agreement.)
AGREEMENT
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NOW, THEREFORE, in accordance with the foregoing recitals, and as consideration
for the mutual covenants, agreements and promises hereinafter set forth and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. FINANCIAL SUPPORT. Subject to the terms and conditions of this
Agreement, from the date of the signing of the Merger Agreement, unless
the Merger Agreement is terminated in accordance with the terms thereof
or unless this Agreement is terminated in accordance with the terms
hereof, Tangible agrees to provide financial support to Gavelnet. ,
Notwithstanding anything to the contrary, Tangible shall have no
obligation to provide financial support under this Agreement
whatsoever, unless and until both of the following conditions are
satisfied: (i) Tangible receives proceeds through the sale of Equity
Securities in the Initial Sale (as such terms are defined in the Merger
Agreement); and (ii) Gavelnet satisfies each and all of its obligations
under this Agreement.
(a) Gavelnet shall prepare an operating budget in reasonably sufficient
detail and present such budget to Tangible so that Tangible has an
understanding of the operating expenses of Gavelnet. Gavelnet, in
consultation with Tangible or otherwise, may make changes to the
operating budget as maybe required to meet the operating objectives
of Gavelnet. Notwithstanding anything to the contrary, and limited
by the maximum amount to be borrowed under the Note, Tangible shall
not be obligated to provide any fund for the continuing operations
of Gavelnet in excess of $200,000 in any calendar month unless
Tangible consents to any use in excess of such amount in writing.
(b) In order to inform Tangible of Gavelnet's objectives and intent,
Gavelnet shall prepare a detailed list of accounts payable or other
current liabilities, as the case may be, which are identified for
settlement by Gavelnet with the respective vendors on such list. In
addition, Gavelnet shall provide, in the aggregate for such list, an
amount that Gavelnet believes will be required in cash to settle
such accounts. Gavelnet shall, with Gavelnet's best efforts,
negotiate with each of the vendors to reduce the cash settlement
amount for each respective account to the minimum amount acceptable
to such vendor.
2. BORROWING. From time to time and at the discretion of Gavelnet,
Gavelnet shall request in writing, or such other form as may be
mutually agreed upon between the parties, an amount to borrow under the
Note (an "ADVANCE") along with a brief explanation as to the use of the
proceeds along with details as may be provided under Section 1 hereof.
Provided that (a) Gavelnet is not in default under the Note or the
Security Agreement, or has obtained a waiver from any such default, (b)
the use of the proceeds of the Advance and the details provided under
Section 1 are in compliance with the terms and conditions hereof, and
(c) the aggregate amount outstanding under the Note after taking into
consideration the amount of the Advance is less than or equal to the
maximum amount to be borrowed under the Note, then Tangible shall,
within two (2) business days of such request, provide the amount of the
Advance to Gavelnet in immediately available U.S. funds. Unless agreed
in writing by Tangible, in no event shall the aggregate amount of all
Advances borrowed hereunder (at any particular point in time) exceed
the lesser of (i) one million two hundred fifty thousand dollars
($1,250,000), or (ii) Sixty Two and One Half Percent (62.5%) of the Net
Offering Proceeds generated through the Initial Sale.
3. SERVICES BY GAVELNET. As consideration for the financial support
provided hereunder, during the term of this Agreement and thereafter
until such time as Gavelnet shall have satisfied all of its obligations
under this Agreement, the Security Agreement and the Note, Gavelnet
agrees to waive all charges to Tangible for services that Gavelnet may
provide relative to the sales of Tangible inventory, or merchandise
Tangible receives on consignment from third parties, as such sales may
be consummated on or through the Gavelnet web site. Further, Gavelnet
agrees to waive all charges to Tangible for the production,
distribution or other services relating to live auction broadcasts of
any Tangible auction or event, except that Gavelnet shall be able to
charge and collect from Tangible all out of pocket costs paid to third
party vendors for such production, distribution or advertising or
marketing costs or travel expenses paid to employees of Gavelnet,
provided that Tangible shall have agreed to all such costs prior to
Gavelnet incurring such costs.
4. TERM. The term of this Agreement shall be two (2) years unless earlier
terminated by the following: (a) the termination of the Merger
Agreement under the terms thereof, in which case this Agreement shall
terminate as of the same date the Merger Agreement terminates; (b) at
the election of Tangible in the event of any breach by Gavelnet of this
Agreement, the Security Agreement or the Note or (c) by mutual consent
of the parties hereto on a date as may be mutually agreed.
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5. GAVELNET REPRESENTATIONS. Gavelnet represents and warrants to Tangible
that Gavelnet has no secured creditors other than the parties
identified in the Intercreditor Agreement.
6. OTHER PROVISIONS. This Agreement, the Security Agreement, the
Intercreditor Agreement and the Note, together with the Merger
Agreement, constitute the entire agreement between the parties relative
to the subject matter hereof and supercedes any other agreement,
whether oral or in writing, between the parties. This Agreement may not
be amended, nor any term or condition waived, unless such amendment or
waiver is in writing and duly executed by the appropriate and
authorized representative of the respective parties. This Agreement may
be signed in several counterparts and each of them is an original and
al of them constitute one agreement. This Agreement will be governed by
and construed in accordance with the internal laws of the State of
California (without reference to its rules as to conflicts of law). The
respective rights or obligations of the parties hereto, as the case may
be, may not be assigned but are binding on the respective successors or
heirs. If either of the parties hereto retains counsel to enforce its
rights hereunder, the prevailing party shall recover its attorneys'
fees and expenses. The Recitals set forth above are incorporated in
their entirety in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day above first written.
TANGIBLE ASSET GALLERIES, INC.
By /s/ Xxxxxxx XxXxxxxx
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Xxxxxxx XxXxxxxx
Title: Chief Executive Officer
0000 Xxx Xxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
XXXXXXXX.XXX, INC.
By /s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx
Title: President
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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