<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)*
2TheMart.com, Inc.
------------------
(Name of Issuer)
Common Stock, $.0001 par value per share
----------------------------------------
(Title of Class of Securities)
89151P 10 4
-----------
(CUSIP Number)
Robert J. Peterson
Vice President
Net Investments, Inc.
6200 Riverside Drive, Cleveland, Ohio 44135
(216) 265-2570
--------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 18, 1999
-----------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
CUSIP NO. 89151P 10 4 13D
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Net Investments, Inc.
34-1884455
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio, USA
7 SOLE VOTING POWER
4,519,200
NUMBER OF 8 SHARED VOTING POWER
SHARES -0-
BENEFICIALLY 9 SOLE DISPOSITIVE POWER
OWNED BY 4,519,200
EACH 10 SHARED DISPOSITIVE POWER
REPORTING -0-
PERSON WITH
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,519,200
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.2%
14 TYPE OF REPORTING PERSON
CO
<PAGE> 3
CUSIP NO. 89151P 10 4 13D
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to shares of common stock, par value $.0001
per share, issued by 2TheMart.com, Inc., an Oklahoma corporation ("2TheMart").
The name and address of the principal executive office of the issuer is
2TheMart.com, Inc., 18301 Von Karman Avenue, 7th Floor, Irvine, California
92612.
ITEM 2. IDENTITY AND BACKGROUND
The Reporting Person is Net Investments, Inc., an Ohio corporation
("NII" or the "Reporting Person"). NII's principal executive offices are located
at 6200 Riverside Drive, Cleveland, Ohio 44135 (Telephone (216) 265-2570). NII's
principal business is making investments.
Set forth in Schedule A hereto are the name, business address, present
principal occupation or employment of each director and executive officer of
NII. Each such person is a citizen of the United States.
During the last five years, neither the Reporting Person nor any of
its directors or executive officers has been (i) convicted of any criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
NII paid the aggregate purchase price of $3,000,000 from its working
capital.
ITEM 4. PURPOSE OF TRANSACTION
On November 17, 1999, for investment purposes, NII entered into a Stock
Purchase Agreement ("Stock Purchase Agreement") with 2TheMart.com, Inc.
("2TheMart") and others pursuant to which NII agreed to make an investment of $3
million in 2TheMart in exchange for 2,000,000 shares of 2TheMart's common stock.
NII's investment in 2TheMart was completed on November 18, 1999.
Except as described below, the Reporting Person has no current plans or
proposals which relate to or would result in any of the events described in
Items (a) through (j) of Item 4 of Schedule 13D:
(a) The Reporting Person is not aware of such plan or proposal.
(b) To the best of the Reporting Person's knowledge, no such
transaction is contemplated.
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CUSIP NO. 89151P 10 4 13D
(c) To the best of the Reporting Person's knowledge, no such
transaction is contemplated.
(d) Under the terms of the Stock Purchase Agreement, the controlling
shareholders of 2TheMart (PZ Holdings Limited ("PZ") and DFM Holdings Ltd.
("DFM")) and the persons who control those shareholders (Steven W. Rebeil
("Rebeil") in the case of PZ and Dominic J. Magliarditi ("Magliarditi") in the
case of DFM) have agreed, as soon as reasonably practicable but no later than
May 9, 2000, to take all actions necessary to (i) increase the size of
2TheMart's board of directors from two to five members and (ii) elect three
independent directors satisfactory to NII. Rebeil is the chairman of the board
and chief executive officer of 2TheMart. Magliarditi is the president, chief
operating officer, secretary, chief financial officer and a director of
2TheMart.
(e) The Reporting Person is not aware of any change to 2TheMart's
present capitalization or dividend policy.
(f) The Reporting Person is not aware of any material change in
2TheMart's business or corporate structure.
(g) Except as described below, the Reporting Person is not aware of any
changes in 2TheMart's articles of incorporation or bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of 2TheMart by any person. NII is a party to a letter agreement dated
October 8, 1999 (the "Letter Agreement"), by and among Rebeil, Magliarditi, PZ,
DFM, 2TheMart and NII restricting the transfer of the shares of common stock of
2TheMart owned or held by PZ, DFM, Rebeil and Magliarditi until October 8, 2001.
According to 2TheMart's, Rebeil's, Magliarditi's, PZ's and DFM's representations
and warranties in the Stock Purchase Agreement, Rebeil is the owner (through PZ)
of 8,400,000 shares of 2TheMart common stock and Magliarditi (through DFM) is
the owner of 5,600,00 shares of 2TheMart common stock. Based on those
representations and warranties and the Schedule 13Ds filed with the Securities
and Exchange Commission by Rebeil and Magliarditi and giving effect to the Stock
Purchase Agreement, the Reporting Person believes that Rebeil and Magliarditi
together control 2TheMart through their combined ownership of approximately
57.1% of the issued and outstanding shares of 2TheMart's common stock. Because
the Letter Agreement restricts the transfer of Rebeil's and Magliarditi's
2TheMart common stock, it could be considered to impede an acquisition of
control of 2TheMart. However, NII could consent to a waiver of the transfer
restrictions or 2TheMart could issue additional shares of its common stock.
(h) The Reporting Person is not aware of any such plan or proposal.
(i) The Reporting Person is not aware of any such plan or proposal.
(j) The Reporting Person is not aware of any such actions other than
those described herein.
<PAGE> 5
CUSIP NO. 89151P 10 4 13D
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The responses of the Reporting Person to Rows 7 through 13 of the
cover page of this statement on Schedule 13D are incorporated herein by
reference. Prior to the consummation of the investment, the Reporting Person
owned 2,519,200 shares of 2TheMart's common stock. The Reporting Person acquired
an additional 2,000,000 shares of 2TheMart's common stock pursuant to the Stock
Purchase Agreement, making the Reporting Person the owner of 4,519,200 shares of
2TheMart's common stock. As a result of its investment the Reporting Person is
the beneficial owner of 18.2% of the outstanding common stock of 2TheMart.
(b) The Reporting Person Stock has the sole power to vote and dispose
of the 4,519,200 shares of common stock identified as beneficially owned by it
in Item 5(a).
(c) On October 8, 1999, the Reporting Person in a private transaction
acquired 300,000 shares of 2TheMart's common stock pursuant to a stock purchase
agreement by and between the Reporting Person and 2TheMart. The aggregate
purchase price was $999,999 ($3.33 per share). Except as disclosed in this
Schedule 13D, neither the Reporting Person nor, to the best of the knowledge of
the Reporting Person, any of its directors or executive officers, has effected
any transaction in 2TheMart's common stock in the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
(a) STOCK PURCHASE AGREEMENT (OCTOBER 8, 1999).
On October 8, 1999, the Reporting Person in a private transaction
acquired 300,000 shares of 2TheMart's common stock pursuant to a stock purchase
agreement by and between the Reporting Person and 2TheMart. The aggregate
purchase price was $999,999 ($3.33 per share).
(b) STOCK PURCHASE AGREEMENT (NOVEMBER 17, 1999).
The Reporting Person is a party to the Stock Purchase Agreement (see
Item 4 above) pursuant to which NII agreed to make an investment of $3 million
in 2TheMart in exchange for 2,000,000 shares of 2TheMart's common stock.
(c) REGISTRATION RIGHTS AGREEMENT.
The Reporting Person and 2TheMart are parties to a Registration Rights
Agreement (the "Registration Rights Agreement") relating to the shares of
2TheMart common stock acquired by the Reporting Person pursuant to the Stock
Purchase Agreement. The Registration Rights Agreement provides that the
Reporting Person (or persons to whom the Reporting Person transfers 2TheMart
common stock who agree to be bound by the Registration Rights Agreement)
<PAGE> 6
CUSIP NO. 89151P 10 4 13D
may make three demands to have shares of 2TheMart common stock registered
pursuant to the Securities Act of 1933, as amended (the "Securities Act"). These
demand registration rights are subject to certain limitations including that no
demand registration may be made for less than 650,000 shares of 2TheMart's
common stock. The Reporting Person also has certain "piggy-back" registration
rights. The Reporting Person must be notified by 2TheMart prior to the filing of
any registration statement under the Securities Act by 2TheMart.
(d) OCTOBER 8, 1999 LETTER AGREEMENT.
The Reporting Person is a party to the Letter Agreement (see Item 4(g)
above). The Letter Agreement, among other things, restricts the transfer of the
shares of 2TheMart common stock owned or held by PZ, DFM, Rebeil and Magliarditi
until October 8, 2001.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(a) Letter Agreement dated October 8, 1999, by and among Rebeil,
Magliarditi, PZ, DFM, 2TheMart and NII.
(b) Stock Purchase Agreement, dated as of November 17, 1999, by
and among Rebeil, Magliarditi, PZ, DFM, 2TheMart and NII.
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned hereby certifies that the information set forth in this
statement is true, complete and correct.
NET INVESTMENT, INC., AN OHIO CORPORATION
By: /s/ Robert J. Peterson
Name: Robert J. Peterson
Title: Vice President
Dated: November 29, 1999
<PAGE> 7
CUSIP NO. 00753C 10 2 13D
SCHEDULE A TO SCHEDULE 13D
DIRECTORS AND EXECUTIVE OFFICERS
OF NET INVESTMENTS, INC.
The following table sets forth the name, business address, present
principal occupation or employment of each director and executive officer of Net
Investments, Inc., an Ohio corporation.
DIRECTORS AND EXECUTIVE OFFICERS OF NET INVESTMENTS, INC.
<TABLE>
<CAPTION>
PRESENT PRESENT
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
<S> <C> <C>
Raymond P. Park 6200 Riverside Drive Chairman of the Board
Cleveland, Ohio 44135 and Chief Executive Officer
Park Corporation
Dan K. Park 6200 Riverside Drive President
Cleveland, Ohio 44135 Park Corporation
Kelly C. Park 6200 Riverside Drive Vice President
Cleveland, Ohio 44135 Park Corporation
Robert J. Peterson 6200 Riverside Drive Vice President
Cleveland, Ohio 44135 and General Counsel
Park Corporation
Shelva J. Davis 6200 Riverside Drive Vice President
Cleveland, Ohio 44135 and Secretary
Park Corporation
</TABLE>
<PAGE> 8
CUSIP NO. 89151P 10 4 13D
EXHIBIT INDEX
(a) Letter Agreement dated October 8, 1999, by and among Rebeil,
Magliarditi, PZ, DFM, 2TheMart and NII.
(b) Stock Purchase Agreement, dated as of November 17, 1999, by
and among Rebeil, Magliarditi, PZ, DFM, 2TheMart and NII.
<PAGE> 9
[2TheMart letterhead] Exhibit (a)
October 8, 1999
PERSONAL AND CONFIDENTIAL
- -------------------------
Raymond P. Park
Net Investments, Inc.
6200 Riverside Drive
Cleveland, OH 44135
RE: STOCK PURCHASE
Dear Ray:
In consideration of Net Investments, Inc. ("NII") purchasing 300,000
newly issued shares of common stock from 2TheMart.com, Inc. ("2TheMart") at
$3.33 per share for an aggregate purchase price of $999,000 each of (i) Steven
W. Rebeil ("SWR"), General Partner of PZ Holdings Limited, a Colorado limited
partnership ("PZLP"), which owns 8,400,000 shares of common stock of 2TheMart,
(ii) Dominic J. Magliarditi ("DJM"), General Partner of DFM Holdings, Ltd., a
Nevada limited partnership ("DFMLP"), which owns 8,500,000 shares of common
stock of 2TheMart, (iii) PZLP, (iv) DFMLP and (v) 2TheMart, hereby agree as
follows:
1. For a period of two years from the date of this letter, each of
SWR, DJM, PZLP and DFMLP and, in each case, any person that
directly, or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with any of
the foregoing individuals or entities, agrees to hold and not to
sell, exchange, give, transfer, pledge, assign, hypothecate,
trade, convey, grant any option or right to purchase, or otherwise
dispose of or encumber, or permit to be encumbered by liens or
legal or equitable interests of any other person or entity
(collectively "Transfer") any or all shares of 2TheMart capital
stock held by it. For a period of two years from the date of this
letter, Steven W. Rebeil, as the General Partner of PZLP, and
Dominic J. Magliarditi, as the General Partner of DFMLP, each
agree that all partnership interests in PZLP and DFMLP,
respectively, shall continue to be held by the current owners and
that no such partnership interests shall be Transferred to any
person or entity. Notwithstanding the foregoing, partnership
interests in PZLP and DFMLP may be Transferred by will or
intestate succession. In order to effectuate the Transfer
restrictions set forth above, within 10 days of the date of this
letter, the stock certificates representing all shares of capital
stock of 2TheMart owned by SWR, DJM, PZLP or DFMLP shall be
endorsed
<PAGE> 10
Raymond P. Park
Net Investments, Inc.
October 8, 1999
Page 2
with a legend, in a form satisfactory to NII, to reflect said
Transfer restrictions.
2. On September 10, 1999, PZLP loaned $2,000,000 to 2TheMart pursuant
to that certain Loan Agreement of that same date (the "Loan").
Notwithstanding anything therein to the contrary, PZLP hereby
forgives, cancels and forever and completely discharges the Loan,
and hereby releases 2TheMart of any and all of its obligations and
liabilities under the Loan, including, without limitation,
payments of principal and interest thereon by 2The Mart, and any
guarantees or security interests granted by 2TheMart with respect
to the Loan. This forgiveness and cancellation of the Loan will be
deemed to be and shall be treated as an additional contribution to
the capital of 2TheMart by PZLP without any additional shares of
capital stock being issued by 2TheMart.
3. For a period of two years from the date of this letter, neither
SWR nor DJM shall receive any increase in their respective current
salaries nor shall they receive bonuses (cash or non-cash), stock
options or any other form of non-cash compensation from 2TheMart.
4. 2TheMart has retained the services of Gibson, Dunn & Crutcher to
provide legal services to 2TheMart in connection with corporate
and securities matters.
If the above accurately sets forth our mutual understanding, please
sign this letter where noted below and send a signed copy to me by facsimile. We
will forward the original of this letter to you upon our receipt of the signed
fax copy from you.
Sincerely,
DFM HOLDINGS, LTD., A NEVADA PZ HOLDINGS LIMITED, A COLORADO
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By: /s/ Dominic J. Magliarditi By: /s/ Steven W. Rebeil
-------------------------- -------------------------------
Name: Dominic J. Magliarditi Name: Steven W. Rebeil
Title: General Partner Title: General Partner
/s/ Francine R. Magliarditi
- -----------------------------------
Francine R. Magliarditi
General Partner
<PAGE> 11
Raymond P. Park
Net Investments, Inc.
October 8, 1999
Page 3
2THEMART.COM, INC., AN OKLAHOMA DOMINIC J. MAGLIARDITI, AN INDIVIDUAL
CORPORATION
By: /s/ Steven W. Rebeil /s/ Dominic J. Magliarditi
----------------------------- -------------------------------------
Name: Steven W. Rebeil Name: Dominic J. Magliarditi
Title: Chairman of the Board and
Chief Executive Officer
By: Dominic J. Magliarditi
-----------------------------
Name: Dominic J. Magliarditi
Title: President
STEVEN W. REBEIL, AN INDIVIDUAL
/s/ Steven W. Rebeil
- ----------------------------------
Name: Steven W. Rebeil
ACKNOWLEDGED AND AGREED:
NET INVESTMENTS, INC.
By: /s/ Raymond P. Park
---------------------------------
Name: Raymond P. Park
Title:
<PAGE> 12
Exhibit (b)
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 17, 1999, by and among
Net Investments, Inc., an Ohio corporation ("Purchaser"), 2TheMart.com, Inc., an
Oklahoma corporation ("Seller"), Steven W. Rebeil ("Rebeil"), Dominic J.
Magliarditi ("Magliarditi"), PZ Holdings Limited, a Colorado limited partnership
("PZ"), and DFM Holdings, Ltd., a Nevada limited partnership ("DFM"),
W I T N E S S E T H:
WHEREAS, Rebeil, the chairman of the board of directors and chief
executive officer of Seller, through PZ owns 8,400,000 shares of Seller's common
stock;
WHEREAS, Magliarditi, the president, chief operating officer, secretary
and chief financial officer of Seller, through DFM owns 5,600,000 shares of
Seller's common stock;
WHEREAS, together Rebeil and Magliarditi control Seller;
WHEREAS, Seller desires to issue and sell 2,000,000 shares of common
stock, par value $0.0001 per share (the "Shares"), of Seller to Purchaser on the
terms and conditions set forth in this Stock Purchase Agreement (hereinafter
called "Agreement"); and
WHEREAS, Purchaser desires to purchase from Seller the Shares on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises and respective mutual
agreements herein contained, it is agreed by and between the parties hereto as
follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 SALE OF THE SHARES. Upon the execution of this Agreement as
provided in Paragraph 4.1 hereto (the "Closing"), subject to the terms and
conditions herein set forth, and on the basis of the representations, warranties
and agreements herein contained, Seller shall sell to Purchaser, and Purchaser
shall purchase from Seller, the Shares.
1.2 INSTRUMENTS OF CONVEYANCE AND TRANSFER. Promptly after the payment
of the Purchase Price (as defined below), but in no event later than three (3)
days after the payment of the Purchase Price, Seller shall deliver a certificate
or certificates representing the Shares to Purchaser, in form and substance
satisfactory to Purchaser, as shall be effective to vest in Purchaser all right,
title and interest in and to all of the Shares, as set forth in Article 4
herein.
<PAGE> 13
1.3 CONSIDERATION AND PAYMENT FOR THE SHARES. In consideration for the
Shares, Purchaser shall pay a purchase price equal to $1.50 per share, for a
total purchase price of $3,000,000 ("Purchase Price"). Purchaser shall forward
the Purchase Price to Seller on the Closing Date in accordance with the wire
instructions set forth in Paragraph 4.3.
ARTICLE 2
REPRESENTATIONS AND COVENANTS
2.1 Seller, Rebeil, Magliarditi, PZ and DFM hereby represent and
warrant that:
(a) ORGANIZATION; POWER AND AUTHORITY. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Oklahoma and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now conducted. PZ is a partnership duly organized, validly
existing and in good standing under the laws of the State of Colorado
and has all requisite partnership power and authority to own, lease and
operate its properties and to carry on its business as now conducted.
DFM is a partnership duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all requisite
partnership power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
(b) AUTHORIZATION OF AGREEMENT. Seller, PZ and DFM have taken
all action necessary to authorize the execution, delivery and
performance of this Agreement by Seller, PZ and DFM, and no other
proceedings on the part of Seller, PZ or DFM are necessary to authorize
the execution and delivery of this Agreement and the consummation of
the transactions hereunder.
(c) BINDING OBLIGATION. Seller, PZ, DFM, Rebeil and
Magliarditi have caused this Agreement to be duly and validly executed
and delivered by Seller, PZ, DFM, Rebeil and Maglairditi to Purchaser,
and this Agreement constitutes a valid and binding obligation of
Seller, PZ, DFM, Rebeil and Magliarditi, enforceable against Seller,
PZ, DFM, Rebeil and Magliarditi in accordance with its terms.
(d) CAPITALIZATION; TITLE TO SHARES. The authorized capital
stock of Seller consists of (i) 50,000,000 shares of common stock, of
which, as of the date hereof, there are 25,745,430 shares issued and
outstanding, and (ii) 25,000,000 shares of preferred stock, of which,
as of the date hereof, there are no shares issued and outstanding. All
of the issued and outstanding shares of common stock have been duly
authorized for issuance and are validly issued, fully paid,
nonassessable and free of preemptive rights. Upon payment of the
Purchase Price therefor and delivery by Seller to Purchaser of
certificates for the Shares which Purchaser is acquiring pursuant to
Article 1 hereof, the Shares will be duly authorized, validly issued
and outstanding, and fully paid and nonassessable, and Purchaser will
acquire good, valid and marketable title thereto, free and clear of all
liens,
-2-
<PAGE> 14
security interests, pledges, encumbrances, charges, restrictions,
demands and claims, of any kind and nature whatsoever, whether direct
or indirect or contingent, except as set forth in Paragraph 2.2 herein.
Except as set forth on SCHEDULE 2.1(d), there is no existing option,
warrant, call, right, commitment or other agreement of any character to
which Seller is a party requiring, and there are no securities of
Seller outstanding which upon conversion or exchange would require, the
issuance, sale or transfer of any shares of capital stock or other
equity securities of Seller or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase
shares of capital stock or other equity securities of Seller.
(e) CONFLICTS; CONSENTS OF THIRD PARTIES. (i) Except as set
forth on SCHEDULE 2.1(e) hereto, none of the execution and delivery by
Seller, PZ or DFM of this Agreement, the consummation of the
transactions contemplated hereby, or compliance by Seller, PZ or DFM
with any of the provisions hereof will (A) conflict with, or result in
the breach of, any provision of the articles of incorporation, by-laws,
partnership agreement, as applicable, or comparable organizational
documents of Seller, PZ or DFM; (B) conflict with, violate, result in
the breach or termination of, or constitute a default under any note,
bond, mortgage or indenture or any other contract to which Seller, PZ
or DFM is a party or by which Seller, PZ or DFM or any of their
properties or assets is bound; (C) violate any statute, rule,
regulation, order or decree of any governmental body or authority by
which Seller, PZ or DFM is bound; or (D) result in the creation of any
lien upon any properties or assets of Seller, PZ or DFM or give rise
to, or accelerate, any rights of any person or entity under any
instrument, law or other item or provision referred to in clause (A),
(B) or (C), above, and (ii) except as set forth on SCHEDULE 2.1(e)
hereto, no consent, waiver, approval, order, permit or authorization
of, or declaration or filing with, or notification to, any person or
governmental authority is required in connection with Seller's, PZ's or
DFM's execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, or the compliance by Seller, PZ or
DFM with any of the provisions hereof.
(f) NO UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 2.1(f) hereto or as fully reflected in, reserved against or
otherwise described in the October 31, 1999 Balance Sheet attached
hereto as SCHEDULE 2.1(f), Seller has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due) that (i) would have been
required to be reflected in, reserved against or otherwise described in
the October 31, 1999 Balance Sheet in accordance with generally
accepted accounting principles applied on a basis consistent with past
practice, or (ii) were not incurred in the ordinary course of business
consistent with past practice since October 31, 1999.
(g) LITIGATION. Except as set forth in SCHEDULE 2.1(g) hereto,
there is no suit, action, proceeding, investigation, claim or order
pending before any court, or before any governmental department,
commission, board, agency, or instrumentality or threatened
-3-
<PAGE> 15
against Seller (or threatened against any of the officers, directors or
key employees of Seller with respect to their activities on behalf of
or in connection with Seller), which, if adversely determined, would
have an adverse effect on Seller; nor is there any reasonable basis for
any such action, proceeding, or investigation.
(h) MATERIAL CONTRACTS. Except as set forth in SCHEDULE 2.1(h)
hereto or as listed under the heading "Financial Statements and
Exhibits" in the registration statement on Form 10 filed by Seller with
the Securities and Exchange Commission on August 26, 1999 (the "Form
10"), Seller is not a party to, and is not bound by, any agreement,
contract, instrument, commitment or understanding, whether written or
oral, that (i) was required to be filed as an exhibit to the Form 10,
(ii) requires aggregate payments from or to Seller or any other party,
or has a value to Seller or any other party, which exceeds $10,000,
(iii) is material to the business, financial condition or results of
operations of Seller, or (iv) places any material restrictions on the
ability of Seller to engage in any business. No agreement, contract or
other instrument identified under the heading "Financial Statements and
Exhibits" on the Form 10 has been terminated, amended in any respect or
otherwise modified since August 26, 1999.
(i) SECURITIES ISSUANCES AND SECURITIES LAWS. SCHEDULE 2.1(i)
and Item 10 of the Form 10 entitled "Recent Sales of Unregistered
Securities" together contain an accurate and complete description of
all issuances of securities of Seller between December 22, 1998 and the
date hereof. SCHEDULE 2.1(i) also contains an accurate and complete
description of all current offerings of Seller's securities, including
the total amount of securities offered, the purchase price per share or
security offered, the status of the offering and the applicable
exemption from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"). The Form 10 complies in all
material respects with the requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and did not when filed
contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Seller has not: (i) issued any
securities in violation of the requirements of Section 5 of the
Securities Act, or any other law; (ii) violated any rule, regulation or
requirement under the Securities Act or the Exchange Act; or (iii)
purchased any securities in violation of any applicable state or
federal securities law or any agreement or contract governing the
purchase of those securities.
(j) SECURITIES OWNERSHIP. SCHEDULE 2.1(j) completely and
accurately sets forth Rebeil's and Magliarditi's direct or indirect
ownership of Seller's common stock, including any common stock owned by
PZ or DFM. SCHEDULE 2.1(j) also completely and accurately sets forth
the name, address and partnership interest of each partner of PZ and
DFM. Other than the common stock identified on SCHEDULE 2.1(j), neither
Rebeil nor Magliarditi has (i) any interest in any securities of Seller
or (ii) the power to influence the disposition or voting of any
securities of Seller.
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<PAGE> 16
(k) INVESTIGATIONS. To the knowledge of Seller, PZ, DFM,
Rebeil and Magliarditi, neither the Seller nor any activities in
connection with Seller's business or the offer or sale of Seller's
securities, is being investigated by any governmental authority. The
Seller has not received any notice (whether oral or written or formal
or informal) of any governmental investigation or inquiry.
(l) IBM OBLIGATIONS. Seller, Rebeil, Magliarditi, PZ and DFM
confirm that, assuming the accuracy of Purchaser's representations and
warranties set forth in Paragraph 2.11(d), Purchaser has made all
requisite efforts on behalf of Seller to convince IBM to extend
Seller's payment obligations in connection with certain Web page
application services provided to Seller by IBM.
(m) SALARY. On October 8, 1999, Rebeil's and Magliarditi's
salary was $200,000 per annum each. Seller does not owe either Rebeil
or Magliarditi any amounts for any past services provided by either
Rebeil or Magliarditi other than their respective bi-monthly salaries
which have accrued but have not yet become payable.
(n) EXEMPTION. Assuming the accuracy of the representations
and warranties of Purchaser set forth in Paragraphs 2.11(a) through
2.11(c), the offer, issuance and delivery by Seller to Purchaser of the
Shares, in the manner and under the circumstances contemplated by this
Agreement, are transactions which do not require registration under the
Securities Act or any state securities laws or corporation laws.
(o) INFORMATION. The information provided to Purchaser or its
representatives by Seller at Purchaser's or its representative's
request concerning (i) pending litigation involving Seller and (ii) any
governmental filings and proceedings relating to Seller, was and
remains accurate and complete and does not contain an untrue statement
of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
2.2 On the Closing Date as defined herein in Paragraph 4.1, Seller
shall deliver to Purchaser certificates representing the Shares subject to no
liens, security interests, pledges, encumbrances, charges, restrictions, demands
or claims in any other party whatsoever, except as set forth in the legend on
the certificate(s), which legend shall provide as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED FOR A PERIOD OF
ONE YEAR FROM THE ISSUANCE THEREOF EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
REGISTRATION OR QUALIFICATION AS MAY BE
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<PAGE> 17
NECESSARY UNDER THE SECURITIES LAWS OF ANY STATE, OR (ii) ON
THE COMPANY'S RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED.
2.3 As soon as reasonably practicable, Seller shall cause (i) the
legend on any certificates representing shares of the Seller's common stock
owned by Purchaser to be amended to comport with the legend in Paragraph 2.2.
Further, any contract or agreement between Seller and Purchaser relating to
Purchaser's purchase of shares of the Seller's common stock is hereby amended to
impose no more restrictive obligations regarding the sale or transfer of such
common stock than those contained in the legend in Paragraph 2.2. No further
action is required by the parties to amend such contracts or agreements other
than the execution of this Agreement.
2.4 As soon as reasonably practicable, but (i) if a meeting of
shareholders is required, in no event later than the next meeting of
shareholders, which meeting shall held no later than May 9, 2000, (ii) if a
meeting of shareholders is not required, in no event later than sixty (60) days
from the date hereof, each of Rebeil, Magliarditi, PZ and DFM and, in each case,
any person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with any of the foregoing
individuals or entities, agrees to (a) take all necessary actions to increase
the number of directors of the Board of Directors from two (2) to five (5), and
(b) appoint or elect three (3) independent directors satisfactory to Purchaser.
If the actions to be taken with respect to the directors pursuant to this
Paragraph 2.4 are not completed by May 9, 2000, if a meeting of shareholders is
required, or January 17, 2000 if a meeting of shareholders is not required, then
Seller shall reduce Rebeil's and Magliarditi's salary to an amount not to exceed
$150,000 per annum until such time as the actions to be taken with respect to
the directors pursuant to this Paragraph 2.4 are completed.
2.5. Each of PZ, DFM, Rebeil and Magliarditi represents and warrants
that Purchaser's investment in Seller pursuant to this Agreement constitutes
good and valuable consideration for its or his compliance with the covenants and
conditions imposed on it or him by this Agreement.
2.6 Seller shall provide Purchaser as soon as reasonably practicable,
certificates, as of the most recent practicable date after the Closing, as to
the corporate existence and foreign qualification of the Company issued by the
Secretary of State of the State of Oklahoma and the Secretary of State of the
State of California, respectively.
2.7 Neither Seller, Rebeil, Magliarditi, PZ or DFM, without the express
written consent of Purchaser, will at any time take any action inconsistent with
any representation, warranty or covenant made by any of them in this Agreement.
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<PAGE> 18
2.8 Seller will at all times conduct its affairs, and Rebeil,
Magliarditi, PZ and DFM will cause Seller to, and each will at all times conduct
its or his affairs with respect to Seller's business, in full conformity and
compliance with all applicable laws and regulations.
2.9 Seller, Rebeil, Magliarditi, PZ and DFM agree that any shares of
Seller's common stock that may be received by PZ and DFM pursuant to the Escrow
Agreement, dated as of December 22, 1998, by and among Ricky Chow, DFM, PZ,
CD-Rom Yearbook Company, an Oklahoma corporation, 2TheMart.com, Inc., a Nevada
corporation, and MRC Legal Services Corporation (the "Escrow Shares") shall be
"shares of 2TheMart capital stock" held by PZ or DFM under the Letter Agreement
dated October 8, 1999 (the "Letter Agreement"), by and among Rebeil,
Magliarditi, PZ, DFM, Seller and Purchaser, and the restrictions on Rebeil,
Magliarditi, PZ and DFM set forth in section 1 of the Letter Agreement shall
apply fully to the Escrow Shares.
2.10 For a period of two years starting from the date hereof (the
"Audit Term"), Seller, Rebeil, Magliarditi, PZ and DFM shall cause Seller's
chief financial officer to deliver to Purchaser a certificate in the form
attached hereto as Exhibit B on or before the last day of each fiscal quarter of
Seller. Seller, Rebeil, Magliarditi, PZ and DFM agree that Purchaser, at any
time during the Audit Term, upon reasonable notice to Seller, may inspect, or
cause a certified public accountant retained by Purchaser at Purchaser's expense
to inspect, Seller's books and records to confirm compliance by the parties with
this Agreement and the Letter Agreement.
2.11 Purchaser hereby represents and warrants that:
(a) Purchaser acknowledges that the Shares will be "restricted
securities" (as such term is defined in Rule 144 promulgated under the
Act ("Rule 144")), that the Shares will include the foregoing
restrictive legend, and, except as otherwise set forth in this
Agreement, that the Shares cannot be sold for a period of one (1) year
from the date of issuance unless registered with the Securities and
Exchange Commission and qualified by appropriate state securities
regulators, or unless Purchaser delivers an opinion of counsel
satisfactory to Seller that such registration or qualification is not
required.
(b) Purchaser has the full right, power and authority to enter
into this Agreement and to carry out and consummate the transaction
contemplated herein. This Agreement constitutes the legal, valid and
binding obligation of Purchaser.
(c) Purchaser acknowledges that investment in the Shares
involves substantial risks and is suitable only for persons of adequate
financial means who can bear the economic risk of an investment in the
Shares for an indefinite period of time. Purchaser further represents
that it:
(i) is an "Accredited Investor" as that term is
defined in Regulation D promulgated under the Act;
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<PAGE> 19
(ii) is acquiring the Shares for its own account, for
investment purposes only and not with a view toward resale,
assignment or distribution thereof, and no other person other
than the beneficial owners of Seller has a direct or indirect
beneficial interest, in whole or in part, in such Shares;
(iii) has, together with its officers and advisors
such knowledge and experience in financial, tax and business
matters that it is capable of evaluating the merits and risks
of an investment in the Shares; and
(iv) has been given the opportunity to ask questions
of and to receive answers from persons acting on Seller's
behalf concerning the terms and conditions of this transaction
and also has been given the opportunity to obtain any
additional information that Seller possesses or can acquire
without unreasonable effort or expense.
(d) On behalf of Seller, Purchaser has communicated with
representatives of IBM to attempt to convince IBM to extend Seller's
payment obligations in connection with certain Web page application
services provided to Seller by IBM.
ARTICLE 3
CONDITIONS TO CLOSING
The obligation of Purchaser to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(a) The representations of Seller, Rebeil, Magliarditi, PZ and
DFM set forth in Article 2 above shall be true and correct in all
respects at and as of the Closing;
(b) Purchaser and Seller shall have entered into a
registration rights agreement in form and substance as set forth in
Exhibit A attached hereto;
(c) DFM and Magliarditi shall have delivered to Seller for
cancellation without further consideration stock certificates
representing in the aggregate 2,900,000 shares of common stock of
Seller, and Seller shall have canceled those stock certificates;
(d) Rebeil shall have contributed $1,500,000 to the capital of
Seller without any additional shares of common stock of Seller being
issued by Seller ("Rebeil's Capital Contribution");
(e) Magliarditi shall have contributed $250,000 to the capital
of Seller without any additional shares of common stock of Seller being
issued by Seller ("Magliarditi's Capital Contribution");
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<PAGE> 20
(f) Seller shall have delivered to Purchaser written evidence
from IBM satisfactory to Purchaser that all the funds from Rebeil's
Capital Contribution and Magliarditi's Capital Contribution were used
by Seller to pay IBM under the IBM Customer Agreement No. VGY1816,
Hardware Addendum Transaction No. T96BUV2 dated August 5, 1999, between
Seller and IBM;
(g) Seller shall have delivered evidence satisfactory to
Purchaser of the cancellation and termination of the loan referenced in
section 2 of the Letter Agreement, including but not limited to,
written evidence of the termination of any pledge and security
agreement in connection with that loan, the original note issued by
Seller in connection with that loan marked canceled and discharged, UCC
termination statements for each UCC statement, if any, filed with
respect to any security interest in connection with that loan;
(h) Seller and Rebeil for no consideration shall have
terminated the Executive Employment Agreement by and between Seller and
Rebeil dated February 1, 1999;
(i) Seller and Magliarditi for no consideration shall have
terminated the Executive Employment Agreement by and between Seller and
Magliarditi dated February 1, 1999;
(j) All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident
thereto, shall be satisfactory in form and substance to Purchaser, and
Purchaser shall have received copies of all documents and other
evidence which Purchaser may reasonably request in connection with the
transactions and of all records of corporate proceeding in connection
herewith in form and substance satisfactory to Purchaser, including,
without limitation, the following:
(i) The articles of incorporation of Seller certified
by the secretary of Seller;
(ii) The by-laws of Seller certified by the secretary
of Seller;
(iii) Resolutions of the Board of Directors of
Seller, authorizing and approving all matters in connection
with this Agreement and the transactions contemplated hereby,
certified by the secretary of Seller; and
(iv) Copies of all partnership proceedings of PZ and
DFM, authorizing and approving all matters in connection with
this Agreement and the transactions contemplated hereby,
certified by a general partner of PZ and the general partners
of DFM, respectively; and.
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<PAGE> 21
(k) Seller, Rebeil, PZ, Magliarditi and DFM shall not be in
violation of, and shall have fully complied with all provisions of, the
Letter Agreement.
ARTICLE 4
CLOSING AND DELIVERY OF DOCUMENTS
4.1 CLOSING. The Closing shall be deemed to have occurred upon the date
of signing of this Agreement. At the time of the signing, the following shall
occur as a single integrated transaction.
4.2 DELIVERY BY SELLER.
(a) Seller shall deliver to Purchaser the stock certificate
representing the Shares and any and all other instruments of conveyance
and transfer required by Paragraph 1.2 promptly after with the payment
of the Purchase Price, but in no event later than three (3) days after
the payment of the Purchase Price,.
(b) Seller shall deliver, or cause to be delivered, to
Purchaser such instruments, documents and certificates as are required
to be delivered by Seller or its representatives pursuant to the
provisions of this Agreement.
4.3 DELIVERY BY PURCHASER.
(a) Purchaser shall deliver the Purchase Price as required in
Paragraph 1.3 in accordance with the following wire instructions:
Bank Name: Bank of America
Branch: Costa Mesa, California 92626
ABA No.: 121000358
Account No.: 09133-08583
Account Name: 2TheMart.com, Inc.
(b) Purchaser shall deliver, or cause to be delivered, to
Seller such instruments, documents and certificates as are required to
be delivered by Purchaser or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 5
AMENDMENT AND WAIVER
5.1 WAIVER AND AMENDMENT. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its or his rights with respect to any
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<PAGE> 22
provision hereof shall in no manner operate as a waiver of or affect such
party's right at a later time to enforce the same. No waiver by any party of any
condition, or of the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach or waiver of any other condition or of the breach of any
other term, provision, covenant, representation or warranty. No modification or
amendment of this Agreement shall be valid and binding unless it be in writing
and signed by all parties hereto.
ARTICLE 6
MISCELLANEOUS
6.1 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof, except that the Letter
Agreement remains in full force and effect. Other than the Letter Agreement, no
understanding, promise, inducement, statement of intention, representation,
warranty, covenant or condition, written or oral, express or implied, whether by
statute or otherwise, which is not embodied in this Agreement is of any force or
effect, and no party hereto shall be bound by or liable for any alleged
understanding, promise, inducement, statement, representation, warranty,
covenant or condition not so set forth.
6.2 NOTICES. All notices provided for in this Agreement shall be in
writing signed by the party giving such notice, and delivered personally or sent
by overnight courier or messenger or sent by registered or certified mail (air
mail if overseas), return receipt requested, or by telex, facsimile
transmission, telegram or similar means of communication. Notices shall be
deemed to have been received on the date of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent by
overnight courier or messenger, shall be deemed to have been received on the
next delivery day after deposit with the courier or messenger, or if sent by
certified or registered mail, return receipt requested, shall be deemed to have
been received on the third business day after the date of mailing.
Notices shall be sent to the addresses set forth below:
If to Seller:
-------------
2TheMart.com, Inc.
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612
Facsimile: (949) 477-1221
Attn: Dominic J. Magliarditi, President
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<PAGE> 23
If to Purchaser:
----------------
Net Investments, Inc.
c/o Park Corporation
6200 Riverside Drive
Cleveland, OH 44135
Facsimile: (216) 265-2632
Attn: Robert J. Peterson
6.3 ARBITRATION. If a dispute or claim shall arise with respect to any
of the terms or provisions of this Agreement, or with respect to the performance
by either of the parties under this Agreement, then either party may, by notice
as herein provided, require that the dispute be submitted to a single arbitrator
recognized by the Cleveland office of the American Arbitration Association
within fifteen (15) days after such notice is given. The written decision of the
single arbitrator ultimately appointed by or for both parties shall be binding
and conclusive on the parties. Judgment may be entered on such written decision
by the single arbitrator in any court having jurisdiction, and the parties
consent to the jurisdiction of the Common Pleas Court of Cuyahoga County, Ohio,
for this purpose. Any arbitration undertaken pursuant to the terms of this
Paragraph shall occur in Cuyahoga County, Ohio.
6.4 CHOICE OF LAW AND VENUE. This Agreement and the rights of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Ohio including all matters of construction, validity,
performance, and enforcement and without giving effect to the principles of
conflict of laws. Any action brought by any party hereto shall be brought within
the State of Ohio, County of Cuyahoga.
6.5 JURISDICTION. The parties submit to the jurisdiction of the courts
of the State of Ohio or a federal court empanelled in the State of Ohio for the
resolution of all legal disputes arising under the terms of this Agreement,
including, but not limited to, enforcement of any arbitration award.
6.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
6.7 ATTORNEYS' FEES. Except as otherwise provided herein, if a dispute
should arise between the parties including but not limited to arbitration, the
prevailing party shall be reimbursed by the nonprevailing party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
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<PAGE> 24
6.8 TAXES. Any income taxes required to be paid in connection with the
payments due hereunder shall be borne by the party required to make such
payment. Any withholding taxes in the nature of a tax on income shall be
deducted from payments due, and the party required to withhold such tax shall
furnish to the party receiving such payment all documentation necessary to prove
the proper amount to withhold of such taxes and to prove payment to the tax
authority of such required withholding.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first written hereinabove.
PURCHASER SELLER
NET INVESTMENTS, INC. 2THEMART.COM, INC.
By: /s/ Raymond P. Park By: /s/ Dominic J. Magliarditi
------------------------------ --------------------------
Raymond P. Park Dominic J. Magliarditi
Title: Chairman of the Board and Title: President
Chief Executive Officer
DFM HOLDINGS, LTD.
By: /s/ Steven W. Rebeil
------------------------------
Dominic J. Magliarditi
General Partner
PZ HOLDINGS LIMITED
By: /s/ Steven W. Rebeil
------------------------------
Steven W. Rebeil
General Partner
/s/ Steven W. Rebeil
------------------------------
Steven W. Rebeil
/s/ Dominic J. Magliarditi
------------------------------
Dominic J. Magliarditi
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<PAGE> 26
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
November 17, 1999, is among 2TheMart.com, Inc. (the "Company"), and Net
Investments, Inc., an Ohio corporation (the "Purchaser") and each other Person
who becomes a party to this Agreement by executing an Instrument of Accession in
the form attached hereto as Exhibit A. Capitalized terms used herein but not
otherwise defined herein have the meanings set forth in Section 1.
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, 2,000,000 shares of the
Company's common stock, $0.0001 par value (the "Common Stock");
WHEREAS, the Company intends to purchase the Common Stock pursuant to a
Stock Purchaser Agreement, dated as of November 17, 1999, by and among the
Purchaser, the Company, Steven W. Rebeil, Dominic J. Magliarditi, PZ Holdings
Limited, a Colorado limited partnership, and DFM Holdings, Ltd., a Nevada
limited partnership (the "Stock Purchase Agreement");
WHEREAS, as a condition to the closing of the Stock Purchase Agreement,
the Purchaser is required to grant the Company the registration rights contained
in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" means this Registration Rights Agreement.
(b) "DEMAND REGISTRATION" has the meaning assigned to that
term in Section 2 hereof.
(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(d) "EXPIRATION DATE" has the meaning assigned to that term in
Section 12.
(e) "HOLDER" means the Purchaser or any other Person to whom
the Purchaser shall have assigned or transferred Registrable Securities
in accordance with Section 13 of this Agreement.
(f) "INSTRUMENT OF ACCESSION" has the meaning specified in the
preamble hereto.
(g) "PERSON" means any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.
(h) "PIGGYBACK REGISTRATION" has the meaning assigned to that
term in Section 3 hereof.
<PAGE> 27
(i) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act, or the
securities laws of any jurisdiction other than the United States, and
the declaration or ordering of effectiveness of such registration
statement or document, or similar action in such other jurisdiction.
(j) "REGISTRABLE SECURITIES" means, all of the Common Stock
acquired pursuant to the Stock Purchase Agreement and all the shares of
the Company's common stock issued as a dividend or other distribution
with respect to the Common Stock, or in exchange for or in replacement
of the Common Stock (whether through stock dividends, stock splits,
reclassifications, mergers, consolidations, recapitalizations or
otherwise).
(k) "REGISTRATION EXPENSES" has the meaning assigned to that
term in Section 6 hereof.
(l) "REGISTRATION RIGHTS" means the rights of the Purchaser to
Demand Registration and Piggyback Registration pursuant to this
Agreement and any other similar rights of any other Person that are in
existence as of the date hereof.
(m) "SEC" means the Securities and Exchange Commission.
(n) "SECONDARY SECURITIES" has the meaning assigned to that
term in Section 9 hereof.
(o) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(p) "VIOLATION" has the meaning assigned to that term in
Section 8(a) hereof.
SECTION 2. REGISTRATION UPON DEMAND. At any time 90 days after the
later of the date of this Agreement or the date on which the Company's
registration statement on Form 10 filed with the SEC on August 26, 1999 becomes
effective until the Expiration Date, upon the written request of the Purchaser
that the Company effect the registration under the Securities Act of its
Registrable Securities (which request shall specify the intended method of
distribution thereof), the Company shall use its best efforts to register under
the Securities Act (a "DEMAND REGISTRATION"), as expeditiously as may be
practicable, the Registrable Securities that the Company has been requested to
register; provided, however, that the Purchaser shall be not entitled to request
(a) more than three Demand Registrations, (b) any Demand Registration within the
6-month period immediately following the date of any previous request for a
Demand Registration hereunder or the date of any previous request for a demand
registration under a similar agreement with other shareholders of the Company,
or (c) any Demand Registration for less than 650,000 shares of the Company's
common stock.
SECTION 3. PIGGYBACK REGISTRATION. If, at any time during the term of
this Agreement, the Company proposes to register any securities under the
Securities Act in connection with any offering of its securities, whether or not
for its own account (other than a registration statement filed with respect to
the issuance of Common Stock, or securities convertible into or exchangeable for
Common Stock, or rights to acquire Common Stock, on Form S-4 or otherwise
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<PAGE> 28
in connection with an acquisition, merger or other transaction or on Form S-8
with respect to shares issuable pursuant to options granted or to be granted to
employees of the Company, or similar forms of registration statements applicable
to "small business issuers" as defined in Rule 405 of the Securities Act), the
Company shall furnish prompt written notice to the Purchaser of its intention to
effect such registration and the intended method of distribution in connection
therewith. On each such occasion, upon the written request of the Purchaser made
to the Company within 15 days after the Purchaser's receipt of such a notice,
the Company shall include in such registration such amount of the Registrable
Securities as the Purchaser shall designate to the Company in writing (a
"PIGGYBACK REGISTRATION"), subject to Section 8 hereof.
SECTION 4. OBLIGATIONS OF THE COMPANY. Whenever the Company is required
under this Agreement to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as may be practicable:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, and to keep such
registration statement effective for up to 90 days.
(b) Prepare and file with the SEC 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 applicable law with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Purchaser the numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of applicable law, and any other documents as it may
reasonably request, in order to facilitate the disposition of
Registrable Securities owned by it.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities laws of such jurisdictions in which the securities are being
registered as shall be reasonably requested by the Purchaser; provided,
however, that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such jurisdiction.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such
offering.
(f) Provide or cause to be provided, at the request of the
Purchaser, on the date that the Purchaser delivers its Registrable
Securities to the underwriters for sale in connection with a
registration pursuant to a Demand Registration, if such securities are
being sold through underwriters, or, if such securities are not being
sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the
purpose of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, address to
the underwriters, if
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<PAGE> 29
any, and to the Purchaser, and (ii) a "comfort" letter, dated such
date, from the independent certified public accountant of the Company,
in the form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering.
(g) Notify the Purchaser, at any time when a prospectus
relating thereto is required to be delivered under applicable law, of
the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing.
SECTION 5. FURNISH INFORMATION. It shall be a condition precedent to
the obligation of the Company to take any action pursuant to this Agreement that
the Purchaser shall furnish to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities.
SECTION 6. EXPENSES OF REGISTRATION. With respect to a Demand
Registration or a Piggyback Registration, the Company shall bear and pay all
out-of-pocket expenses incurred in connection with the registrations, filings or
qualifications of Registrable Securities, with respect to the registrations made
pursuant to Sections 2 and 4, including, without limitation, all registration,
filing, and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and reasonable fees and expenses of
counsel representing the Purchaser (the "REGISTRATION EXPENSES"), but excluding
underwriting discounts and commissions relating to Registrable Securities.
SECTION 7. UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 4 to include any of the Registrable
Securities of the Purchaser in the registration of the securities to be included
in such underwriting, or in such underwriting itself, unless the Purchaser
accepts the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering, whether upon exercise of Registration Rights or otherwise
(collectively, "SECONDARY SECURITIES"), exceeds the number of Secondary
Securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only such number of Secondary Securities, including
Registrable Securities, as the underwriters determine in their sole discretion
will not jeopardize the success of the offering. The Secondary Securities so
included shall be apportioned among the Purchaser and such other selling
shareholders having exercised Registration Rights, pro rata in proportion to the
total number of Secondary Securities, including Registrable Securities, owned by
the Purchaser and such other selling shareholders, respectively, before any
Secondary Shares shall be included on behalf of any other shareholder, or in
such other proportion as may be agreed to by all such shareholders and the
Purchaser.
-4-
<PAGE> 30
SECTION 8. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless the Purchaser, any underwriter (as defined in the
Securities Act or other applicable law) for the Purchaser and each
Person, if any, who controls the Purchaser or underwriter within the
meaning of the Securities Act, the Exchange Act or other applicable
law, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act or
other applicable law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations
(collectively a "Violation"): any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or
any violation or alleged violation by the Company of the Securities Act
or other applicable law, or any rule or regulation promulgated under
the Securities Act or other applicable law; and the Company will pay to
the Purchaser, underwriter or controlling Person any reasonable legal
or other expenses incurred by it in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 8(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished expressly for
use in connection with such registration by the Purchaser or such
underwriter or controlling Person.
(b) To the extent permitted by law, the Purchaser will
indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each Person, if
any, who controls the Company within the meaning of the Securities Act
or other applicable law, any underwriter, and any controlling Person of
any such underwriter, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing Persons
may become subject, under the Securities Act or other applicable law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished
by the Purchaser expressly for use in connection with such
registration; and the Purchaser will pay any reasonable legal or other
expenses incurred by any Person to be indemnified pursuant to this
Section 8(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the
Purchaser, which consent shall not be unreasonably withheld; and
provided further, however, that in no event shall
-5-
<PAGE> 31
any indemnity under this Section 8(b) exceed the gross proceeds from
the offering received by the Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 8, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so
desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 8.
(d) The obligations of the Company and the Purchaser under
this Section 8 shall survive the completion of any offering of
Registrable Securities under a registration statement pursuant to this
Agreement.
SECTION 9. REPORTS. With a view to making available to the Purchaser
the benefits of Rules 144 and 144A under the Securities Act, the Company agrees
to do the following from the date of effectiveness of the Company's registration
statement on Form 10 filed under the Exchange Act until the Expiration Date:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times;
(b) file with the SEC and the applicable authority in each
other jurisdiction where the Company's securities are registered in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act, and the similar laws of
each such other jurisdiction; and
(c) furnish to the Purchaser forthwith upon request a copy of
the most recent annual or quarterly report of the Company and such
other reports and documents filed by the Company with governmental
authorities (including the SEC), and such other information as may be
reasonably requested in availing the Purchaser of any rule or
regulation of the SEC or similar authorities in any jurisdiction where
the Company's securities are registered, which permits the selling of
any such securities without registration.
-6-
<PAGE> 32
SECTION 10. "MARKET STAND-OFF" AGREEMENT.
(a) The Purchaser hereby agrees that, during the duration of
the period specified by the Company and an underwriter of Common Stock
or other securities of the Company following the effective date of a
registration statement of the Company under the Securities Act (but no
longer than 120 days), it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of any
securities of the Company held by the Purchaser at any time during such
period except Common Stock included in such registration and except in
a private transaction in which the transferee of the Purchaser agrees
to abide by the agreement of the Purchaser pursuant to this Agreement
for the remaining duration of the period specified to the Purchaser by
the Company and the underwriter. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions, consistent
with the provisions of this Section 10, with respect to the shares of
Common Stock of the Purchaser (and the shares or securities of every
other Person subject to the foregoing restriction) until the end of
such period.
(b) The Company hereby agrees that if the Purchaser effects a
firm commitment underwriting of its Registrable Securities, then,
during the duration of the period specified by the Purchaser and an
underwriter of Purchaser's Registrable Securities following the
effective date of a registration statement filed by the Company under
the Securities Act pursuant to a Demand Registration (but no longer
than 120 days or the period ending on the date on which the Purchaser
has sold all of its securities registered under such registration
statement), the Company shall not directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of any
securities of the Company at any time during such period except (i)
Common Stock included in such registration, (ii) in a private
transaction in which the person acquiring such securities enters into
an agreement substantially similar to the one contained in this Section
10(b), (iii) securities that are registered on a registration statement
on Form S-4 or Form S-8, or any successor forms, (iv) pursuant to the
exercise of any previously issued warrants or options, or (v) pursuant
to existing stock option plans of the Company or future stock option
plans of the Company that are approved by the Board of Directors.
SECTION 11. LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. Except for
the rights of others in existence on the date of this Agreement and the rights
contemplated in this Agreement, from and after the date of this Agreement, the
Company shall not, without the prior written consent of the Purchaser, which
consent may not be unreasonably withheld, enter into any agreement with any
holder or prospective holder of any securities of the Company that would allow
such holder or prospective holder (i) to include such securities in any
registration filed under Section 2, or (ii) to make a demand registration of
such securities; provided, however, the Company may, without the Purchaser's
prior written consent, grant demand registration rights on terms no more
favorable to the investor than those provided to the Purchaser to any investor
who invests not less than one million dollars ($1,000,000) in the Company.
-7-
<PAGE> 33
SECTION 12. TERMINATION. Except for the right to indemnification
provided herein, the Purchaser shall not be entitled to exercise any right
provided for in this Agreement after the earlier of (a) three years following
the date of effectiveness of the Company's first registration statement filed
under the Securities Act pursuant to this Agreement or (b) the date on which all
of the Registrable Securities then owned by Purchaser may be immediately resold
pursuant to Rule 144 (such date, the "EXPIRATION DATE").
SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement and the rights of
any Holder hereunder may be assigned to, and shall inure to the benefit of, any
Person to whom such Holder transfers Registrable Securities and the transferee
agrees to be bound by all of the terms and conditions of this Agreement by
executing and delivering to the Company an Instrument of Accession.
SECTION 14. NOTICES. All notices, demands or requests required or
permitted under this Agreement must be in writing, and shall be made by hand
delivery, certified mail, overnight courier service, telex or telecopier: if to
the Company, to 2TheMart.com, Inc. 18301 Von Karman Avenue, 7th Floor, Irvine,
California 92612, telecopy (949) 477-1221, Attn: President; and if to the
Purchaser, to Net Investments, Inc., c/o Park Corporation, 6200 Riverside Drive,
Cleveland, Ohio 44135, telecopy (216) 265-2632, Attn: Robert J. Peterson; but
any party may designate a different address by a notice similarly given to the
other party hereto. Any such notice or communication shall be deemed given when
delivered by hand, if delivered on a business day; on the next business day
after being deposited for next-day delivery with Federal Express or a similar
overnight courier; when receipt is acknowledged, if telecopied on a business
day; and the next business day following the day on which receipt is
acknowledged if telecopied on a day that is not a business day.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first written above.
COMPANY:
2THEMART.COM, INC.
By:
-----------------------------------------
Dominic J. Magliarditi, President
PURCHASER:
NET INVESTMENTS, INC.
By:
-----------------------------------------
Raymond P. Park, Chairman of the Board
And Chief Executive Officer
-8-
<PAGE> 34
EXHIBIT A
Instrument of Accession
-----------------------
Reference is made to that certain Registration Rights
Agreement dated as of November 17, 1999, a copy of which is attached hereto (as
amended and in effect from time to time, the "Registration Rights Agreement"),
among 2TheMart.com (the "Company"), and Net Investments, Inc.
The undersigned, _________________________, hereby agrees that
by his execution hereof the undersigned is a Holder and a party to the
Registration Rights Agreement and all of the Company's common stock purchased by
the undersigned (and any and all securities of the Company issued in respect
thereof) are subject to all of the restrictions and conditions applicable to
Registrable Securities as set forth in the Registration Rights Agreement. This
Instrument of Accession shall take effect and shall become a part of said
Registration Rights Agreement immediately upon execution. The undersigned
acknowledges that the maximum number of Demand Registrations, including any
Demand Registrations made by others, that may be made pursuant to the
Registration Rights Agreement is three.
Executed as of the date set forth below under the laws of the State of
Ohio.
Signature:
--------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
Date:
--------------------------------
Accepted:
2TheMart.com, Inc.
By:
------------------------------
Date:
---------------------------
<PAGE> 35
EXHIBIT B
2THEMART.COM, INC.
CERTIFICATE OF CHIEF FINANCIAL OFFICER
I, ________________, do hereby certify that I am the Chief Financial
Officer of 2TheMart.com, Inc., an Oklahoma corporation (the "Company"), and
further certify that:
1. I am familiar with the Letter Agreement dated October
8, 1999 (the "Letter Agreement"), by and among Steven
W. Rebeil, Dominic J. Magliarditi, PZ Holdings
Limited, DFM Holdings, Ltd., the Company and Net
Investments, Inc.
2. I understand that section 3 of the Letter Agreement
provides that until October 9, 2001 neither Steven W.
Rebeil nor Dominic J. Magliarditi may receive from
the Company (i) any increase in their respective
then-current salaries ($200,000 each), (ii) any
bonuses (cash or non-cash), (iii) stock options, or
(iv) any other form of non-cash compensation.
3. Neither Steven W. Rebeil nor Dominic J. Magliarditi
has received from the Company any salary increase,
bonus, stock option, or any form of non-cash
compensation in violation of section 3 of the Letter
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day
of ______, ______.
--------------------------------
Name:
Title: Chief Financial Officer
-16-
<PAGE> 36
Schedule 2.1(d)
Capitalization; Title to Shares
Chow Options for 2,500,000 shares of Seller's common stock
Employee Options for an aggregate of 513,200 shares of Seller's common stock
Consultant Options for 125,000 shares of Seller's common stock
<PAGE> 37
Schedule 2.1(e)
Conflicts; Consents of Third Parties
None.
<PAGE> 38
Schedule 2.1(f)
No Undisclosed Liabilities
2TheMart.com, Inc.
(a Development Stage Enterprise)
Balance Sheet
October 31, 1999
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash and cash equivalents $ 684,628
Restricted cash 124,448
---------------
Total current assets 809,076
Property and equipment
Computer hardware and software 6,675,344
Furniture, fixtures and other office equipment 319,463
Marketing equipment 19,159
Tenant improvements 288,717
Less: accumulated depreciation (10,938)
---------------
7,291,745
---------------
Deposits 20,832
---------------
Total Assets $ 8,121,653
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 281,438
Other accrued liabilities 84,544
-------------
Total current liabilities 365,982
Note payable to officer 250,000
Stockholders' Equity
Preferred stock, par value $0.0001; 25,000,000
shares authorized; none issued and outstanding -
Common stock, par value $0.0001; 50,000,000
shares authorized; 25,600,430 issued and outstanding 2,504
Additional paid-in capital 15,155,287
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
<S> <C>
Deferred compensation expense (3,195,856)
Deficit accumulated during the development stage (4,456,264)
------------
7,505,671
------------
Total Liabilities and Stockholders' Equity $ 8,121,653
============
</TABLE>
<PAGE> 40
Schedule 2.1(g)
Litigation
Class Action Lawsuits
1. Mary Ellen Harrington, On Behalf of Herself and All Others Similarly
Situated v. 2TheMart.com, Steven W. Rebeil, and Dominic J. Magliarditi
(No. SACV99-1127 DOX (ANX))
2. Vinh D. Diep, On Behalf of Herself and All Others Similarly Situated v.
2TheMart.com, Steven W. Rebeil, and Dominic J. Magliarditi (No.
SACV99-1255 DOX (EEX))
<PAGE> 41
Schedule 2.1(h)
Material Contracts
None.
<PAGE> 42
Schedule 2.1(i)
Securities Issuance and Securities Laws
Seller is currently offering shares under a Private Placement Memorandum dated
October 1, 1999 (the "PPM"), at a price of $1.50 per share of Seller's common
stock, pursuant to which Seller expects to raise approximately $2,500,000. To
date Seller has sold approximately 145,000 shares under the PPM and
approximately six (6) other potential investors have expressed interest in the
acquisition of shares under the PPM. The offer and sale of the shares under the
PPM is exempt from the registration and prospectus delivery requirements of
Securities Act pursuant to Section 4(2) and/or 3(B) of the Securities Act, and
Rule 506 under Regulation D.
<PAGE> 43
Schedule 2.1(j)
Securities Ownership
Rebeil - 8,400,000 shares of Seller's common stock, which shares are owned by
PZ, a partnership owned by Rebeil and his wife, Jilly Rebeil
Magliarditi - 5,600,000 shares of Seller's common stock, which shares are owned
by DFM, a partnership owned by Magliarditi and his wife, Francine Magliarditi
