EXHIBIT 10.136
Investment Agreement
Investment Agreement
between
Toys International.com Inc. ("Toys International" or "Company")
550 Rancheros Drive, San Marcos, CA 92069
Play Co. Toys & Entertainment Corp. ("Playco")
550 Rancheros Drive, San Marcos, CA 92069
both represented by
Harold Rashbaum, Chairman of the Board and Rich Brady, President
CDMI Capital Corporation ("CDMI")
P.O. Box 47, Roadtown, Tortola, British Virgin Islands
represented by Ilan Arbel
and
Concord Effekten AG ("Concord")
Gro(beta)e Gallusstr. 1 - 7 60311 Frankfurt am Main
represented by
Dirk Schaper (Chairman of the Board) and Bernd Groebler (Board member)
Preface
Objective of this Agreement is a Pre-IPO capital increase of Toys
International through an investment by Concord and CDMI. Toys International is
currently a wholly owned subsidiary of Playco. Playco is a US public company,
quoted on the OTC Bulletin Board, which is controlled by affiliates of CDMI.
After a second capital increase, the shares will be distributed to the public
and Toys International will be introduced for trading on the Regulated Market
("Geregelter Markt") in the SMAX segment at the Frankfurt Stock Exchange. The
date of first listing is planned for 15 October 1999.
I. Participation
Toys International shall issue 660.000 of its common stock, $0.001 par
value. Concord and CDMI agree to each purchase 330.000 shares, for the price of
US$4.24 per share, for an aggregate value of US$1.4 million each. Toys
International agrees that at the conclusion of this transaction, the total
issued and outstanding share capital of the Company will be 10 million shares of
common stock issued as follows:
Concord: 330,000 shares (3.3%)
CDMI: 330,000 shares (3.3%)
Playco 9,340,000 shares (93.4%)
Concord shall be allowed to sell part of its shares to a cooperation
partner.
Playco may transfer 25% of its shares in Toys International to Tudor
Technologies, Inc. ("Tudor"), a British Virgin Islands investment company, which
invested in Playco's original acquisition of certain assets of Toys
International and received an option over 25% of Playco's interest in Toys
International. The above transfer may not occur unless Playco secures a voting
rights agreement from Tudor giving Playco the irrevocable right to vote Tudor's
shares and Tudor agrees to participate in the Voting Trust described below.
The Company agrees that it shall not issue any additional equity or debt
capital prior to the IPO without the express written approval of Concord.
II. Voting trust
Playco, Concord and CDMI hereby agree to form a voting trust concerning
their shares of Toys International in conformity with the following arrangements
(the "Voting Trust"):
All shares owned by Playco, Concord and CDMI shall, in regard to the voting
rights arising from these shares, be committed until Toys International goes
public. This shall also apply for new shares which the contracting parties
obtain in the course of further capital increases. The committed shares shall
remain the separate property of each of the Parties and this Agreement shall not
be construed as establishing joint or shared ownership. In the event of third
parties acquiring shares in Toys International, Playco, Concord and CDMI will
ensure that these new shareholders become parties to the Voting Trust.
The purpose of the Voting Trust is to assure the official listing of Toys
International on the Frankfurt stock exchange and to deal with matters regarding
capital increases and the public offering process.
The Voting Trust shall be responsible for all issues regarding the official
listing of Toys International on the Frankfurt stock exchange, capital increases
and the public offering process.. This includes, if necessary, consulting and
decision-making, and for taking note of all matters incumbent upon it under this
contract, in particular:
decisions on how the voting rights controlled by the Voting Trust shall to
be exercised for each agenda item of a planned shareholders' meeting;
changes to the Voting Trust, the admission of new shareholders, and the
transfer of shares to third parties, as far as this agreement does not stipulate
the right to have co-investors;
all other matters relating to the Company and the Voting Trust.
Meetings of the Voting Trust members ("Trust Meetings") shall be held upon
invitation of the Trust Representative. The invitation to a Trust Meeting shall
be issued no later than three days prior to a shareholder's meeting of the
Company. The Trust Representative has the obligation to call for a Trust Meeting
upon written request of Trust members which own no less than 3% of the shares of
Toys International. The invitation to a Trust Meeting shall be in writing, or by
fax, with an invitation period of two days (beginning with the day after which
the letter was sent). The day of the Trust Meeting is not included in the
calculation of the invitation period. In urgent cases, the invitation period can
be shortened to one day. The Trust Meeting may be held by telephone if all Trust
Members are present.
The Trust Meeting shall not have a quorum until 98% of the entire share
capital of the Voting Trust is present or regularly represented. If this is not
the case, the Trust Representative shall call a new Trust Meeting which has no
quorum with a shortened invitation period of two days.
Resolutions of the Trust may be made in writing if all Trust Members sign
the resolution.
Each Trust Member has the right to appoint another Trust Member as his
representative by written authorization. Representation by third parties is not
permitted, except for authorized employees of the Trust Members.
All resolutions of the Trust Meeting shall be recorded in writing, signed
by the Trust Representative, and sent to all Trust Members.
The Trust Representative shall be elected for a period of four years. The
first Trust Representative will be Mr. Harold Rashbaum.
Resolutions of the Trust Meeting shall be adopted by a simple majority of
all exercised votes, if not otherwise agreed on in this contract. Abstentions
are considered as not exercised votes. The voting rights are exercised according
to the number of shares of Toys International held by each Trust Member, with
one share entitled to one vote. The right to vote in the Trust Meeting shall not
exist if one of the parties entitled to such vote cannot exercise such vote in a
Shareholders' Meeting of the Company on the actual resolution topic involved.
The following resolutions of the Trust Meeting relating to decisions about
the following issues at a Shareholders' Meeting of the Company require the
approval of Concord:
resolutions on all capital increases which take place prior to the IPO, and
resolutions on assuring the public placement;
resolutions on dividend payments from net profits (ss. 119 Para. 1 No. 2 of
the German Corporation Act "Aktiengesetz")
resolutions on changes to the articles of incorporation, including capital
increases and decreases, and on dissolving the company.
Moreover, Concord has a veto-right concerning decisions of the Trust
Meeting, which could, from Concord's sole discretion, materially adversely
affect the IPO of Toys International.
The rights of Concord set forth in Sections 11(a) through (d) shall not be
construed to give Concord any veto-right over the general operations and
management of the Company.
The Parties agree that on request of not less than 3% of the committed
shares, a shareholders' meeting can be convened in accordance with ss. 122 of
the Corporation Act "Aktiengesetz".
The voting rights of the shares in the Voting Trust shall be exercised at
the Shareholder Meeting by the Trust Representative, unless an alternative
representative is appointed at the Trust Meeting. The right of the Trust Members
to participate at Shareholder Meetings is not affected by this rule.
In the event of a shareholder dying, the Voting Trust shall be continued in
regard to the committed shares with the heirs or survivors benefiting. In the
event of bequest through a legacy, the transfer of the shares involved shall be
conditional on the heirs or survivors entering into this voting trust agreement.
This Voting Trust agreement shall be deposited with the Company and the
Company agrees that any exercise at a Shareholder Meeting by a Trust Member of
their voting rights in violation of this Voting Trust agreement shall be not
valid.
The provisions under this section IV will also be valid for the legal
successors of the parties.
III. Management
Harold Rashbaum, Rich Brady and Jim Frakes agree to remain active in their
present functions and positions. This agreement shall be valid for not less than
three years after Toys International goes public, and if the company does not go
public, then at least until December 31, 2004.
IV. Business Plan
The Business Plan (appendix A) is an integral part of this agreement:
Toys International agrees, within 28 days after the end of each quarter, to
forward to Concord an internal report containing actual figures for the quarter
concerned in a comparison with the planned figures (within 6 weeks of the end of
each quarter, except for the year end, the Company shall provide public
quarterly reports. Within 90 days from the end of the fiscal year the Company
shall provide audited accounts, unless the Frankfurt Stock Exchange requires
other terms).
If there is a negative deviation of more than 30% in the resulting net
income for a quarter in comparison with the Business Plan, Concord shall have
the right to appoint a representative to the Board of Directors.
Toys International furthermore agrees to inform Concord immediately if it
is foreseeable, that the monthly planned sales and income figures will be more
than 10% below the expected results.
V. Warranties
Toys International hereby represents and warrants to Concord and CDMI as of
the date this contract is entered into that
Toys International is a corporation duly organized, validly existing, and
in corporate good standing under the laws of the State of Delaware, USA.
Toys International has all requisite corporate power and authority to
perform, and observe its obligations under this Agreement and any other
instruments provided for herein and to carry on Toys International's business.
Toys International represents and warrants that the execution, delivery,
performance and observance of this Agreement by it and each of the other
documents or instruments delivered by Toys International to Concord and CDMI
hereunder have been duly and validly authorized by all necessary corporate
action. Toys International represents and warrants that this Agreement and such
documents and instruments have each been duly executed and delivered by it, and
are the legal, valid, and binding obligations of it, enforceable against it in
accordance with their terms.
Toys International represents and warrants that neither the execution and
delivery of this Agreement by Toys International nor compliance by Toys
International with the terms and provisions of this Agreement will conflict with
or result in a breach of any of the terms, conditions, or provisions of any
contract or other instrument to which Toys International is a party or by which
Toys International is or may be bound (including, without limitation, the
Articles of Association of Toys International) or constitute a default
thereunder.
no governmental or third party consents, approvals, filings, or
qualifications are necessary in connection with the execution, delivery,
performance, and observance of Toys International's obligations under this
Agreement or the documents and instruments provided for herein by Toys
International.
the shares being issued hereunder shall be fully paid and non-assessable
and that there are no third party claims, liens or charges relating to shares of
Toys International, other than an option owned by Tudor Technologies, Inc. over
25% of Playco's shares in Toys International.
the issued and outstanding share capital of Toys International following
the transaction contemplated by this Agreement shall consist of 10,000,000
shares of common stock, $0.001 par value.
Toys International is not overindebted or insolvent.
to the best of its knowledge, the last annual financial statements of Toys
International are materially accurate,
Toys International has paid all taxes due, and all tax liabilities have
been accurately shown in the financial statements,
to the best of its knowledge and belief no hidden dividend payments have
been made at Toys International,
no lawsuits against Toys International are pending, and Toys International
itself is not conducting any lawsuits against third parties.
all approvals required for Toys International business operations are
unrestrictedly in place,
the property of Toys International is free of any claims of third parties
(except Finova, which has a first lien on the assets of the Toys International
pursuant to its credit facility), and all approvals are unrestrictedly in place
relating to construction permission, trade and industry legislation,
environmental statutes and other requirements.
Toys International further warrants that it knows of no circumstances which
prior to Toys International going public might entail changes in the above
situations and guarantees.
Toys International refuses to register any transfer of the securities not
made in accordance with the provisions of Regulation S, pursuant to registration
under the Act, or pursuant to an available exemption from registration;
provided, however, that if German law prevents Toys International from refusing
to register securities transfers, other reasonable procedures such as a
restrictive legend will be implemented to prevent any transfer of the securities
not made in accordance with the provisions of Regulation S.
Should the above listed representations and warranties be incorrect,
Concord and CDMI, irrespective of further rights arising from this contract,
shall be put in the position in which they would be if the representations and
warranties concerned were to be correct. This above entitlement shall be valid
until three years after the IPO of Toys International, or December 31, 2004,
whichever is earlier.
Concord and CDMI represent and warrant as follows:
that they are not U.S. persons and are not acquiring the securities for the
account or benefit of any U.S. person;
That they agree to resell such securities only in accordance with the
provisions of Regulation S under the US Securities Act of 1933, as amended (the
""Act"), pursuant to registration under the Act, or pursuant to an available
exemption from registration; and that they agree not to engage in hedging
transactions with regard to such securities unless in compliance with the Act;
VI. Lock Up
Playco agrees, for a period of six months after the IPO, and Concord and
CDMI agree until the IPO, not to dispose of their shares, except as provided
elsewhere in this Agreement. Any shares not sold by CDMI and Concord in the IPO
shall be bound by the same lock up as Playco. CDMI agrees that Concord shall
have sole discretion as to the number of shares sold by CDMI and Concord in the
IPO, provided that they shall be an equal amount.
The parties agree, that the shares which are locked up according to this
agreement, shall be deposited on trust in a common lock-up-account of a banking
institution and shall be transferred only according to this agreement. This
joint deposit shall not alter anything regarding the parties' separate ownership
of the shares each of them holds. In particular, this shall not be construed as
establishing any joint or shared ownership.
On termination of this contract, the parties may demand delivery of their
shares. Shares which have to remain on a security deposit for reasons of
liability are exempt from this regulation.
The lock-up shall not be considered contrary to the right of Concord to
sell shares to one or more co-investors prior to the IPO.
VII. Adjustment of Concord and CDMI shares.
If the IPO price for the 330.000 shares each held by Concord and CDMI is
less than $2,8 Million, Concord and CDMI shall receive additional shares from
the Company until the value of the shares held by Concord and CDMI equals an IPO
value of $2,8 Million. If Toys International chooses, this adjustment may be
paid in cash. Toys International shall inform Concord and CDMI in writing prior
to the filing of the prospectus with the Deutsche Borse AG as to whether the
adjustment will be paid in cash or shares. The adjustment shall be payable with
closing of the IPO.
VIII. Right of withdrawal, consequences of a withdrawal
CDMI and Concord shall be entitled to withdraw from this contract if by
April 1, 2000, the capital increase required for the IPO has not been
implemented for reasons within the responsibility of Toys International or
Playco.
Concord and CDMI can, not affecting other rights, withdraw from this
contract prior to Toys International going public:
if Toys International is in breach of any representation or warranty under
Section V.
if a comparison between the business plan and the actual quarterly figures
reveals negative deviations of 30 % or more, or in the case of any similar
negative deviation of figures which have been authorized by Toys International
for being published prior to the IPO.
If the market valuation of the Company at the IPO is less than $50 million.
if the proceeds of the pre-IPO investment is not utilised according to the
provisions of the Engagement Letter dated June 14, 1999.
The withdrawal shall be declared by registered letter given 30 days notice
and specifying the reasons for the withdrawal.
If Concord and/or CDMI should withdraw for the reasons specified in No. 1
and/or No. 2 above, Toys International agrees to repay Concord and/or CDMI
assignment of the shares to Toys International.
Following withdrawal from this contract by CDMI or Concord, they shall have
no rights or duties whatsoever any longer under this contract, with the
exception of the above-mentioned obligations. Concord and CDMI's rights under
Section V(2) shall remain unaffected by a right of withdrawal.
Other provisions
Changes and supplements to this contract must be made in writing.
In case one or more provisions of this Contract are rendered ineffective or
contestable, the validity of the other provisions will not be affected. In this
case, a valid regulation will replace the ineffective and contestable provisions
having a similar economic purpose to the ineffective or contestable provision.
The same applies in case the Contract contains a gap.
This contract is subject to the laws of the Federal Republic of Germany.
International Laws shall not apply. The place of jurisdiction is Frankfurt am
Main.
XII. Term of Contract
This contract shall begin upon the signing by the parties and shall end
three years after Toys International going public, but not later than December
31, 2004.
For CDMI: For Concord:
Frankfurt a.m.. the . . . . . . . . . Frankfurt a.m., the . . . . . . . . .
- -------------------------- ---------------- ----------------
Ilan Arbel Bernd Groebler Markus Saller
Vorstand Prokurist
For Toys International: For Playco:
- ----------------------------------- -----------------------------------
Harold Rashbaum, Chairman of the Board Harold Rashbaum, Chairman of the Board
- -------------------------------- --------------------------------
Richard Brady, Director and President Richard Brady, Director and President