UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______.
Commission File Number: 0-27151
2THEMART.COM, INC.
(Exact Name of Registrant as Specified in Its Charter)
Oklahoma 33-0544320
(State of Incorporation) (I.R.S. Employer Identification Number)
18301 Von Karman Avenue, 7th Floor, Irvine, California, 92612
(Address of principal executive offices)
(949) 477-1200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Name of each exchange on which registered:
--------------------- ------------------------------------------
Common Stock, par value $0.0001 Over-the-Counter Bulletin Board
Number of securities outstanding as of April 28, 2000: 30,149,516
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter time as required), and
(2) has been subject to such filing requirements for the past 90 days:
2TheMart.com, Inc. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of April 28, 2000 was $31,809,700 assuming that all officers and
directors of the Company are affiliates.
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2THEMART.COM, INC.
TABLE OF CONTENTS
Item Page
- ---- PART I ----
1. Business 1
2. Properties 4
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters 5
6. Selected Financial Data 9
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
8. Financial Statements and Supplementary Data 12
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 12
PART III
10. Directors and Executive Officers of the Registrants 14
11. Executive Compensation 14
12. Security Ownership of Certain Beneficial Owners and Management 17
13. Certain Relationships and Related Transactions 18
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 19
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PART I
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of the Securities Exchange Act of 1934 (the "Exchange Act"). These
statements are based on management's current beliefs and assumptions about the
Company and the industry in which the Company competes in, and on information
currently available to management. Forward-looking statements include, but are
not limited to, the information concerning possible or assumed future results of
operations of the Company. Forward-looking statements also include statements
in which words such as "expect," "anticipate," "intend," "plan," "believe,"
"estimate," "consider" and other similar expressions are used. Forward-looking
statements are not guarantees of future performance. They involve risks,
uncertainties and assumptions. The Company's future results and shareholder
values may differ materially from those expressed or implied in these
forward-looking statements. Readers are cautioned not to put undue reliance on
any forward-looking statements.
ITEM 1. BUSINESS
GENERAL BUSINESS DESCRIPTION AND ORGANIZATION
2TheMart.com, Inc. ("2TheMart.com" or the "Company"), a development stage
company, was formed as an Internet-based electronic commerce ("e-commerce")
company. Since formation, the Company's primary operations centered around the
development of an online product portal where merchant partners sell their
products on a fee-per-transaction basis and consumers are offered a vast
selection of specialty and brand name products to create a compelling
one-stop-shopping destination. The Company launched its Web site on November 18,
1999. As further discussed below, on April 14, 2000, the Company entered into
an Agreement and Plan of Reorganization whereby the Company will merge with
GoToWorld.com, Inc., a Delaware corporation. As a result, the Company intends
to adopt the business plan of GoToWorld.com, Inc. Consequently, the Company's
Web site is currently off-line.
The Company was originally incorporated under the laws of the State of Oklahoma
on December 2, 1992 as S.K.B. Design, Inc. Between 1992 to 1996, the Company
was inactive. On October 1, 1996, the Company acquired certain technology and
assets with the intention of developing a cd-rom based multimedia yearbook
product. On December 22, 1997, the Company changed its name from S.K.B. Design,
Inc. to CD-Rom Yearbook Company, Inc. ("CD-Rom") to reflect its new business
plan. Due to certain technical and market difficulties, the business of CD-Rom
did not develop as expected. As a result, CD-Rom ceased its operations in the
fall of 1998 and began a search for new business opportunities. On December 22,
1998, CD-Rom acquired all of the outstanding common stock of 2TheMart.com, Inc.,
a Nevada corporation ("2TheMart.com-Nevada"), in a business combination
described as a "reverse merger." For accounting purposes, the merger has been
treated as the merger of CD-Rom into 2TheMart.com-Nevada. Immediately prior to
the merger, CD-Rom had 2,291,850 shares of common stock outstanding. As part of
the reorganization, the Company issued 17,800,000 shares of the common stock of
the Company to the shareholders of 2TheMart.com-Nevada in exchange for
17,800,000 shares of the common stock of 2TheMart.com-Nevada.
Simultaneously with the merger, CD-Rom changed its name to "2TheMart.com, Inc.,"
an Oklahoma corporation, and adopted the business plan of 2TheMart.com-Nevada.
All officers and directors of CD-Rom resigned their positions, and the
management of 2TheMart.com-Nevada was appointed as new management to the
Company. The Company's common stock is currently traded on the NASD
Over-The-Counter ("OTC") Bulletin Board under the symbol "TMRTE."
Planned Reorganization:
On April 14, 2000, the Company entered into an Agreement and Plan of
Reorganization between the Company, its wholly owned subsidiary, 2TheMart.com,
Inc., a Delaware Corporation formed solely for the purpose of reincorporating
the Company in the state of Delaware ("2TMD"), GoToWorld.com, Inc., a Delaware
Corporation ("GTW"), and GoToWorld's parent company Languageforce, Inc., a
Colorado Corporation ("LanguageForce"), whereby the Company will merge with and
into 2TMD, with 2TMD being the surviving Company. Pursuant to the agreement,
all of the Company's common stock will be exchanged for shares of 2TMD on a one
for one basis. As a result, the Company will effectuate a reincorporation from
an Oklahoma corporation into a Delaware corporation. Immediately subsequent to
the Company's merger with 2TMD, GTW will merge with and into the subsequent
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combined company, now 2TMD. Pursuant to the agreement, all of the shares of GTW
will be exchanged for 52,930,931 shares of the common stock of 2TMD in a
business combination described as a "reverse merger." Subsequent to the merger
of GTW into 2TMD, 2TMD will change its name to "GotoWorld.com, Inc." Under the
terms of the agreement, Ian S. Simpson shall become the President, Chief
Executive Officer and Chairman of the Board of the surviving corporation; Steven
W. Rebeil, the Company's current Chairman of the Board of Directors, will
relinquish all of his positions with the Company. The closing of the agreement
and effectiveness of the proposed mergers is subject to shareholder approval of
both Company and GTW.
In contemplation of the proposed merger with GTW, the Company plans to integrate
GTW's and 2TM's business plans. GTW is a global communications and commerce
super portal. Its plan of operations is to become the gateway to the
business-to-business world markets. GTW's business solutions and services to be
provided will include the ability to instantly communicate between over 14
different languages with its Universal Translator technology licensed from
LanguageForce, Inc., GTW's former parent company. This technology allows total
access to the world's products and services without language barriers.
Historical Business Operations:
Prior to the Company's proposed merger with GTW, the Company's business strategy
and business plan consisted of the following:
2TheMart.com Web Site
Visitors to the 2TheMart.com site were able to browse among its items for sale,
which are organized across numerous product categories and are facilitated by
easy navigation and searching. Browsers and buyers could also search product
listings using a variety of means such as by category, keyword and seller name.
Upon registering as a 2TheMart.com user, a seller was able to immediately list
an item for sale, specify a price for and how long the product is listed.
Individual sellers paid a nominal placement fee for an item based on the
seller's minimum price for the item. The minimum price for the placement fee
ranged from $0.25 to $2.00 per item. Sellers were able to highlight their
product listings through a variety of premium services made available to them.
When a transaction occurs, 2TheMart.com automatically notified the buyer and
seller via email and then the buyer and seller consummate the transaction
independently of 2TheMart.com. At the time of notification of a transaction,
2TheMart.com charged the seller a transaction fee that typically ranges from
1.25% to 5%, based on the closing price of the item. Merchant partners were
charged a fee that is a percentage of their transaction price ranging from
3-20%. Buyers were not charged for making bids or purchases through
2TheMart.com. At no point during the process did 2TheMart.com take possession
of either the item being sold or the buyer's payment for the item; instead,
2TheMart.com only acted as the facilitator of the transaction. Following
completion of a transaction, each user was able to rate his or her experience
with the seller through the use of "User Ratings."
Governmental Regulation
2TheMart.com is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on the
Internet, other than regulations applicable to businesses generally.
Transaction Services
In order to offer a complete experience to buyers and sellers, 2TheMart.com
offered a variety of pre- and post-transaction services to enhance the user
experience. 2TheMart.com has pre-transaction services, such as services to
facilitate scanning and uploading of photographs of listed items and
post-transaction services, such as third-party escrow services and arrangements
with shippers to help sellers ship their products more easily.
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Competition
The market for business to consumer e-commerce is rapidly evolving and intensely
competitive and 2TheMart.com expects competition to intensify further in the
future. Barriers to entry are relatively low and current and new competitors can
launch new sites at a relatively low cost using commercially available software.
2TheMart.com currently or potentially competes with a number of other companies.
The Company's direct competitors include various online business to consumer
services, including eBay; Auction Universe, a Times-Mirror Company; Excite; and
a number of other small online vendors, including those that serve specialty
markets. 2TheMart.com's primary competitor is Amazon.com's Z Shops in the
business to consumer segment and eBay in the consumer to consumer segment.
2TheMart.com potentially faces competition from a number of large online
communities and services that have expertise in developing online commerce and
in facilitating online person to person interaction. Certain of these potential
competitors, including Amazon.com, America Online, Microsoft and Yahoo!
currently offer a variety of business to consumer trading services and
classified ad services. Other large companies with strong brand recognition and
experience in online commerce, such as Cendant Corporation, QVC and large
newspaper or media companies are also potential competitors. Competitive
pressures created by any one of these companies or by the Company's competitors
collectively, could have a material adverse effect on the Company's business,
results of operations and financial condition.
2TheMart.com believes that the principal competitive factors in its targeted
marketplace will be brand recognition, reliability of the Company's Web site,
the site's ease of use, and the number of visitors to the site.
Current Number of Employees
At May 1, 2000 the Company had 12 full time employees.
ITEM 2. PROPERTIES
Effective February 3, 1999, the Company began leasing 20,341 square feet of
administrative office space in Irvine, California. The facility serves as the
Company's headquarters and primary place of business. The current monthly
rental rate is $35,597. The lease expires in June 2001.
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On April 29, 1999, the Company entered into an agreement with Exodus to secure
space for the housing of its main Web site server operations in Sterling,
Virginia. Pursuant to its agreement with Exodus, the Company is required to pay
Exodus a minimum monthly fee of approximately $78,000 (which may increase
depending on the Company's Internet bandwidth usage).
Effective January 3, 2000, the Company began leasing approximately 3,000 square
feet of office space in New York City. The office would have been primarily be
used as a satellite sales office. The monthly rental rate is $7,968 and the
lease expires in five years.
ITEM 3. LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination or
breach of contract actions incidental to the operation of its business. On
September 13, 1999 and October 11, 1999, two putative class action lawsuits were
filed in the United States District Court, Central District of California,
Southern Division, against the Company and its then principal officers, Steven
W. Rebeil and Dominic J. Magliarditi entitled Mary Ellen Harrington, On Behalf
of Herself and All Others Similarly Situated v. 2TheMart.com, Inc., Steven W.
Rebeil, and Dominic J. Magliarditi (No. SACV99-1127 DOC (ANX)) and Vinh D. Diep,
On Behalf of Herself and All Others Similarly Situated v. 2TheMart.com, Inc.,
Steven W. Rebeil, and Dominic J. Magliariditi (No. SACV99-1255 DOC (EEX). In
December 1999, the complaints were consolidated into a consolidated complaint
(the "Complaint"). The Complaint alleges, on behalf of a class of individuals
who purchased shares of the Company's common stock between January 19, 1999 and
August 26, 1999, that the defendants engaged in a plan to defraud the market and
purchasers of the Company's common stock in violation of section 10(b) of the
Exchange Act, SEC Rule 10b-5 and Section 20(a) of the Exchange Act (as against
Mr. Rebeil and Mr. Magliarditi) by failing to disclose material facts or making
material misstatements of fact regarding the status of the Company's Web site.
The Complaint seeks compensatory damages for themselves and for the class.
The Company and its defendant officers and directors believe that the lawsuits
are without merit and that they have meritorious defenses to the above actions.
The Company has tendered the action to its insurers and plans on vigorously
defending the litigation. The Company believes that it has adequate insurance
coverage to meet any potential losses, subject to a $250,000 deductible.
However, failure to successfully defend the action which results in an award
greater than the Company's insurance coverage, could have a material adverse
effect on the Company's results of operations, liquidity and financial
condition.
In March 2000, the defendants filed a motion to dismiss with prejudice all
claims made in the Complaint for failure to state a claim. A decision on such
motion is expected in 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no submissions of matters to a vote of security holders during the
period December 22, 1998 (inception) to December 31, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the high and low closing prices for shares of the
Company's common stock for the periods noted since the reverse merger, as
reported by the National Daily Quotation Service and the NASD OTC Bulletin
Board. Quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
CLOSING PRICE
YEAR PERIOD HIGH LOW
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1999 First Quarter $31.63 $ 1.75
Second Quarter $36.00 $12.25
Third Quarter $20.00 $ 5.94
Fourth Quarter $16.50 $ 2.38
2000 First Quarter $ 8.00 $ 3.75
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4, 1999,
issuers who do not make and maintain current filings pursuant to Sections 13 and
15(d) of the Securities Exchange Act of 1934 are ineligible for listing on the
OTC Bulletin Board. Pursuant to the Rule, issuers who are not current with such
filings are subject to having the quotation of their securities removed from the
OTC Bulletin Board pursuant to a phase-in schedule depending on each issuer's
trading symbol as reported on January 4, 1999 and thereafter may quote its
common stock on the National Quotation Bureaus "Pink Sheets" (the "Pink
Sheets").
The Company was not in compliance with the Rule during the period October 8,
1999 to February 22, 2000, and therefore, the Company's common stock traded on
the Pink Sheets. The Company filed its Registration Statement on Form 10 in
order to become a "reporting" company and received no further comments from the
Securities and Exchange Commission regarding the Form 10 on February 11, 2000.
On February 23, 2000, the Company's common stock resumed trading on the OTC
Bulletin Board.
Due to the failure of the Company to timely file its annual report on Form 10-K,
the Company became non-compliant with Rule 6530. As a result, the Company's
trading symbol was amended to "TMRTE" on April 27, 2000. As such, the Company
has approximately 30 days from April 27, 2000 in order to become current with
its reporting requirements or be subject to delisting from the NASD OTCBB. By
filing the Company's Annual Report on Form 10-K herein, the Company expects to
once again be compliant with Rule 6530, at which time the Company's trading
symbol will be changed to "TMRT".
NUMBER OF SHAREHOLDERS
The number of holders of record of the common stock of the Company as of the
close of business on April 30, 2000 was 337.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its common stock and does
not expect to pay cash dividends in the foreseeable future. The Company intends
to retain future earnings, if any, to provide funds for the operation and
expansion of its business.
RECENT SALES OF UNREGISTERED SECURITIES
On December 22, 1998, CD-Rom entered into a merger agreement to acquire all of
the outstanding Common Stock of 2TheMart-Nevada in a business combination
described as a "reverse merger." The merger closed on January 8, 1999. For
accounting purposes, the merger has been treated as the merger of CD-Rom into
2TheMart-Nevada. Immediately prior to the acquisition, CD-Rom had 2,291,850
shares of Common Stock outstanding. As part of the reorganization and stock
purchase agreement, CD-Rom issued an additional 17,800,000 shares of the Common
Stock of CD-Rom to the shareholders of 2TheMart-Nevada (all of which were
"accredited" investors) in exchange for all of the shares of 2TheMart-Nevada.
In addition, 1.2 million of the previously issued CD-Rom shares were placed in
escrow to be distributed to the 2TheMart-Nevada shareholders upon the occurrence
of certain events. This issuance was an isolated transaction not involving a
public offering and consequently conducted under an exemption under Section 4(2)
of the Securities Act of 1933.
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On January 8, 1999, the Company issued an aggregate of 917,500 shares of its
Common Stock to six unrelated and unaffiliated "accredited" investors. The
issuances were a limited offering not over $1 million without general
advertising and solicitation made under Rule 504 of Regulation D promulgated
under the Securities Act of 1933, resulting in net proceeds to the Company in
the amount of $980,000.
On January 8, 1999, the Company issued an aggregate of 80,000 shares of its
Common Stock to the Company's securities counsel in accordance with an agreement
negotiated in December 1998. The issuance was a limited offering not over $1
million without general advertising and solicitation made under Rule 504 of
Regulation D promulgated under the Securities Act of 1933, in exchange for legal
services provided in relation to the Company's merger with 2TheMart-Nevada
valued at $20,000.
On January 25, 1999, the Company issued 15,000 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) Common Stock to
the Company's securities counsel, in consideration for legal services valued at
$15,000. The shares were valued at $1.00 per share in accordance to the
original pricing of the Company's then ongoing private placement. The issuance
was an isolated transaction not involving a public offering and consequently
conducted under an exemption under Section 4(2) of the Securities Act of 1933.
On January 25, 1999, the Company issued 40,000 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) Common Stock to an
individual, in consideration for the purchase of the 2jauction.com software
valued at $40,000. The shares were valued at $1.00 per share in accordance with
an agreement negotiated in December 1998. The issuance was an isolated
transaction not involving a public offering and consequently conducted under an
exemption under Section 4(2) of the Securities Act of 1933.
On January 29, 1999, the Company issued 1,000,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common Stock
to an unrelated "accredited" investor, resulting in net proceeds of $1,000,000
to the Company. The issuance was an isolated transaction not involving a public
offering and consequently conducted under an exemption under Section 4(2) of the
Securities Act of 1933.
On January 30, 1999, the Company issued 50,000 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) Common Stock to an
unrelated "accredited" investor in exchange for $25,000 and consultation
services valued at $25,000. The issuance was an isolated transaction not
involving a public offering and consequently conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
On February 2, 1999, the Company issued 100,000 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) Common Stock to
Thomas Benjamin, the Company's Vice-President of Business Development as
employee compensation valued at $175,000. The issuance was an isolated
transaction not involving a public offering and consequently conducted under an
exemption under Section 4(2) of the Securities Act of 1933.
On February 2, 1999, the Company issued 7,500 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) to an unrelated
individual in consideration for certain consultation services rendered valued at
$7,500. The issuance was an isolated transaction not involving a public
offering and consequently conducted under an exemption under Section 4(2) of the
Securities Act of 1933.
On February 2, 1999, the Company issued 5,000 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) to an employee of
the Company as employee compensation valued at $7,500. The issuance was an
isolated transaction not involving a public offering and consequently conducted
under an exemption under Section 4(2) of the Securities Act of 1933.
On February 4, 1999, the Company issued 1,555,000 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common Stock
to an unrelated accredited investor, resulting in net proceeds of
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$1,555,000 to the Company. The issuance was conducted under an exemption
provided by Rule 506 of Regulation D promulgated under the Securities Act of
1933 and Section 4(2) of the Securities Act of 1933.
On March 1, 1999, the Company issued 15,000 shares of "restricted" (as that term
is defined under Rule 144 of the Securities Act of 1933) Common Stock to the
Company's securities counsel, in consideration for legal services rendered
valued at $15,000. The issuance was an isolated transaction not involving a
public offering and consequently conducted under an exemption under Section 4(2)
of the Securities Act of 1933.
On April 7, 1999, the Company issued an aggregate of 75,000 "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) shares of the
Company's Common Stock in addition to warrants to purchase 125,000 "restricted"
(as that term is defined under Rule 144 of the Securities Act of 1933) shares of
the Company's Common Stock at an exercise price of $5.00 to an unrelated
"accredited" individual, in exchange for certain consultation services rendered
valued at $535,000. These issuances were conducted under an exemption provided
by Section 4(2) of the Securities Act of 1933 as well as Rule 506 and 701 of
Regulation D promulgated under the Securities Act of 1933.
In April, 1999, the Company completed a private placement offering of 1,280,000
"restricted" (as that term is defined under Rule 144 of the Securities Act of
1933) shares of the Company's Common Stock. The issuance was offered without
general solicitation or advertising under Rule 506 of Regulation D and Section
4(2) of the Securities Act of 1933 to unrelated "accredited" investors. An
aggregate of 840,000 shares were sold at a price of $1.00. After such shares
were sold, the Company amended its PPM, increasing the price of the offered
shares to $5.00. A total of 300,080 shares were sold at a price of $5.00. The
offering resulted in aggregate net proceeds to the Company of $2,340,400.
In August, 1999, the Company issued an aggregate of 53,000 "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) shares of the
Company's Common Stock at a price of $10.00 per share pursuant to a private
offering of the Company's Common Stock commencing on July 12, 1999 (the "July
12, 1999 Private Offering") to four "accredited" investors. The sales resulted
in aggregate net proceeds to the Company of $530,000. On September 9, 1999, the
Company lowered the offering price of its July 12, 1999 Private Offering to
$5.00 per share. As a result, 53,000 additional shares of the Company's Common
Stock was issued to the original investors in the July 12, 1999 Private Offering
to lower their net price to $5.00 per share. The issuances were offered without
general solicitation or advertising to unrelated accredited investors under Rule
506 of Regulation D and Section 4(2) of the Securities Act of 1933.
On September 1, 1999, the Company issued 5,000 "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) shares of the Company's
Common Stock to the Company's securities counsel in exchange for legal services
rendered valued at $25,000.
On September 14, 1999, the Company issued 2,500 "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) shares of the Company's
Common Stock to an unrelated consultant of the Company in exchange for certain
consultation services rendered valued at $26,250. The issuance was an isolated
transaction not involving a public offering and consequently conducted under an
exemption under Section 4(2) of the Securities Act of 1933.
In September 1999, the Company issued 105,133 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) shares of the
Company's Common Stock to unrelated third parties in consideration for the
build-out of tenant improvements valued at $157,700. The issuance was an
isolated transaction not involving a public offering and consequently conducted
under an exemption under Section 4(2) of the Securities Act of 1933.
On August 23, 1999, the Company issued 141,210 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) shares of the
Company's Common Stock pursuant to a "cashless exercise" option previously
issued to an unrelated third-party as part of the Company's reverse merger as
previously described. The issuance was an isolated transaction not involving a
public offering and consequently conducted under an exemption under Section 4(2)
of the Securities Act of 1933.
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Beginning October 1999 through January 2000, the Company issued 4,182,202
"restricted" (as that term is defined under Rule 144 of the Securities Act of
1933) shares of its Common Stock pursuant to a private placement of the
Company's common stock at a price of $1.50 per share, plus 295,186 shares for
offering costs, resulting in net proceeds of $6,273,303 (the "October
Offering"). The issuances were offered without general solicitation or
advertising under Rule 506 of Regulation D and Section 4(2) of the Securities
Act of 1933. Subsequent to the sale, the Company discovered that some
purchasers of the October Offering resold their shares in possible violation of
the Securities Laws. As a result, certain purchasers voluntarily returned
shares (totaling 1,173,574 shares) to the Company. The Company has made every
effort to insure that it complied with all applicable securities laws and that
all purchasers of the Company's October Offering received full and adequate
disclosure regarding the Company's operations. However, in the event that
portions of the October Offering were deemed to have been made in contradiction
of the Securities Act of 1933, as amended, the Company may face certain
contingent liabilities.
On October 8, 1999, the Company issued 300,000 "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) shares of its Common Stock
to an "accredited" investor at a price of $3.33 per share resulting in net
proceeds of $999,000. The issuance was an isolated transaction not involving a
public offering and consequently conducted under an exemption under Section 4(2)
of the Securities Act of 1933.
On October 18, 1999, the Company issued 291,429 "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) shares of its Common Stock
to an "accredited" unrelated shareholder upon conversion of a convertible note
in the amount of $500,000 previously issued. The issuance was an isolated
transaction not involving a public offering and consequently conducted under an
exemption under Section 4(2) of the Securities Act of 1933.
On October 21, 1999, the Company issued 30,000 "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) shares of its Common Stock
to an unrelated third-party for certain consultation services rendered to the
Company valued at $45,000. The issuance was an isolated transaction not
involving a public offering and consequently conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
On October 25, 1999, the Company sold an additional 1,000,000 shares of the
"restricted" Common Stock of the Company to an unaffiliated accredited
shareholder of the Company at a price of $1.00 per share resulting in proceeds
to the Company of $1,000,000. The issuance was an isolated transaction not
involving a public offering and consequently conducted under an exemption under
Section 4(2) of the Securities Act of 1933.
On November 18, 1999, the Company issued 2,000,000 "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) shares of its Common Stock
to an "accredited" investor at a price of $1.50 per share resulting in net
proceeds of $3,000,000. The issuance was an isolated transaction not involving
a public offering and consequently conducted under an exemption under Section
4(2) of the Securities Act of 1933.
On December 16, 1999, the Company issued 5,000 shares of "restricted (as that
term is defined under Rule 144 of the Securities Act of 1933) shares of its
Common Stock to an unrelated consultant of the Company in consideration for
certain consultation services rendered valued at $52,500.
In March 2000, the Company initiated a private offering of up to 7,500,000
shares of the Company's "restricted" Common Stock. As of April 15, 2000, the
Company has sold 580,000 shares resulting in net proceeds of $580,000. The
issuances were offered without general solicitation or advertising to unrelated
accredited investors under Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933.
On March 8, 2000, the Company issued 12,500 shares of "restricted" (as that term
is defined under Rule 144 of the Securities Act of 1933) Common Stock to the
Company's securities counsel, in consideration for legal services valued at
$12,500. The issuance was an isolated transaction not involving a public
offering and consequently conducted under an exemption under Section 4(2) of the
Securities Act of 1933.
On March 22, 2000, the Company issued 75,000 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) Common Stock to
the Company's securities counsel, in consideration for legal services
8
<PAGE>
valued at $75,000. The issuance was an isolated transaction not involving a
public offering and consequently conducted under an exemption under Section 4(2)
of the Securities Act of 1933.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Selected Financial Data:
As previously discussed, the Company was originally incorporated under the laws
of the State of Oklahoma on December 2, 1992 as S.K.B. Design, Inc. Between
1992 to 1996, the Company was inactive. On October 1, 1996, the Company
acquired certain technology and assets with the intention of developing a cd-rom
based multimedia yearbook product. On December 22, 1997, the Company changed
its name to CD-Rom Yearbook Company, Inc. to reflect its new business plan. Due
to certain technical and market difficulties, the business of CD-Rom did not
develop as expected. As a result, the Company ceased its operations in the fall
of 1998 and began a search for new business opportunities. On December 22,
1998, CD-Rom acquired all of the outstanding common stock of 2TheMart-Nevada, in
a business combination described as a "reverse merger." Selected financial data
has been included for the period December 22, 1998 (inception) to December 31,
1999.
The following table contains selected financial data of the Company and is
qualified by the more detailed financial statements and the notes thereto
provided in this Form 10-K. The financial data as of and for the period
December 22, 1998 (inception) to December 31, 1999, has been derived from the
Company's financial statements, which statements were audited by Corbin & Wertz.
For the Period December
22, 1998 (inception) to
December 31, 1999 or as
Selected Financial Data of December 31, 1999
- ------------------------------------ -------------------------
Net Sales and Interest Income $ 117,030
Net Loss $ (9,655,722)
Net Loss per Basic and Diluted Share $ (0.40)
Total Assets $ 16,076,528
Short-term Note Payable $ 1,775,000
Stockholders' Equity $ 12,024,905
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
After CD-Rom's merger with 2TheMart-Nevada, as previously discussed, the Company
discontinued its prior business plan and implemented in its place the Company's
current business plan to develop and launch an e-commerce Web site to facilitate
transactions between businesses and consumers and between consumers and
consumers. Between December 22, 1998 and January 8, 1999, 2TheMart-Nevada had
no activity of any significance including capital transactions and operating
activities. Accordingly, separate financial statements as of December 31, 1998
were not considered necessary, and therefore, this discussion and analysis will
focus on the Company's current business plan and operations.
During the period from December 22, 1998 (inception) through December 31, 1999,
the Company had no substantive revenues from its operations because it was in
the development stages and recently launched its e-commerce Web site. However,
the Company earned approximately $117,000 on interest on short-term investments
from cash raised during 1999. The Company incurred expenses of approximately
$9.8 million consisting primarily of payroll and related compensation, non-cash
stock and option issuances, professional fees and marketing expenses.
9
<PAGE>
Plan of Operations for the Twelve Months Ending December 31, 2000.
On April 14, 2000, the Company entered into an Agreement and Plan of
Reorganization between the Company, its wholly owned subsidiary, 2TheMart.com,
Inc., a Delaware Corporation formed solely for the purpose of reincorporating
the Company in the state of Delaware ("2TMD"), GoToWorld.com, Inc., a Delaware
Corporation ("GTW"), and GoToWorld's parent company Languageforce, Inc., a
Colorado Corporation ("LanguageForce"), whereby the Company will merge with and
into 2TMD, with 2TMD being the surviving Company. Pursuant to the agreement,
all of the Company's common stock will be exchanged for shares of 2TMD on a one
for one basis. As a result, the Company will effectuate a reincorporation from
an Oklahoma corporation into a Delaware corporation. Immediately subsequent to
the Company's merger with 2TMD, GTW will merge with and into the subsequent
combined company, now 2TMD. Pursuant to the agreement, all of the shares of GTW
will be exchanged for 52,930,931 shares of the common stock of 2TMD in a
business combination described as a "reverse merger." Subsequent to the merger
of GTW into 2TMD, 2TMD will change its name to "GotoWorld.com, Inc." Under the
terms of the agreement, Ian S. Simpson shall become the President, Chief
Executive Officer and Chairman of the Board of the surviving corporation; Steven
W. Rebeil, the Company's current Chairman of the Board, will relinquish all of
his positions with the Company. The closing of the agreement and effectiveness
of the proposed mergers is subject to shareholder approval of both Company and
GTW.
In contemplation of the proposed merger with GTW, the Company plans to integrate
GTW's and 2TM's business plans. GTW is a global communications and commerce
super portal. Its plan of operations is to become the gateway to the
business-to-business world markets. GTW's business solutions and services to be
provided will include the ability to instantly communicate between over 14
different languages with its Universal Translator technology licensed from
LanguageForce, Inc., GTW's former parent company. This technology allows total
access to the world's products and services without language barriers.
GTW's innovative advertising vehicles of Get Paid to Surf , Get Paid to Shop ,
and Get Paid to Chat , currently bring millions of visitors and members to its
global super portal. These visitors and members have access to the global
markets through new services to be provided as a result of the acquisition.
Those services are expected to include a worldwide business-to-business and
business-to-consumer directory-in localized languages; B2B and B2C auction
services; B2B and B2C e-commerce store front hosting and services; as well as
additional business solutions.
GTW plans to aggressively roll out its international expansion of localized
content specific super portals in over 10 countries utilizing its instant
translation capabilities in Chinese, Japanese, French, German, Korean, Spanish,
Italian, Portugese, Swedish and Danish.
Complete details regarding the Company's proposed merger and the business
operations of GTW will be disclosed in the Company's Schedule 14A Proxy
Statement ("Proxy Statement") to be filed shortly. Upon clearance by the
Securities and Exchange Commission, the Proxy Statement will be forwarded to all
shareholders of the Company. All eligible shareholders of the Company as of a
record date (to be determined in the Proxy Statement) will be given the
opportunity to vote on the proposed merger at the Company's upcoming annual
shareholder's meeting.
In the event that the Company's proposed merger with GTW is not accomplished as
planned, the Company intends on continuing with the development of its current
e-commerce Web site.
Liquidity
Net cash used in operating activities was $6.2 million, due primarily to the net
loss of $9.7 million offset by non-cash compensation expense for stock and
options, and an increase in accounts payable and current liabilities totaling
$1.2 million and $2.2 million, respectively.
Cash used in investing activities was $11.3 million, due to the purchase of
computer hardware and development of software.
10
<PAGE>
Cash provided by financing activities was $20 million that was due to the sale
of common stock and proceeds from the issuance of notes payable partially offset
primarily by the repayment of a note payable totaling $17.7 million, $2.7
million and $0.3 million, respectively. Additionally, a note payable totaling
$0.5 million was converted into 291,429 shares of common stock and a $2.0
million note payable was forgiven by the Chief Executive Officer.
On November 18, 1999, the Company entered into a payment agreement for the
satisfaction of the remaining amounts owed for the Company's Web site as well as
additional services provided by IBM relating to the Web site. The Company will
pay IBM approximately $1.8 million plus interest at a rate of 13.5% per annum
compounded monthly beginning November 1, 1999, to be paid in twelve equal
monthly payments of principal and interest totaling $162,552, with the first
payment due on January 31, 2000. The Company has withheld payments to IBM
beginning March 2000 pending resolution of product quality and repair issues
regarding the Company's Web site.
Lack of Profitability, Potential Losses
From its inception in December 1998, through December 31, 1999, the Company has
experienced aggregate losses of $9,655,722. Results of operations in the future
will be influenced by numerous factors including, among others, expansion, the
Company's ability to drive traffic to its web site, to attract affiliates,
provide superior customer service and retain qualified personnel. The Company
may incur problems, delays, expenses, and difficulties during this stage, any of
which may be beyond the Company's control. These include, but are not limited
to, unanticipated regulatory compliance, marketing problems and intense
competition that may exceed current estimates. There is no assurance that the
Company will ever operate profitably.
Additionally, the Company's financial statements have been prepared on the basis
of a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. The Company had not yet
generated revenues from Web site operations and, at December 31, 1999, had
accumulated a deficit from its operating activities. Continuation of the
Company as a going concern is dependent upon, among other things, obtaining
additional capital, meeting other obligations under various agreements and
achieving satisfactory levels of profitable operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
As of April 30, 2000, the Company had $262,109 in cash and cash equivalents.
However, $220,000 is "restricted" cash in the form of certificates of deposits
securing existing lines of credit. The Company does not currently have
sufficient funds to meet its operating expenses. In contemplation of its
proposed merger, the Company has ceased its capital raising efforts and has
taken its Web site off line. Pursuant to an Interim Operating Agreement between
the Company and GTW effective April 19, 2000, GTW has agreed to fund the
Company's daily operating expenses pending completion of the merger, as
previously discussed.
Capital Expenditures
The Company contracted with IBM to acquire hardware and software for its Web
site operations and corporate infrastructure and the development of its Web site
in the amount of approximately $11.0 million of which $7.9 million is for
hardware and software and $3.1 million is for Web site development. As of
November 19, 1999 the Company has paid $9.2 million of its obligation. On
November 18, 1999, the Company entered into a payment agreement with IBM whereby
the Company will pay the remaining amounts owed for its Web site in 12 monthly
payments beginning January 31, 2000. The Company has withheld payments to IBM
beginning March 2000 pending resolution of product quality and repair issues
regarding the Company's Web site.
The Company is also required to pay for the space that it has secured with
Exodus at Exodus' Sterling, Virginia data center for the Company's Internet
connectivity. The Company's minimum expected monthly obligation to Exodus
pursuant to its contract is approximately $78,000, which may increase depending
on the Company's bandwidth usage. At December 31, 1999, the Company owes Exodus
approximately $286,000. The Company has also contracted with Ciber for the
implementation and specific coding projects of the Company's back-end accounting
and billing software. The Company currently owes Ciber approximately $332,000
for the completion of its work. Additionally, the Company has contracted with
Lawson to license the use of Lawson's accounting software system. Under the
terms of the agreement with Lawson, the Company paid Lawson approximately
$129,000 with $300,000
11
<PAGE>
due in monthly payments of $100,000 beginning January 2000, and has the option
of either paying a one time flat fee to Lawson on May 1, 2000 in the amount of
$573,070 or a fee based on a percentage of the Company's revenue. Under the
terms of the agreement, the Company is required to pay Lawson $30,000 upon the
Company reaching $50 million in revenue.
The Company is currently in discussions with IBM, Exodus, Ciber, and Lawson for
the satisfaction of the amounts due IBM, Exodus, Ciber, and Lawson. The Company
does not currently have sufficient funds to meet those commitments. Failure to
successfully negotiate a reduction of the amounts due or failure to raise
additional funding to meet those expenditures would have a materially adverse
effect on the Company's operations.
Results of Operations
The Company has not realized any material operating revenue to date.
Additionally, the Company does not expect any material increase in operating
revenues until after the Company begins aggressively marketing the Web site.
Since the Company has no historical operating revenues to gauge future operating
revenues upon, it is uncertain as to what level of revenues, if any, the Company
may achieve from its Web operations.
As a result of the development stage nature of the Company's prior operations,
the Company is not reporting any impact on its operations from inflation or
changing prices.
Quantitative and Qualitative Disclosures About Market Risk
The Company is not exposed to material risk based on interest rate fluctuation,
exchange rate fluctuation, or commodity price fluctuation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related reports of independent auditors listed in
the accompanying index are filed as part of this report. See "Index to
Financial Statements" on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Deloitte & Touche LLP was engaged to audit the financial statements of CD-Rom
Yearbook Company for the years ended December 31, 1997 and 1998. In July 1999,
Deloitte & Touche LLP resigned from such engagement prior to issuing any
reports. There were no disagreements of the type required to be reported by
this Item 14 between Deloitte & Touche LLP and the CD-Rom Yearbook Company.
Subsequently, on August 10, 1999, the Company retained the services of Grant
Thornton LLP ("GT"), Certified Public Accountants to audit its 1999 financial
statements, at which time the Company determined that audited financials of
CD-Rom Yearbook Company was not required for its Form 10 filing but rather
audited financials of the combined entity for the period ended June 30, 1999
were required.
On March 22, 2000, the Company received correspondence from GT stating that GT
had resigned as independent accountants for the Company as of March 17, 2000.
The resignation of GT was not approved by the Company's Board of Directors. In
resigning, GT cited the following reportable events (the "Reportable Events"):
1. That during the period in which GT was engaged as independent auditors,
GT noted certain events or circumstances that led it to conclude that it would
no longer be able to rely on management's representations; and
2. That GT believes that the Company does not have adequate internal
controls or the appropriate level of management or board oversight over the
Company's policies and practices.
The Company has authorized GT to respond fully to any successor independent
accounting firm regarding the Reportable Events and GT's resignation as auditors
of the Company.
12
<PAGE>
GT had served as the Company's independent accountant and had previously audited
and issued a report dated August 24, 1999 on the Company's financial statements
for the period from December 22, 1998 (inception) to June 30, 1999. To the best
of the Company's knowledge, there were no disagreements with GT on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
GT, would have caused GT to make reference to the subject matter of the
disagreement in its report.
The Company's Board of Directors is presently conducting an investigation of the
Company's policies and procedures and is in the process of implementing
additional internal controls in order to ensure the integrity of the Company's
policies and procedures. Additionally, Dominic J. Magliarditi, the Company's
President, Chief Operating Officer, Secretary, Chief Financial Officer, and a
member of its Board of Directors has relinquished all of his positions with the
Company effective March 28, 2000. The Company is also currently actively
recruiting additional officers and board members.
In connection with its proposed merger with GoToWorld.com, Inc., ("GoToWorld")
the Company has agreed to appoint Ian S. Simpson, GoToWorld's current Chairman
of the Board and Chief Executive Officer, as the merged Company's CEO, Chairman,
and member of its board of directors. The Company believes that the changes
already effectuated as well as the changes in management contemplated in its
proposed merger with GoToWorld will substantially resolve the issues raised by
GT.
Management of the Company believes that the Company's internal controls are
adequate and that management's representations can be relied on by the Company's
auditors.
On March 23, 2000, the Company's Board of Directors approved the appointment of
and formally engaged, the firm of Corbin & Wertz ("C&W"), as the Company's
principal accountant. Thereupon, C&W began auditing the Company's financial
statements for the fiscal year ended December 31, 1999. As part of the audit,
C&W will review the Company's internal control policies and procedures.
From the period from December 22, 1998 (inception) to June 30, 1999, and
subsequent interim period, prior to engaging C&W, the Company has not consulted
C&W regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements; or (ii) any matter that
was either the subject of a disagreement or a reportable event.
13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of the current directors and
executive officers of the Company, the principal offices and positions with the
Company held by each person and the date such person became a director or
executive officer of the Company. The executive officers of the Company are
elected annually by the Board of Directors. The directors serve one-year terms
and until their successors are elected. The executive officers serve terms of
one year or until their death, resignation or removal by the Board of Directors.
There are no family relationships between any of the directors and executive
officers. In addition, there was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer.
The directors and executive officers of the Company as of May 1, 2000, are as
follows:
Name Age Position(s)
- --------------------------------------------------------------------------------
Steven W. Rebeil 37 Chairman of the Board of Directors, Director
Thomas N. Benjamin 35 Vice President of Strategic Planning & Analysis
STEVEN W. REBEIL has served as Chairman of the Board and a Director of the
Company since January 1999. Mr. Rebeil was formerly the Company's Chief
Executive Officer and Chairman of the Board in 1999. Mr. Rebeil has been the
principal shareholder and Chairman of the Board of Directors of Gem Development
Company, a real estate development company. From 1994 to 1997, Mr. Rebeil, was
a principal and officer of Gem Gaming, Inc., which designed and developed hotel
projects. From 1989 to 1996, Mr. Rebeil was a principal and officer of Gem
Homes, Inc., a Las Vegas, Nevada developer of residential real estate
properties. Between 1982 to 1989, Mr. Rebeil founded and managed R&R
Landscaping, Inc., a Las Vegas area landscape maintenance and construction
company.
THOMAS N. BENJAMIN has served as the Company's Vice President of Strategic
Planning and Analysis since August 1999 and prior to that, the Company's Vice
President of Business Development from January 1999 to July 1999. From July
1995 to December 1998 Mr. Benjamin worked as a consultant for a variety of
companies advising clients on issues ranging from technological intellectual
property to real estate development. Between January 1994 and April 1995, Mr.
Benjamin worked for SpecTron Communications Corporation as its Vice President of
Operations which developed credit card activated wireless phones. From February
1990 to December 1993, Mr. Benjamin worked for The Clifford Companies, a real
estate management and restructuring company, where he last held the position of
Vice President and Regional Manager.
2TheMart is presently seeking additional management and directors.
ITEM 11. EXECUTIVE COMPENSATION
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the period December 22, 1998 (inception)
to December 31, 1999. Other than as set forth herein, no executive officer's
salary and bonus exceeded $100,000 in the period. The following information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether paid or
deferred.
14
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- -----------------------
Awards Payouts
------ -------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ----------------- ------------ ----------- ------------- -------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dominic 1999 159,036 -0- -0- -0- -0- -0- -0-
J. Magliarditi
(Former
President, COO,
Secretary, and
CFO)
Steven W. 1999 153,267 -0- -0- -0- -0- -0- -0-
Rebeil
(Chairman of the
Board and
former CEO)
Thomas N. 1999 94,423 -0- -0- 175,000 300,000 -0- -0-
Benjamin
(V.P. of
Strategic
Planning and
Analysis)
Robert Allende 1999 124,904 -0- -0- -0- 110,000 -0- -0-
(Former Chief
Technology
Officer)
Mark Rosenberg 1999 71,539 -0- -0- -0- 125,000 -0- 23,368
(Former V.P. of
Marketing
and Sales)
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS FOR PERIOD
DECEMBER 22, 1998 (INCEPTION) TO DECEMBER 31, 1999
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT
SECURITIES OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED EXERCISE GRANT DATE
GRANTED TO ALL PRICE EXPIRATION PRESENT VALUE
NAME (#) EMPLOYEES ($/SH) DATE ($)
<S> <C> <C> <C> <C> <C>
Dominic J. Magliarditi -0- n/a n/a n/a n/a
Steve W. Rebeil -0- n/a n/a n/a n/a
Thomas N. Benjamin(2) 110,000 39% 3.00 9/1/05 975,000
Robert Allende(3) 360,000 14% 2.375/5.00 10/19/00 675,000
Mark Rosenberg(1) 125,000 16% 5.00 03/24/00 2,000,000
</TABLE>
(1) Represents vested options to acquire 12,500 shares of the Company's
common stock at an exercise price of $5.00 per share and 112,500 options to
acquire shares of the Company's common stock at an exercise price of $5.00 per
share vesting over a period of four years beginning on November 7, 1999 in
accordance with Mr. Rosenberg's employment offer letter. On September 24, 1999,
Mr. Rosenberg resigned his position as the Vice-President of Marketing and
Sales. Under the terms of his employment offer letter, all non vested options
(112,500) were immediately cancelled. In addition, the 12,500 vested options
must be exercised by Mr. Rosenberg within six months of Mr. Rosenberg's
termination of employment.
(2) Represents vested options to acquire 150,000 shares of the Company's
common stock at an exercise price of $3.00 per share and 150,000 options to
acquire shares of the Company's common stock at an exercise price of $3.00 per
share which vest over a period of two years beginning September 1, 2000, in
accordance with Mr. Benjamin's employment offer letter. Pursuant to the terms
of Mr. Benjamin's offer letter, all 300,000 options will automatically vest as
of the closing of the Company's proposed merger with GoToWorld.com, Inc. Does
not include options to purchase 200,000 shares of the Company's common stock at
an exercise price of $4.75 issued pursuant to the Company's 2000 Stock Incentive
Plan which vest over a period of four years. Pursuant to a decision of the
Board of Directors, 25% (50,000 options) vest upon closing of the Company's
merger with GoToWorld.com.
(3) Represents vested options to acquire 25,000 shares of the Company's
common stock at an exercise price of $5.00; vested options to acquire 11,667
shares of the Company's common stock at an exercise price of $2.375; 50,000
options to acquire shares of the Company's common stock at an exercise price of
$5.00 per share vesting over a period of three years beginning on February 14,
2001 in accordance with Mr. Allende's employment offer letter; and 23,333
options to acquire shares of the Company's common stock at an exercise price of
$2.375 per share vesting over two years beginning on October 6, 1999. Does not
include 250,000 options to acquire shares of the Company's common stock at an
exercise price of $4.75 vesting over four years issued pursuant to the Company's
2000 Stock Incentive Plan in fiscal 2000. The Company laid off Mr. Allende on
April 19, 2000 as a result of its planned merger with GoToWorld.com, Inc.
Consequently, all 75,000 options to purchase the Company's Common stock at an
exercise price of $5.00 per share are deemed automatically vested pursuant to
Mr. Allende's employment letter. The remaining unvested 23,333 options at
$2.375 and 250,000 options issued pursuant to the Company's stock incentive plan
automatically expired and are deemed cancelled due to Mr. Allende's termination
except for 25% of the options issued under the 2000 Stock Incentive Plan
(62,500) which were vested by a decision of the Board of Directors as to all
employees as a result of the Company's proposed merger.
15
<PAGE>
<TABLE>
<CAPTION>
OPTION EXERCISES FOR PERIOD
DECEMBER 22, 1998 (INCEPTION) TO DECEMBER 31, 1999
AND OPTION VALUES AS OF DECEMBER 31, 1999
SHARES NUMBER OF UNEXERCISED SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON UNDERLYING OPTIONS IN-THE-MONEY OPTIONS
EXERCISE VALUE REALIZED AT DECEMBER 31, 1999 AT DECEMBER 31, 1999 ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------- ------------ --------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Dominic J. Magliarditi n/a n/a n/a n/a
Steve W. Rebeil n/a n/a n/a n/a
Thomas N. Benjamin -0- -0- 150,000/150,000 581,250/581,250
Robert Allende -0- -0- 36,667/73,333 99,375/198,750
Mark Rosenberg -0- -0- 12,500/0 0/0
</TABLE>
COMPENSATION ARRANGEMENTS
On September 3, 1999, the Company entered into an employment offer letter with
Thomas N. Benjamin, the Company's Vice-President of Strategic Planning &
Analysis, whereby the Company will pay Mr. Benjamin an annual salary of
$125,000. Pursuant to the letter, Mr. Benjamin's annual salary increased to
$150,000 on January 1, 2000. The letter also requires the Company to provide
health benefits to Mr. Benjamin and his family and to allow Mr. Benjamin the
opportunity to participate in the Company's retirement, stock option and bonus
plans as they may be established. Under the letter, in the event of a
termination of Mr. Benjamin's employment with the Company for reasons other than
cause, Mr. Benjamin will also be entitled to receive his base salary for a
period of twelve months after termination. Pursuant to the letter, the Company
has also agreed to grant options for up to 300,000 shares of common stock of the
Company at an exercise price of $3.00 with 150,000 options vesting immediately
and the remainder over a period of two years.
On March 6, 1999, the Company entered into an employment offer letter with
Robert Allende, the Company's Chief Technology Officer, whereby the Company will
pay Mr. Allende an annual salary of $125,000. Pursuant to the letter, Mr.
Allende's salary increased to $150,000 on September 1, 1999. On December 31,
1999, the Company, under the letter, paid Mr. Allende $12,500. Pursuant to the
letter, the Company has also agreed to grant options for up to 50,000 shares of
common stock of the Company to be granted at the discretion of the Board of
Directors of the Company on the first anniversary of Mr. Allende's employment
with the Company. Additionally, the letter granted Mr. Allende options to
purchase up to 75,000 shares of the Company's common stock at an exercise price
of $5.00 per share, vesting over a period of three years. The letter also
requires the Company to provide health benefits to Mr. Allende and his family
and to allow Mr. Allende the opportunity to participate in the Company's
retirement, stock option and bonus plans as they may be established. On April
19, 2000, the Company laid-off Mr. Allende as a result of its planned merger
with GoToWorld.com, Inc. Pursuant to his employment offer letter, the Company
is obligated to continue paying Mr. Allende his regular salary for a period of
three months from the date of his termination.
COMPENSATION OF DIRECTORS
Directors currently receive no cash compensation for their services in that
capacity. Reasonable out-of-pocket expenses may be reimbursed to directors in
connection with attendance at meetings.
BOARD INTERLOCKS AND INSIDER PARTICIPATION
Mr. Rebeil currently serves as an officer and director of the Company and
participates in the deliberations of the Company's Board of Directors concerning
executive officer compensation.
BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION
Compensation for the Company's Chief Executive Officer and other executives is
determined by the full board of directors which currently consists of Mr.
Rebeil. As the Company is a development stage company with little or no
historical performance information, the Company determined the initial year's
compensation for its CEO and executive officers with reference to comparable
compensation granted to executive officers of similar companies in the Internet
and high technology field.
2000 STOCK INCENTIVE PLAN
On February 14, 2000, the Company's Board of Directors approved the
2TheMart.com, Inc.'s 2000 Stock Incentive Plan (the "Plan"). Under the terms of
the Plan, a Committee established by the Board of Directors (the "Committee")
has the sole authority to determine which of the eligible persons shall receive
awards pursuant to the Plan. The Plan authorizes the Committee to award to
eligible individuals, Stock Options, Stock Appreciation Rights, Restricted
Stock, Stock Bonuses, or Performance Share Awards (the "Awards"). Under the
Plan, the number of shares underlying such Awards, and other terms and
16
<PAGE>
number of shares underlying such Awards, and other terms and conditions of the
Awards granted under the Plan are subject to the sole discretion of the
Committee to the extent they do not conflict with the terms of the Plan. Up to
20% of the common stock the Company outstanding as of February 14, 2000 and
increasing 20% of any subsequent additional increases in the outstanding common
stock of the Company up to a maximum of 15,000,000 shares, are reserved for
issuance under the Plan. As of March 31, the Company had issued options for the
purchase of an aggregate of 1,862,110 shares of the Company's common stock under
the Plan to 73 employees of the Company. Additionally, options to purchase an
aggregate of 759,930 shares of the Company's common stock were issued to 67
employees of the Company prior to the adoption of the Plan and are not included
thereby.
Pursuant to the Plan, in the event of an acquisition, merger, or other change in
the Company's control, all awards issued under the Plan automatically vest as to
existing and recently terminated employees except where otherwise determined by
the Company's Board of Directors. With regards to the Company's proposed merger
with GoToWorld.com, Inc, the Company's Board of Directors has determined to vest
25% of all outstanding awards under the Plan.
Approval and ratification of the Plan will require the affirmative vote of the
holders of a majority of the outstanding shares of the Company's common stock
present or represented and voting at the Company's 2000 annual shareholder's
meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000 , certain information with
respect to the number of shares of common stock of the Company beneficially
owned by (i) each officer and director of the Company; (ii) each person known to
beneficially own more than 5% of the Company's common stock; and (iii) all
directors and executive officers as a group. The Company has no other class of
stock outstanding.
<TABLE>
<CAPTION>
Name and Address of Percent of
Beneficial Owners and Management Number of Shares Shares of Common Stock
- ----------------------------------------------- ------------------------ ----------------------
<S> <C> <C>
Steven W. Rebeil(1)
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612 10,400,000 33.73%
Dominic J. Magliarditi(2)
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612 3,545,000 11.50%
Thomas N. Benjamin(3)
18301 Von Karman Avenue, 7th Floor
Irvine, California 92612 250,000 <1%
Net Investments Inc.
6200 Cleveland Drive
Cleveland Ohio, 44135 4,519,200 14.72%
All directors and officers as a group (2 total) 14,244,666 46.20%
</TABLE>
(1) Denotes shares beneficially owned by Mr. Rebeil but held of record by PZ
Holdings, Limited. Mr. Rebeil is the general partner of PZ Holdings, Limited.
(2) Denotes shares beneficially owned by Mr. Magliarditi (the Company's
former President, COO, Secretary and CFO) but held of record by DFM Holdings,
Ltd. Mr. Magliarditi is a general partner of DFM Holdings, Limited. On
November 18, 1999 and in connection with the additional capital raised by the
Company through its recent stock sales, Mr. Magliarditi contributed 2.9 million
shares of common stock back to the Company.
(3) Includes vested options to acquire 150,000 shares of the Company's
common stock at an exercise price of $3.00 per share. Does not include an
aggregate of 150,000 options to acquire shares of the Company's common stock at
an exercise price of $3.00 per share vesting over a period of two years
beginning September 1, 2000, in accordance with Mr. Benjamin's employment offer
letter. Pursuant to the terms of Mr. Benjamin's offer letter, all 300,000
options will automatically vest as of the closing of the Company's proposed
merger with GoToWorld.com, Inc. In addition, 50,000 options granted to Mr.
Benjamin pursuant to the 2000 Stock Incentive Plan vest upon close of the
Company's merger with GoToWorld.com, Inc
The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
17
<PAGE>
investment power with respect to securities. Shares of common stock subject to
options or warrants currently exercisable, or exercisable within 60 days, are
deemed outstanding for purposes of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On November 18, 1999, Dominic J. Magliarditi, the Company's then President and
Chief Operating Officer agreed to contribute 2.9 million shares of the Company's
common stock back to the Company's treasury at the request of other potential
investors. Consequently, these shares were cancelled and returned to the
Company's treasury.
On May 2, 2000, the Company entered into a short-term note with PZ Holdings,
Ltd., a limited partnership controlled by Steven W. Rebeil, the Company's
Chairman and sole director for $15,000. Under the terms of the note, the
Company is obligated to repay the principal amount of $15,000 plus one interest
payment equal to 10%. upon demand by the holder The amounts owed under the note
is secured by the Company's assets.
On May 2, 2000, the Company entered into a short-term note with DFM Holdings,
Ltd., a limited partnership controlled by Dominic J. Magliarditi, the Company's
former President, COO, CFO, Secretary, and a director for $15,000. Under the
terms of the note, the Company is obligated to repay the principal amount of
$15,000 plus one interest payment equal to 10% upon demand by the holder. The
amounts owed under the note is secured by the Company's assets.
18
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1 and 2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The financial statements listed in the Index to Financial Statements on Page F-1
of this report are filed as part of this report.
(a)(3) EXHIBITS
INDEX TO EXHIBITS
EXHIBIT NUMBER
2.1* Reorganization and Stock Purchase Agreement dated December
22, 1998
2.2 Agreement and Plan of Reorganization dated April 14, 2000
3.1* Articles of Incorporation
3.2* Amended Articles of Incorporation, filed with the Oklahoma
Secretary of State on December 22, 1997
3.3* Certificate of Merger, filed with the Oklahoma Secretary of
State on January 8, 1999.
3.4* Amended Articles of Incorporation, filed with the Oklahoma
Secretary of State on February 16, 1999
3.5* Bylaws of the Company
10.1* Lease by and between Cruttenden Roth Incorporated and K23
LP, assigned to 2TheMart.com, Inc. relating to property
located at 18500 Von Karman Avenue, Suite 120, Irvine, CA
92715.
10.2* Contract dated February 3, 1999 and May 28, 1999 by and
between 2TheMart.com, Inc. and International Business
Machines, Inc.
10.3* Contract dated April 29, 1999 by and between 2TheMart.com,
Inc. and Exodus Communications, Inc.
10.4* Employment agreement by and between 2TheMart.com, Inc. and
Steven W. Rebeil dated February 1, 1999
10.5* Employment agreement by and between 2TheMart.com, Inc. and
Dominic J. Magliarditi dated February 1, 1999
10.6* Employment agreement by and between 2TheMart.com, Inc. and
Robert Allende dated March 6, 1999
10.7* Employment agreement by and between 2TheMart.com, Inc. and
Mark Rosenberg dated May 7, 1999
10.8* Agreement between mPRm, Inc. and 2TheMart.com, Inc. dated
June 11, 1999
10.9* Agreement between USWeb/CKS and 2TheMart.com, Inc. dated
June 18, 1999
10.10* Co-Branding and Advertising Agreement between I-Escrow,
Inc. and 2TheMart.com, Inc. dated June 21, 1999.
19
<PAGE>
10.11* Agreement between Summit Group and 2TheMart.com, Inc. dated
June 24, 1999.
10.12* Agreement between Lawson Association, Inc. and
2TheMart.com, Inc. dated July 16, 1999.
10.13* IBM Computer Hardware Agreement between IBM and
2TheMart.com, Inc. dated August 5, 1999.
10.14* Promissory Note in the amount of $500,000 dated August 8,
1999.
10.15* Promissory Note in the amount of $250,000 dated September
10, 1999
10.16* Employment letter agreement by and between 2TheMart.com,
Inc. and Thomas N. Benjamin dated September 3, 1999
10.17 Lease by and between 2TheMart.com, Inc., and Dah Chong Hong
Trading Corporation for the lease of that certain real
property located at 362 Fifth Avenue, New York, New York
10001.
10.18 Interim Operating Agreement by and between GoToWorld.com,
Inc. and 2TheMart.com, Inc. dated April 19, 2000.
10.19 2000 Stock Incentive Plan
16.1* Letter from Deloitte and Touche LLP
16.2* Letter from Grant Thornton LLP
27.1 Financial Data Schedule
___________________
* Previously Filed
+ To be filed with the Company's Schedule 14A Proxy Statement
(b) REPORTS ON FORM 8-K
On March 29, 2000, the Company filed a Report on Form 8-K regarding the
resignation of its then independent accountants Grant Thornton.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
2TheMart.com, Inc.
Date: May 23, 2000 By: /s/ Steven W. Rebeil
Steven W. Rebeil
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ Steven W. Rebeil
Steven W. Rebeil
Sole Director
Date: May 23, 2000
21
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 22, 1998 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1999
WITH
INDEPENDENT AUDITORS' REPORT THEREON
22
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-1
Balance Sheet as of December 31, 1999 . . . . . . . . . . . . . . F-2
Statement of Operations for the period from December 22, 1998
(date of inception) to December 31, 1999. . . . . . . . . . . . . F-3
Statement of Stockholders' Equity for the period from
December 22, 1998 (date of inception) to December 31, 1999 . . . . . . . F-4
Statement of Cash Flows for the period from December 22, 1998
(date of inception) to December 31, 1999. . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
2TheMart.com, Inc.
We have audited the accompanying balance sheet of 2TheMart.com, Inc. (the
"Company") as of December 31, 1999, and the related statements of operations,
stockholders' equity and cash flows for the period from December 22, 1998 (date
of inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 2TheMart.com, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
period from December 22, 1998 (date of inception) through December 31, 1999 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3, the Company
has incurred a net loss of $9,655,722 since inception, has negative working
capital of $1,255,565 at December 31, 1999, has no substantive revenues since
inception and has significant contingent liabilities. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
As discussed in Note 3, the ability of the Company to continue in existence is
dependent primarily upon closing its proposed merger transaction and obtaining
additional debt and equity financing to fund its short-term operating expenses,
capital expenditure requirements and marketing needs, as well as the successful
resolution of the contingent liabilities and the generating of income from
strategic alliances and from the Company's web site. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts (including the realizability of long-lived assets
under SFAS No. 121), or the amount and classification of liabilities that might
result from the outcome of this uncertainty.
CORBIN & WERTZ
Irvine, California
May 15, 2000
<PAGE>
<TABLE>
<CAPTION>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 2,521,770
Prepaid expenses 274,288
------------
2,796,058
------------
Property and equipment, at cost:
Computer hardware and software 12,148,137
Furniture, fixtures and other office equipment 429,611
Leasehold improvements 648,168
------------
13,225,916
Less accumulated depreciation and amortization (372,099)
------------
12,853,817
------------
Other assets:
Restricted cash 220,224
Other 206,429
------------
426,653
------------
$16,076,528
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,750,805
Accrued liabilities 525,818
Note payable 1,775,000
------------
Total current liabilities 4,051,623
------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized;
no shares issued and outstanding -
Common stock, $0.0001 par value; 50,000,000 shares authorized;
29,482,016 shares issued and outstanding 2,948
Additional paid-in capital 23,016,942
Deferred compensation expense (1,339,263)
Deficit accumulated during the development stage (9,655,722)
------------
Total stockholders' equity 12,024,905
------------
$16,076,528
============
</TABLE>
- --------------------------------------------------------------------------------
See independent auditors' report and
accompanying notes to financial statements
F-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 22, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
Sales and interest income $ 117,030
------------
Expenses:
Payroll and related expenses 1,916,634
Professional fees 2,501,310
Value of non-cash stock and option issuances 1,250,296
Marketing 924,512
Depreciation 372,099
Interest 79,975
Other general and administrative 2,727,926
------------
9,772,752
------------
Net loss $(9,655,722)
============
Basic and diluted loss per common share $ (0.40)
============
Basic and diluted weighted average shares outstanding 24,366,569
============
</TABLE>
- --------------------------------------------------------------------------------
See independent auditors' report and
accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEFERRED DEVELOPMENT
SHARES AMOUNT CAPITAL EXPENSE STAGE TOTAL
------------- ------------ ------------ ----------- ------- -----------
Founders' shares, December 22, 1998 17,800,000 $ 1,780 $ - $ - $ - $ 1,780
Subsequent adjustments to founders' shares:
Forgiveness of note and accrued interest
payable to a founder in October 8, 1999 - - 2,018,411 - - 2,018,411
Return of common stock by founder on
November 18, 1999 (2,900,000) (290) - - - (290)
------------- ------------- ------------- ---------- ------ -----------
Adjusted founders' shares 14,900,000 1,490 2,018,411 - - 2,019,901
Shares issued in merger to shareholders of
CD-Rom Yearbook Company, Inc. on
January 8, 1999 2,291,850 229 (229) - - -
Stock sold for cash:
January 8, 1999 at $1.00 per share 855,000 85 854,915 - - 855,000
January 8, 1999 at $2.00 per share 62,500 6 124,994 - - 125,000
January 29 1999 at $1.00 per share 1,000,000 100 999,900 - - 1,000,000
February 4, 1999 at $1.00 per share 1,555,000 155 1,554,845 - - 1,555,000
April 1999 at $1.00 per share, including
115,000 shares and 125,000 warrants
issued for offering costs 980,000 98 864,902 - - 865,000
April 1999 at $5.00 per share 300,080 30 1,500,370 - - 1,500,400
August 1999 at $10.00 per share 53,000 5 529,995 - - 530,000
October 8, 1999 at $3.33 per share 300,000 30 998,970 - - 999,000
October 25, 1999 at $1.00 per share 1,000,000 100 999,900 - - 1,000,000
November 18, 1999 at $1.50 per share 2,000,000 200 2,999,800 - - 3,000,000
October 1999 to December 1999 at $1.50
per share, including 295,186 shares issued
for offering costs 3,303,814 330 6,272,973 - - 6,273,303
Non-cash issuances of stock:
January 8, 1999 at $0.24 per share to
attorney for services 80,000 8 19,426 - - 19,434
January 25, 1999 at $1.00 per share to
third party for software 40,000 4 39,996 - - 40,000
February 2, 1999 at $1.75 per share to
employee for compensation 100,000 10 174,990 - - 175,000
February 2, 1999 at $1.50 per share to
employee for compensation 5,000 1 7,499 - - 7,500
February 2, 1999 at $1.00 per share to
consultant for services 7,500 1 7,499 - - 7,500
March 1, 1999 at $1.00 per share to
attorney for services 15,000 2 14,998 - - 15,000
September 1999 to adjust August 1999
offering to $5.00 per share 53,000 5 (5) - - -
September 1, 1999 at $1.00 per share to
attorney for services 5,000 1 24,999 - - 25,000
September 14, 1999 at $10.50 per share
to consultant for services 2,500 - 26,250 - - 26,250
September, 1999 at $1.50 per share
to third parties for tenant improvements 105,133 11 157,689 - - 157,700
</TABLE>
- --------------------------------------------------------------------------------
See independent auditors' report and
accompanying notes to financial statements
F-4
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED
FOR THE PERIOD FROM DECEMBER 22, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DEFICIT
ACCUMULATED
ADDITIONAL DEFERRED DURING THE
COMMON STOCK PAID-IN COMPENSATION DEVELOPMENT
SHARES AMOUNT CAPITAL EXPENSE STAGE TOTAL
------------ ------------ ------------- ------------ ------------ ------------
October 21, 1999 at $1.50 per share
to consultant for services 30,000 3 44,997 - - 45,000
December 16, 1999 at $10.50 per share
to consultant for services 5,000 1 52,499 - - 52,500
Conversion of note and accrued interest
payable on October 18, 1999 at $1.75
per share 291,429 29 509,998 - - 510,027
Cashless exercise of stock options on
August 23, 1999, net of 31,590 shares
redeemed 141,210 14 (14) - - -
Intrinsic value of stock options issued to
employees - - 2,216,375 (1,339,263) - 877,112
Net loss - - - - (9,655,722) (9,655,722)
------------ ------------ ------------- ------------ ------------ ------------
Balances, December 31, 1999 29,482,016 $ 2,948 $ 23,016,942 $(1,339,263) $(9,655,722) $12,024,905
============ ============ ============= ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
See independent auditors' report and
accompanying notes to financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 22, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
<S> <C>
Cash flows from operating activities:
Net loss $ (9,655,722)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 372,099
Loss on disposition of software 40,000
Value of non-cash stock and option issuances 1,250,296
Accrued interest on notes payable converted to common stock 28,438
Change in operating assets and liabilities:
Prepaid expenses and other assets (480,717)
Accounts payable and accrued liabilities 2,276,623
-------------
Net cash used in operating activities (6,168,983)
-------------
Cash flows used in investing activities:
Purchases of property and equipment and costs incurred for development
of software and web site (11,293,216)
-------------
Cash flows from financing activities:
Proceeds from issuances of common stock, 17,704,193
Proceeds from issuances of notes payable 2,750,000
Repayment of note payable (250,000)
Net change in restricted cash (220,224)
-------------
Net cash provided by financing activities 19,983,969
-------------
Net increase in cash and cash equivalents 2,521,770
Cash and cash equivalents at beginning of period -
-------------
Cash and cash equivalents at end of period $ 2,521,770
=============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 11,600
=============
Supplemental disclosures of non-cash investing and financing activities:
Conversion of short-term note and accrued interest payable to
common stock $ 510,027
=============
Conversion of short-term note and accrued interest payable to
capital contribution $ 2,018,411
=============
Purchase of fixed assets with common stock $ 197,700
=============
Purchase of fixed assets with note payable $ 1,775,000
=============
</TABLE>
- --------------------------------------------------------------------------------
See independent auditors' report and
accompanying notes to financial statements
F-6
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The Company
2TheMart.com, Inc., an Oklahoma corporation ("2TheMart" or the "Company") is a
development stage, internet-based electronic commerce ("e-commerce") company.
The Company's year end is December 31. The Company has contracted with an
unrelated party to develop and launch a business-to-consumer and
consumer-to-consumer trading community on the internet. The Company, which
launched its web site on November 18, 1999, has developed an e-commerce site in
which buyers and sellers are brought together to buy and sell a variety of goods
such as antiques, apparel, coins, collectibles, computers, memorabilia, movies,
music, toys and more. The 2TheMart service enables sellers to list items for
sale, buyers to bid on those items and it allows the 2TheMart users to browse
through all items in a fully automated, topically arranged online service.
Reorganization
In December 1998, CD-Rom Yearbook Company, Inc., an Oklahoma corporation
("CD-Rom") entered into a merger agreement to acquire all of the outstanding
shares of common stock of 2TheMart-Nevada, a Nevada corporation formed on
December 22, 1998. As the shareholders of 2TheMart-Nevada controlled CD-Rom
after this transaction, this business combination is treated as a reverse
acquisition for accounting purposes whereby 2TheMart-Nevada is considered the
accounting acquiror and CD-Rom is considered the accounting acquiree. The
merger became effective on January 8, 1999. Between December 22, 1998 and
January 8, 1999, neither 2TheMart-Nevada nor CD-Rom had any activity of
significance including capital transactions and operating activities.
Accordingly, neither separate financial statements of either entity as of
December 31, 1998 nor proforma financial statements were considered necessary.
The surviving legal entity, CD-Rom, changed its name to 2TheMart.com, Inc. The
transaction has been treated as a recapitalization of 2TheMart-Nevada with no
recording of assets or liabilities at fair values on that date.
Immediately prior to the merger, CD-Rom had 2,291,850 shares of common stock
outstanding. As part of the reorganization and stock purchase agreement, CD-Rom
issued an additional 17,800,000 shares of common stock to the shareholders of
2TheMart-Nevada in exchange for all of the shares of common stock of
2TheMart-Nevada. In addition, options to purchase 2.5 million shares of the
Company's common stock at an exercise price of $3.00 were issued to various
shareholders of CD-Rom and 1.2 million of the previously issued CD-Rom shares of
common stock were placed in escrow under the terms of an agreement (the "Escrow
Agreement"), to be distributed to the 2TheMart-Nevada shareholders upon the
occurrence of either of the following
- --------------------------------------------------------------------------------
F-7
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION, CONTINUED
events: 1) the exercise of any of the CD-Rom options given to the previous
controlling shareholders of CD-Rom; or 2) the effectiveness of any Registration
Statement filed with the Securities and Exchange Commission ("SEC") with respect
to any of the shares of common stock underlying the CD-Rom options. In the
event that either the CD-Rom options are not exercised or the Company fails to
file and have declared effective a Registration Statement covering the shares of
common stock underlying the CD-Rom options by June 22, 2000, all of the escrow
shares of common stock would be returned to the previous controlling shareholder
of CD-Rom. Shares of common stock covered by this Escrow Agreement are depicted
as outstanding since January 8, 1999 (the merger date) and have been included in
the calculation of basic and diluted loss per share for the period December 22,
1998 to December 31, 1999.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk and Cash
Financial instruments that potentially subject the Company to a concentration of
credit risk consist of cash and cash equivalents and restricted cash. Cash and
cash equivalents and restricted cash are deposited with high credit, quality
financial institutions.
Cash balances are maintained at one commercial bank. Accounts at that
institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up
to $100,000. As of December 31, 1999, the Company had cash balances in this
bank in excess of the FDIC limit totaling $2.6 million.
Cash equivalents consist of money market funds whose fair value approximates
cost and are readily redeemable.
Restricted cash consists of cash securing standby letters of credit issued to
vendors of the Company.
Property and Equipment
The Company has adopted Statement of Position 98-1 ("SOP 98-1"), "Accounting for
the Cost of Computer Software Developed or Obtained for Internal Use." In
fiscal 1999, the Company capitalized external costs to acquire and customize
hardware, software and its Internet web site (see Note 4).
- --------------------------------------------------------------------------------
F-8
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Depreciation and amortization are provided for over the estimated useful lives
of the assets, ranging from 2.5 years to 7 years. Leasehold improvements are
amortized over the lives of the respective leases or the useful lives of the
improvements, whichever is shorter. The straight-line method of depreciation is
followed for substantially all assets for financial reporting purposes, but
accelerated methods are used for tax purposes.
Betterments, renewals, and extraordinary repairs that extend the lives of the
assets are capitalized; other repairs and maintenance charges are expensed as
incurred. The cost and related accumulated depreciation applicable to assets
retired are removed from the accounts, and
the gain or loss on disposition is recognized in current operations. During
1999, the Company wrote off the value of software it acquired in a January 1999
transaction (see Note 6) as it determined that such software would not be used
in the on-going operations of the Company.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 requires recognition of impairment of long-lived assets in
the event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets. At December 31, 1999, management determined
that there has been no impairment of the Company's long-lived assets. There can
be no assurance, however, that market conditions will not change or demands for
the Company's services will continue which could result in future long-lived
asset impairments (see Note 3).
Income Taxes
Deferred tax assets and liabilities are recognized for the future consequences
of events that have been recognized in the Company's financial statements or tax
returns. The measurement of the deferred items is based on enacted tax laws. A
valuation allowance related to a deferred tax asset is recorded when it is more
likely than not that some portion or all of the deferred tax asset will not be
realized.
Deferred Compensation Expense
The Company granted certain options to officers and employees at exercise prices
that were less than the fair value of such shares. Amounts recorded as
deferred compensation are amortized over the appropriate service period based
upon the vesting schedule for such grants (generally four years).
- --------------------------------------------------------------------------------
F-9
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Fair Value of Financial Instruments
The Company is required to estimate the fair value of all financial instruments
included on its balance sheet at December 31, 1999. The Company considers the
carrying value of such amounts in the financial statements (cash and cash
equivalents, restricted cash, accounts payable, accrued liabilities and
short-term note payable) to approximate their fair value due to the relatively
short period of time between origination of the instruments and their expected
realization and interest rates, which approximate current market rates.
Revenue Recognition
Online transaction revenues are derived primarily from success fees charged for
the selling of items on the 2TheMart web site and are calculated as a percentage
of the final sales transaction value. Revenues related to success fees are
recognized at the time that the transaction is successfully concluded. A
transaction is considered successfully concluded when at least one buyer has bid
above the seller's specified minimum price or reserve price, whichever is
higher, at the end of the transaction term.
Advertising
The Company expenses all advertising as incurred. Amounts incurred for
advertising expense for the period ended December 31, 1999 were $66,025.
Research and Development
The Company expenses all research and development as incurred, which totaled
$377,105 for the period ended December 31, 1999.
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. SFAS 130 had no effect on the
Company's financial statements as it had no comprehensive income components.
- --------------------------------------------------------------------------------
F-10
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Segment Information
The Company has adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information
about segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly reports
issued to stockholders. It also requires entity-wide disclosures about the
products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers. As the Company is
currently in the start-up phase, it does not yet have any reportable segments.
Earnings Per Share
Basic net income per common share is computed by dividing the net income
available to common stockholders for the period by the weighted average number
of common shares outstanding during the period. Incremental common shares
issuable upon the exercise of stock options and warrants, are included in the
computation of diluted net loss per common share to the extent such shares are
dilutive. As the Company has a loss for the period presented, all options are
antidilutive and are not included in the per share computation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from these estimates.
Year 2000
The Year 2000 issue relates to limitations in computer systems and applications
that may prevent proper recognition of the Year 2000. The potential effect of
the Year 2000 issue on the Company and its business partners will not be fully
determinable until the Year 2000 and thereafter. If Year 2000 modifications are
not properly completed either by the Company or entities with which the Company
conducts business, the Company's revenues and financial condition could be
adversely impacted.
- --------------------------------------------------------------------------------
F-11
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Recent Accounting Pronouncements
The FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS
133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on the balance sheet at their fair value. This
statement, as amended by SFAS 137, is effective for financial statements for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Company
does not expect the adoption of this standard to have a material impact on its
results of operations, financial position or cash flows as it currently does not
engage in any derivative or hedging activities.
In March 2000, the Emerging Issues Task Force reached a consensus on Issue No.
00-2, "Accounting for Web Site Development Costs" ("EITF 00-2") to be applicable
to all web site development costs incurred for the quarter beginning after June
30, 2000. The consensus states that for specific web site development costs,
the accounting for such costs should be accounted for under AICPA Statement of
Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The Company has not yet addressed
whether the adoption of EITF 00-2 will have a material effect on its financial
statements.
NOTE 3 - DEVELOPMENT STAGE ENTERPRISE AND GOING CONCERN
Since December 22, 1998 (date of inception), the Company has been primarily in
the development stage and its principal activities have consisted of raising
capital and developing its internet-based e-commerce web site.
The accompanying financial statements have been prepared on the basis of a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company launched its web site
on November 18, 1999.
The Company has incurred a net loss of $9,655,722 since inception, has negative
working capital of $1,255,565 at December 31, 1999, has no substantive revenues
since inception and has significant contingent liabilities (see Note 10). These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue in existence is dependent
primarily upon obtaining additional debt and equity financing to fund the
Company's short-term operating expenses, capital expenditure requirements and
marketing needs, as well as the successful resolution of contingent liabilities
and the generating of income from strategic alliances and from the Company's web
site. The Company has entered into a proposed merger (see Note 11) that it
anticipates will enhance its ability to successfully accomplish the above items.
Management believes that the proposed merger and other potential funding sources
- --------------------------------------------------------------------------------
F-12
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 3 - DEVELOPMENT STAGE ENTERPRISE AND GOING CONCERN, CONTINUED
will be sufficient to fund its capital expenditures, working capital
requirements and other cash requirements through December 31, 2000 and that the
Company will be successful in resolving its contingent liabilities. However,
there is no assurance the Company will be able to successfully resolve its
contingent liabilities, effect its proposed merger, and obtain sufficient
additional funds when needed, or that such funds, if available, will be
obtainable on terms satisfactory to the Company. The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts (including the realizability of long-lived assets under
SFAS No. 121) or the amount and classification of liabilities that might result
from the outcome of this uncertainty.
NOTE 4 - COMMITMENTS
The Company has entered into contracts with an unrelated party for the
acquisition of computer hardware and software and development of its web site.
The total amount of these contracts is approximately $11.0 million, of which
$9.2 million had been paid as of December 31, 1999 and the remaining balance was
converted to a note payable (see Note 5).
On April 29, 1999, the Company entered into an agreement with Exodus
Communications, Inc. ("Exodus") to secure space for the housing of its main Web
site server operations. Pursuant to its agreement with Exodus, the Company will
be required to pay Exodus a minimum monthly fee of approximately $78,000,
increasing depending on Internet bandwidth usage, once the Company has installed
its computer hardware at Exodus' data center located in Sterling, Virginia
(which occurred in July 15, 1999). The Exodus agreement is cancelable by either
party after one year from the installation date upon 90 days notice by either
party. The remaining minimum commitment for future payments at December 31, 1999
was approximately $630,000.
On July 16, 1999, the Company entered into an agreement with Lawson Associates,
Inc., dba Lawson Software for the use of its ERP system ("Lawson"). Under the
terms of the agreement with Lawson, the Company made a payment of approximately
$129,000 and owed $300,000, a licensing fee due in three monthly $100,000
installments beginning January 2000. In addition, the Company owes Lawson
approximately $166,000 for services provided. The Lawson agreement is cancelable
upon 90 days written notice. Subsequent to year end, the Company temporarily
discontinued the use of Lawson in order to reduce costs related to maintaining
the software. The Company is currently using another accounting software
package in place of Lawson until revenue-generating activities justify the cost
of maintaining the Lawson software.
- --------------------------------------------------------------------------------
F-13
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 4 - COMMITMENTS, CONTINUED
The Company has a commitment with a third-party customer support organization to
enable to Company scale in its customer support capabilities without diminishing
the Company's customer support effectiveness. The agreement calls for the
Company to make a minimum payment of $10,000 per month to the third party
through January 1, 2001, resulting in a future minimum commitment of $120,000.
In June 1999, the Company entered into a one-year agreement with USWeb/CKS to
develop and implement the marketing programs and strategies of the Company's Web
site. The Company is obligated to pay $86,000 per month. Subsequent to year
end, the parties cancelled the agreement and the Company is not obligated to pay
any termination or cancellation fee.
The Company is currently in discussions with certain of its vendors (including
the vendors listed above) for the satisfaction of the amounts due them. The
Company does not currently have sufficient funds to meet those commitments (see
Note 3). Failure to successfully negotiate a reduction of the amounts due or
failure to raise additional funding to meet those expenditures would have a
materially adverse effect on the Company's operations (see Note 3).
The Company conducts a substantial portion of its operations utilizing leased
office space, office equipment and communications equipment. Some of the
operating leases provide that the Company pays taxes, maintenance, insurance and
other occupancy expenses applicable to the leased premises. Generally, the
leases provide for renewal for various periods at stipulated rates. Future
minimum payments due under operating leases are as follows:
Year Ended
December 31,
- ----------------
2000 $ 631,000
2001 400,000
2002 178,000
2003 152,000
2004 115,000
-------------
$ 1,476,000
=============
Rent expense for the period from December 22, 1998 (date of inception) through
December 31, 1999 was approximately $444,000.
- --------------------------------------------------------------------------------
F-14
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
In August 1999, the Company borrowed $500,000 from a shareholder and entered
into a short-term note, bearing interest at 12% per annum and due and payable on
October 18, 1999. On October 18, 1999, the Company converted the short-term
note and $10,027 of accrued interest into 291,429 shares of the Company's
"restricted" common stock.
On September 10, 1999, the Company borrowed $2,000,000 from the Company's CEO
and largest shareholder and entered into a short-term note, bearing interest at
12% per annum and due and payable on October 31, 1999. On October 8, 1999, the
CEO agreed to forgive and cancel the note without receiving any consideration or
shares of the Company's common stock at the request of other potential
investors. The forgiveness of the note and $18,411 of accrued interest was
accounted for as a capital contribution to the Company as an adjustment of the
consideration received from founders' shares.
On September 10, 1999, the Company borrowed $250,000 from an officer and entered
into a short-term note, bearing interest at 12% per annum and due on October 10,
1999. On October 8, 1999, the officer agreed to extend the due date of the
$250,000 note to November 19, 1999. At that time, the note was paid from
proceeds from the November 18, 1999 sale of "restricted" shares of common stock
(see Note 6).
On November 18, 1999, the Company entered into a payment agreement with an
unrelated party for the satisfaction of the remaining amounts owed for
development of the Company's web site (see Note 4) as well as additional
services related to the web site. The note is secured by all equipment
purchased from the unrelated party. Under the payment agreement, the Company
will pay $1,775,000 plus interest at a rate of 13.5% per annum beginning
November 1, 1999, to be paid in twelve equal monthly payments of principal and
interest totaling $162,552, with the first payment due on January 31, 2000. The
Company has withheld payments beginning March 2000 under this agreement pending
resolution with the unrelated party of product quality and repair issues
regarding the Company's web site.
NOTE 6 - STOCKHOLDERS' EQUITY
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of 25,000,000
shares of preferred stock, $0.0001 par value. As of December 31, 1999, there
were no issued and outstanding shares of Preferred Stock. The Company's Board
of Directors has authority, without action by the shareholders, to issue all or
any portion of the authorized but unissued preferred stock in one or more series
and to determine the voting rights, preferences as to dividends and liquidation,
conversion, conversion rights, and other rights of such series.
- --------------------------------------------------------------------------------
F-15
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Common Stock
The Company's Articles of Incorporation authorizes the issuance of 50,000,000
shares of common stock, $0.0001 par value per share, of which 29,482,016 shares
were outstanding as of December 31, 1999. Holders of shares of common stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders. Holders of shares of common stock have no cumulative voting
rights. Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefore. In the
event of a liquidation, dissolution or winding up of the Company, the holders of
shares of common stock are entitled to share pro rata in all assets remaining
after payment in full of all liabilities. Holders of shares of common stock
have no preemptive rights to purchase the Company's common stock. There are no
conversion rights or redemption or sinking fund provisions with respect to the
common stock. All of the outstanding shares of common stock are fully paid and
non-assessable.
On January 8, 1999, the Company issued an aggregate of 917,500 shares of its
common stock at $1.00 and $2.00 per share, resulting in net proceeds of
$980,000. Also, on January 8, 1999, the Company issued 80,000 shares of its
common stock to the Company's securities counsel in consideration for legal
services rendered, valued at $19,434.
On January 25, 1999, the Company issued 40,000 shares of "restricted" common
stock to an individual in consideration for the purchase of software, valued at
$40,000. The shares were valued at $1.00 per share in accordance with an
agreement negotiated in December 1998 (see Note 2).
On January 29, 1999, the Company issued 1,000,000 shares of "restricted" common
stock to an investor resulting in net proceeds of $1,000,000.
On February 2, 1999, the Company issued 100,000 shares of "restricted" common
stock to an employee as employee compensation, valued at $175,000. Also, on
February 2, 1999, the Company issued 7,500 shares of "restricted" common stock
to an unrelated third party in consideration for certain consultation services
rendered, valued at $7,500. Finally, on February 2, 1999, the Company issued
5,000 shares of "restricted" common stock to an employee of the Company as
employee compensation, valued at $7,500.
On February 4, 1999, the Company issued 1,555,000 shares of "restricted" common
stock, resulting in net proceeds of $1,555,000.
- --------------------------------------------------------------------------------
F-16
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED
On March 1, 1999, the Company issued 15,000 shares of "restricted" common stock
to the Company's securities counsel in consideration for legal services
rendered, valued at $15,000.
In April 1999, the Company completed a private placement offering of 1,280,080
"restricted" shares of common stock (including 115,000 shares and 125,000
warrants issued for offering costs). 865,000 shares were sold at a price of
$1.00 per share. After such shares were sold, the Company amended its private
placement offering memorandum, increasing the price of the offered shares to
$5.00 per share. A total of 300,080 shares were sold at that price. The
offering resulted in net proceeds of $2,365,400.
In August 1999, the Company issued 53,000 shares of "restricted" common stock at
a price of $10.00 per share pursuant to a July 12, 1999 private placement of
common stock resulting in net proceeds of approximately $530,000. In September
1999, the Company elected to terminate the July 12, 1999 private placement and
initiated in its place a private placement of 2.0 million shares of common stock
at a price of $5.00 per share. Investors of the Company's July 12, 1999 private
placement were issued 53,000 additional shares of "restricted" common stock to
reduce their purchase price from $10.00 per share to $5.00 per share.
On September 1, 1999, the Company issued 5,000 shares of "restricted" shares of
common stock to the Company's securities counsel in consideration for legal
services rendered, valued at $25,000. On September 14, 1999, the Company issued
2,500 shares of "restricted" common stock to an unrelated consultant of the
Company in consideration for certain consultation services rendered, valued at
$26,250. Also, in September 1999, the Company issued 105,133 shares of
"restricted" common stock to unrelated third parties in consideration for the
build-out of tenant improvements, valued at $157,700.
On October 1, 1999, the Company initiated a private placement of 7,000,000
shares of "restricted" common stock at a price of $1.50 per share. No shares
were sold under this private placement until October 28, 1999. As of December
31, 1999, the Company had sold 3,303,814 shares (including 295,186 shares issued
for offering costs and net of 1,173,574 shares returned after year end - see
Note 10), resulting in net proceeds of $6,273,303 (see Note 10).
On October 8, 1999, the Company issued 300,000 shares of "restricted" common
stock at a price of $3.33 per share, resulting in net proceeds of $999,000.
On October 18, 1999, the $500,000 short-term note (see Note 5) was converted
(along with accrued interest of $10,027) into 291,429 shares of "restricted"
common stock.
- --------------------------------------------------------------------------------
F-17
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' EQUITY, CONTINUED
On October 21, 1999, the Company issued 30,000 shares of "restricted" shares of
common stock to an unrelated consulting company in consideration for certain
consultation services rendered, valued at $45,000.
On October 25, 1999, the Company issued 1,000,000 shares of "restricted" common
stock at a price of $1.00 per share, resulting in net proceeds of $1,000,000. On
November 18, 1999, the Company sold 2,000,000 shares of "restricted" common
stock at a price of $1.50 per share, resulting in net proceeds of $3,000,000.
On August 23, 1999, a CD-Rom option holder exercised his "cashless exercise"
option to acquire shares of the Company's common stock (see Note 1). Based on
the trading price of the Company's stock on the date of exercise, the option
holder exercised 172,800 shares at $3 per share by "redeeming" 31,590 shares
valued at $16.41 per share.
On November 18, 1999, the president and one of the founders of the Company
agreed to contribute 2.9 million shares of his common stock holdings back to the
Company at the request of other potential investors, which is reflected as an
adjustment to the original founders' shares.
On December 16, 1999, the Company issued 5,000 shares of "restricted" common
stock to an unrelated consultant of the Company in consideration for certain
consultation services rendered valued at $52,500.
NOTE 7 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share for the period December 22, 1998 (inception) to December 31, 1999:
Numerator:
Numerator for basic and diluted earnings per share - net loss $ 9,655,722
==============
Denominator:
Denominator for basic and diluted earnings per share -
weighted average shares outstanding 24,366,569
==============
- --------------------------------------------------------------------------------
F-18
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 7 - EARNINGS PER SHARE, CONTINUED
Options and warrants to purchase 3,099,630 shares of common stock ranging from
$2.375 to $14.375 per share per share were outstanding at December 31, 1999.
Such options and warrants were not included in the computation of diluted
earnings per common share because they were antidilutive.
NOTE 8 - STOCK OPTIONS AND WARRANTS
The Company accounts for its stock options in accordance with the provisions of
APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). Under
APB 25, the Company recognized intrinsic compensation expense of $877,112 for
vested employee options and deferred compensation of $1,339,263 for unvested
employee options for the period ended December 31, 1999.
Had compensation cost for the stock options been determined based on the fair
value at the grant date consistent with the method of SFAS No. 123, 'Accounting
for Stock-Based Compensation," the Company's net loss and net loss per share
would have been the pro forma amounts indicated below:
FOR THE PERIOD
DECEMBER 22, 1998
(DATE OF INCEPTION) TO
DECEMBER 31, 1999
---------------------
Actual net loss $ (9,655,722)
=================
Pro forma net loss $ (9,854,705)
=================
Actual net loss per share $ (0.40)
=================
Pro forma net loss per share $ (0.41)
=================
The fair value of each option grant was estimated at the grant date using the
Black-Scholes option-pricing model for the period December 22, 1998 (inception)
to December 31, 1999, assuming a risk-free interest rate of 6%, volatility of
104%, zero dividend yield, and an expected life of 6 years.
- --------------------------------------------------------------------------------
F-19
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 8 - STOCK OPTIONS AND WARRANTS, CONTINUED
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options and warrants that have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options and warrants have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
A summary of the status of the Company's options as of December 31, 1999 is
presented below:
1999
-----------------------
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
---------- ---------
Outstanding, beginning of year - $ -
Granted 3,259,930 3.62
Exercised (172,800) (3.00)
Expired/Forfeited (112,500) (10.00)
----------- ---------
Outstanding, end of year 2,974,630 $ 3.42
=========== =========
Exercisable, end of year 2,514,492 $ 3.06
=========== =========
Weighted average fair value of
options granted $ 2.03
=========
- --------------------------------------------------------------------------------
F-20
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 8 - STOCK OPTIONS AND WARRANTS, CONTINUED
The following table summarizes information about options granted during the year
ended December 31, 1999:
WEIGHTED
EXERCISE PRICE AVERAGE
PER SHARE EXERCISE PRICE SHARES
----------------- --------------- ---------
Options granted:
Above fair market value $ 3.00 $ 3.00 2,500,000
At fair market value $2.375 to $14.375 $ 6.47 191,930
Below fair market value $ 3.00 to $10.00 $ 5.41 568,000
----------------- --------------- ---------
Total $2.375 to $14.375 $ 3.62 3,259,930
================= =============== =========
<TABLE>
<CAPTION>
The following table summarizes information concerning options outstanding at
December 31, 1999:
Options Outstanding Options Exercisable
----------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Weighted
Average
Options Remaining Weighted Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise Price at 12/31/99 Life Exercise Price at 12/31/99 Exercise Price
- -------------- ----------- ----------------- -------------- ----------- --------------
2.38 - $5.00 2,782,150 3.8 years $ 3.04 2,493,867 $ 3.01
6.63 - $9.88 154,270 3.8 years 8.12 8,125 8.00
10.00 - $14.38 38,210 3.4 years 12.38 12,500 10.00
----------- ------------- ----------- --------------
2,974,630 $ 3.42 2,514,492 $ 3.06
=========== ============== =========== ==============
</TABLE>
In addition to the options listed above, the Company issued a warrant for
125,000 common shares at $5 per share to a consultant for services rendered in
connection with a private placement offering (see Note 6).
On September 24, 1999, an officer resigned from the Company who had 12,500
vested and 112,500 unvested stock options. The vesting of these stock options
had resulted in $200,000 of compensatory stock expense and the unvested options
resulted in approximately $1,800,000 of deferred compensation in the second
quarter of 1999. Due to the voluntary termination of this former officer, the
unvested stock options were cancelled and the Company reversed the
aforementioned deferred compensation in the third quarter of 1999.
- --------------------------------------------------------------------------------
F-21
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 8 - STOCK OPTIONS AND WARRANTS, CONTINUED
Subsequent to year end, the Company has entered into a proposed merger (see Note
11). Vesting of some or all of the options outstanding may be altered depending
on the outcome of this merger (see Note 11).
NOTE 9 - INCOME TAXES
As of December 31, 1999, the Company had net deferred tax assets of
approximately $3.8 million, which has been offset in full by a valuation
allowance as the Company is still in the development stage. This deferred tax
asset is comprised primarily of expenses recognized for stock options for book
purposes and unused federal and state net operating losses and credits that can
be used to reduce taxes through 2019 for federal and 2004 for state purposes.
NOTE 10 - CONTINGENCIES
Litigation
On September 13, 1999 and October 11, 1999, the Company was served with class
action lawsuits which allege that the Company and certain of its officers
engaged in a plan to defraud the market and purchasers of the Company's common
stock by failing to disclose material facts or making material misstatements of
fact regarding the status of the Company's Web site. Additionally, the Company
has been informed and believes there may be additional purported class action
lawsuits filed against the Company based upon similar alleged facts and claims.
The Company believes that such lawsuits or claims are without merit and they
have meritorious defenses to the actions. As these lawsuits were recently
filed, neither the Company nor the Company's legal counsel can estimate the
amount of loss, if any, which may result from the outcome of these actions. The
Company has tendered these actions to its insurers and believes that they have
adequate insurance to meet any potential losses from these claims, subject to a
$250,000 deductible. At December 31, 1999, the Company has paid or accrued
$250,000 relating to its insurance deductible in these cases. However, failure
to successfully defend these actions which results in an award greater than the
Company's insurance coverage, could have a material adverse effect on the
Company's results of operations, liquidity and financial condition.
- --------------------------------------------------------------------------------
F-22
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 10 - CONTINGENCIES, CONTINUED
Stock Offering
As discussed in Note 6, beginning October 1999 through December 31, 1999, the
Company issued 4,182,202 "restricted" (as that term is defined under Rule 144 of
the Securities Act of 1933) shares of its common stock pursuant to a private
placement of the Company's common stock at a prices of $1.50 per share, plus
295,186 shares for offering costs, resulting in net proceeds of $6,273,303 (the
"October Offering"). The issuances were offered without general solicitation or
advertising under Rule 506 of Regulation D and Section 4(2) of the Securities
Act of 1933. Subsequent to the sale, the Company discovered that some
purchasers of the October Offering resold their shares in possible violation of
the Securities Act of 1933, as amended, and other applicable securities laws
("Securities Laws"). As a result, certain purchasers voluntarily returned
shares (totaling 1,173,574 shares) to the Company. The Company has made every
effort to insure that it complied with all applicable Securities Laws and that
all purchasers of the Company's October Offering received full and adequate
disclosure regarding the Company's operations. However, in the event that
portions of the October Offering may be deemed to have been made in
contradiction of the Securities Laws, the Company may face certain contingent
liabilities, including certain administrative action as well as reimbursement of
certain investors' investment amounts.
The accompanying statement of stockholders' equity reflects the return of
1,173,574 shares in 1999 as if the original shares were never issued.
The accompanying financial statements do not reflect the potential effects of
these contingencies, which could be material (see Note 3).
- --------------------------------------------------------------------------------
F-22
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENTS
2000 Stock Incentive Plan
On February 14, 2000, the Company's Board of Directors approved the 2000 Stock
Incentive Plan (the "Plan"). Under the terms of the Plan, a Committee
established by the Board of Directors (the "Committee") has the sole authority
to determine which of the eligible persons shall receive awards pursuant to the
Plan. Under the Plan, the number of shares underlying such awards, and other
terms and conditions of the awards granted under the Plan are subject to the
sole discretion of the Committee to the extent they do not conflict with the
terms of the Plan. Up to 20% of the common stock of the Company outstanding as
of February 14, 2000 and increasing 20% of any subsequent additional increases
in the outstanding common stock of the Company up to a maximum of 15,000,000
shares, are reserved for issuance under the Plan. As of March 31, 2000, the
Company had issued options for the purchase of an aggregate of 1,862,110 shares
of the Company's common stock under the Plan to 73 employees of the Company.
Pursuant to the Plan, in the event of an acquisition, merger, or other change in
the Company's control, all awards issued under the Plan automatically vest as to
existing and recently terminated employees except where otherwise determined by
the Company's Board of Directors. With regards to the Company's proposed merger
(see below), the Company's Board of Directors has determined to vest 25% of the
2000 Plan options. Options granted in 1999 contained no such provisions and
thus, in general, have no accelerated vesting as a result of the proposed
merger.
Approval and ratification of the Plan will require approval of the Company's
stockholders.
Common Stock Activity
Since December 31, 1999, the Company has received proceeds of $580,000 from
sales of common stock at a price of $1.00 per share. This cash has been used to
pay ongoing operating expenses as well as the commitments outlined in Note 4.
- --------------------------------------------------------------------------------
F-24
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Management
The Company's president/chief financial officer (and one of the two founders)
resigned in March, 2000. The Company anticipates that the contemplated merger
(see below) will address some of its management vacancies; if not, the Company
intends to recruit individuals with the appropriate amount of management and
industry experience.
Proposed Merger
On April 13, 2000, the Company entered into an Agreement and Plan of
Reorganization between the Company, its wholly owned subsidiary, 2TheMart.com,
Inc., a Delaware Corporation ("2TMD"), GoToWorld.com, Inc., a Delaware
Corporation ("GTW"), and GoToWorld's parent company, Languageforce, Inc., a
Colorado Corporation ("LanguageForce"), whereby the Company will merge with and
into 2TMD, with 2TMD being the surviving Company. Pursuant to the agreement,
all of the Company's common stock will be exchanged for shares of 2TMD on a one
for one basis. As a result, the Company will effectuate a reincorporation from
an Oklahoma corporation into a Delaware corporation. Immediately subsequent to
the Company's merger with 2TMD, GTW will merge with and into the subsequent
combined company, now 2TMD. Pursuant to the agreement, all of the shares of GTW
will be exchanged for 52,930,931 shares of the common stock of 2TMD in a
transaction accounted for as a reverse acquisition for accounting purposes
(i.e., an acquisition by GTW of 2TMD). Subsequent to the merger of GTW into
2TMD, 2TMD will change its name to "GotoWorld.com, Inc."
Under the terms of the agreement, Ian S. Simpson will become the President,
Chief Executive Officer and Chairman of the Board of the surviving corporation;
Steven W. Rebeil, the Company's CEO and Chairman of the Board, will relinquish
all of his management positions with the Company and will become a director. The
closing of the agreement and effectiveness of the proposed mergers is subject to
shareholder approval of both the Company and GTW.
- --------------------------------------------------------------------------------
F-25
<PAGE>
2THEMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENTS, CONTINUED
Operating Agreement
The Company has entered into an Interim Operating Agreement with GTW effective
April 19, 2000. Pursuant to the agreement GTW has agreed to fund the Company's
daily operating expenses pending completion of the proposed merger discussed
above.
- --------------------------------------------------------------------------------
F-26
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into this 13th day of April, 2000, by and among 2THEMART.COM, INC., an Oklahoma
corporation ("2TM"), 2THEMART.COM, INC., a Delaware corporation ("2TMD"), and
the "Surviving Corporation"), GOTOWORLD.COM, INC., a Delaware corporation
("GTW") and LANGUAGEFORCE, INC., a Colorado corporation ("LF").
RECITALS
A. GTW is a wholly-owned subsidiary of LF and 2TMD is a wholly-owned
subsidiary of 2TM.
B. Subject to and in accordance with the terms and conditions of this
Agreement and pursuant to the Certificate of Merger attached hereto as Exhibit A
("Certificate of Merger"), the parties intend that 2TM will merge with and into
2TMD (the "Initial Merger") and immediately subsequently GTW will merge with and
into 2TMD (the "Subsequent Merger" and, together with the Initial Merger, the
"Mergers"), whereby at the Effective Time of the Initial Merger, all of the 2TM
Common Stock will be converted into shares of 2TMD Common Stock on a one share
for one share basis and at the Effective Time of the Subsequent Merger all of
the GTW Common Stock will be converted into fifty-two million nine hundred
thirty thousand nine hundred and thirty-one (52,930,931) shares of 2TM Common
Stock
C. For federal income tax purposes, it is intended that the Mergers
shall qualify as a tax free reorganization within the meaning of '368(a)(2)(D)
of the Code.
D. The parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Mergers.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in and for the
consideration and mutual covenants set forth herein, the parties agree as
follows:
1 CERTAIN DEFINITIONS.
1.1 "2TM COMMON STOCK" shall mean all of the outstanding shares of
Common Stock of 2TM.
1.2 "2TM DISCLOSURE SCHEDULE" shall mean the disclosure schedule
provided to GTW and LF by 2TM and 2TMD disclosing such items and matters as are
required to be disclosed under this Agreement.
1.3 "2TM FINANCIAL STATEMENTS" shall mean 2TM's audited balance sheet
as of December 31, 1999, and statements of operations, stockholder's equity and
cash flow for the twelve (12) month period then ended.
<PAGE>
1.4 "2TM PRODUCTS/SERVICES" shall mean all products or services which
have been, or are being, marketed by 2TM, or are currently under development,
and all patents, patent applications, trade secrets, copyrights, trademarks,
trade names and other proprietary rights related to such products or services.
1.5 "AFFILIATE" shall have the meaning set forth in the rules and
regulations promulgated by the Commission pursuant to the Securities Act.
1.6 "CLOSING" shall mean the closing of the transactions contemplated
by this Agreement.
1.7 "CLOSING DATE" shall mean the date of the Closing.
1.8 "CODE" shall mean the United States Internal Revenue Code of 1986,
as amended.
1.9 "COMMISSION" shall mean the United States Securities and Exchange
Commission.
1.10 "DISSENTING SHARES" shall mean those shares held by holders who
perfect their appraisal rights under the applicable state laws.
1.11 "EFFECTIVE TIME" shall mean the date and time of the effectiveness
of the Initial Merger under Delaware and Oklahoma law and the date and time of
the effectiveness of the Subsequent Merger under Delaware law.
1.12 "GAAP" shall mean generally accepted accounting principles.
1.13 "GTW COMMON STOCK" shall mean all the outstanding shares of common
stock of GTW.
1.14 "GTW DISCLOSURE SCHEDULE" shall mean the disclosure schedule
provided to 2TM and 2TMD by GTW and LF disclosing such items and matters as are
required to be disclosed under this Agreement.
1.15 "GTW FINANCIAL STATEMENTS" shall mean GTW's audited balance sheet
as of December 31, 1999, and statements of operations, stockholders' equity and
cash flow for the twelve (12) month period then-ended.
1.16 "GTW PRODUCTS/SERVICES" shall mean all products or services which
have been, or are being, marketed by GTW or are currently under development, and
all trade secrets, copyrights, trademarks, trade names and other proprietary
rights related to such products or services.
1.17 "MATERIAL ADVERSE EFFECT" shall mean an effect on the operations,
assets or financial condition of an entity considered as a whole which would
lead a reasonable business person to conclude that entering into the Merger
would not be advisable in light of the effect.
1.18 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
<PAGE>
1.19 "SUBSIDIARY" OR "SUBSIDIARIES" shall mean all corporations,
trusts, partnerships, associations, joint ventures or other Persons, as defined
below, of which a corporation or any other Subsidiary of such corporation owns
not less than twenty percent (20%) of the voting securities or other equity or
of which such corporation or any other Subsidiary of such corporation possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies, whether through ownership of voting shares, management
contracts or otherwise. "Person" means any individual, corporation, trust,
association, partnership, proprietorship, joint venture or other entity.
1.20 "TRANSACTION DOCUMENTS" shall mean all documents or agreements
attached as an exhibit or schedule hereto, and set forth on the Table of
Contents.
2. PLAN OF REORGANIZATION.
2.1 THE MERGERS. Subject to the terms and conditions of this Agreement
and the Certificate of Merger, 2TM shall be merged with and into 2TMD and
immediately thereafter GTW shall be merged with and into 2TMD in accordance with
the applic-able provisions of the laws of the States of Delaware and Oklahoma,
and with the terms and conditions of this Agreement and the Certificates of
Merger set forth as Exhibits A, B and C, so that:
(A At the Effective Time (as defined in Section 2.5 (below)), 2TM shall
be merged with and into 2TMD and immediately subsequently GTW shall be merged
with and into 2TMD. As a result of the Initial Merger, the separate corporate
existence of 2TM shall cease, and 2TMD shall continue as the surviving
corporation, and shall succeed to and assume all of the rights and obligations
of 2TM in accordance with the laws of Oklahoma and Delaware. As a result of the
Subsequent Merger, the separate corporate existence of GTW shall cease, and 2TMD
shall continue as the surviving corporation, and shall succeed to and assume all
of the rights and obligations of GTW (which shall include the rights and
obligations of 2TM) in accordance with the laws of Delaware.
(B The Certificate of Incorporation and Bylaws of 2TMD in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws, respectively, of the Surviving Corporation after the
Effective Time unless and until further amended as provided by law, provided,
however, that the name of 2TMD shall be changed to "Gotoworld.com, Inc."
(C Subject to the terms of this Agreement, Ian S. Simpson shall become
the President, Chief Executive Officer and Chairman of the Board of the
Surviving Corporation and the remaining directors and officers of 2TM
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation after the Effective Time, except that Steven W. Rebeil
shall resign all officer positions with the Surviving Corporation. Such
directors and officers shall hold their position until the election and
qualification of their respective successors or until their tenure is otherwise
terminated in accordance with the Bylaws of the Surviving Corporation. The
parties hereto agree that the Board of Directors of the Surviving Corporation
shall consist of not less than seven members, two of which shall be designated
by 2TMD and two of which shall be designated by GTW, with the remaining three
initially selected by the four designees.
<PAGE>
2.2 CONVERSION OF SHARES.
(A Each share of 2TM Common Stock, issued and outstanding immediately
prior to the Effective Time, will, by virtue of the Initial Merger, and at the
Effective Time, and without further action on the part of any holder thereof, be
converted into an equivalent number of shares of fully paid and nonassessable
shares of 2TMD common stock on a one share for one share basis.
(B All of the shares of GTW common stock, issued and outstanding
immediately prior to the Effective Time (all of which are owned by LF as of the
date of this agreement), will, by virture of the Subsequent Merger, and at the
Effective Time, and without further action on the part of LF, be converted into
fifty-two million nine hundred thirty thousand nine hundred and thirty-one
(52,930,931) shares of fully paid and nonassessable shares of 2TMD common stock.
(C) In the event the issued and outstanding shares of 2TM common stock as
set forth in Section 3.2(a) are subsequently reduced by the voluntary
cancellation of any of said shares by the Surviving Company and the respective
shareholder therein, the shares issued to GTW as set forth in Section 2.2(b)
shall be reduced by 62.6333% of the shares so cancelled.
2.3 FRACTIONAL SHARES. No fractional shares of 2TMD common stock will
be issued in connection with the Subsequent Merger.
2.4 THE CLOSING. Subject to termination of this Agreement as provided
in Section 10 (below), the Closing shall take place at the offices of
2TheMart.com, Inc., 18301 Von Karman Avenue, Seventh Floor, Irvine, CA 92612, as
soon as possible upon the satisfaction or waiver of all conditions set forth in
Sections 8, 9 and 10 hereof, or such other time and place as is mutually
agreeable to the parties. The Closing shall be no later than the time
following the clearance of 2TMD's required time period under the required filing
in accordance with Schedule 14C.
2.5 EFFECTIVE TIME. Simultaneously with the Closing, the Certificate
of Merger for the Initial Merger shall be filed in the office of the Secretary
of State of the State of Delaware and the Secretary of State of the State of
Oklahoma. Immediately upon filing of the Certificate of Merger for the Initial
Merger, the Certificate of Merger for the Subsequent Merger shall be filed in
the office of the Secretary of State of the State of Delaware. The Initial
Merger shall become effective immediately upon the filing of the first
Certificate of Merger with such offices and the Subsequent Merger shall become
effective immediately upon the filing of the second Certificate of Merger with
such office.
2.6 TAX FREE REORGANIZATION. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Mergers in
accordance with the provisions of '368(a)(2)(D) of the Code. Each party agrees
that it will not take or assert any position on any tax return, report or
otherwise which is inconsistent with the qualification of the Mergers as a
reorganization within the meaning of '368(a) of the Code. Except for cash paid
in lieu of fractional shares, no consideration that could constitute "other
property" within the meaning of '356 of the Code is being paid by GTW or 2TM for
the 2TMD Common Stock. In addition, GTW and 2TMD represent now, and as of the
Closing Date, that they presently intend to continue 2TM's historic business or
use a significant portion of 2TM's business assets in a business and 2TM and
2TMD represent now, and as of the Closing Date, that they presently intend to
continue GTW's historic business or use a significant portion of GTW's business
assets in a business.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF 2TM AND 2TMD. Except as otherwise
set forth in the 2TM Disclosure Schedule attached hereto, 2TM and 2TMD jointly
and severally represent and warrant to GTW and LF as set forth below. No fact
or circumstance disclosed shall constitute an exception to these representations
and warranties unless such fact or circumstance is set forth in the 2TM
Disclosure Schedule or such supplements thereto as may mutually be agreed upon
in writing by 2TM, 2TMD, GTW and LF.
3.1 ORGANIZATION. 2TM and 2TMD are corporations duly organized,
validly existing and in good standing under the laws of the state of
incorporation of such entity and have the corporate power and authority to carry
on their respective businesses as it is now being conducted. 2TM and 2TMD are
duly qualified or licensed to do business and are in good standing in each
jurisdiction in which the nature of their respective businesses or properties
makes such qualification or licensing necessary except where the failure to be
so qualified would not have a Material Adverse Effect on 2TM and 2TMD. The 2TM
Disclosure Schedule contains a true and complete listing of the locations of all
sales offices, and any other offices or facilities of 2TM, and a true and
complete list of all states in which 2TM maintains any employees. The 2TM
Disclosure Schedule contains a true and complete list of all states in which 2TM
is duly qualified to transact business as a foreign corporation. True and
complete copies of 2TM's and 2TMD's Articles of Incorporation and Bylaws, as in
effect on the date hereof and as to be in effect as of the Closing, have been
provided to GTW, LF or their representatives.
3.2 CAPITALIZATION.
(A The authorized capital of 2TM will consist, prior to the Closing, of
50,000,000 shares of Common Stock, of which 29,578,194 shares will be issued and
outstanding. The authorized capital of 2TMD will consist, prior to the Closing,
of 100,000,000 shares of Common Stock, of which 1,000 shares will be issued and
outstanding. 2TM is the record and beneficial owner of all such shares of 2TMD
Common Stock, free and clear of any and all claims, liens, encumbrances or
security interests.
(B Except as set forth in the 2TM Disclosure Schedule, neither 2TM nor
2TMD has outstanding any preemptive rights, subscription rights, options,
warrants, rights to convert or exchange, capital stock equivalents, or other
rights to purchase or otherwise acquire any 2TM or 2TMD capital stock or other
securities.
(C All of the issued and outstanding shares of 2TM and 2TMD capital
stock have been duly authorized, validly issued, are fully paid and
nonassessable, and such capital stock has been issued in full compliance with
all applicable federal and state securities laws. None of 2TM's or 2TMD's
issued and outstanding shares of capital stock are subject to repurchase or
redemption rights.
(D Except for any restrictions imposed by applicable state and federal
securities laws, there is no right of first refusal, option, or other
restriction on transfer applicable to any shares of 2TM's or 2TMD's capital
stock.
(E Except as set forth in the 2TM Disclosure Schedule, 2TM is not under
any obligation to register under the Securities Act any shares of its capital
stock or any other of its securities that might be issued in the future if the
Merger were not consummated.
(F 2TM is not a party or subject to any agreement or understanding
(and, to 2TM's and 2TM's actual knowledge, there is no agreement or
understanding between or among any persons) that affects or relates to the
voting or giving of written consent with respect to any security.
<PAGE>
3.3 POWER, AUTHORITY AND VALIDITY. 2TM and 2TMD have the corporate
power to enter into this Agreement and the other Transaction Documents to which
they are parties and to carry out their obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Transaction Documents and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Boards of Directors of 2TM and 2TMD and, except for
approval of the shareholders of 2TM, no other corporate proceedings on the part
of 2TM or 2TMD are necessary to authorize this Agreement, the other Transaction
Documents and the transactions contemplated herein and therein. 2TM and 2TMD
are not subject to, or obligated under, any charter, bylaw or contract provision
or any license, franchise or permit, or subject to any order or decree, which
would be breached or violated by or in conflict with its executing and carrying
out this Agreement and the transactions contemplated hereunder and under the
Transaction Documents. Except for (i) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which 2TM is qualified to do
business, (ii) the filing of the Certficate of Merger with the Secretary of
State of the State of Oklahoma, and (ii) filings under applicable securities
laws, no consent of any person who is a party to a contract which is material to
2TM's business, nor consent of any governmental authority, is required to be
obtained on the part of 2TM to permit the transactions contemplated herein and
to permit 2TM to continue the business activities of 2TM as previously conducted
by 2TM without a Material Adverse Effect. This Agreement is, and the other
Transaction Documents when executed and delivered by 2TM and 2TMD shall be, the
valid and binding obligations of 2TM and 2TMD, enforceable in accordance with
their respective terms.
3.4 FINANCIAL STATEMENTS.
(A 2TM has delivered to GTW copies of the 2TM Financial Statements.
(B The 2TM Financial Statements are complete and in accordance with the
books and records of 2TM and present fairly the financial position of 2TM as of
its historical dates. The 2TM Financial Statements have been prepared in
accordance with GAAP, applied on a basis consistent with prior periods. Except
and to the extent reflected or reserved against in such balance sheets
(including the notes thereto), 2TM does not have, as of the dates of such
balance sheets, any liabilities or obligations (absolute or contingent) of a
nature required or customarily reflected in a balance sheet (or the notes
thereto) prepared in accordance with GAAP. The reserves, if any, reflected on
the 2TM Financial Statements are adequate in light of the contingencies with
respect to which they are made.
(C 2TM has no debt, liability, or obligation of any nature, whether
accrued, absolute, contingent, or otherwise, and whether due or to become due,
that is not reflected or reserved against in the 2TM Financial Statements,
except for those (i) that may have been incurred after the date of the 2TM
Financial Statements; or (ii) that are not required by GAAP to be included in a
balance sheet or the notes thereto, except that 2TM has not established any
reserves with respect to the costs and fees associated with this Agreement, the
other Transaction Documents, and the transactions contemplated hereby and
thereby. All material debts, liabilities, and obligations incurred after the
date of the 2TM Financial Statements were incurred in the ordinary course of
business, and are usual and normal in amount both individually and in the
aggregate.
<PAGE>
3.5 TAX MATTERS.
(A 2TM has fully and timely, properly and accurately filed all tax
returns and reports required to be filed by it (or extensions thereof),
including all federal, foreign, state and local tax returns and estimates for
all years and periods (and portions thereof) for which any such returns, reports
or estimates were due. All such returns, reports and estimates were prepared in
the manner required by applicable law. All income, sales, use, occupation,
property or other taxes or assessments due from 2TM have been paid. There are
no pending assessments, asserted deficiencies or claims for additional taxes
that have not been paid. The reserves for taxes, if any, reflected on the 2TM
Financial Statements are adequate and there are no tax liens on any property or
assets of 2TM. There have been no audits or examinations of any tax returns or
reports by any applicable governmental agency. No state of facts exists or has
existed which would constitute grounds for the assessment of any penalty or of
any further tax liability beyond that shown on the respective tax reports,
returns or estimates. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any federal, state or local
income tax return or report for any period.
(B All taxes which 2TM has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper taxing authority.
(C 2TM is not a party to any tax-sharing agreement or similar
arrangement with any other party.
(D At no time has 2TM been included in the federal consolidated income
tax return of any affiliated group of corporations.
(E No payment which 2TM is obliged to pay to any director, officer,
employee or independent contractor pursuant to the terms of an employment
agree-ment, severance agreement or otherwise will constitute an excess parachute
payment as defined in '280G of the Code.
(F 2TM is not currently under any contractual obligation to pay any tax
obligations of, or with respect to any transaction relating to, any other person
or to indemnify any other person with respect to any tax.
3.6 TAX-FREE REORGANIZATION.
(A Neither 2TM nor 2TMD has taken or agreed to take any action that
would prevent the Mergers from constituting a reorganization qualifying under
the provi-sions of '368(a) of the Code.
(B Neither 2TM nor 2TMD is an investment company as defined in
''368(a)(2)(F)(iii) and (iv) of the Code.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999, 2TM
has not:
(A suffered any material adverse change in its financial condition or
in the operations of its business, nor any material adverse changes in its
balance sheet, (with the 2TM Financial Statements and any subsequent balance
sheet analyzed as if each had been prepared according to GAAP), including but
not limited to cash distributions or material decreases in the net assets of
2TM;
(B suffered any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting its properties or business;
<PAGE>
(C granted or agreed to make any increase in the compensation payable
or to become payable by it to its officers or employees, except those occurring
in the ordinary course of business;
(D declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of its capital stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition by it
of such shares;
(E issued any shares of its capital stock or any warrants, rights,
options or entered into any commitment relating to its shares except for the
issuance of its shares pursuant to the exercise of outstanding options or
pursuant to its current Private Placement Memorandum;
(F made any change in the accounting methods or practices it follows,
whether for general financial or tax purposes, or any change in depreciation or
amorti-zation policies or rates adopted therein;
(G sold, leased, abandoned or otherwise disposed of any real property
or any machinery, equipment or other operating property other than in the
ordinary course of business;
(H sold, assigned, transferred, licensed or otherwise disposed of any
patent, trademark, trade name, brand name, copyright (or pending application for
any patent, trademark or copyright) invention, work of authorship, process,
know-how, formula or trade secret or interest thereunder or other intangible
asset except in the ordinary course of its business;
(I suffered any labor dispute;
(J engaged in any activity or entered into any material commitment or
transaction (including without limitation any borrowing or capital expenditure)
other than in the ordinary course of business;
(K incurred any liabilities except in the ordinary course of business
and consistent with past practice which would be required to be disclosed in
financial statements prepared in accordance with GAAP;
(L permitted or allowed any of its property or assets to be subjected
to any mortgage, deed of trust, pledge, lien, security interest or other
encumbrance of any kind, except those permitted under Section 3.8 hereof, other
than any purchase money security interests incurred in the ordinary course of
business;
(M made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of Ten Thousand Dollars
($10,000), or in the aggregate, in excess of Fifty Thousand Dollars ($50,000);
(N paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or arrangement
with any of its Affiliates, officers, directors or stockholder or any Affiliate
or associate of any of the foregoing;
(O made any amendment to or terminated any agreement which, if not so
amended or terminated, would be required to be disclosed on the 2TM Disclosure
Schedule; or
<PAGE>
(P agreed to take any action outside of its ordinary course of business
or which would constitute a breach of any of the representations contained in
this Agreement.
3.8 TITLE AND RELATED MATTERS. 2TM has good and marketable title to
all the properties, interests in properties and assets, real and personal,
reflected in the 2TM Financial Statements or acquired after the date of the 2TM
Financial Statements (except properties, interests in properties and assets sold
or otherwise disposed of since the date of the 2TM Financial Statements in the
ordinary course of business), free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except the lien of current
taxes not yet due and payable and except for liens which in the aggregate do not
secure more than Ten Thousand Dollars ($10,000) in liabilities and the security
provided pursuant to 2TM's Payment Agreement with IBM dated November 19, 1999.
The equipment of 2TM used in the operation of its business is in good operating
condition and repair. All real or personal property leases to which 2TM is a
party are valid, binding, enforceable obligations of 2TM effective in accordance
with their respective terms. There is not under any of such leases any existing
material default or event of default or event which, with notice or lapse of
time or both, would constitute a material default. The 2TM Disclosure Schedule
contains a description of all real and personal property leased or owned by 2TM,
identifying such property and, in the case of real property, stating the monthly
rental due, term of lease and square feet leased. True and correct copies of
each of 2TM's leases have been provided to GTW, LF or their representatives.
<PAGE>
3.9 PROPRIETARY RIGHTS.
(A 2TM owns all right, title and interest in and to, or valid licenses
for use of, all patents, copyrights, technology, software, software tools,
know-how, processes, trade secrets, trademarks, service marks, trade names and
other proprietary rights used in or necessary for the conduct of 2TM's business
as conducted to the date hereof or contemplated, including, without limitation,
the technology and all proprietary rights developed or discovered or used in
connection with or contained in the 2TM Products/Services, free and clear of all
liens, claims and encumbrances (including without limitation distribution
rights) (all of which are referred to as "2TM Proprietary Rights") and 2TM has
the right to transfer all such rights to 2TMD as contemplated hereby. The
foregoing representation as it relates to 2TM Third-Party Technology (as
hereinafter defined) is limited to 2TM's interest pursuant to the 2TM
Third-Party Licenses (as hereinafter defined), all of which are valid and
enforceable and in full force and effect and which grant 2TM such rights to the
2TM Third-Party Technology as are employed in or necessary to the business of
2TM as conducted or proposed to be conducted. The 2TM Disclosure Schedule
contains an accurate and complete description of (i) all patents, trademarks
(with separate listings of registered and unregistered trademarks), trade names,
and registered copyrights in or related to the 2TM Products/ Services, all
applications and registration statements therefor, and a list of all licenses
and other agreements relating thereto; and (ii) a list of all licenses and other
agreements with third parties (the "2TM Third-Party Licenses") relating to any
inventions, technology, know-how, or processes that 2TM is licensed or otherwise
authorized by such third parties to use, market, distribute or incorporate into
products distributed by 2TM (such software, inventions, technology, know-how and
processes are collectively referred to as the "2TM Third-Party Technology").
2TM's trademark or trade name registrations related to the 2TM Products/Services
and all of 2TM's copyrights in any of the 2TM Products/Services are valid and in
full force and effect, and consummation of the transactions contemplated hereby
will not alter or impair any such rights. No claims have been asserted against
2TM (and 2TM is not aware of any claims which are likely to be asserted against
it or which have been asserted against others) by any person challenging 2TM's
use, possession, manufacture, sale, provision or distribution of the 2TM
Products/Services under any patents, trademarks, trade names, copyrights, trade
secrets, technology, know-how or processes utilized by 2TM (including, without
limitation, the 2TM Third-Party Technology) or challenging or question-ing the
validity or effectiveness of any license or agreement relating thereto
(including, without limitation, the 2TM Third-Party Licenses). There is no
valid basis for any claim of the type specified in the immediately preceding
sentence which could in any material way relate to or interfere with the
currently planned continued enhancement and exploitation by 2TM of any of the
2TM Products/Services. None of the 2TM Products/Services nor the use or
exploita-tion of any patents, trademarks, trade names, copyrights, technology,
know-how or processes by 2TM in its current business infringes on the rights of,
constitutes misappro-priation of, or in any way involves unfair competition with
respect to, any proprietary information or intangible property right of any
third person or entity, including without limitation any patent, trade secret,
copyright, trademark or trade name.
(B No employee of 2TM is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or agreement
relating to the relationship of any such employee with 2TM or, to 2TM's actual
knowledge, any other party because of the nature of the business conducted by
2TM or proposed to be conducted by 2TM.
(C Each person presently or previously employed by 2TM (including
independent contractors, if any) with access to confidential information has
executed a confidentiality and non-disclosure agreement pursuant to the form of
agreement previously provided to GTW or its representatives. Such
confidentiality and non-disclosure agreements constitute valid and binding
obligations of 2TM and such person, enforceable in accordance with their
respective terms. Neither the execution or delivery of such agreements, nor the
carrying on of their business as employees by such persons, nor the conduct of
their business as currently anticipated, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any of such persons is
obligated.
(D No product or service liability or warranty claims which
individually or in the aggregate could exceed One Thousand Dollars ($1,000)
individually or Ten Thousand ($10,000) in the aggregate have been communicated
to, or threatened against, 2TM nor, to 2TM's actual knowledge, is there any
specific situation, set of facts or occurrence that provides a basis for such
claim.
3.10 EMPLOYEE BENEFIT PLANS. There is no unfunded prior service cost
with respect to any bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, or other employee benefit or fringe
benefit plans, whether formal or informal, maintained by 2TM. Each bonus,
deferred compensation, pension, profit-sharing, retirement, stock purchase,
stock option, and other employee benefit or fringe benefit plans, whether formal
or informal, maintained by 2TM conforms to all applicable requirements of the
Employees Retirement Income Security Act. The 2TM Disclosure Schedule lists and
describes all profit-sharing, bonus, incentive, deferred compensation, vacation,
severance pay, retirement, stock option, group insurance or other plans (whether
written or not) providing employee benefits.
3.11 BANK ACCOUNTS. The 2TM Disclosure Schedule sets forth the names
and locations of all banks, trusts, companies, savings and loan associations,
and other financial institutions at which 2TM maintains accounts of any nature
and the names of all persons authorized to draw thereon or make withdrawals
therefrom.
<PAGE>
3.12 CONTRACTS.
(A 2TM has no agreements, contracts or commitments that provide for the
sale, licensing or distribution by 2TM of any of its products, services,
inventions, technology, know-how, trademarks or trade names except in the
ordinary course of its business.
(B Without limiting the provisions of Section 3.9 and except for any
agreements with GTW or LF, 2TM has not granted to any third party any exclusive
rights of any kind with respect to any of the 2TM Products/Services.
(C There is no outstanding sales contract, commitment or proposal of
2TM that is currently expected to result in any loss to 2TM (before allocation
of overhead and administrative costs) upon completion or performance thereof.
(D 2TM has no outstanding agreements, contracts or commitments with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by it on notice
of not longer than thirty (30) days and without liability, penalty or premium.
(E 2TM has no independent contractor or similar agreement, contract or
commitment that is not terminable on no more than thirty (30) days' notice
without penalty or liability of any type, including without limitation severance
or termination pay.
(F 2TM has no currently effective collective bargaining or union
agreements, contracts or commitments.
(G 2TM is not restricted by agreement from competing with any person or
from carrying on its business anywhere in the world.
(H 2TM has not guaranteed any obligations of other persons or made any
agreements to acquire or guarantee any obligations of other persons.
(I 2TM has no outstanding loan or advance to any person; nor is it
party to any line of credit, standby financing, revolving credit or other
similar financing arrangement of any sort which would permit the borrowing by
2TM of any sum not reflected in the 2TM Financial Statements.
(J All material contracts, agreements and instruments to which 2TM is a
party are valid, binding, in full force and effect, and enforceable by 2TM in
accordance with their respective terms. No such material contract, agreement or
instrument contains any material liquidated-damages, penalty or similar
provision. 2TM has not received any notice from any party to any such material
contract, agreement or instrument that such party intends to cancel, withdraw,
modify or amend such contract, agreement or arrangement.
(K The 2TM Disclosure Schedule lists all material agreements pursuant
to which 2TM has agreed to supply to any third party 2TM Products/Services.
<PAGE>
(L 2TM is not in default under or in breach or violation of, nor, to
its actual knowledge, is there any valid basis for any claim of default by 2TM
under, or breach or violation by 2TM of, any contract, commitment or restriction
to which 2TM is a party or to which it or any of its properties is bound, where
such defaults, breaches, or violations would, in the aggregate, have a Material
Adverse Effect on 2TM. To 2TM's actual knowledge, no other party is in default
under or in breach or violation of, nor is there any valid basis for any claim
of default by any other party under or any breach or violation by any other
party of, any material contract, commitment, or restriction to which 2TM is
bound or by which any of its properties is bound, where such defaults, breaches,
or violations would, in the aggregate, have a Material Adverse Effect on 2TM.
(M All agreements, contracts and commitments (the "Material Contracts")
listed or described in the 2TM Disclosure Schedule pursuant to this Section 3.12
are assumable, or will otherwise be the property of, the Surviving Corporation
following the Merger without further action by the Surviving Corporation or GTW.
If any of the Material Contracts are not assumable by or will not be the
property of, the Surviving Corporation following the Merger, then 2TM has
described in the 2TM Disclosure Schedule such actions as is necessary for
assumption of the Material Contract by the Surviving Corporation.
(N True and correct copies of each document or instrument described in
the 2TM Disclosure Schedule pursuant to this Section 3.12 have been made
available to GTW, LF or their representatives.
3.13 INSIDER TRANSACTIONS. No Affiliate of 2TM or 2TMD has any
interest in (i) any material equipment or other property, real or personal,
tangible or intangible, including, without limitation, any item of intellectual
property, used in connection with or pertaining to the business of 2TM; or (ii)
any creditor, supplier, customer, agent or representative of 2TM; provided,
however, that no such Affiliate or other person shall be deemed to have such an
interest solely by virtue of the ownership of less than one percent (1%) of the
outstanding stock or debt securities of any publicly-held company, the stock or
debt securities of which are traded on a recognized stock exchange or quoted on
the National Association of Securities Dealers Automated Quotation System.
3.14 INSURANCE. The 2TM Disclosure Schedule contains a list of the
principal policies of fire, liability and other forms of insurance held by 2TM.
3.15 DISPUTES AND LITIGATION. Except as set forth in the 2TM
Disclosure Schedule, there is no suit, action, litigation, proceeding,
investigation, claim, complaint, or accusation pending, or to its knowledge
threatened against or affecting 2TM or any of its properties, assets or business
or to which 2TM is a party, in any court or before any arbitrator of any kind or
before or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and to its knowledge, there is no
basis for such suit, action, litigation, proceeding, investigation, claim,
complaint, or accusation; (b) there is no pending or threatened change in any
environmental, zoning or building laws, regulations or ordinances which affect
or could affect 2TM or any of its properties, assets or businesses; and (c)
there is no outstanding order, writ, injunction, decree, judgment or award by
any court, arbitrator or governmental body against or affecting 2TM or any of
its properties, assets or business. There is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar right
on the part of any director or officer of 2TM or any such person's heirs,
executors or administrators as against 2TM.
<PAGE>
3.16 COMPLIANCE WITH LAWS. 2TM has at all times been, and presently
is, in full compliance with, and has not received notice of any claimed
violation of, any applicable federal, state, local, foreign and other laws,
rules and regulations. 2TM has filed all returns, reports and other documents
and furnished all information required or requested by any federal, state, local
or foreign governmental agency and all such returns, reports, documents and
information are true and complete in all respects. All permits, licenses,
orders, franchises and approvals of all federal, state, local or foreign
governmental or regulatory bodies required of 2TM for the conduct of its
business have been obtained, no violations are or have been recorded in respect
of any such permits, licenses, orders, franchises and approvals, and there is no
litigation, proceeding, investigation, arbitration, claim, complaint or
accusation, formal or informal, pending or threatened, which may revoke, limit,
or question the validity, sufficiency or continuance of any such permit,
license, order, franchise or approval. Such permits, licenses, orders,
franchises and approvals are valid and sufficient for all activities presently
carried on by 2TM.
3.17 SUBSIDIARIES. Other than 2TMD, 2TM has no subsidiaries. 2TM does
not own or control (directly or indirectly) any capital stock, bonds or other
securities of, and does not have any proprietary interest in, any other
corporation, general or limited partnership, firm, association or business
organization, entity or enterprise, and 2TM does not control (directly or
indirectly) the management or policies of any other corporation, partnership,
firm, association or business organization, entity or enterprise.
3.18 ENVIRONMENTAL MATTERS.
(A As of the date hereof, no underground storage tanks are present
under any property that 2TM has at any time owned, operated, occupied or leased.
As of the date hereof except as set forth in the 2TM Disclosure Schedule, no
material amount of any substance that has been designated by any governmental
entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws
(a "Hazardous Material"), excluding office, janitorial and other immaterial
supplies, are present, as a result of the actions of 2TM or, to 2TM's actual
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water, that 2TM have at any time owned, operated, occupied or leased.
(B At no time has 2TM transported, stored, used, manufactured, disposed
of, released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has 2TM
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material in violation of any rule, regulation, treaty or statute
promulgated by any governmental entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activities.
(C 2TM currently holds all environmental approvals, permits, licenses,
clearances and consents necessary for the conduct of its business as such
business is currently being conducted, the absence of which would be reasonably
likely to have a Material Adverse Effect on 2TM.
<PAGE>
(D No action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending or, to the actual knowledge of 2TM,
threatened concerning any Environmental Permit. 2TM is not aware of any fact or
circumstance which could involve it in any environmental litigation or impose
upon it any environmental liability which would be reasonably likely to have a
Material Adverse Effect on 2TM.
3.19 CORPORATE DOCUMENTS. 2TM and 2TMD have furnished to GTW and LF
for their examination: (i) copies of their Certificates or Articles of
Incorporation and Bylaws; (ii) their Minute Book containing all records required
to be set forth of all proceedings, consents, actions, and meetings of the
stockholders, the board of directors and any committees thereof; (iii) all
permits, orders, and consents issued by any regulatory agency with respect to
2TM or 2TMD, or any securities of 2TM or 2TMD, and all applications for such
permits, orders, and consents; and (iv) their stock transfer books setting forth
all transfers of any capital stock. The corporate minute books, stock
certificate books, stock registers and other corporate records of 2TM and 2TMD
are complete and accurate in all material respects, and the signatures appearing
on all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in such books and
records were duly and validly taken in compliance with the laws of the
applicable jurisdiction.
3.20 NO BROKERS. Neither 2TM nor 2TMD is obligated for the payment of
fees or expenses of any broker or finder in connection with the origin,
negotiation or execution of this Agreement or the Certificate of Merger or in
connection with any transaction contemplated hereby or thereby.
3.21 DISCLOSURE. No statements by 2TM or 2TMD contained in this
Agreement and the Exhibits and 2TM Disclosure Schedule attached hereto, any
other Transaction Document or any written statement or certificate furnished or
to be furnished pursuant hereto or in connection with the transactions
contemplated hereby and thereby (when read together) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made.
4. REPRESENTATIONS AND WARRANTIES OF GTW AND LF. Except as otherwise
set forth in the GTW Disclosure Schedule attached hereto, GTW and LF jointly and
severally represent and warrant to 2TM as set forth below. No fact or
circumstance disclosed to 2TM shall constitute an exception to these
representations and warranties unless such fact or circumstance is set forth in
the GTW Disclosure Schedule or such supplements thereto as may mutually be
agreed upon in writing by GTW and 2TM.
<PAGE>
4.1 ORGANIZATION. GTW and LF are corporations duly organized, validly
existing and in good standing under the laws of the state of incorporation of
such entity and have the corporate power and authority to carry on their
respective businesses as it is now being conducted. GTW and LF are duly
qualified or licensed to do business and are in good standing in each
jurisdiction in which the nature of their respective businesses or properties
makes such qualification or licensing necessary except where the failure to be
so qualified would not have a Material Adverse Effect on GTW. The GTW
Disclosure Schedule contains a true and complete listing of the locations of all
sales offices, and any other offices or facilities of GTW, and a true and
complete list of all states in which GTW maintains any employees. The GTW
Disclosure Schedule contains a true and complete list of all states in which GTW
is duly qualified to transact business as a foreign corporation. True and
complete copies of GTW's Articles of Incorporation and Bylaws, as in effect on
the date hereof and as to be in effect as of the Closing, have been provided to
2TM or its representatives.
4.2 CAPITALIZATION.
(A) The authorized capital of GTW will consist, prior to the Closing,
of 1,000,000 shares of Common Stock, of which 100 shares will be issued and
outstanding. LF is the record and beneficial owner of all such shares of GTW
Common Stock, free and clear of any and all claims, liens, encumbrances or
security interests.
(B) Except as set forth in the GTW Disclosure Schedule, neither GTW nor
LF has outstanding any preemptive rights, subscription rights, options,
warrants, rights to convert or exchange, capital stock equivalents, or other
rights to purchase or otherwise acquire any GTW capital stock or other
securities.
(C) All of the issued and outstanding shares of GTW capital stock have
been duly authorized, validly issued, are fully paid and nonassessable, and such
capital stock has been issued in full compliance with all applicable federal and
state securities laws. None of GTW's issued and outstanding shares of capital
stock are subject to repurchase or redemption rights.
(D) Except for any restrictions imposed by applicable state and federal
securities laws, there is no right of first refusal, option, or other
restriction on transfer applicable to any shares of GTW's capital stock.
(E) GTW is not under any obligation to register under the Securities
Act any shares of its capital stock or any other of its securities that might be
issued in the future if the Merger were not consummated.
(F) GTW is not a party or subject to any agreement or understanding
(and, to GTW's and LF's actual knowledge, there is no agreement or understanding
between or among any persons) that affects or relates to the voting or giving of
written consent with respect to any security.
<PAGE>
4.3 POWER, AUTHORITY AND VALIDITY. GTW and LF have the corporate power
to enter into this Agreement and the other Transaction Documents to which they
are parties and to carry out their obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Boards of Directors of GTW and LF and no other corporate
proceedings on the part of GTW or LF are necessary to authorize this Agreement,
the other Transaction Documents and the transactions contemplated herein and
therein. GTW and LF are not subject to, or obligated under, any charter, bylaw
or contract provision or any license, franchise or permit, or subject to any
order or decree, which would be breached or violated by or in conflict with its
executing and carrying out this Agreement and the transactions contemplated
hereunder and under the Transaction Documents. Except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which GTW
is qualified to do business, (ii) the filing of the Certficate of Merger with
the Secretary of State of the State of Oklahoma, and (ii) filings under
applicable securities laws, no consent of any person who is a party to a
contract which is material to GTW's business, nor consent of any governmental
authority, is required to be obtained on the part of GTW to permit the
transactions contemplated herein and to permit GTW to continue the business
activities of GTW as previously conducted by GTW without a Material Adverse
Effect. This Agreement is, and the other Transaction Documents when executed
and delivered by GTW and LF shall be, the valid and binding obligations of GTW
and LF, enforceable in accordance with their respective terms.
4.4 FINANCIAL STATEMENTS.
(A) GTW has delivered to 2TM copies of the GTW Financial Statements.
(B) The GTW Financial Statements are complete and in accordance with
the books and records of GTW and present fairly the financial position of GTW as
of its historical dates. The GTW Financial Statements have been prepared in
accordance with GAAP, applied on a basis consistent with prior periods. Except
and to the extent reflected or reserved against in such balance sheets
(including the notes thereto), GTW does not have, as of the dates of such
balance sheets, any liabilities or obligations (absolute or contingent) of a
nature required or customarily reflected in a balance sheet (or the notes
thereto) prepared in accordance with GAAP. The reserves, if any, reflected on
the GTW Financial Statements are adequate in light of the contingencies with
respect to which they are made.
(C) GTW has no debt, liability, or obligation of any nature, whether
accrued, absolute, contingent, or otherwise, and whether due or to become due,
that is not reflected or reserved against in the GTW Financial Statements,
except for those (i) that may have been incurred after the date of the GTW
Financial Statements; or (ii) that are not required by GAAP to be included in a
balance sheet or the notes thereto, except that GTW has not established any
reserves with respect to the costs and fees associated with this Agreement, the
other Transaction Documents, and the transactions contemplated hereby and
thereby. All material debts, liabilities, and obligations incurred after the
date of the GTW Financial Statements were incurred in the ordinary course of
business, and are usual and normal in amount both individually and in the
aggregate.
4.5 SITE STATISTICS
1. The current active registered users of the Site are 1,800,000
2. The Site receives on average no less than 300,000 unique visitors per day
3. The Site receives on average no less than 10,000,000 banner ad
impressions per day
4. The Site accrues on average no less than $20,000 per day in banner ad
revenue
5. The Site accrues on average approximately $6,000 per day payable to its
web surfers pursuant to the "pay to surf" program
<PAGE>
4.6 TAX MATTERS.
(A) GTW has fully and timely, properly and accurately filed all tax
returns and reports required to be filed by it (or extensions thereof),
including all federal, foreign, state and local tax returns and estimates for
all years and periods (and portions thereof) for which any such returns, reports
or estimates were due. All such returns, reports and estimates were prepared in
the manner required by applicable law. All income, sales, use, occupation,
property or other taxes or assessments due from GTW have been paid. There are
no pending assessments, asserted deficiencies or claims for additional taxes
that have not been paid. The reserves for taxes, if any, reflected on the GTW
Financial Statements are adequate and there are no tax liens on any property or
assets of GTW. There have been no audits or examinations of any tax returns or
reports by any applicable governmental agency. No state of facts exists or has
existed which would constitute grounds for the assessment of any penalty or of
any further tax liability beyond that shown on the respective tax reports,
returns or estimates. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any federal, state or local
income tax return or report for any period.
(B) All taxes which GTW has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper taxing authority.
(C) GTW is not a party to any tax-sharing agreement or similar
arrangement with any other party.
(D) At no time has GTW been included in the federal consolidated income
tax return of any affiliated group of corporations.
(E) No payment which GTW is obliged to pay to any director, officer,
employee or independent contractor pursuant to the terms of an employment
agree-ment, severance agreement or otherwise will constitute an excess parachute
payment as defined in '280G of the Code.
(F) GTW is not currently under any contractual obligation to pay any
tax obligations of, or with respect to any transaction relating to, any other
person or to indemnify any other person with respect to any tax.
4.7 TAX-FREE REORGANIZATION.
(A) Neither GTW nor LF has taken or agreed to take any action that
would prevent the Mergers from constituting a reorganization qualifying under
the provi-sions of '368(a) of the Code.
(B) Neither GTW nor LF is an investment company as defined in
''368(a)(2)(F)(iii) and (iv) of the Code.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999, GTW
has not:
<PAGE>
(A) suffered any material adverse change in its financial condition or
in the operations of its business, nor any material adverse changes in its
balance sheet, (with the GTW Financial Statements and any subsequent balance
sheet analyzed as if each had been prepared according to GAAP), including but
not limited to cash distributions or material decreases in the net assets of
GTW;
(B) suffered any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting its properties or business;
(C) granted or agreed to make any increase in the compensation payable
or to become payable by it to its officers or employees, except those occurring
in the ordinary course of business;
(D) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of its capital stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition by it
of such shares;
(E) issued any shares of its capital stock or any warrants, rights,
options or entered into any commitment relating to its shares except for the
issuance of its pursuant to the exercise of outstanding options;
(F) made any change in the accounting methods or practices it follows,
whether for general financial or tax purposes, or any change in depreciation or
amorti-zation policies or rates adopted therein;
(G) sold, leased, abandoned or otherwise disposed of any real property
or any machinery, equipment or other operating property other than in the
ordinary course of business;
(H) sold, assigned, transferred, licensed or otherwise disposed of any
patent, trademark, trade name, brand name, copyright (or pending application for
any patent, trademark or copyright) invention, work of authorship, process,
know-how, formula or trade secret or interest thereunder or other intangible
asset except in the ordinary course of its business;
(I) suffered any labor dispute;
(J) engaged in any activity or entered into any material commitment or
transaction (including without limitation any borrowing or capital expenditure)
other than in the ordinary course of business;
(K) incurred any liabilities except in the ordinary course of business
and consistent with past practice which would be required to be disclosed in
financial statements prepared in accordance with GAAP;
(L) permitted or allowed any of its property or assets to be subjected
to any mortgage, deed of trust, pledge, lien, security interest or other
encumbrance of any kind, except those permitted under Section 4.8 hereof, other
than any purchase money security interests incurred in the ordinary course of
business;
<PAGE>
(M) made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of Ten Thousand Dollars
($10,000), or in the aggregate, in excess of Fifty Thousand Dollars ($50,000);
(N) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or arrangement
with any of its Affiliates, officers, directors or stockholder or any Affiliate
or associate of any of the foregoing;
(O) made any amendment to or terminated any agreement which, if not so
amended or terminated, would be required to be disclosed on the GTW Disclosure
Schedule; or
(P) agreed to take any action outside of its ordinary course of
business or which would constitute a breach of any of the representations
contained in this Agreement.
4.9 TITLE AND RELATED MATTERS. GTW has good and marketable title to
all the properties, interests in properties and assets, real and personal,
reflected in the GTW Financial Statements or acquired after the date of the GTW
Financial Statements (except properties, interests in properties and assets sold
or otherwise disposed of since the date of the GTW Financial Statements in the
ordinary course of business), free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except the lien of current
taxes not yet due and payable and except for liens which in the aggregate do not
secure more than Ten Thousand Dollars ($10,000) in liabilities. The equipment
of GTW used in the operation of its business is in good operating condition and
repair. All real or personal property leases to which GTW is a party are valid,
binding, enforceable obligations of GTW effective in accordance with their
respective terms. There is not under any of such leases any existing material
default or event of default or event which, with notice or lapse of time or
both, would constitute a material default. The GTW Disclosure Schedule contains
a description of all real and personal property leased or owned by GTW,
identifying such property and, in the case of real property, stating the monthly
rental due, term of lease and square feet leased. True and correct copies of
each of GTW's leases have been provided to 2TM or its representatives.
4.10 PROPRIETARY RIGHTS.
<PAGE>
(A) GTW owns all right, title and interest in and to, or valid licenses
for use of, all patents, copyrights, technology, software, software tools,
know-how, processes, trade secrets, trademarks, service marks, trade names and
other proprietary rights used in or necessary for the conduct of GTW's business
as conducted to the date hereof or contemplated, including, without limitation,
the technology and all proprietary rights developed or discovered or used in
connection with or contained in the GTW Products/Services, free and clear of all
liens, claims and encumbrances (including without limitation distribution
rights) (all of which are referred to as "GTW Proprietary Rights") and GTW has
the right to transfer all such rights to GTWD as contemplated hereby. The
foregoing representation as it relates to GTW Third-Party Technology (as
hereinafter defined) is limited to GTW's interest pursuant to the GTW
Third-Party Licenses (as hereinafter defined), all of which are valid and
enforceable and in full force and effect and which grant GTW such rights to the
GTW Third-Party Technology as are employed in or necessary to the business of
GTW as conducted or proposed to be conducted. The GTW Disclosure Schedule
contains an accurate and complete description of (i) all patents, trademarks
(with separate listings of registered and unregistered trademarks), trade names,
and registered copyrights in or related to the GTW Products/ Services, all
applications and registration statements therefor, and a list of all licenses
and other agreements relating thereto; and (ii) a list of all licenses and other
agreements with third parties (the "GTW Third-Party Licenses") relating to any
inventions, technology, know-how, or processes that GTW is licensed or otherwise
authorized by such third parties to use, market, distribute or incorporate into
products distributed by GTW (such software, inventions, technology, know-how and
processes are collectively referred to as the "GTW Third-Party Technology").
GTW's trademark or trade name registrations related to the GTW Products/Services
and all of GTW's copyrights in any of the GTW Products/Services are valid and in
full force and effect, and consummation of the transactions contemplated hereby
will not alter or impair any such rights. No claims have been asserted against
GTW (and GTW is not aware of any claims which are likely to be asserted against
it or which have been asserted against others) by any person challenging GTW's
use, possession, manufacture, sale, provision or distribution of the GTW
Products/Services under any patents, trademarks, trade names, copyrights, trade
secrets, technology, know-how or processes utilized by GTW (including, without
limitation, the GTW Third-Party Technology) or challenging or question-ing the
validity or effectiveness of any license or agreement relating thereto
(including, without limitation, the GTW Third-Party Licenses). There is no
valid basis for any claim of the type specified in the immediately preceding
sentence which could in any material way relate to or interfere with the
currently planned continued enhancement and exploitation by GTW of any of the
GTW Products/Services. None of the GTW Products/Services nor the use or
exploita-tion of any patents, trademarks, trade names, copyrights, technology,
know-how or processes by GTW in its current business infringes on the rights of,
constitutes misappro-priation of, or in any way involves unfair competition with
respect to, any proprietary information or intangible property right of any
third person or entity, including without limitation any patent, trade secret,
copyright, trademark or trade name.
(B) No employee of GTW is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or agreement
relating to the relationship of any such employee with GTW or, to GTW's actual
knowledge, any other party because of the nature of the business conducted by
GTW or proposed to be conducted by GTW.
(C) Each person presently or previously employed by GTW (including
independent contractors, if any) with access to confidential information has
executed a confidentiality and non-disclosure agreement pursuant to the form of
agreement previously provided to GTW or its representatives. Such
confidentiality and non-disclosure agreements constitute valid and binding
obligations of GTW and such person, enforceable in accordance with their
respective terms. Neither the execution or delivery of such agreements, nor the
carrying on of their business as employees by such persons, nor the conduct of
their business as currently anticipated, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any of such persons is
obligated.
(D) No product or service liability or warranty claims which
individually or in the aggregate could exceed One Thousand Dollars ($1,000)
individually or Ten Thousand ($10,000) in the aggregate have been communicated
to, or threatened against, GTW nor, to GTW's actual knowledge, is there any
specific situation, set of facts or occurrence that provides a basis for such
claim.
<PAGE>
(E) GoToWorld has a nonexclusive, royalty-free, perpetual, World wide
license (exclusive of the excluded territories of Spain, Japan and Latin
America) to the GoToWorld branded browser software and plug-ins, all in
executable form only, including all upgrades or new features, if any, to the
browser software and plug-ins, as such upgrades or new features become
available.
4.11 EMPLOYEE BENEFIT PLANS. There is no unfunded prior service cost
with respect to any bonus, deferred compensation, pension, profit-sharing,
retirement, stock purchase, stock option, or other employee benefit or fringe
benefit plans, whether formal or informal, maintained by GTW. Each bonus,
deferred compensation, pension, profit-sharing, retirement, stock purchase,
stock option, and other employee benefit or fringe benefit plans, whether formal
or informal, maintained by GTW conforms to all applicable requirements of the
Employees Retirement Income Security Act. The GTW Disclosure Schedule lists and
describes all profit-sharing, bonus, incentive, deferred compensation, vacation,
severance pay, retirement, stock option, group insurance or other plans (whether
written or not) providing employee benefits.
4.12 BANK ACCOUNTS. The GTW Disclosure Schedule sets forth the names
and locations of all banks, trusts, companies, savings and loan associations,
and other financial institutions at which GTW maintains accounts of any nature
and the names of all persons authorized to draw thereon or make withdrawals
therefrom.
4.13 CONTRACTS.
(A) GTW has no agreements, contracts or commitments that provide for
the sale, licensing or distribution by GTW of any of its products, services,
inventions, technology, know-how, trademarks or trade names except in the
ordinary course of its business.
(B) Without limiting the provisions of Section 4.9 and except for any
agreements with 2TM, GTW has not granted to any third party any exclusive rights
of any kind with respect to any of the GTW Products/Services.
(C) There is no outstanding sales contract, commitment or proposal of
GTW that is currently expected to result in any loss to GTW (before allocation
of overhead and administrative costs) upon completion or performance thereof.
(D) GTW has no outstanding agreements, contracts or commitments with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by it on notice
of not longer than thirty (30) days and without liability, penalty or premium.
(E) GTW has no employment, independent contractor or similar agreement,
contract or commitment that is not terminable on no more than thirty (30) days'
notice without penalty or liability of any type, including without limitation
severance or termination pay.
(F) GTW has no currently effective collective bargaining or union
agreements, contracts or commitments.
<PAGE>
(G) GTW is not restricted by agreement from competing with any person
or from carrying on its business anywhere in the world.
(H) GTW has not guaranteed any obligations of other persons or made any
agreements to acquire or guarantee any obligations of other persons.
(I) GTW has no outstanding loan or advance to any person; nor is it
party to any line of credit, standby financing, revolving credit or other
similar financing arrangement of any sort which would permit the borrowing by
GTW of any sum not reflected in the GTW Financial Statements.
(J) All material contracts, agreements and instruments to which GTW is
a party are valid, binding, in full force and effect, and enforceable by GTW in
accordance with their respective terms. No such material contract, agreement or
instrument contains any material liquidated-damages, penalty or similar
provision. GTW has not received any notice from any party to any such material
contract, agreement or instrument that such party intends to cancel, withdraw,
modify or amend such contract, agreement or arrangement.
(K) The GTW Disclosure Schedule lists all material agreements pursuant
to which GTW has agreed to supply to any third party GTW Products/Services.
(L) GTW is not in default under or in breach or violation of, nor, to
its actual knowledge, is there any valid basis for any claim of default by GTW
under, or breach or violation by GTW of, any contract, commitment or restriction
to which GTW is a party or to which it or any of its properties is bound, where
such defaults, breaches, or violations would, in the aggregate, have a Material
Adverse Effect on GTW. To GTW's actual knowledge, no other party is in default
under or in breach or violation of, nor is there any valid basis for any claim
of default by any other party under or any breach or violation by any other
party of, any material contract, commitment, or restriction to which GTW is
bound or by which any of its properties is bound, where such defaults, breaches,
or violations would, in the aggregate, have a Material Adverse Effect on GTW.
(M) All agreements, contracts and commitments (the "Material
Contracts") listed or described in the GTW Disclosure Schedule pursuant to this
Section 4.12 are assumable, or will otherwise be the property of, the Surviving
Corporation following the Mergers without further action by the Surviving
Corporation or GTW. If any of the Material Contracts are not assumable by or
will not be the property of, the Surviving Corporation following the Mergers,
then GTW has described in the GTW Disclosure Schedule such actions as is
necessary for assumption of the Material Contract by the Surviving Corporation.
(N) True and correct copies of each document or instrument described in
the GTW Disclosure Schedule pursuant to this Section 4.12 have been made
available to 2TM or its representatives.
<PAGE>
4.14 INSIDER TRANSACTIONS. No Affiliate of GTW or LF has any interest
in (i) any material equipment or other property, real or personal, tangible or
intangible, including, without limitation, any item of intellectual property,
used in connection with or pertaining to the business of GTW; or (ii) any
creditor, supplier, customer, agent or representative of GTW; provided, however,
that no such Affiliate or other person shall be deemed to have such an interest
solely by virtue of the ownership of less than one percent (1%) of the
outstanding stock or debt securities of any publicly-held company, the stock or
debt securities of which are traded on a recognized stock exchange or quoted on
the National Association of Securities Dealers Automated Quotation System.
4.15 INSURANCE. The GTW Disclosure Schedule contains a list of the
principal policies of fire, liability and other forms of insurance held by GTW.
4.16 DISPUTES AND LITIGATION. Except as set forth in the GTW
Disclosure Schedule, there is no suit, action, litigation, proceeding,
investigation, claim, complaint, or accusation pending, or to its knowledge
threatened against or affecting GTW or any of its properties, assets or business
or to which GTW is a party, in any court or before any arbitrator of any kind or
before or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and to its knowledge, there is no
basis for such suit, action, litigation, proceeding, investigation, claim,
complaint, or accusation; (b) there is no pending or threatened change in any
environmental, zoning or building laws, regulations or ordinances which affect
or could affect GTW or any of its properties, assets or businesses; and (c)
there is no outstanding order, writ, injunction, decree, judgment or award by
any court, arbitrator or governmental body against or affecting GTW or any of
its properties, assets or business. There is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar right
on the part of any director or officer of GTW or any such person's heirs,
executors or administrators as against GTW.
4.17 COMPLIANCE WITH LAWS. GTW has at all times been, and presently
is, in full compliance with, and has not received notice of any claimed
violation of, any applicable federal, state, local, foreign and other laws,
rules and regulations. GTW has filed all returns, reports and other documents
and furnished all information required or requested by any federal, state, local
or foreign governmental agency and all such returns, reports, documents and
information are true and complete in all respects. All permits, licenses,
orders, franchises and approvals of all federal, state, local or foreign
governmental or regulatory bodies required of GTW for the conduct of its
business have been obtained, no violations are or have been recorded in respect
of any such permits, licenses, orders, franchises and approvals, and there is no
litigation, proceeding, investigation, arbitration, claim, complaint or
accusation, formal or informal, pending or threatened, which may revoke, limit,
or question the validity, sufficiency or continuance of any such permit,
license, order, franchise or approval. Such permits, licenses, orders,
franchises and approvals are valid and sufficient for all activities presently
carried on by GTW.
4.18 SUBSIDIARIES. GTW has no subsidiaries. GTW does not own or
control (directly or indirectly) any capital stock, bonds or other securities
of, and does not have any proprietary interest in, any other corporation,
general or limited partnership, firm, association or business organization,
entity or enterprise, and GTW does not control (directly or indirectly) the
management or policies of any other corporation, partnership, firm, association
or business organization, entity or enterprise.
<PAGE>
4.19 ENVIRONMENTAL MATTERS.
(A) As of the date hereof, no underground storage tanks are present
under any property that GTW has at any time owned, operated, occupied or leased.
As of the date hereof except as set forth in the GTW Disclosure Schedule, no
material amount of any substance that has been designated by any governmental
entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws
(a "Hazardous Material"), excluding office, janitorial and other immaterial
supplies, are present, as a result of the actions of GTW or, to GTW's actual
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water, that GTW have at any time owned, operated, occupied or leased.
(B) At no time has GTW transported, stored, used, manufactured,
disposed of, released or exposed its employees or others to Hazardous Materials
in violation of any law in effect on or before the Closing Date, nor has GTW
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material in violation of any rule, regulation, treaty or statute
promulgated by any governmental entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activities.
(C) GTW currently holds all environmental approvals, permits, licenses,
clearances and consents necessary for the conduct of its business as such
business is currently being conducted, the absence of which would be reasonably
likely to have a Material Adverse Effect on GTW.
(D) No action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending or, to the actual knowledge of GTW,
threatened concerning any Environmental Permit. GTW is not aware of any fact or
circumstance which could involve it in any environmental litigation or impose
upon it any environmental liability which would be reasonably likely to have a
Material Adverse Effect on GTW.
4.20 CORPORATE DOCUMENTS. GTW has furnished to 2TM for its
examination: (i) copies of its Certificate or Articles of Incorporation and
Bylaws; (ii) its Minute Book containing all records required to be set forth of
all proceedings, consents, actions, and meetings of the stockholders, the board
of directors and any committees thereof; (iii) all permits, orders, and consents
issued by any regulatory agency with respect to GTW, or any securities of GTW,
and all applications for such permits, orders, and consents; and (iv) their
stock transfer books setting forth all transfers of any capital stock. The
corporate minute books, stock certificate books, stock registers and other
corporate records of GTW are complete and accurate in all material respects, and
the signatures appearing on all documents contained therein are the true
signatures of the persons purporting to have signed the same. All actions
reflected in such books and records were duly and validly taken in compliance
with the laws of the applicable jurisdiction.
<PAGE>
4.21 NO BROKERS. Neither GTW nor LF is obligated for the payment of
fees or expenses of any broker or finder in connection with the origin,
negotiation or execution of this Agreement or the Certificate of Merger or in
connection with any transaction contemplated hereby or thereby.
4.22 DISCLOSURE. No statements by GTW or LF contained in this
Agreement and the Exhibits and GTW Disclosure Schedule attached hereto, any
other Transaction Document or any written statement or certificate furnished or
to be furnished pursuant hereto or in connection with the transactions
contemplated hereby and thereby (when read together) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made.
5. PRECLOSING COVENANTS OF 2TM AND 2TMD.
5.1 NOTICES AND APPROVALS. 2TM agrees: (a) to give and to cause 2TMD
to give all notices to third parties which may be necessary or deemed desirable
by GTW in connection with this Agreement and the consummation of the
transactions contemplated hereby; (b) to use its best efforts to obtain and to
cause 2TMD to obtain, all federal and state governmental regulatory agency
approvals, consents, permit, authorizations, and orders necessary or deemed
desirable by GTW in connection with this Agreement and the consummation of the
transaction contemplated hereby; and (c) to use its best efforts to obtain, and
to cause 2TMD to obtain, all consents and authorizations of any other third
parties necessary or deemed desirable by GTW in connection with this Agreement
and the consummation of the transactions contemplated hereby.
5.2 EMPLOYMENT AGREEMENTS, OTHER COMMITMENTS.
(A) Prior to the Closing, all employment agreements to which 2TM is a
party shall be reviewed by 2TM and GTW and assumed by 2TMD as of the Closing
with such modifications as may be acceptable to 2TM, GTW and the employee party
to such agreement.
(B) Prior to the Closing, 2TMD shall enter into an employment agreement
with Ian S. Simpson, to serve as 2TMD's President, Chief Executive Officer and
Chairman, which agreement shall provide, among other provisions: (i) a base
annual salary of $200,000 for a three year term, and (ii) a grant of 500,000
options to purchase 2TMD common stock vesting over four years with an exercise
price of $2.00 per share, with 25% of these options vesting as the Effective
Time and 25% of these options vesting on any secondary offering of shares by
2TMD.
(C) Prior to the Closing, 2TMD shall enter into a consulting agreement
with Steven W. Rebeil, which agreement shall provide, among other provisions:
(i) a base annual payment of $200,000, payable not less than monthly for a
three year term, and (ii) a grant of 500,000 options to purchase 2TMD common
stock vesting over four years with an exercise price of $2.00 per share, with
25% of these options vesting as the Effective Time and 25% of these options
vesting on any secondary offering of shares by 2TMD.
<PAGE>
(D) Prior to the Closing, 2TMD shall enter into a consulting agreement
with Dominic J. Magliarditi, which agreement shall provide among other
provisions: (i) a base annual payment of $200,000, payable not less than
monthly, for a three year term, and (ii) a grant of 500,000 options to purchase
2TMD common stock vesting over four years with an exercise price of $2.00 per
share, with 25% of these options vesting as the Effective Time and 25% of these
options vesting on any secondary offering of shares by 2TMD.
(E) Prior to the Closing, 2TMD shall enter into an employment agreement
with Sean Gharavi, to serve as 2TMD's Director of Internet Marketing, which
agreement shall provide among other provisions: (i) a base annual salary of
$90,000 for a three year term, and (ii) a grant of 20,000 options to purchase
2TMD common stock vesting over four years with an exercise price of $5.00 per
share.
(F) Prior to the Closing, 2TMD shall enter into an agreement with Yuri
Mordovskoi, who will become a Director of 2TMD post-closing, to issue 100,000
options to purchase 2TMD common stock vesting over four years with an exercise
price of $5.00 per share, with 50% of the options vesting on any secondary
offering of shares by 2TMD. Mr. Mordovskoi shall have no fewer options than any
new director on the Board of Directors of 2TMD.
5.3 ADVICE OF CHANGES. 2TM will promptly advise GTW in writing (i) of
any event occurring subsequent to the date of this Agreement which would render
any representation or warranty of 2TM or 2TMD contained in this Agreement, if
made on or as of the date of such event or the Closing Date, untrue or
inaccurate in any material respect and (ii) of any material adverse change in
2TM's business, taken as a whole.
5.4 INFORMATION FOR GTW'S STATEMENTS AND APPLICATIONS. 2TM and 2TMD
and their employees, accountants and attorneys shall cooperate fully with GTW in
the preparation of any statements or applications made by GTW to any federal or
state governmental regulatory agency in connection with this Agreement and the
transactions contemplated hereby and to furnish GTW with all information
concerning 2TM and 2TMD necessary or deemed desirable by GTW for inclusion in
such statements and applications, including, without limitation, all requisite
financial statements and schedules.
5.5 CONDUCT OF BUSINESS BY 2TM. Until the Closing, 2TM will continue
to conduct its business and maintain its business relationships in the ordinary
and usual course and will not, without the prior written consent of GTW:
(A) borrow any money which borrowings exceed in the aggregate Ten
Thousand Dollars ($10,000) or incur or commit to incur any capital expenditures
in excess of Ten Thousand Dollars ($10,000) in the aggregate;
(B) lease, license, sell, transfer or encumber or permit to be
encumbered any asset, intellectual property right or other property associated
with the business of 2TM (including sales or transfers to Affiliates of 2TM),
except for sales of inventory in the usual and ordinary course of business;
<PAGE>
(C) dispose of any of its assets, except in the regular and ordinary
course of business;
(D) enter into any lease or contract for the purchase or sale of any
property, real or personal except in the ordinary course of business;
(E) pay any bonus, increased salary, or special remuneration to any
officer or employee, including any amounts for accrued but unpaid salary or
bonuses (other than amounts not in excess of normal payments made on a regular
basis in prior periods);
(F) change accounting methods;
(G) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital, or redeem or otherwise acquire any of its
capital stock;
(H) amend or terminate any contract, agreement or license to which it
is a party except in the ordinary course of business;
(I) loan any amount to any person or entity, or guaranty or act as a
surety for any obligation;
(J) issue or sell any shares of its capital stock of any class or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of capital stock, other than stock options granted as part of existing
stock option program or pursuant to any recapitalization plan disclosed to and
approved by GTW in its discretion and except for the issuance of up to 2,500,000
shares pursuant to 2TM's current Private Placement Memorandum;
(K) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization affecting the number of outstanding
shares of its capital stock of any class or affecting any other of its
securities;
(L) amend its Certificate of Incorporation or Bylaws except as
necessary to carry out a recapitalization plan;
(M) make or change any election, change any annual accounting period,
adopt or change any accounting method, file any amended tax return, enter into
any closing agreement, settle any tax claim or assessment, surrender any right
to claim refund of taxes, consent to any extension or waiver of the limitation
period applicable to any tax claim or assessment, or take any other action or
omit to take any action, if any such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action or omission would have
the effect of increasing the tax liability of 2TM;
<PAGE>
(N) do anything that would cause there to be material adverse changes
in its Financial Statements (with such Financial Statements analyzed as if it
had been prepared according to GAAP, and including but not limited to cash
distributions or material decreases in the net assets of 2TM), except as would
occur in the ordinary course of 2TM's business, between the date of the 2TM
Financial Statements and the Closing Date; or
(O) agree to do any of the things described in the preceding clauses
Section 5.5(a) through (n).
6. PRECLOSING COVENANTS OF GTW AND LF.
6.1 NOTICES AND APPROVALS. GTW and LF agree: (a) to give all notices
to third parties which may be necessary or deemed desirable by 2TM in connection
with this Agreement and the consummation of the transactions contemplated
hereby; (b) to use their best efforts to obtain all federal and state
governmental regulatory agency approvals, consents, permit, authorizations, and
orders necessary or deemed desirable by 2TM in connection with this Agreement
and the consummation of the transaction contemplated hereby; and (c) to use
their best efforts to obtain all consents and authorizations of any other third
parties necessary or deemed desirable by 2TM in connection with this Agreement
and the consummation of the transactions contemplated hereby.
6.2 EMPLOYMENT AGREEMENTS, OTHER COMMITMENTS TERMINATED. Prior to the
Closing, all employment agreements to which GTW is a party shall be reviewed by
2TM and GTW and, as agreed between them, either terminated prior to the Closing
or assumed by 2TMD as of the Closing with such modifications as may be
acceptable to 2TM, GTW and the employee party to such agreement.
6.3 ADVICE OF CHANGES. GTW will promptly advise 2TM in writing (i) of
any event occurring subsequent to the date of this Agreement which would render
any representation or warranty of GTW or LF contained in this Agreement, if made
on or as of the date of such event or the Closing Date, untrue or inaccurate in
any material respect and (ii) of any material adverse change in GTW's business,
taken as a whole.
6.4 INFORMATION FOR 2TM'S STATEMENTS AND APPLICATIONS. GTW and LF and
their employees, accountants and attorneys shall cooperate fully with 2TM in the
preparation of any statements or applications made by 2TM to any federal or
state governmental regulatory agency in connection with this Agreement and the
transactions contemplated hereby and to furnish 2TM with all information
concerning GTW and LF necessary or deemed desirable by 2TM for inclusion in such
statements and applications, including, without limitation, all requisite
financial statements and schedules.
6.5 CONDUCT OF BUSINESS BY GTW. Until the Closing, GTW will continue
to conduct its business and maintain its business relationships in the ordinary
and usual course and will not, without the prior written consent of 2TM:
(A) borrow any money which borrowings exceed in the aggregate Ten
Thousand Dollars ($10,000) or incur or commit to incur any capital expenditures
in excess of Ten Thousand Dollars ($10,000) in the aggregate;
<PAGE>
(B) lease, license, sell, transfer or encumber or permit to be
encumbered any asset, intellectual property right or other property associated
with the business of GTW (including sales or transfers to Affiliates of GTW),
except for sales of inventory in the usual and ordinary course of business;
(C) dispose of any of its assets, except in the regular and ordinary
course of business;
(D) enter into any lease or contract for the purchase or sale of any
property, real or personal except in the ordinary course of business;
(E) pay any bonus, increased salary, or special remuneration to any
officer or employee, including any amounts for accrued but unpaid salary or
bonuses (other than amounts not in excess of normal payments made on a regular
basis in prior periods);
(F) change accounting methods;
(G) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital, or redeem or otherwise acquire any of its
capital stock;
(H) amend or terminate any contract, agreement or license to which it
is a party except in the ordinary course of business;
(I) loan any amount to any person or entity, or guaranty or act as a
surety for any obligation;
(J) issue or sell any shares of its capital stock of any class or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of capital stock, other than stock options granted as part of existing
stock option program or pursuant to any recapitalization plan disclosed to and
approved by 2TM in its discretion;
(K) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization affecting the number of outstanding
shares of its capital stock of any class or affecting any other of its
securities;
(L) amend its Certificate of Incorporation or Bylaws except as
necessary to carry out a recapitalization plan;
(M) make or change any election, change any annual accounting period,
adopt or change any accounting method, file any amended tax return, enter into
any closing agreement, settle any tax claim or assessment, surrender any right
to claim refund of taxes, consent to any extension or waiver of the limitation
period applicable to any tax claim or assessment, or take any other action or
omit to take any action, if any such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action or omission would have
the effect of increasing the tax liability of GTW;
<PAGE>
(N) do anything that would cause there to be material adverse changes
in its Financial Statements (with such Financial Statements analyzed as if it
had been prepared according to GAAP, and including but not limited to cash
distributions or material decreases in the net assets of GTW), except as would
occur in the ordinary course of GTW's business, between the date of the GTW
Financial Statements and the Closing Date; or
(O) agree to do any of the things described in the preceding clauses
Section 6.5(a) through (n).
7. MUTUAL COVENANTS.
7.1 NO PUBLIC ANNOUNCEMENT. The parties shall make no public
announcement concerning this Agreement, their discussions or any other memos,
letters or agreements between the parties relating to the Merger until such time
as they agree to the contents of a mutually satisfactory press release which
they intend to publicly-release on the date of this Agreement. Either of the
parties, but only after reasonable consultation with the other, may make
disclosure if required under applicable law.
7.2 OTHER NEGOTIATIONS. Between the date hereof and the Closing, or
such earlier date as GTW and 2TM mutually agree to discontinue discussions of
the Merger, neither GTW nor 2TM will take any action to solicit, initiate, seek,
encourage or support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any corporation,
partnership, person or other entity or group (other than discussions pursuant to
this Agreement) regarding any acquisition, any merger or consolidation with or
involving 2TM or GTW, or any acquisition of any material portion of the stock or
assets. 2TM and GTW agree that any such negotiations in progress as of the date
hereof will be terminated or suspended during such period.
7.3 DUE DILIGENCE, INVESTIGATION, AND AUDITS. At such time prior to
the Closing as may be reasonably requested, each party shall make available to
the other party and the other party's employees, agents and representatives all
information concerning the operation, business and prospects of such party as
may be reasonably requested by the other party. Each party will cooperate with
the other party for the purpose of permitting the other party to discuss such
party's business and prospects with such party's customers, creditors, suppliers
and other persons having business dealings with such party, subject to
reasonable confidentiality obligations between the parties.
<PAGE>
7.4 REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS. Subject to the
terms and conditions of this Agreement, 2TM, 2TMD, GTW and LF shall use their
respective best efforts to (i) make all necessary filings with respect to the
Merger and this Agreement under the Securities Act, and applicable blue sky or
similar securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto and shall supply all additional
information requested in connection therewith; (ii) make merger notification or
other appropriate filings with federal, state or local governmental bodies or
applicable foreign governmental agencies and shall use all reasonable efforts to
obtain required approvals and clearances with respect thereto and shall supply
all additional information requested in connection therewith; (iii) obtain all
consents, waivers, approvals, authorizations and orders required in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger; and (iv) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
7.5 FURTHER ASSURANCES. Prior to and following the Closing, each party
agrees to cooperate fully with the other parties and to execute such further
instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
7.6 OUTSTANDING OPTIONS. At the Effective Time, the parties hereto
agree that the Surviving Corporation shall adopt a stock incentive plan that
will authorize the issuance of the lessor of (1) 15,000,000 shares of the
Surviving Corporation's common stock, or (2) generally, twenty percent (20%) of
the outstanding Shares at that time. The Surviving Corporation shall issue
replacement options under the Plan as provided on Schedule A, attached hereto
and incorporated herein by this reference. In no event shall these replacement
options be issued on less than an equivalent and equal basis as those existing
options issued to the GTW and 2TM existing employees. At the Effective Time,
the parties hereto agree that the Surviving Corporation shall immediately deem
vested twenty-five percent (25%) of all unvested options set forth on Schedule
A, on the same terms and conditions, including Exercise Price and Term as set
forth on that Schedule. At, or subsequent to the Effective Time, the parties
hereto agree that the Surviving Corporation shall issue up to 250,000 additional
options to the remaining LF employees under the Plan.
7.7 COMPLETION OF INVESTMENT. At the Effective Time, the parties
hereto agree that Steven W. Rebeil shall be issued an aggregate of 2,000,000
shares of common stock of 2TMD in consideration for his investment of $2,000,000
in 2TM.
8. CLOSING MATTERS.
8.1 FILING OF CERTIFICATES OF MERGER. On the date of the Closing, but
not prior to the Closing, the Certificates of Merger for the Initial Merger
shall be filed with the offices of the Secretary of State of the State of
Delaware and Oklahoma and the merger of 2TM with and into 2TMD shall be
consummated. Immediately after filing of the initial Certificates of Merger,
the Certificate of Merger for the Subsequent Merger shall be filed with the
offices of the Secretary of State of the State of Delaware and the merger of GTW
with and into 2TMD shall be consummated.
8.2 EXCHANGE OF CERTIFICATES. At the Closing, LF shall exchange its
GTW Common Stock certificate(s) for a certificate representing the 2TMD Common
Stock issuable upon execution of the Mergers. At the Effective Time, all
certificates representing 2TM Common Stock shall, without any further action on
the part of the shareholders holding such shares, represent an equivalent number
of shares of 2TMD Common Stock.
<PAGE>
8.3 DELIVERY OF DOCUMENTS. On or before the Closing, the parties shall
deliver the documents, and shall perform the acts, which are set forth in
Sections 9 and 10, as specified in such Sections, including delivery of the
counterpart signature pages of the Transaction Documents executed by 2TM, 2TMD,
GTW and/or LF, as the case may be. All documents which 2TM or 2TMD shall
deliver or cause to be delivered shall be in form and substance reasonably
satisfactory to GTW. All documents which GTW or LF shall deliver or cause to be
delivered shall be in form and substance reasonably satisfactory to 2TM.
9. CONDITIONS TO 2TM'S OBLIGATIONS. Unless otherwise provided below,
2TM's and 2TMD's obligations to close the transactions contemplated under this
Agreement are subject to the fulfillment or satisfaction by Closing of each of
the following conditions (any one or more of which may be waived by 2TM, but
only in a writing signed by 2TM):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of GTW and LF set forth in Section 4 shall be true in all
material respects on and as of the Closing with the same force and effect as if
they had been made at the Closing, and 2TM shall receive a certificate to such
effect executed by the Chairmen and Presidents of GTW and LF.
9.2 COVENANTS. GTW and LF shall have performed and complied with all
of its covenants contained in Sections 6 and 7 on or before the Closing, and 2TM
shall receive a certificate from GTW and LF to such effect executed by the
Presidents of GTW and LF.
9.3 NO LITIGATION. On and as of the Closing, no litigation or
proceeding shall be threatened or pending against GTW with the purpose or with
the probable effect of enjoining or preventing the consummation of any of the
transactions contemplated by this Agreement, and 2TM shall receive a certificate
to such effect executed by the Chairmen and Presidents of GTW and LF.
9.4 NO ADVERSE DEVELOPMENT. There shall not have been any material
adverse changes in the financial condition, results of operations, assets,
liabilities, business or prospects of GTW since the date of this Agreement, and
2TM shall receive a certificate to such effect executed by the Chairmen and
President of GTW.
9.5 AUTHORIZATIONS. 2TM shall have received from GTW written evidence
that the execution, delivery and performance of GTW's and LF's obligations under
this Agreement and the Certificate of Merger have been duly and validly approved
and authorized by the Board of Directors of GTW and LF.
9.6 GOVERNMENT CONSENTS. There shall have been obtained at or prior to
the Closing such permits or authorizations, and there shall have been taken such
other action, as may be required by any regulatory authority having jurisdiction
over the parties and the subject matter and the actions herein proposed to be
taken.
9.7 OPINION OF GTW'S COUNSEL. At the Closing, 2TM shall have received
from counsel to GTW an opinion dated as of the Closing Date in substantially the
form attached hereto as Exhibit D.
9.8 FILING OF CERTIFICATE OF MERGER. As of the Closing, the
Certificate of Merger for the Initial Merger shall have been filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of Oklahoma and the Certificate of Merger for the Subsequent Merger shall
have been filed with the Secretary of State of the State of Delaware.
<PAGE>
10. CONDITIONS TO GTW'S AND LF'S OBLIGATIONS. Unless otherwise
provided below, the obligations of GTW and LF are subject to the fulfillment or
satisfaction by Closing, of each of the following conditions (any one or more of
which may be waived by GTW, but only in a writing signed by GTW):
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of 2TM and 2TMD contained in Section 3 shall be true in all
material respects on and as of the Closing with the same force and effect as if
they had been made at the Closing, and GTW shall receive a certificate from 2TM
and 2TMD to such effect with respect to the representations and warranties of
2TM and 2TMD executed by the Chairmen and Presidents of 2TM and 2TMD.
10.2 COVENANTS. 2TM and 2TMD shall have performed and complied with
all of its covenants contained in Sections 5 and 6 on or before the Closing, and
GTW shall receive a certificate from 2TM and 2TMD to such effect signed by the
Chairmen and Presidents of 2TM and 2TMD.
10.3 NO LITIGATION. On and as of the Closing, no litigation or
proceeding shall be threatened or pending against 2TM or 2TMD for the purpose or
with the probable effect of enjoining or preventing the consummation of any of
the transactions contemplated by this Agreement, and GTW shall receive a
certificate from 2TM and 2TMD to such effect signed by the Chairmen and
Presidents of 2TM and 2TMD.
10.4 AUTHORIZATIONS. GTW shall have received from 2TM written evidence
that the execution, delivery and performance of this Agreement and the
Certificate of Merger have been duly and validly approved and authorized by
2TM's Board of Directors and by 2TMD's Board of Directors. GTW shall have
received a certificate from 2TM and 2TMD to such effect signed by the Chairmen
and Presidents of 2TM and 2TMD.
10.5 NO ADVERSE DEVELOPMENT. There shall not have been any material
adverse changes in the financial condition, results of operations, assets,
liabilities, business or prospects of 2TM since the date of this Agreement. GTW
shall have received a certificate from 2TM to such effect signed by the Chairmen
and President of 2TM.
10.6 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the Closing such permits or authorizations, and there shall have been taken
such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken
10.7 OPINION OF 2TM'S COUNSEL. At the Closing, GTW shall have received
from counsel to 2TM, an opinion dated the Closing Date in substantially the form
attached hereto as Exhibit C.
10.8 FILING OF CERTIFICATE OF MERGER. As of the Closing, the
Certificate of Merger for the Initial Merger shall have been filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of Oklahoma and the Certificate of Merger for the Subsequent Merger shall
have been filed with the Secretary of State of the State of Delaware.
<PAGE>
11. TERMINATION OF AGREEMENT.
11.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing by the mutual written consent of each of the parties hereto.
This Agreement may also be terminated and abandoned:
(A) By GTW or LF if any of the conditions precedent to GTW's and LF's
obligations pursuant to Section 10 shall not have been fulfilled at and as of
the Closing.
(B) By 2TM if any of the conditions precedent to 2TM's and 2TM's
obligations pursuant to Section 9 above shall not have been fulfilled at and as
of the Closing.
(C) By 2TM in the event that 5% or more of the shareholders of 2TM
elect to exercise dissenters rights in accordance with applicable Oklahoma
corporate law.
(D) By either 2TM or GTW, if the Merger is not effected by August 30,
2000.
Any termination of this Agreement under this Section 11.1 shall be effected
by the delivery of written notice of the terminating party to the other parties
hereto.
11.2 LIABILITY FOR TERMINATION. Any termination of this Agreement
pursuant to this Section 11 shall be without further obligation or liability
upon any party in favor of any other party hereto; provided, that if such
termination shall result from the willful failure of a party to carry out its
obligations under this Agreement, then such party shall be liable for losses
incurred by the other parties. The provisions of this Section 11.2 shall survive
termination.
11.3 CERTAIN EFFECTS OF TERMINATION. In the event of the termination
of this Agreement as provided in Section 11.1 hereof, each party, if so
requested by the other party, will (i) return promptly every document (other
than documents publicly available) furnished to it by the other party (or any
subsidiary, division, associate or affiliate of such other party) in connection
with the transactions contemplated hereby, whether so obtained before or after
the execution of this Agreement, and any copies thereof which may have been
made, and will cause its representatives and any representatives of financial
institutions and investors and others to whom such documents were furnished
promptly to return such documents and any copies thereof any of them may have
made; or (ii) destroy such documents and cause its representatives and such
other representatives to destroy such documents, and such party shall deliver a
certificate executed by its president or vice president stating to such effect;
and
11.4 REMEDIES. No party shall be limited to the termination right
granted in Section 11.1 hereto by reason of the nonfulfillment of any condition
to such party's closing obligations but may, in the alternative, elect to do one
of the following:
<PAGE>
(A) proceed to close despite the nonfulfillment of any closing
condition, it being understood that consummation of the transactions
contemplated hereby shall be deemed a waiver of any misrepresentation or breach
of warranty or covenant and of any party's rights and remedies with respect
thereto to the extent that the other party shall have actual knowledge of such
misrepresentation or breach and the Closing shall nonetheless take place; or
(B) decline to close, terminate this Agreement as provided in Section
11.1 hereof, and thereafter seek damages.
<PAGE>
12. INDEMNIFICATION.
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
The representations, warranties, covenants and agreements of the parties
contained in Sections 3 and 4 of this Agreement or in any writing delivered
pursuant to such sections, to the extent that a breach or default in any such
representations, warranties, covenants or agreements is not as a result of
fraud, shall not terminate at, but rather shall survive, the Closing Date and
shall terminate on the date which is 24 months from the Closing; provided,
however, that such representations, warranties, covenants and agreements shall
survive as to any claim or demand made prior to 24 months from the Closing until
such claim or demand is fully paid or otherwise resolved by the parties hereto
in writing or by a court of competent jurisdiction.
12.2 INDEMNIFICATION BY 2TM. 2TM shall indemnify and hold harmless
GTW, LF, their directors and officers, and each other person, if any, who
controls GTW or LF within the meaning of the Securities Act ("Controlling
Persons") in respect of any and all claims, losses, damages, liabilities,
demands, assessments, judgments, costs and expenses (including, without
limitation, settlement costs and any legal or other expenses for investigating,
bringing or defending any actions or threatened actions) reasonably incurred by
GTW or LF, any of their directors, officers or Controlling Persons in connection
with any misrepresentation or breach of any warranty made by 2TM or 2TMD in this
Agreement or in any schedule, exhibit, certificate or other instrument
contemplated by this Agreement.
12.3 INDEMNIFICATION BY GTW AND LF. GTW and LF shall, jointly and
severally, indemnify and hold harmless 2TM in respect of any and all claims,
losses, damages, liabilities, demands, assessments, judgments, costs and
expenses (including, without limitation, settlement costs and any legal or other
expenses for investigating, bringing or defending any actions or threatened
actions) reasonably incurred by 2TM in connection with any misrepresentation or
breach of any warranty made by GTW or LF in this Agreement or in any schedule,
exhibit, certificate or other instrument contemplated by this Agreement.
12.4 CLAIMS FOR INDEMNIFICATION.
(A) Whenever any claim shall arise for indemnification under this
Section 12, the indemnified party shall describe such claim in a Notice of Claim
to the other party and, when known, specify the facts constituting the basis for
such claim and the amount or an estimate of the amount of such claim. Each
Notice of Claim shall (A) be signed by the indemnified party, (B) contain a
description of the claim, (C) specify the amount of such claim, and (D) state
that, in the opinion of the signer thereof, such Notice of Claim is valid under
the terms of Section 12 hereof, and is being given in good faith.
<PAGE>
(B) The indemnified party shall give the other party prompt notice of
any claim for indemnification hereunder resulting from, or in connection with,
any claim or Third-Party Claim and, with respect to any Third-Party Claim, the
indemnified party shall undertake the defense thereof by representatives
reasonably satisfactory to the indemnified party and the other partie(s) hereto.
The indemnified party shall not have the right to settle or compromise or enter
into any binding agreement to settle or compromise, or consent to entry of any
judgment arising from, any such claim or proceeding in its sole discretion
without the prior written consent of the other party. Each party shall have the
right to participate in any such defense of a Third-Party Claim with advisory
counsel of its own choosing at its own expense. In the event the indemnified
party, within a reasonable time after notice of any Third-Party Claim, fails to
defend, the other party shall have the right to undertake the defense,
compromise or settlement of such Third-Party Claim on behalf of, and for the
account of, 2TM, GTW or LF, at the expense and risk of all parties to the extent
of their liability set forth in Section 12. No party shall, without the
indemnified party's written consent, settle or compromise any such Third-Party
Claim or consent to entry of any judgment that does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party, or affiliate or affiliates, as the case may be, an
unconditional release from all liability in respect of such Third-Party Claim.
12.5 ARBITRATION. If a party makes a good faith determination that a
breach (or potential breach) of any of the confidentiality, non-competition, or
intellectual property rights provisions of this Agreement by the other party may
result in damages or consequences that will be immediate, severe, and incapable
of adequate redress after the fact, so that a temporary restraining order or
other immediate injunctive relief is necessary for a realistic and adequate
remedy, that party may seek immediate injunctive relief without first seeking
relief through arbitration. After the court has ruled on the request for
injunctive relief, the parties will thereafter proceed with arbitration of the
dispute and stay the litigation pending arbitra-tion. Subject to the foregoing,
any dispute arising out of this Agreement, or its performance or breach, shall
be resolved by binding arbitration conducted by JAMS/Endispute under the
JAMS/Endispute Rules for Complex Arbitration (the "JAMS Rules"). This
arbitration provi-sion is expressly made pursuant to and shall be governed by
the Federal Arbitration Act, 9 U.S.C. Sections 1-14. The parties hereto agree
that pursuant to Section 9 of the Federal Arbitration Act, a judgment of the
United States District Courts for the Central District of California shall be
entered upon the award made pursuant to the arbitration. A single arbitra-tor,
who shall have the authority to allocate the costs of any arbitration initiated
under this paragraph, shall be selected according to the JAMS Rules within ten
(10) days of the submis-sion to JAMS/Endispute of the response to the statement
of claim or the date on which any such response is due, whichever is earlier.
The arbitrator shall conduct the arbitration in accordance with the Federal
Rules of Evidence. The arbitrator shall decide the amount and extent of
pre-hearing discovery which is appropriate. The arbitrator shall have the power
to enter any award of monetary and/or injunctive relief (including the power
issue permanent injunctive relief and also the power to reconsider any prior
request for immediate injunctive relief by either of the parties and any order
as to immediate injunctive relief previously granted or denied by a court in
response to a request therefor by either of the parties), including the power to
render an award as provided in Rule 43 of the JAMS Rules; provided, however,
that the arbitrator shall not have the power to award punitive damages under any
circumstances (whether styled as punitive, exemplary, or treble damages, or any
penalty or punitive type of damages) regardless of whether such damages may be
available under applicable law, the parties hereby waiving their rights to
recover any such damages. The arbitrator shall award the prevailing party its
costs and reasonable attorneys' fees, and the losing party shall bear the entire
cost of the arbitration, including the arbitrator's fees. All arbitration shall
be held in Orange County, California. In addition to the above court, the
arbitration award may be enforced in any court having jurisdiction over the
parties and the subject matter of the arbitra-tion. Notwithstanding the
foregoing, the parties irrevocably submit to the nonexclusive jurisdic-tion of
the state and federal courts situated where the respondent is domiciled or
resides as of the Effective Date in any action to enforce an arbitration award.
With respect to any request for immediate injunctive relief, that state and
federal courts in Orange County, California shall have exclusive jurisdiction
and venue over any such disputes.
<PAGE>
12.6 LIMITATION ON INDEMNIFICATION. No indemnified party hereunder
will be entitled to make a claim against any indemnifying party under Section
12.2 or 12.3 unless and until (i) the aggregate amount of losses indemnifiable
by 2TM, GTW or LF exceeds Fifty Thousand Dollars ($50,000).
13. MISCELLANEOUS.
13.1 GOVERNING LAWS. It is the intention of the parties hereto that
the internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
parties hereto.
13.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
13.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be interpreted so as best to reasonably
effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve, to the extent possible, the economic,
business and other purposes of the void or unenforceable provision.
13.4 ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the
documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
13.6 EXPENSES. Except as provided to the contrary herein, each party
shall pay all of its own costs and expenses incurred with respect to the
negotiation, execution and delivery of this Agreement, the exhibits hereto, and
the other Transaction Documents.
<PAGE>
13.7 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
13.8 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby notwithstanding any investigation of the parties hereto and shall
terminate on the date one year after the Closing Date.
13.9 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
13.10 ATTORNEYS' FEES. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party shall be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including without limitation, costs, expenses and
fees on any appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment. A party not entitled to recover its costs shall not be entitled to
recover attorneys' fees. No sum for attorneys' fees shall be counted in
calculating the amount of a judgment for purposes of determining if a party is
entitled to recover costs or attorneys' fees.
13.11 NOTICES. Any notice provided for or permitted under this
Agreement will be treated as having been given when (a) delivered personally,
(b) sent by confirmed telex or telecopy, (c) sent by commercial overnight
courier with written verification of receipt, or (d) mailed postage prepaid by
certified or registered mail, return receipt requested, to the party to be
notified, at the address set forth below, or at such other place of which the
other party has been notified in accordance with the provisions of this Section
13.11.
2TM or 2TMD:
2TheMart.com, Inc.
18301 Von Karman Avenue
Seventh Floor
Irvine, CA 92612
Attn. Steven Rebeil
Facsimile No.: (949) 477-1221
With copy to:
M. Richard Cutler, Esq.
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile No.: (949) 719-1977
<PAGE>
GTW and LF:
Language Force
Gotoworld.com, Inc.
1601 E. Lincoln Avenue
Orange, CA 92685
Attn: Ian S. Simpson
Facsimile No.: (714) 279-9368.
With copy to:
William T. Gay, Esq.
Snell & Wilmer
1920 Main Street, Suite 1200
Irvine, CA 92614
Facsimile No.: (949) 955-2507
Such notice will be treated as having been received upon actual receipt.
13.12 TIME. Time is of the essence of this Agreement.
13.13 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. The titles and headings herein are
for reference purposes only and shall not in any manner limit the construction
of this Agreement which shall be considered as a whole.
13.14 NO JOINT VENTURE. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section 13.14.
13.15 PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
13.16 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
<PAGE>
13.17 ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. Except for the
agreements provided for in Section 5.2 of this Agreement, no provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any
third-party bene-ficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner of any party hereto or any other
person or entity except employees and stockholders of 2TM specifically referred
to herein, and, except as so provided, all provisions hereof shall be personal
solely between the parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
2THEMART.COM, INC. GOTOWORLD.COM, INC.
an Oklahoma corporation a Delaware corporation
By:/s/ Steven W. Rebeil By: /s/ Ian S. Simpson
Steven W. Rebeil, Ian S. Simpson,
Chairman and Chief Chairman and President
Executive Officer
2THEMART.COM, Inc. LANGUAGEFORCE, INC.
a Delaware corporation a Colorado corporation
By:/s/ Steven W. Rebeil By: /s/ Ian S. Simpson
Steven W. Rebeil, Ian S. Simpson,
Chairman and Chief President
Executive Officer
STANDARD FORM OF OFFICE LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
AGREEMENT OF LEASE, made as of this 10th day of December, 1999 between DAH
CHONG HONG TRADING CORPORATION, a New York corporation having an office at 362
Fifth Avenue, New York, New York 10001, party of the first part, hereinafter
referred to as "Landlord" or "Owner", and 2THEMART.COM, INC., having an office
at 18301 Von Karman Avenue, Irvine, CA 92612, party of the second part,
hereinafter referred to as "Tenant".
WITNESSETH: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the premises (hereinafter called "premises", "demised premises" or
"Premises") known as suite 1201, substantially as crosshatched on the floor
plans annexed hereto as Exhibit A, in the building known as 362 Fifth Avenue,
New York, New York (hereinafter called "building" or "Building"), for the term
(hereinafter called "term" or "Term") to commence upon substantial completion of
Landlord's Work as mentioned in Article 47J (hereinafter called the
"Commencement Date"), and to end on the date that is five years thereafter
(hereinafter called "Expiration Date"), or until such term shall sooner cease
and expire as hereinafter provided, both dates inclusive, at an annual rental as
described In Article 38 (together with the sums payable pursuant to Article 49,
hereinafter called "rent" or "Fixed Rent"), together with all other sums of
money as shall become due and payable by Tenant under this lease (hereinafter
called "additional rent" or "Additional Rent") which Tenant agrees to pay lawful
money of the United States which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment, In equal monthly
installments in advance on the first day of each month during said term, at the
office of Landlord or such other place as Landlord may designate, without any
set off or deduction whatsoever, except that Tenant shall pay the first monthly
installment(s) on the execution hereof (unless this lease be a renewal
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default In the payment of rent to Landlord
pursuant to the terms of another lease with Landlord or with Landlord's
predecessor in interest, Landlord may at Landlord's option and without notice to
Tenant add the amount of such arrearages to any monthly installment of rent
payable hereunder and the same shall be payable to Landlord as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives,.
successors and assigns, hereby covenant as follows:
Rent: 1. Tenant shall pay the rent as above and as hereinafter
provided.
Occupancy: 2. Tenant shall use and occupy the demised premises for general
office and for no other purpose.
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
<PAGE>
without Owner's prior written consent(*1). Subject to the prior written consent
of Owner, and to the provisions of this article, Tenant, at Tenant's expense,
may make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved in each instance by Owner (*2). Tenant
shall, before making any alterations, additions, installations or improvements,
at its expense, obtain all permits, approvals and certificates required by an
governmental or quasi-governmental bodies and (upon completion)certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors acid sub-contractors to carry such workman's
compensation, general liability, personal and property
damage insurance as Owner may require. If any, mechanic's lien is filed
against the demised premises, or die building of which the same forms a part,
for work claimed to have been done for, or materials furnished to, Tenant,
whether or not done pursuant to this article, the same shall be discharged by
Tenant within thirty days thereafter, at Tenant's expense, by payment or filing
the bond required by law. All fixtures and all paneling, partitions, railings
and like installations, installed in the premises at any time, either by Tenant
or by Owner on Tenant's behalf, shall, upon installation, become the property of
Owner and shall remain upon and be surrendered with the demised premises unless
Owner, by notice to Tenant no later than twenty days prior to the date fixed as
the termination of this lease elects to relinquish Owner's right thereto and to
have them removed by Tenant in which event tile same shall be removed from the
premises by, Tenant prior to the expiration of the lease, at Tenant's expense.
Nothing to this Article shall be construed to give Owner title to or to prevent
Tenant's removal of trade fixtures, moveable office furniture and equipment, but
upon removal of any such from the premises or upon removal of other
installations as may be required by Owner, Tenant shall immediately and at Its
expense repair and restore the premises to the condition existing prior-to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed, by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or may be removed from the premises by Owner, Tenant's expense.
Maintenance 4. Tenant shall, throughout the term of this lease, take good
care
and of the demised premises and the fixtures and appurtenances
therein.
Repairs: Tenant shall be responsible for all damage or injury to the
demised
premises or any other part of the building and the systems and
equipment thereof, whether requiring structural or nonstructural repairs caused
by or resulting from carelessness, omission, neglect or improper conduct of
Tenant. Tenant's subtenants, agents, employees, Invitees or licensees, or which
arise out of any work, labor, service or equipment done for or supplied to
Tenant or any subtenant or arising out of the installation, use or operation of
the property or equipment of Tenant or any subtenant. Tenant shall also repair
all damage to the building and the demised premises caused by the moving of
Tenant fixtures, furniture and equipment. Tenant shall promptly make, at
Tenant's expense, all repairs in and to the demised premises for which Tenant is
responsible, using only the contractor for the trade or trades in question,
selected from a list of at least two contractors per trade submitted by Owner.
Any other repairs in or to the bullding or the facilities and systems thereof
for which Tenant is responsible shall be performed by Owner at the Tenant's
expense. Owner shall maintain in good working order and repair the exterior and
the structural pardons of the building, including the structural portions of its
demised remises, and the public portions of the building interior and the
building plumbing, electrical, heating and ventilating systems (to the extent
such systems presently exist) serving the demised premises. Tenant agrees to
give prompt notice of any defective condition in the premises for which Owner
may be responsible hereunder. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or others
making repairs, alterations, additions or improvements in or to any portion of
the budding or the demised premises or in and to the fixtures, appurtenances or
equipment thereof. It is specifically agreed that Tenant shall not be entitled
to any setoff or reduction of rent by reason of any failure of Owner to comply
with the covenants of this or any other article of this Lease. Tenant agrees
that Tenant's sole remedy at law in such instance will be by way of an action
for damages for breach of contract. The provisions of this Article 4 shall not
apply in the case of fire or other casualty which are dealt with In Article 9
hereof.
<PAGE>
Window 5. Tenant will not clean nor require, permit, suffer or allow
any window
Cleaning: in the demised premises to be cleaned from the outside is
violation of Section 202 of the Labor Law or any other applicable law
or of the Rules
of the Board of Standards and Appeals, or of any other Board or body having or
asserting
jurisdiction.
Requirements 6. Prior to the commencement of the lease term, if Tenant is
then
of Law, in possession, and at all times thereafter, Tenant, at Tenant's
Fire Insurance, sole cost and expense, shall, promptly comply wide all
present
floor Loads: and future laws, orders and regulations of all state federal,
municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters, Insurance
Services Office, or any similar body which shall impose any violation, order or
duty upon Owner or Tenant wide respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof, (including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's use
or manner of use of the premises or the building (including the use permitted
under the lease). Nothing herein shall require Tenant to make structural repairs
or alterations unless Tenant has, by its manner of use of the demised premises
or method of operation therein, violated any such laws, ordinances, orders,
rules, regulations or requirements with respect thereto. Tenant may, after
securing Owner to
Owner's satisfaction against all damages, interest, penalties and expenses,
including, but not limited to, reasonable attorney's fees, by cash deposit or by
surety bond in an amount and in a company attorney's to Owner, contest and
appeal any such law, ordinances, orders, rules, regulations or requirements
provided same is done with all reasonable promptness and provided such appeal
shall not subject Owner to prosecution for a criminal offense or constitute a
default under any lease or mortgage under which Owner may be obligated, or cause
the demised premises or any part thereof to be condemned or vacated. Tenant
shall not do or permit any actor ,to be done in or to the demised premises which
is contrary to law, or which will invalidate or be in conflict with public
liability , fine or other policies of insurance at any time carried by, or for
the benefit of Owner with respect
to the demised premises or the building of which the demised premises formal or
which shall or might subject Owner to any liability or responsibility to any
person of for property damage. Tenant shall not keep anything in the demised
premises except as now or hereafter permitted by the Fire Department, Board of
Fire Underwriters, Fire Insurance Rating or other authority having jurisdiction,
and then only in such manner and
such quantity so as not to increase the rate for fire insurance applicable to
the building, nor use the premises in a manner which will increase the insurance
rate for the building or an property located therein over that in effect prior
to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses,
fines, penalties, or damages, which may be imposed upon Owner by reason of
Tenant's failure to comply with the provisions this article and if by reason of
such failure the fire insurance rate shall, at
the beginning of this lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant, in any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up " of rate for the building or demised premises issued
by the New York Fire Insurance Exchange, or other body making fire insurance
rates applicable to said premises shall be conclusive evidence of the facts
therein stated and of the several items and charges in the fire insurance rates
then applicable to said premises. Tenant shall not place a load upon any floor
of the demised premises the floor load per square foot area which it was
designed to carry and is allowed by law.
<PAGE>
Owner reserves the right to prescribe the weight and position of all safes,
business machines and mechanical equipment. Such installations shall be placed
and maintained by Tenant, at Tenant's expense in settings sufficient, in Owner's
judgement, to absorb and prevent vibration noise and annoyance.
Subordination: 7. This lease is subject and subordinate to all ground or
underlying
leases and to all mortgages which may now or hereafter affect such leases
or the real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall from time to time execute promptly any certificate that Owner may
request.
Property 8. Owner or its agents shall not be liable for any damage to
Loss, Damage property of Tenant or of others entrusted to employees of
Reimbursement the building, nor for loss of or damage to any property of
Indemnity: Tenant by theft or otherwise, nor for any injury or damage
to persons or property resulting from any cause of whatsoever nature, unless
caused by or due to the negligence of Owner, or its agents, servants or
employees. Owner or its agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or caused by other
tenants or persons in, upon or about said building or caused by operations is
construction of any private, public or quasi public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor not abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable attorneys
fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's
agents, contractors, employees, invitees, or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenants Tenant's agents contractors, employees, invitees or licensees.
Tenant s liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, any contractor, employee invitee or licensee of any
sub-tenant. In case action or proceeding is brought against Owner by reason of
any such claim, Tenant, upon written notice from Owner, will at Tenant's
expense, resist or defend such action or proceeding by counsel approve ,by Owner
in writing, such approval not to be unreasonably withheld.
Destruction 9.(a) If the premises or any part thereof shall be damaged by
fire
Fire and Other or other casualty, Tenant shall give immediate notice thereof
Casualty: to Owner this lease shall continue in full force and effect
except as hereinafter set forth. (b) If the demised premises are
<PAGE>
partially damaged or rendered partially unusable by fire or other casualty, the
damages thereto shall be repaired by and at the expense of Owner and the rent
and other items of additional rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the of the premises which is usable. 8 If the demised premises am totally
damaged or rendered wholly unusable by fire or other casualty, then the rent and
other items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the data when the premises shall have been repaired and restored by Owner
(or sooner preoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part, if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within 90 days after
such fire or casualty, or 30 days, after adjustment of the insurance claim for
such fire or casualty, whichever is sooner, specifying a date for the expiration
of the lease, which date shall
______________________________
Rider to be added if necessary.
not be more than 60 days after the giving of such notice and upon the date
specified in such notice the term of this lease shall expire as fully and
Completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith surrender and vacate the premises without
prejudice however, to Landlord's rights and remedies against Tenant under the
leases in effect prior to such termination, and any rent owing shall provision
paid up to such date and any payments of rent made by Tenant which were on
account of shall any period subsequent to such date be returned to Tenant.
Unless Owner shall serve a termination notice as provided for herein, Owner
shall make the repairs and restorations under the conditions of (b) and 8
hereof, with all reasonable expedition, subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owners control. After any
such casual Tenant shall cooperate with Owner's restoration by removing from
premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and moveable equipment, furniture and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
including obligation to restore under subparagraph (b) above, each party
look first to any insurance in its favor before making any claim against the
other party for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such is in force and collectible and to the
extent permitted by law, Owner and Tenant each hereby releases and waives all
right of recovery with respect to subparagraphs (b), (d), and (e) above, against
the other or any one claiming through or under each of them by way of
subrogation or otherwise. The release and waiver herein referred to shall be
deemed to include any loss or damage to the demised premises and/or to any
personal property, equipment, trade fixtures, goods and merchandise located
therein. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums then the party
benefitting from the waiver shall pay such premium within coverage shall be days
after written demand or be deemed to have agreed that the party obtaining
insurance shall be free of any further obligation under, the provisions hereof
with respect to waiver of subrogation. Tenant acknowledges that Owner will not
carry insurance on Tenant's furniture for furnishings or fixtures or equipment,
improvements, or obligated a appurtenances removable by Tenant end agree that
Owner will not repair any damage thereto or replace the same. (f) Tenant here
waives the provisions of Section 227 of the Real Property Law and agrees that
the provisions of this article shall govern and control in lieu thereof.
Eminent 10. If the whole or any part of the demised premises
Domain: shall be acquired or condemned by Eminent Domain for any public
or quasi public use or purpose, then and in that event, the term of this
lease shall cease and terminate from the date of title vesting in such
proceeding and Tenant shall have no claim Tenant shall have no claim for the
value of any unexpired term of lease and assigns to Owner, Tenant's entire
interest in any such award. Tenant shall have the right to make an independent
claim to the condemning authority for the value of Tenant's moving expenses and
property, trade fixtures is entitled he terms of the low equipment, provided
Tenant is entitled pursuant to the terms of the lease to remove such property,
trade fixture equipment at the and of the term provided further such claim does
not reduce Owner's award.
<PAGE>
Assignment 11. Tenant, for itself, its heirs, distributees, executors
Mortgage, administrators, legal representative, successor and assigns,
Etc. expressly covenants that it shall not assign, mortgage or
encumber
mortgage or encumber this agreement, no underlet or suffer or permit
the demised premises or any part thereof to used by others, without the prior
written consent of Owner in each instance (*3). Transfer of the majority of the
stock of a corporate Tenant or the majority partnership interest of the majority
of the stock of a corporate Tenant shall be deemed an assignment. If this lease
be assigned or if the demised premises or any part thereof be underlet or
occupied by anybody other than Tenant, Owner may, after default by Tenant,
collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, but no such assignment
underletting occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, under tenant or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Owner to an assignment
underletting shall not in any wise be construed to relieve Tenant from obtaining
the express consent in writing of Owner to any further assignment or
underletting.
Electric 12. Rates and conditions in respect to submetering or rent
Current: inclusion, as the case may be, to be added in RIDER attached
hereon. Tenant covenants and agrees that its use of electric current
shall not exceed the capacity of existing feeders to the building or the risers
or wiring installation and Tenant may not use any electrical equipment which, in
Owner's opinion, reasonably exercised, will installations or interfere with the
use thereof by other tenants of the building. The change at any time of the
character of electric service shall in no wise make Owner liable or responsible
to Tenant, for any loss, damages or expenses which Tenant may sustain.
Access to 13. Owner or Owner's agents shall have the right(but shall
not be
Premises: obligated) to enter the demised premises in any emergency at
any time, and, at other reasonable times, to examine the same and to make such
replacements and improvements as Owner may deem necessary and replacements
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits in and through the demised promises and to
erect new pipes and conduits therein provided they are concealed within the
walls, floor, or ceiling. Owner may, during ,progress of any work in the demised
premises, take all necessary materials and equipment into said premises without
the same constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any damages by reason of
loss or Interruption of business or otherwise. Throughout the term hereof Owner
shall have the
right to enter the demised premises at reasonable hours for the purpose of
showing the same to prospective purchasers or mortgagees of the building ,and
during the last six months of the term for the purpose of showing a same to
prospective tenants. If Tenant is not present to open and permit an entry the
demised premises, Owner or Owner's agents may enter the a same whenever such
entry may be necessary or permissible by master key or forcibly and provided
reasonable care is exercised to safeguard Tenant's property, such a shall not
render Owner or its agents liable therefor, nor in any event the obligations of
Tenant hereunder be affected. If during the last month of the term Tenant shall
have removed all or substantially all of Tenant's property therefrom Owner may
immediately enter, alter, renovate or redecorate the demised promises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
<PAGE>
Vault, 14. No Vaults, vault space or area, whether or not enclosed or
Vault Space, covered not within the property line of the building is leased
Area: hereunder, anything contained in or indicated on any sketch,
blue print or plan, or anything contained elsewhere in this lease to the
contrary
notwithstanding. Owner makes no representation as to the location of the
property line of the building. All vaults and vault space and all such areas not
within the property line of the building, which Tenant may be permitted to use
and/ or occupy, is to be used and/or occupied under a revocable license, and if
any such license be revoked, or if the amount of such space or area be
diminished or required by any federal, state or municipal authority or public
utility, Owner shall not be subject to any liability nor shall Tenant entitled
to any compensation or diminution or abatement of rent, nor shall such
revocation, diminution or requisition be deemed constructive or actual eviction.
Any tax, fee or charge of municipal authorities for such vault or area shall be
paid by Tenant.
Occupancy: 15. Tenant will not at any time use or occupy the demised
premises
in violation of the certificate of occupancy issued for the building of
which the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to Owner's
work, if any. In any event, Owner makes no representation as to the condition of
the premises and Tenant agrees to accept the same subject to violations, whether
or not of record.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the
sending of a written notice to Tenant within a reasonable time after the
happening of any one or more of the following events: (1) the commencement of a
case in bankruptcy or under the laws any, state naming Tenant as the debtor; or
(2) the making by Tenant of an assignment or any other arrangement for the
benefit of creditors under any state statute. Neither Tenant nor any person
claiming through or under Tenant, or by reason of any statute or order of court,
shall thereafter be entitled to possession of the promises demised but shall
forthwith quit and surrender the premises. If this lease shall be assigned in
accordance with its terms, the provisions of this Article 16 shall be applicable
only to the party then owning Tenant's interest in this lease.(b) It is
stipulated and agreed that in the event of the termination of this lease
pursuant to (a) hereof, Owner shall forthwith notwithstanding any other
provisions of this lease to the contrary, be entitled to recover from Tenant as
and for liquidated damages an amount equal to the difference between the rent
reserved hereunder for the unexpired portion of the term demised and the fair
and reasonable rental value of the demised premises for the same period. In the
computation of such damages the difference between any installment of rent
becoming due hereunder after the date of termination and the fair and reasonable
rental value of the demised premises for the period for which such installment
was payable
shall be discounted to the date of termination at the rate of four percent
(4%)per annum. If such promises or any part thereof be re-let by the Owner for
the unexpired term of said lease, or any part thereof, before presentation
of proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such re-letting shall be deemed to be the fair and
reasonable rental value for the part or the whole of the premises so re-let
during the farm of the re-letting. Nothing herein contained shall limit
or the right of the Owner to prove for and obtain as liquidated damages by
reason of such termination, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, and governing the proceedings
in which. such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
<PAGE>
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants
of this lease other than the covenants for the payment of rent or
additional
rent; or if the demised premises become vacant or deserted or if any execution
or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shah be taken or occupied by someone other than Tenant; or
if this lease be rejected under Section 235 of Title 11 of the U.S. Code
(bankruptcy code); or if
Tenant shall fail to move into or take possession of the premises within thirty
(30) days after the commencement of the term of this lease, then, in any or more
of such events, upon Owner serving a written (*4)notice upon Tenant specifying
the nature of said default an expiration of said (*4) to comply with or remedy
such default, or the said default or
omission complained of shall be of a nature that the same cannot be completely
cured or remedied within said (*4), and if Tenant shall not have diligently
commenced curing such default within such (*4) and shall not thereafter with
reasonable diligence and in good faith, proceed remedy or cure such default,
then Owner may serve a written five (5) days notice of cancellation of this
lease upon Tenant, and upon the expiration of, said five (5) days this lease
and the term thereunder shall end and expire as fully and completely as if the
expiration of such five (5) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided (2) If the notice provided for in (1) hereof shall have
been given, and the term shall expire as aforesaid; or If Tenant shall make
default in the payment of the rent reserved herein or any item of additional
rent herein mentioned or any part of either or in making any other payment in
herein required; then and in any of such events(*5). Owner may without notice,
re-enter the demised premises either by force or otherwise, and dispossess
Tenant by summary proceedings or otherwise, and the legal representative of
Tenant or other occupant of demised premises and remove their effects and hold
the premises as if this lease had not been made, and Tenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end. If Tenant shall make default hereunder prior to the date fixed as the
commencement terminate such renewal extension agreement by written notice.
Remedies of 18. In case of any such default, re-entry , expiration and/or
Owner and dispossess by summary proceedings or otherwise,(a) the rent
Waiver of shall become due thereupon and be paid up to the time of such
Redemption: re-entry, dispossess and/or expiration (b) Owner may re-let
the premises or any part or parts thereof, either in the name of
Owner or
<PAGE>
otherwise, for a term or term, which may at Owner's option be less than or
exceed the period which, would otherwise have constituted the balance of the
term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, and/or 8 Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of thus lease. The failure of Owner to
re-let the premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated damages there shall
be added to the said deficiency such expenses as Owner may incur in connection
with re-letting, such as legal expenses reasonable attorneys' fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing
the same for re-letting. Any such liquidated damages shall be paid in monthly
installments by Tenant on the rent day specified in this lease and any suit
brought to collect the amount deficiency for any month shall not prejudice in
any way the rights of Owner to collect the deficiency for any subsequent month
by a similar proceeding. Owner, in putting the demised premises in good order or
preparing the same for re-rental may, at Owner's option, make such alterations,
repairs, replacements, and/or ,decorations in the demised premises as Owner, in
Owner's sole judgement, considers advisable and necessary, for the purpose of
re-letting the demised premises, and the making of such alterations, repairs,
replacements, and/or decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid. Owner shall in no event be liable
in any way whatsoever for failure to re-let the demised premises, or in the
event that the demised premises are re-let, for failure to collect the rent
thereof under such re-letting and in no event shall Tenant be entitled to
receive any excess, if any, of such net rents collected over the sums payable by
Tenant to Owner hereunder. In the event of a breach or threatened breach by
Tenant of any of the covenants or provisions hereof, Owner shall have the right
of injunction and the right to invoke any remedy allowed at law or in equity, as
if re-entry, summary proceedings and other remedies were not herein provided
for, Mention in this lease of any particular remedy, shall not preclude Owner
from any other remedy, in law or in equity. Tenant hereby expressly waives any
and all rights of redemption granted by or under any present or future laws in
the event of Tenanting evicted or dispossessed for any cause, or in the event
,of Owner obtaining possession of demised premises, by reason of the violation
by Tenant of any of the covenants and conditions of this lease, or otherwise.
Fees and 19. If Tenant shall default in the observance or performance
of
Expenses: any term or covenant on Tenant's part to be observed or
performed
under or by virtue of any of the terms or provisions in any
article of this lease, after notice if required and upon expiration of any
applicable grace period if any, (except in an emergency),then, unless otherwise
provided elsewhere in this lease, Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder. If
Owner, in connection with the foregoing or connection with any default by Tenant
in the covenant to pay rent hereunder, makes any expenditures or incurs any
obligations for the payment of money, including but not limited to reasonable
attorneys' fees, in instituting, prosecuting or defending any action or
proceeding, and prevails to any such action or proceeding then Tenant will
reimburse owner for such sums so paid or obligations incurred wide interest ate
casts. The foregoing expenses incurred by reason of Tenant's default shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Owner
within ten (10) days of rendition of any bill or statement to Tenant therefor.
If Tenant a lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner, as damages.
Building 20. Owner shall have the right at any time
Alterations without the same constituting an eviction and with
and the incurring liability to Tenant therefor to change
Management: Management arrangement or location of public entrances,
passageways,
doors, doorways, corridors, elevators, stairs, toilets or other public
parts of the building and to change the name, number or designation by which the
building may be known. There shall be no allowance to Tenant for diminution of
rental value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from owner or other Tenants making any
repairs in the building or any such alterations, additions and improvements.
Furthermore, Tenant shall not have any claim against Owner by reason of Owner's
imposition of such controls of the manner of access to the building by Tenant's
social or business visitors as the Owner may deem necessary for the security of
the building and its occupants.
<PAGE>
No Repre- 21. Neither Owner nor Owner's agents have made any
representations
sentations or promises with respect to the physical condition of the
building,
by Owner: the land upon which it is erected or the demised premises,
the rents, leases, expenses of operation or any
other matter or thing affecting or related to the premises except as herein
expressly set forth and rights, easements or licenses are acquired by Tenant by
expressly set or otherwise except as expressly set forth in the provisions of
this lease. Tenant has
inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same "as is" and acknowledges that
the taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a part
were in good and satisfactory condition at the time such possession was so
taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
is whole or in part, unless such executory agreement is in writing and signed by
the against whom enforcement of the change, modification, discharge or a
abandonment is sought.
End of 22. Upon the expiration or other termination of the
Term: term of this lease, Tenant shall quit and surrender to
Owner the demised premises, broom clean, in good order and condition,
ordinary wear and damages which Tenant is not required to repair as provided
elsewhere la this lease excepted, and Tenant shall remove all its property.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of is lease. If the last day of the term of this
Lease or any renewal thereof, falls on Sunday this lease shall expire at noon on
the preceding Saturday unless it be a legal holiday in which case it shall
expire at noon on the preceding business day.
Quiet 23. Owner covenants and agrees with Tenant that upon Tenant
Enjoyment. paying the rent and additional rent and observing and
performing
all the terms observing and performing all the terms covenants and
conditions, on Tenant's part to be observed and performed tenant may peaceably
and quietly ahoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 31
hereof and to the ground leases, underlying leases and mortgages here in before
mentioned.
Failure 24. If Owner is unable to give possession of the demised
premises
to Give on the date of the commencement of the term hereof,
Possession: because of the holding-over or retention of possession
<PAGE>
of any tenant, undertenant or occupants or if the demised premises are
located in a building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy or because of
the fact that a certificate of occupancy has not been procured or for any other
reason, Owner shall not be subject to any liability for failure to give
possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to extend
the term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible for Owner's inability to obtain possession or complete
construction) until after Owner shall have given Tenant written notice that the
Owner is able to deliver possession in condition this lease(*6) If permission is
given to Tenant to enter into possession of the demised premises prior to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease. Tenant covenants and agrees that such
possession and/or occupancy shall be deemed to be under the terms, covenants,
conditions and of this lease except the obligation to pay the fixed annual rent
set forth In the preamble to this lease. The provisions of this article are
intended to constitute "an express provision to the contrary " within the
meaning of Section 223-a of the New York Real Property Law,
No Waiver: 25. The failure of Owner to seek redress for violation of,
or to insist upon the strict performance of any covenant or condition of
this lease or of any of the Rules or Regulations, set forth or hereafter adopted
by Owner, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Owner of runt and/or additional rent with knowledge of
the breach of any covenant of thin lease
shall not be deemed a waiver of such breach and no provision of this lease shall
be deemed to have been waived by Owner unless such waiver be in writing signed
by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any
endorsement or statement of any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Owner may accept such
check or payment without prejudice to Owner's right to recover the balance of
such rent or pursue any other remedy in this lease provided. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises, and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have any power to accept the keys of said premises prior
to the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of the
premises.
Waiver of 26. It is mutually agreed by and between Owner and
Trial by Jury: Tenant that the respective parties hereto shall and
they hereby do waive trial by jury in any action
proceeding or counterclaim brought by either of the parties hereto against the
other
(except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any proceeding or action for possession
including a summary proceeding for possession of the premises, Tenant will not
interpose any counterclaim of whatever nature or description in any such
proceeding including a counterclaim under Article 4 except for statutory
mandatory counterclaims.
Inability to 27. This Lease and the obligation of Tenant to pay rent
hereunder
Perform: and perform all of the other covenants and agreements
hereunder on part of Tenant to be performed shall in no wise be
affected, impaired or excused
because Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable make, or is delayed in making any repair, additions,
alterations or decorations or is unable to
supply or is delayed in supplying any equipment, fixtures, or other materials if
Owner is prevents or delayed from so doing by reason of strike or labor troubles
or any cause whatsoever including, but not limited to, government preemption or
restrictions or by
reason of any rule, order or regulation of any department or subdivision thereof
of any government agency or by reason of the conditions which have been or are
affected, either directly or indirectly, by war or other emergency.
<PAGE>
Bills and 28. Except as otherwise in this lease provided, a bill,
Notices; statement, notice or communication which Owner may desire
or be
required to give to Tenant, shall be deemed sufficiently given or
rendered if, in writing, delivered to Tenant , personally or sent by registered
or certified mail addressed to Tenant at the
________________________________
Rider to be added if necessary.
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left, at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Services 29. As long as Tenant is not in default under any of the
covenants of this
Provided by lease beyond the applicable a grace Period provided in this
Owners: lease for the curing of such faults, Owner, shall provide:
(a) necessary elevator facilities on business days from 8 a.m. to 6 p.m.
and have one elevator subject to call at all other times; (b) heat to the
demised premises when and as required by law, on business days from 8 a.m. to 6
P.M.; (c)water for ordinary lavatory purposes, but if Tenant uses or consumes
water for any other purpose purposes or in unusual quantities (of which fact
Owner shall be the sole judge),Owner may install water meter at Tenant's expense
which Tenant thereafter maintain at Tenant's expense in good working order and
repair to register such water consumption and Tenant shall pay for water
consumed as shown on said meter as additional rent as and when bills are
rendered; (d) cleaning service for the demised premises on business, days at
Owner's expense provided that the same are kept in order by Tenant. If, however,
said premises an to be kept clean by Tenant, it shall be done; at Tenant's
sole-expense, in a manner reasonably satisfactory to Owner and no one other than
persons approved by Owner shall be permitted to enter said premises or the
building of which they are a part for such purpose. Tenant shall pay Owner the
cost of removal of any of Tenant's refuse and rubbish from the building; ; (e)
if the demised premises are serviced by Owner's air conditioning cooling and
ventilating system, air conditioning/cooling will be furnished to tenant from
May 15th through September 30th on business days (Mondays through Fridays,
holidays excepted) from 8:00 a.m. to 6.00 p.m., and ventilation will be
furnished on business days during the aforesaid hours except when air
conditioning/cooling is being furnished as aforesaid. If Tenant requires air
conditioning/cooling or ventilation for more extended hours or on Saturdays,
Sundays or on holidays, as defined under Owner's contract with Operating
Engineers Local 94-94A, Owner will furnish the same at Tenant's expense.
___________RIDER to be added in respect to rates and conditions for such
additional service; (f) Owner reserves the right to stop, services of the
heating, elevators, plumbing, air-conditioning, electric, power systems or
cleaning or other services, if any, when necessary by reason of accident or for
repairs, alterations, replacements or improvements necessary or desirable in the
judgment of Owner for as long as may be reasonably required by reason thereof.
If the building of which the demised premises are a part supplies manually
operated elevator service Owner at any time may substitute automatic control
elevator service and proceed diligently with alterations necessary therefor
without in any wise affecting this lease or the obligation of Tenant hereunder.
<PAGE>
Captions: 30. The Captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
lease
nor the intent of any provisions thereof.
Definitions: 31. The term "office", or "offices", wherever used in this
lease, shall not be construed to mean premises used as a store or
stores, for the sale or display, at any time, of goods wares or merchandise, of
any kind, or as a restaurant, shop, booth, bootblack or other stand, barber
shop, or for other similar purposes or for manufacturing. The term "Owner" means
a landlord or lessor, and as used in this lease means only the owner, or the
mortgagee in possession, for the time being of the land and building (or the
owner of a lease of the building of the land and building)
of which the demised premises form a part, so that in the event of any sale or
sales of said land and building or of said lease, or in the event of a lease of
said building or of the land and building, the said Owner shall be and hereby is
entirely freed and relieved of all covenants and obligations of Owner hereunder,
and it shall be deemed and construed without further agreement between the
parties or their successors in interest, or between the parties and the
purchaser at any such sale, or the said lessee of the building, or of the land
and building, that the purchaser or the lessee of the building has assumed and
agreed to carry out any and all covenants and obligations of Owner, hereunder
The words re-enter and "re-entry" as used in this lease are not restricted to
their technical legal meaning. The term "business days" as used in this lease
shall exclude Saturdays, Sundays and all days as observed by the State or
Federal Government as legal holidays and those designated as holidays by the
applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to HVAC service. Wherever
it is expressly provided in this lease that consent shall not be unreasonably
withheld, such consent shall not be unreasonably delayed.
Adjacent 32. If an excavation shall be trade upon land adjacent to the
Excavation- demised premises or shall be authorized to be made, Tenant
shall
Shoring: afford to the person causing or authorized to cause such
excavation,
license to enter upon the demised premises for the purpose of doing
such
work as said person shall deem necessary to preserve the wall or the building of
which demised premises form a part from injury or damage and to support the same
by proper foundations without any claim for damages or indemnity against Owner,
or diminution or abatement of rent.
Rules and 33. Tenant and Tenant's servants, employees, agents,
visitors,
Regulations: and licensees shall observe faithfully and comply strictly
with, the Rules and Regulations and such other and further reasonable
Rules and Regulations as Owner or Owner's agents may from time to time adopt.
Notice of any additional rules or regulations shall be given in such manner as
Owner may elect. In case Tenant disputes the reasonableness of any additional
Rule or Regulation hereafter made or adopted owner or Owner's agents, the
parties hereto agree to submit the question on of the reasonableness of such
Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenants part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within fifteen
(15) days after the giving of notice thereof. Nothing in this lease contained
shall be construed to impose upon Owner any duty or obligation to enforce the
Rules and regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for violation
of the same by any other tenant, its servants, employees, agents, visitors or
licensees.
<PAGE>
Security 34.Tenant deposited $55,776.00 with Owner the sum of as
security for the
faithful performances and observance by Tenant of the forms, provisions
and conditions of this lease; it is agreed that to the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional tent or any other sum as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of say of the terms,
covenants and conditions of this lease, including but not limited to, arty
damages or deficiency in the re-letting of the premises, whether, such damages
of deficiency accrued before or after proceedings or other re-entry by Owner. In
the event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this lease , the security shall be
returned to Tenant after the date fixed as the and of the Lease and after
delivery of entire possession of the demised promises to Owner. In the event of
a sale of the land and building, of which the demised premises form a part,
Owner shall have the right to transfer the security to the vendee or lessee and
Owner shall thereupon be released by Tenant from all liability for the return of
said security; and Tenant agrees to look to the new Owner solely for the return
of said security, and it is agreed that the provisions hereof shall apply to
every transfer or assignment made of the security to a new Owner . Tenant
further covenants that It will not assign or encumber or attempt to assignor
encumber the monies deposited herein as security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted, encumbrance.
Estoppel 35. Tenant, at any time, and from time to time, upon
Certificate: at least 10 days' prior notice by Owner, shall execute,
acknowledged
and deliver to Owner; and/or to any other person, firm or corporation
specified by Owner, a statement certifying that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), stating the
dates to which the rent have been paid, and stating whether or not there exists
any default by Owner under this Lease, and, if so ,specifying each such default.
Successors 36. The covenants, conditions and agreements contained
and Assigns: is this lease shall bind and inure to the benefit
of Owner sad Tenant and their respective heirs, distributees,
executors, administrators, successors except as otherwise provided in this
lease, their assigns. Tenant shall look only to Owner's estate and interest in
the lead sad building, for the satisfaction of Tenant's remedies for the
collection of a judgment (or other judicial process) against Owner in the event
of nay default by Owner hereunder, and no other
property or assets of such Owner ( or any partner, member, officer or director
thereof, disclosed or undisclosed), shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this lease, the relationship of Owner and Tenant hereunder, or
Tenant's use and occupancy of the demised premises.
Space to be filled In or deleted.
Landlord will except on letter of credit of cash
<PAGE>
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner: DAH CHONG HONG TRADING CORPORATE
/s/ Barney Ghaw
Barney Ghaw
2THEMART.COM, INC.
Witness for Tenant:
/s/ Steven Rebeil
for 2TheMart.com, Inc.
<PAGE>
ACKNOWLEDGEMENTS
CORPORATE OWNER . CORPORATE TENANT
STATE OF NEW YORK, ss.:_______ STATE OF NEW YORK,.
ss:________
County of ____________________ County of ________________
On this ____day of ____ , 19 _____ , On this _____day of ____,
19 ___,
before me personally came ________ , before me personally came,
to me known, who being by me duly sworn, to me known, who being by me
duly sworn;
did depose and say that did depose and say that
he resides in _______________________ he resides in
_____________________
that he is the ____________ of __________ that he is the ____________
of ________
the corporation described in and which the corporation described in and
which
executed the foregoing executed the foregoing
instrument, as OWNER; that he knows the instrument, as Tenant; that he
knows
seal of said corporation; the seal of said corporation;
the seal affixed to said instrument is the seal affixed to said
instrument is
such corporate seal; such corporate seal; that it was
so affixed by order of the Board of Directors so affixed by order of the
Board of
of said corporation, and that Directors of said corporation, and
that
he signed his name thereto by like order. he signed his name thereto by like
order.
INDIVIDUAL OWNER INDIVIDUAL TENANT
STATE OF NEW YORK, ss.: __________ STATE OF NEW YORK, ss.:
County of _______________ County of _______________
On this __________ day of ______, 19_____, On this __________ day of
_________, 19_____,
before me personally came________________ before me personally
came____________
to be known and known to me to be to be known and known to me to
be the
the individual individual
described in and who, as OWNER, described in and who, as OWNER,
executed
executed the foregoing instrument the foregoing instrument
and acknowledged to me that ____________he and acknowledged to me
that__________ he
executed the same. executed the same.
<PAGE>
RIDER
To Printed Form of Lease
Between
DAH CHONG HONG TRADING CORP., as Landlord,
And 2THEMART.COM, INC., as Tenant
*1. which consent shall not be unreasonably withhold
*2. which approval shall not be unreasonably withhold
*3. which consent shall not be unreasonably withhold
*4. twenty (20)
*5. after Tenant's opportunity to cure said default has expired
*6. if Owner can not deliver the Premises to the Tenant to take possession
within 45 days of the commencement of the term of this lease, Tenant may of its
option terminate this lease and all deposits shall be returned to the tenant
unless the delay is caused by the tenant.
<PAGE>
STANDARD RIDER ANNEXED TO
AGREEMENT OF LEASE BETWEEN
DAH CHONG HONG TRADING CORPORATION,
AS LANDLORD, AND 2THEMART.COM, INC.,
AS TENANT
LATE PAYMENT CHARGE:
37. A. If Tenant fails to pay any Fixed Rent or Additional Rent within five
(5) business
days after the date the same is due, Tenant shall pay a late charge of $.05 for
each $1.00 which thereafter remains unpaid to compensate Landlord for additional
expenses incurred by Landlord in processing such late payment and such payment
shall be deemed to be Additional Rent due upon demand by the Landlord.
B. If Tenant fails to pay when due any installment or payment of Fixed Rent
or Additional Rent for ten (10) business days after the date on which it is due,
Tenant shall pay Interest thereon at a rate ("Interest Rate") equal to the
lesser of 15% per annum or the maximum legal rate from the due date of such
installment or payment to the date of payment thereof, and such interest shall
be deemed to be Additional Rent due upon demand by the Landlord
FIXED RENT; RENT RESTRICTIONS; CPI ESCALATION:
38. A. The Fixed Rent (exclusive of any portion thereof payable for electric
current as provided in Article 49), shall be $95,616 per annum payable $7,968.00
per month.
a. The Fixed Rent and Additional Rent is due and payable, in advance, on
the first day of each month. If the Rent Commencement Date shall not occur on
the first day of a calendar month, the Fixed Rent for such calendar month shall
be prorated on a per diem basis, and Landlord shall credit the excess amount
paid on the execution of this Lease toward the payment of Fixed Rent for the
next succeeding calendar month
B. If the Fixed Rent or any Additional Rent shall be or become
uncollectible by virtue of any law or governmental order, Tenant shall take such
action (without additional expense to Tenant) as Landlord may request, as may be
legally permissible, to permit Landlord to collect the maximum Fixed Rent and
Additional Rent which may, from time to time during the continuance of such
legal rent restriction, be legally permissible, but not in excess of the amounts
of Fixed Rent or Additional Rent payable under this lease. Upon the termination
of such legal rent restriction prior to the Expiration Date, (a) the Fixed Rent
and Additional Rent, after such termination, shall become payable under this
lease in the amount of the Fixed Rent and Additional Rent set forth in this
lease for the period following such termination, and (b) Tenant shall pay to
Landlord, if legally permissible, an amount equal to (i) the Fixed Rent and
Additional Rent which would have been paid pursuant to this lease, but for such
rent restriction, less (ii) the Fixed Rent and Additional Rent paid by Tenant to
Landlord during the period that such rent restriction was in effect.
C. The Fixed Rent shall be increased as of the first day of each calendar
year of the Term to be equal to the product obtained by multiplying the annual
Fixed Rent then in effect by a fraction, the numerator of which is the CPI Index
(hereinafter defined) for December of the preceding year (the "Then Ended Year")
and the denominator of which is the CPI Index for December of the calendar year
preceding the Then Ended Year.
(a) As used herein, the term "CPI Index" shall mean the Consumer Price
Index for all Urban Consumers for New York-Northeastern New Jersey, All Items
(1982-84 = 100) as published by the Bureau of Labor Statistics of the United
States Department of Labor or any successor thereto.
(b) In the event that the CPI Index (or successor or substitute index)
is not available, the next most comparable governmental publication shall be
used as the index.
(c) In no event shall any provision of this Article 38C dealing with
adjustments to the annual Fixed Rent be construed so as to reduce the annual
Fixed Rent below the annual Fixed Rent payable for the prior payment period.
<PAGE>
(d) Landlord shall cause a statement of any increase in the Fixed Rent
provided for in this Article 38C to be prepared and delivered to Tenant in
January of each year. Any delay or failure of Landlord in computing or billing
for the additional Fixed Rent here in above provided shall not constitute a
waiver or in any way impair the continued obligation of Tenant to pay such
increased Fixed Rent. Upon receipt of such statement from Landlord, Tenant shall
pay to Landlord an amount equal to the difference between the Fixed Rent then
being paid by Tenant and the Fixed Rent set forth in such statement as increased
pursuant to this Article 38C. After receipt of such statement, Tenant shall pay
to Landlord the Fixed Rent in accordance with such statement until receipt of a
new statement
(e) Tenant shall pay any increase in Fixed Rent pursuant to this Article 38C
as of
January 1, 2001, and as of the first day of each calendar year of the Term
thereafter.
ADDITIONAL CLEANING:
39. A. Tenant shall pay to Landlord on demand Landlord's charges for
cleaning work
in the Premises or the Building required because of (i) misuse or neglect on the
part Tenant or its agents, employees, contractors, subcontractors or
visitors,(ii) use of portions of the Premises for preparation, serving, or
consumption of food or beverages, data processing or computer operations,
private lavatories or toilets, or other
special purposes requiring greater or more difficult cleaning work than office
areas,
(iii) interior glass surfaces, (iv) non building standard materials or finishes
installed by Tenant or at its request and (v) increases in frequency or scope in
any of the items set forth on Exhibit C as shall have been requested by Tenant.
B. If Tenant is permitted hereunder to and does have a separate area for
the storage, preparation, service or consumption of food or beverages in the
Premises Tenant, at Tenant's expense, shall cause all portions of the remises so
used to be cleaned daily in a manner satisfactory to Landlord, and to be
exterminated against infestation by vermin, roaches or rodents regularly and, in
addition, whenever there shall be evidence of any infestation.
C. The cleaning services required to be furnished by Landlord hereunder may
be furnished by a contractor or contractors employed by Landlord and Tenant
agrees that Landlord shall not be deemed in default of any of its cleaning
obligations hereunder unless such default shall continue for an unreasonable
period of time after notice from Tenant to Landlord setting forth the specific
nature of such default.
DESIGNATED SUPPLIERS:
40. Only Landlord, or any one or more persons, firms or corporations
authorized in writing by Landlord, which authorization shall not be unreasonable
withheld shall be permitted to
(i) furnish laundry, linen, towels, bootblacking, barbering, plant care,
drinking water, ice and other similar supplies and services to tenants and
occupants of the Building and (ii) act as maintenance contractor for any waxing,
polishing, lamp replacement, cleaning and maintenance work in the Premises.
Landlord may fix, in its absolute discretion, at any time and from time to time,
the hours during which and the regulations under which such supplies and
services are to be furnished. Landlord expressly reserves the right to act as or
to designate, at any time and from time to time, a n exclusive supplier of all
or any one or more of such supplies and services, provided that the quality
thereof and the charges therefor are reasonably comparable to that of other
suppliers or contractors, and Landlord expressly reserves the right to exclude
from the Building any person, firm or corporation attempting to furnish any of
such supplies or services, but not so designated by Landlord. Landlord expressly
reserves the right to exclude from the Building any person, firm or corporation
attempting to deliver or purvey any food or beverages, provided, however, that
Tenant or regular office employees of Tenant who are not employed by any
supplier of such food or beverages or by any person, firm or corporation engaged
in the business or purveying such food or beverages, may bring food or beverages
into the Building for consumption within the Premises by Tenant or the employees
of Tenant, but not for resale to or for consumption by any other tenant, or the
employees or guests of any other tenant. Landlord may fix in its absolute
discretion, at any time and from time to time, the hours during which, and the
regulations under which food and beverages may be brought into the Building by
Tenant or its employees. However, Tenant and its regular office employees may
personally bring food or beverages into the Building for consumption within the
Premises solely by Tenant, its regular office employees and invitees. In all
events, all food and beverages shall be carried m closed containers. Only
Landlord or any one or more persons, firms or corporations, authorized in
writing by Landlord shall be permitted to act as contractor or subcontractor for
any work to be performed in accordance with this lease. Landlord expressly
reserves the right to act as or to designate, at any time and from time to time,
an exclusive construction contractor, and Landlord expressly reserves the right
to exclude from the Building any person, firm or corporation attempting to act
as construction contractor in violation hereof. In the event Tenant shall employ
any contractor, such contractor and any subcontractor shall agree to employ only
such materials and such labor as will not result in labor disputes, strikes or
jurisdictional disputes with other contractors, mechanics, or laborers engaged
by Tenant, Landlord or others. Tenant, upon demand of Landlord, shall cause all
materials, contractors, mechanics or laborers causing such difficulty, strike or
dispute to leave or be removed from the Building immediately. Tenant will inform
Landlord in writing of the names of any contractor or subcontractor Tenant
proposes to use in the Premises at least ten (10) days prior to the beginning of
work by such contractor or subcontractor.
<PAGE>
BROKERAGE:
41. Tenant represents that in the negotiation of this lease it dealt with no
broker or brokers other than Newmark & Company Real Estate, Inc. And Cushman &
Wakefield, Inc. Tenant hereby agrees to indemnify and hold Landlord harmless
from and against any and all claims, liabilities, suits, costs and expenses
including reasonable attorneys' fees and disbursements arising out of any
inaccuracy or alleged inaccuracy of the above representation. Landlord shall
have no liability for any brokerage commissions arising out of a sublease or
assignment by Tenant. The provisions of this Article shall survive the
expiration or sooner termination of this lease.
ESTOPPEL CERTIFICATE:
42. Tenant shall at any time and from time to time upon not less than ten
(10) days' prior notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing setting forth the Commencement Date, the
Expiration Date and the Fixed Rent and certifying (i)that this lease is
unmodified and in full force and effect (or if there has been any modification,
that the same is in full force and effect as modified and stating the
modification), (ii) the dates to which the Fixed Rent and Additional Rent have
been paid in advance, if any, (iii) whether or not to the knowledge of Tenant,
Landlord is in default in performance of any of its obligations under this lease
and, if so, specifying each such default of which Tenant may have knowledge,
(iv) whether Tenant has accepted possession of the Premises, (v) whether Tenant
has made any claim against Landlord under this lease and, if so, the nature
thereof and the dollar amount, if any, of such claim, (vi) whether there exist
any offsets or defenses against enforcement of any of the terms of this lease
upon the part of Tenant to be performed, and, if so, specifying the same, and
(vii) such further information with respect to this lease or the Premises as
Landlord may reasonably request, it being intended that any such statement
delivered pursuant hereto shall be binding upon Tenant and may be relied upon by
Landlord and by any prospective purchaser of the Real Property and/or the
Building or any part thereof or of the interest of Landlord in any part thereof,
by any mortgagee or prospective mortgagee thereof, by any lessor or prospective
lessor thereof, by any lessee or prospective lessee thereof, or by any
prospective assignee of any mortgage thereof.
NON-LIABILITY
43. A. Neither Landlord nor Landlord's agents, officers, directors,
shareholders,
partners or principals (disclosed or undisclosed) shall be liable to Tenant or
Tenant's agents, employees, contractors, invitees or licensees or any other
occupant of the Premises, and Tenant shall save Landlord, any mortgagee of the
Building and/or the land on which the Building is located (the "Land"; the Land
and the Building, collectively, the "Real Property") and their respective
agents, employees, contractors, officers, directors, shareholders, partners and
principals (disclosed or undisclosed)harmless from any loss, costs, liability,
claim, damage, expense (including reasonable attorneys' fees and disbursements),
penalty or fine incurred in connection with or arising from any injury to Tenant
or to any other person or for any damage to, or loss (by theft or otherwise)of,
any Tenant's property or of the property of any other person, irrespective of
the cause of such injury damage or loss (including the acts or negligence of any
tenant or of any owners or occupants of adjacent or neighboring property or
caused by operations in construction of any private, public or quasi-public
work) unless due to the negligence of Landlord or Landlord's agents without
contributory negligence on the part of Tenant, its employees, agents,
contractors, invitees or licensees, it being understood that no property, other
than such as might normally be brought upon or kept in the Premises as
incidental to the reasonable use of the Premises for the purposes herein
permitted will be brought upon or be kept in the Premises; to the extent of the
limit of liability of tenant insurance as outlined below paragraph 44 herein,
that even if due to any such negligence of Landlord or Landlord's agents, Tenant
waives, to the full extent permitted by law, any claim for consequential damages
in connection therewith and Landlord and Landlord's agents shall not be liable,
to the extent of Tenant s insurance coverage, for any loss or damage to any
person or property even if due to the negligence of Landlord or Landlord's
agents. Any Building employee to whom any property shall be entrusted by or on
behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to
such property and neither Landlord nor Landlord's agents shall be liable for any
loss of or damage to any such property by theft or otherwise.
B. Neither any (a) performance by Landlord, Tenant or others of any repairs,
alterations or improvements in or to the Real Property, Building or Premises,
(b) failure of Landlord or others to make any such repairs or improvements, (c)
damage to the Building, Premises or Tenant's property in the Premises, (d) any
injury to any persons, caused by other tenants or persons in the Building, or by
operations in the construction of any private, public or quasi-public work, or
by any other cause, (e) latent defect in the Building or Premises, nor (f)
inconvenience or annoyance to Tenant or injury to or interruption of Tenant's
business by reason of any of the events or occurrences referred to in the
foregoing subdivisions (a) through (f) shall impose any liability on Landlord or
Landlord's agent to Tenant, other than such liability as may be required or
imposed upon Landlord by law for Landlord's negligence or the negligence of
Landlord's agents m the operation or maintenance of the Building or for the
breach by Landlord of any express covenant of this lease on Landlord's part to
be performed or observed. No representation, guaranty or warranty is made or
assurance given that any communications or security systems, devices or
procedures of the Building, if any, will be effective to prevent injury to
Tenant or any other person or damage to, or loss (by theft or otherwise) of, any
of Tenant's property or of the property of any other person, and Landlord
reserves the right to discontinue or modify at any time such communications or
security systems or procedures without liability to Tenant.
<PAGE>
C. Tenant shall pay to Landlord as Additional Rent, within ten (10days
following
rendition by Landlord to Tenant of bills or statements therefor, sums equal to
all reasonable losses, costs, liabilities, claims, damages, fines, penalties and
expenses referred to in the indemnification contained in Article 8 hereof.
D. Notwithstanding anything to the contrary contained herein, Tenant shall
look only
to Landlord's estate in the Building (or the proceeds thereof) for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any
default by Landlord hereunder, and no other property or assets of Landlord or
its agents, directors, officers, shareholders, partners or principals (disclosed
or undisclosed) shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Tenant's remedies under or with respect to
this lease, the relationship of Landlord and Tenant hereunder or under law or
Tenant's use or occupancy of the Premises or any other liability of Landlord to
Tenant.
E. The provisions of this Article shall survive the expiration or
sooner termination of this lease.
INSURANCE:
44. Tenant, at its expense, shall maintain at all times during the Term (a)
"all risk"
property insurance covering Tenant's property and improvements and betterment's
to a limit of not less than the full replacement cost thereof and (b)
comprehensive general liability insurance covering personal injury and property
damage, with such limits as may reasonably be requested by Landlord from time to
time, but not less than $2,000,000 in respect to bodily injury, or death arising
out of any one occurrence and $1,000,000 for property damage. The policy or
policies evidencing such insurance shall include Landlord and such parties as
Landlord shall designate as a named additional insured. The limits of such
insurance shall not limit the liability of Tenant. All policies required to be
maintained pursuant to the provisions of this lease shall be issued by an
insurance company or companies having a Best's rating (or any successor
publication of comparable standing) of at least A/XIV and authorized to do
business in the State of New York. All policies required to be maintained
pursuant to the provisions of this lease shall have a written undertaking from
the insurer to notify all insureds thereunder at least sixty (60) days prior to
cancellation thereof. Upon the execution of this lease, Tenant shall deliver to
Landlord and any additional insureds such fully paid for policies or
certificates of insurance evidencing any such policy. Tenant shall procure,
maintain and place such insurance and pay all premiums and charges therefor and
upon failure to do so Landlord may, but shall not be obligated to, procure,
maintain and place such insurance or make such payments, and in such event the
Tenant agrees to pay the amount thereof, plus interest at the rate of two (2%)
percent above the rate announced from time to time by Citibank, N.A. (New York)
as its base corporate lending rate, to Landlord on demand and said sum shall be
in each instance collectible as Additional Rent on the first day of the month
following the date of payment by Landlord. During such times as Tenant shall be
performing any alteration, installation, addition or improvement to the
Premises, Tenant shall carry or cause to be carried (and shall provide Landlord
with evidence thereof) (i) worker's compensation insurance covering all persons
employed in connection with such alteration, installation, addition or
improvement in statutory limits, (ii) broad, form comprehensive general
liability insurance including a completed operations endorsement with limits of
liability of not less than $2,000,000 combined single limit bodily injury and
property damage, (iii) builder's risk insurance, completed value non-reporting
form, covering all physical loss, in an amount reasonably satisfactory to
Landlord, (iv) an umbrella policy in amounts required by Landlord, and (v) such
other insurance, and in such amounts as Landlord deems reasonably necessary to
protect Landlord's interest in the Premises and Building from any act or
omission of Tenant's contractors and subcontractors. Tenant's failure to provide
and keep in force the aforementioned insurance shall be regarded as a material
default hereunder entitling Landlord to exercise any or all of the remedies
provided in this lease in the event of Tenant's default.
COMPLIANCE WITH LOCAL LAW No.5:
45. Notwithstanding anything contained to the contrary elsewhere in this
lease, Tenant acknowledges with respect to any alterations made by Tenant within
the demised premises
<PAGE>
either by Tenant, in accordance with other applicable provisions of this lease,
or performed by Landlord on Tenant's behalf or pursuant to a work letter
agreement executed between the parties at the time of entering this lease, that
it will be Tenant's responsibility and obligation to comply with all fire safety
requirements and controls imposed by Local Law 5 of the City of New York, as
same now exists or may hereafter be amended, as well as with any and all other
laws, rules and obligations of the City of New York or of any governmental
agency or department thereof having jurisdiction with respect to the demised
premises. The performance of any of the foregoing Local Law 5 required work,
installations and alterations shall be performed by Tenant in accordance with
the subject to all applicable provisions of this lease (including but not
limited to Articles 3 and 6 hereof) and of law. Landlord represents best to its
knowledge that the premises are currently in compliance with all Local Laws.
TRANSFER AFTER BANKRUPTCY:
46. If this lease is assigned to any person or entity pursuant to the
provisions of the
Bankruptcy Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code"), any and all
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies and other consideration constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be
held in trust for the benefit of Landlord and be promptly paid to or turned over
to Landlord.
If Tenant assumes this lease and proposes to assign the same pursuant to
the provisions of the Bankruptcy Code to any person or entity who shall have
made a bona fide offer to accept an assignment of this lease on terms acceptable
to Tenant then notice of such proposed assignment, setting forth (i) the name
and address of such person, (ii) all of the terms and conditions of such offer,
and (iii) the adequate assurance to be provided Landlord to assure such person's
future performance under this lease, including, without limitation, the
assurance referred to to Section 365(b)(3) of the Bankruptcy Code, shall be
given to Landlord by Tenant no later than twenty (20) days after receipt by
Tenant but in any event no later than ten (10) days prior to the date that
Tenant shall make application to a court of competent jurisdiction for authority
and approval to enter into such assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be exercised by notice to Tenant
given at any time prior to the effective date of such proposed assignment, to
accept an assignment of this lease upon the same terms and conditions and for
the same consideration, if any, as the bona fide offer made by such person, less
any brokerage commissions which may be payable out of the consideration to be
paid by such person for the assignment of this lease.
MISCELLANEOUS PROVISIONS:
47. A. If any of the provisions of this lease, or the application
thereof to any person
or circumstance, shall, to any extent, be invalid or unenforceable, the
remainder of this lease, or the application of such provision or provisions to
persons or circumstances other than those as to whom or which it is held invalid
or unenforceable, shall not be affected thereby, and every provision of this
leas shall be valid and enforceable to the fullest extent permitted by law.
B. (a) Tenant hereby indemnifies and agrees to hold Landlord harmless from
and
against any loss, cost, liability, claim, damage, fine, penalty and expense
(including reasonable attorneys' fees and disbursements) resulting from delay by
Tenant in surrendering the Premises upon the termination of this lease as
provided in Article 22, including any claims made by any succeeding tenant or
prospective tenant founded upon such delay.
(b) In the event Tenant remains in possession of the Premises after the
termination of this lease without the execution of a new lease, Tenant, at the
option of Landlord, shall be deemed to be occupying the Premises as a tenant
from month-to-month, at a monthly rental equal to two (2) times the Fixed Rent
and Additional Rent payable during the last month of the Term, subject to all of
the other terms of this lease insofar as the same are applicable to a
month-to-month tenancy.
C. The persons executing this lease on behalf of Tenant hereby
represent and warrant that they have been duly authorized to execute this lease
for and on behalf of Tenant.
D. Notwithstanding the provisions of Article 3, no approval of plans or
specifications by Landlord or consent by Landlord allowing Tenant to make any
alterations, installations, additions or improvements in the Premises at any
time during the Term shall In any way be deemed to be an agreement by Landlord
that the contemplated alterations, installations, additions or improvements
comply with any legal requirements or any certificate of occupancy for the
Building nor shall it be deemed to be a waiver by Landlord of such compliance by
Tenant or of any of the terms of this lease. Notice is hereby given that neither
Landlord, Landlord's agent, nor any mortgagee of the Building shall be liable
for any labor or materials furnished or to be furnished to Tenant upon credit,
and that no mechanic's or other lien for such labor or material shall attach to
or affect any estate or interest of Landlord or any such mortgagee in and to the
Premises or the Building. Tenant shall keep records of all alterations,
installations, additions or improvements costing in excess of $10,000 and the
cost thereof, and within fifteen (15) days after demand by Landlord, Tenant
shall furnish to Landlord copies of such records if Landlord shall request the
same.
<PAGE>
E. If Tenant is a partnership (or is comprised of two (2) or more persons,
individually, or as joint venturers or as copartners of a partnership) or if
Tenant's interest in this lease shall be assigned to a partnership (or to two
(2) or more persons, individually, or as joint venturers or as copartners of a
partnership) (any such partnership and such persons are referred to in this
Section as "Partnership Tenant"), the following provisions shall apply to such
Partnership Tenant, (a) the liability of each of the parties comprising
Partnership Tenant shall be joint and several, and (b) each of the parties
comprising Partnership Tenant hereby consents in advance to and agrees to be
bound by, any modifications, termination, discharge or surrender of this lease
which may hereafter be made and by any notices, demands, requests or other
communications which may hereafter be given, by Partnership Tenant or by any of
the parties comprising Partnership Tenant, and (c)any bills, statements,
notices, demands, requests or other communications given or rendered to
Partnership Tenant or to any of the parties comprising Partnership Tenant shall
be deemed given or rendered to Partnership Tenant or to any of the parties
comprising Partnership Tenant and shall be binding upon Partnership Tenant and
all parties, and (d) if Partnership Tenant shall admit new partners shall, all
such new partners shall, by their admission to Partnership Tenant, be deemed to
have assumed performance of all of the terms, covenants and conditions of this
lease on Tenant's part to be observed and performed and (e) Partnership Tenant,
shall give prompt notice to Landlord of the admission of any such new partners
and upon demand of Landlord, shall cause each such new partner to execute and
deliver to Landlord an agreement in form satisfactory to Landlord, wherein each
such new Partner shall assume performance of all of the terms, covenants and
conditions of this lease on Tenants's part to be observed and performed (but
neither Landlord's failure to request any such agreement nor the failure of any
such new partner to execute or deliver any such agreement nor the failure of any
such new partner to execute or deliver any such agreement to Landlord shall
vitiate the provisions of Subdivision (d) of this Section E).
F. All exhibits to this lease and any and all rider provisions attached to
this
lease are hereby incorporated into this lease. If any provision contained in any
rider hereto is inconsistent or In conflict with any printed provision of this
lease, the provision contained in such rider shall supersede said printed
provision and shall control.
G. Wherever it is specifically provided in this lease that a party's consent
is not
to be unreasonably withheld, a response to a request for such consent shall also
not be unreasonably delayed. If either Landlord or Tenant considers that the
other has unreasonably withheld or delayed a consent, it shall so notify the
other party within ten (10) days after receipt of notice of denial of the
requested consent or, in case notice of denial is not received within twenty
(20) days after making its request for the consent. Tenant hereby waives any
claim against Landlord which it may have based upon any assertion that Landlord
has unreasonably withheld or unreasonably delayed any such consent, and Tenant
agrees that its sole remedy shall be an action or proceeding to enforce any such
provision or for specific performance, injunction or declaratory judgment. In
the event of such a determination, the requested consent shall be deemed to have
been granted; however, Landlord shall have no liability to Tenant for its
refusal or failure to give such consent. The sole remedy for Landlord's
unreasonably withholding or delaying of consent shall be as provided in this
Section.
H. Subject to force majeure, Landlord's performance of repairs and
Landlord's right
to close the Buildin to comply with any legal requirements, Landlord hereby
agrees that Tenant shall have access to the remises 24 hours per day, seven days
per week except for certain legal holidays and such other days as shall be
designated as holidays by Landlord or the applicable operating engineers union
or Building service employees union contract. Landlord shall notify Tenant of
such holidays on an annual basis.
I. Tenant will furnish to Landlord:
(1) Within 120 days after the end of each fiscal year of Tenant, annual
consolidated financial statements (balance sheets and profit and loss
statements) of Tenant, in comparative form, certified by an independent
certified public accountant of recognized standing (selected by Tenant), if such
certified statements are delivered to shareholders or any other party, and
otherwise certified by the chief financial officer of Tenant; and
(2) such other information regarding the condition (financial or otherwise) of
Tenant as Landlord may reasonably request. Each financial statement of Tenant
shall be accompanied by a certificate of its chief financial officer that (a) he
has reviewed this Lease and has obtained no knowledge of any default hereunder
or of any condition or event which, with notice or lapse of time or both, would
constitute a default hereunder (or, if any such default, condition or event
shall exist, the nature and period of existence thereof and the action to be
taken by Tenant with respect thereto), and (b) no material adverse change in the
business, condition (financial or otherwise), operations or prospects of Tenant
or its affiliates has occurred during the period covered by such statement.
<PAGE>
J. LANDLORD'S WORK
Landlord shall paint the premises with the building standard paint and the color
to be chosen by the tenant. Landlord shall shampoo the rugs and stretch it if
required.
K. If any holder of a superior mortgage or superior lease or the successors
or
assigns of the foregoing (collectively referred to as "Successor Landlord")
shall succeed to the rights of Landlord under this lease, Tenant agrees, at the
election and upon request of any such Successor Landlord, to fully and
completely attorn to and recognize any such Successor Landlord, as Tenant's
landlord under this lease upon the then executory terms of this lease provided
such Successor Landlord shall agree in writing to accept Tenant's attornment.
The foregoing provision shall inure to the benefit of any such Successor
Landlord, shall apply notwithstanding that, as a matter of law, this lease may
terminate upon the termination of a superior lease, shall be self-operative upon
any such demand, and no further instrument shall be required to give effect to
said provisions. Nothing contained herein shall be construed to impair any right
otherwise exercisable by any such owner, holder or lessee.
L. Landlord hereby advises Tenant that Landlord has installed an Enterphone
2000
security system in the Building in order to restrict access into the Building
outside of the Building's ordinary business ours. As of the date hereof, the
Building's ordinary business hours are from 7:00 A.M. to 6:00 P.M. on Mondays
through Fridays except for the holidays referred to in paragraph H of this
Article. Such security system uses pendants, which unlock the magnetic lock of
the Building's exterior doors. Upon the execution and delivery of this lease,
Landlord shall furnish to Tenant at no cost to Tenant one (1.) pendant for each
1000 rentable square feet of the Premises. Tenant shall be permitted to purchase
additional pendants at Landlord's standard charge therefor, which as of the date
hereof is $75.00 for each additional pendant. Tenant shall, upon the termination
of its tenancy, turn over to Landlord all pendants furnished to Tenant. In the
event of the failure to return any pendants furnished by Landlord, Tenant shall
pay to Landlord its then standard charge therefor, and Landlord shall be
entitled to deduct such amount from any security deposited hereunder prior to
returning the balance thereof to Tenant in accordance with the terms hereof.
Tenant shall comply with all reasonable security measures instituted by Landlord
at any time during the Term with respect to the aforementioned security system
or otherwise, but the establishment and enforcement of such measures shall not
impose any responsibility or liability upon Landlord to Tenant for any reason.
This paragraph L is subject to the terms of Article 43B.
M. Notwithstanding anything in the Lease to the contrary, any contractors,
subcontractor or materialmen employed by or on behalf of Tenant to perform
repairs or alterations, whose names and any other information reasonably
requested by Landlord shall have been submitted in writing to Landlord for
Landlord's approval prior to the commencement of any work, may only perform
approval prior to the commencement of any work, may only perform work during
those hours expressly permitted by Landlord. As of the date hereof such hours
are from 9:30 A.M. to 4:30 P.M. on business days only.
N. ELEVATOR SERVICE:
As long as Tenant is not in default under any of the terms, convenants or
conditions of this lease on Tenant's part to be observed or performed, Landlord,
at Landlord's expense, shall furnish necessary passenger elevator service on
business days from 8:00 A.M. to 6:00 P.M. and on Saturdays and Sundays from 8:00
A.M. to 5:00 P.M. and shall have an elevator subject to call at all other times
except on major holidays when the building shall be closed. Tenant acknowledges
that the passenger elevators may be utilized as service elevators on business
days between the hours of 9:30 A.M. and noon and between 1:30 P.M. and 4:00 P.M.
In the event Tenant shall require the use of the Building's service elevators
when the Building is open at any time other than those set forth above on
business days, Landlord shall provide a service elevator or passenger elevators,
as the case may be, for the use of Tenant, provided Tenant gives Landlord
reasonable notice of the time and use of such about elevators to be made by
Tenant and Tenant pay Landlords usual and reasonable charge for the use
O. HVAC:
A. As long as Tenant is not in default under any of the terms,
convenants or conditions of this lease on Tenant's part to be observed or
performed, Landlord, at Landlord's expense, shall (i) to the extent that the
installed air cooling or conditioning facilities of the Building permit, furnish
and distribute to the Premises cooled or conditioned air from 8:00 A.M. to 6:00
P.M. on business days whenever during the period between April 15th and October
15th of each year the same may be required in the Landlord's judgement in order
to maintain the temperature of the premises about 72 degrees Fahrenheit and (ii)
to the extent that the installed heating facilities of the Building permit,
furnish and distribute to the Premises heated air from 8:00 A.M. to 6:00 P.M. on
business days whenever during the period between October 15th and April 14th of
each year the same may be required in the Landlord's judgement. Landlord and
Tenant further agree to operate the heating or cooling and ventilating equipment
in accordance with their design criteria unless a recognized energy conservation
law, program, guideline, regulation or recommendation promulgated by any
Federal, State, City or other governmental or quasi-governmental bureau, board,
department, agency, offce, commission or other subdivision thereof or the
American Society of Heating, Refrigeration and Air-Conditioning Engineers, Inc.
or any successor thereto or other organization serving a similar function shall
provide for any reduction in operations below said design criteria in which case
such equipment shall be operated so as to provide reduced service in accordance
with such law, program; guideline, regulation or recommendation.
<PAGE>
B. If Tenant shall require heating or cooling and ventilation
services other than between 8:00 A.M. and 6:00 P.M. on business days ("after
hours"), Landlord shall, furnish after hours heating or cooling and ventilation
service upon reasonable advance notice from Tenant, given between the hours of
9:00 A.M. and 3:00 P.M. on any business day, and Tenant shall pay Landlord's
then established charges therefor on Landlord's demand. If any of the other
tenants of the Building shall request and receive after hours heating or cooling
and ventilation service, pursuant to Landlord's obligation to provide the same
to them, at the same time and utilizing the same system as Tenant, only that
equitably prorated portion of the charge made by Landlord for such service shall
be allocated to Tenant.
C. Notwithstanding the foregoing provisions of this Section, Landlord
shall not be responsible if the normal operation of the Building heating or
cooling and ventilation system shall fail to provide heated or cooled and
outside air at reasonable temperatures, pressures or degrees of humidity or in
reasonable temperatures, pressures or degrees of humidity or in reasonable
volumes or velocities in any portion of the Premises (i) which shall have an
electrical load in excess or four (4) watts per square foot of usable area for
all purposes (including lighting and power), or which shall have a human
occupancy factor in excess of one (1) person per one hundred (100) square feet
of usable area (the average electrical load and human occupancy factors for
which the Building air conditioning system is designed), or (ii) because of any
rearrangement of partitioning or other improvements made or performed by or on
behalf of Tenant or any person claiming through or under Tenant. Whenever such
heating or cooling and ventilation system is in operation, Tenant agrees to
cause all windows of the Premises to be closed whenever the Premises are not
occupied. Tenant shall cooperate fully with Landlord at all times and abide by
all regulations and requirements which Landlord may reasonably prescribe for the
proper functioning and protection of the heating or cooling and ventilation
system. In addition to any and all other rights and remedies which Landlord may
invoke for a violation or breach of any of the provisions of this Article,
Landlord may discontinue furnishing services under this Article during the
period of such violation or breach, and such discontinuance shall not constitute
an actual or constructive eviction, in whole or in part, or entitle Tenant to
any abatement or diminution of rent, or relieve Tenant from any of its
obligations under this lease, or impose any liability upon Landlord or
Landlord's agents.
P. INDOOR AIR QUALITY (IAQ)
A. Tenant has fully investigated the condition of the Premises or waived its
right to do so and is fully familiar with the physical condition of the Premises
and every part thereof, including, without limitation, the indoor air quality
(IAQ) generally, and the HVAC system, and Tenant accepts the same "as is".
B. Tenant shall comply with all current and future federal,
state, and local
environmental and IAQ laws, regulations, and industry standards, including,
without limitation, any restrictions on smoking in the workplace.
C. The premises shall not be used for any dangerous, noxious, or offensive
trade or business or for any purpose, trade, or business that will adversely
affect the IAQ for the premises or Building (including any common areas);
D. Landlord shall have the right, but not the obligation, at all times
during
the Lease Term to inspect the Premises and conduct such vests and investigations
(including, without limitation, a Phase I indoor Air Quality audit) to evaluate
the IAQ in the Premises and/or the Building. Landlord's entry may be made at any
time either during or after Tenant's business hours.
STANDARD ESCALATION RIDER ANNEXED TO
AGREEMENT OF LEASE BETWEEN
DAH CHONG HONG TRADING CORPORATION,
AS LANDLORD, AND, 2THEMART.COM, INC.,
AS TENANT
ESCALATION:
<PAGE>
48. A. As used herein:
(a) The term "Taxes" shall mean (a) all real estate taxes, assessments(special
or otherwise), sewer rents, rates and charges, or any other governmental charge
of a similar or dissimilar nature, whether general, special, ordinary or
extraordinary, which may be levied or assessed on or with respect to all or any
part of the Building or the parcel of land on which the Building is located
(hereinafter called "Real Property") by the City or County of New York or any
other taxing authority and (b) any expenses, including attorneys' fees and
disbursements, incurred by Landlord in contesting any of the foregoing or the
assessed valuation of all or any part of the Real Property. If, however, by law,
any assessment may be divided and paid in annual installments, then, for the
purposes of this Article, (a) such assessment shall be deemed to have been so
divided into the maximum number of annual installments permitted by law, and (b)
there shall be deemed included in Taxes for each calendar year the annual
installment of such assessment. becoming payable during such calendar year,
together with interest payable during such calendar yer on such annual
installment and on all installments thereafter becoming due as provided by law,
all as if such assessment had been so divided.
(b) The term "Landlord's Basic Tax Liability" shall mean the liability of
Landlord for the calendar year 2000 for Taxes.
(c) The term "Landlord's Base Tax Year" shall mean the calendar year 2000.
(d) The term "Tenant's Proportionate Share" shall mean 1.88%.
B. (a) If Taxes payable in any fiscal year falling wholly or partially
within the
Term shall be in such amount as shall constitute an increase above Landlord's
Basic Tax Liability, Tenant shall pay as Additional Rent for such fiscal year a
sum equal to Tenant's Proportionate Share of the amount by which Taxes for such
fiscal year exceed Landlord's Basic Tax Liability.
(b) On the first day of each month following rendition of each Landlord's
Statement which shows payment of Additional Rent due from Tenant pursuant to
this Section, Tenant shall pay to Landlord on account of the estimated
Additional Rent for the fiscal year following the fiscal year for which
Landlord's Statement shall have been rendered, a sum equal to one-twelfth
(1/12th) of the total Additional Rent shown on such Landlord's Statement. Such
Additional Rent shall be due and payable at the same time as each monthly
installment of Fixed Rent.
(c) A reconciliation shall be made upon each Landlord's Statement as
follows;
Tenant shall be debited with any Additional Rent shown on such Landlord's
Statement and credited with the aggregate of the total amount, if any, paid by
Tenant in accordance with the provisions of paragraph (b) on account of the
estimated Additional Rent for the fiscal year in question, and within ten (10)
days following rendition of such Landlord's Statement, Tenant shall pay to
Landlord the amount of any net debit balance shown thereon, or Landlord shall
apply against the next ensuing installments of Fixed Rent any net credit balance
shown thereon.
(d) If, as a result of any application or proceeding brought by or on behalf of
Landlord for reduction in the assessed valuation of the Real Property affecting
any fiscal year commencing after Landlord's Base Tax Year, there shall be a
decrease in Taxes for any such fiscal year with respect to which Landlord shall
have previously rendered a Landlord's Statement, Landlord's Statement next
following such decrease shall include an .adjustment for such fiscal year
reflecting such decrease in Taxes (less all costs and expenses, including
counsel fees, incurred by Landlord in connection with the application or
proceeding to reduce the Taxes with respect to any fiscal year occurring after
Landlord's Base Tax Year).
C. Landlord's Statement shall be rendered to Tenant in accordance with the
provisions of Article 28 of this lease. Landlord's failure to render Landlord's
Statements with respect to any such increase in Taxes, during any fiscal or
calendar year shall not prejudice Landlord's right to render a Landlord's
Statement with respect thereto or with respect to any subsequent fscal or
calendar year. Nothing herein contained shall restrict Landlord from issuing
Landlord's Statements at any time there is an increase in Taxes during any
fiscal or calendar year or any time thereafter. The obligations of Landlord and
Tenant under the provisions of this Article with respect to any Additional Rent
shall survive the Expiration Date or any sooner termination of the Term.
D. Each Landlord's Statement shall be conclusive and binding upon Tenant
unless
within thirty (30) days after receipt of such Landlord's Statement Tenant shall
notify Landlord that it disputes the correctness of Landlord's Statement,
specifying the respects in which Landlord's Statement is claimed to be
incorrect. Pending the determination of any such dispute by agreement or
otherwise, Tenant shall pay Additional Rent in accordance with the applicable
Landlord's Statement, and such payment shall be without prejudice to Tenant's
position. If the dispute shall be determined in Tenant's favor, Landlord shall
forthwith pay to Tenant the amount of Tenant's overpayment of Additional Rent
resulting from compliance with Landlord's Statement.
<PAGE>
E. The computations of Additional Rent under this Article are intended to
constitute
a formula for an agreed rental adjustment and may or may not constitute an
actual reimbursement to Landlord for costs and expenses paid by Landlord with
respect to the Building.
F. The term "Landlord's Statement" shall mean an instrument containing a
computation
of any Additional Rent or changed Fixed Rent due pursuant to the provisions of
this Article. Nothing herein contained shall restrict Landlord from issuing
Landlord's Statements at any time that there is an increase in Taxes during any
fiscal year or an increase in Operating Expenses or the Index during any
calendar year.
<PAGE>
STANDARD ELECTRICITY RIDER TO
AGREEMENT OF LEASE BETWEEN
DAH CHONG HONG TRADING CORPORATION,
AS LANDLORD, AND, 2THEMART.COM, INC.,
AS TENANT
ELECTRICITY:
49. A. Landlord, at Landlord's expense, subject to the provisions of
paragraph B
hereof, shall, furnish electrical energy to or for the use of Tenant in the
Premises. So long as the furnishing of such electrical energy is included in the
Fixed Rent on a so-called "rent inclusion" basis in accordance with this Section
there shall be no special charge to Tenant by way of measuring such electrical
energy on any meter or otherwise.
B. Tenant agrees that the Fixed Rent reserved herein shall be increased to
compensate Landlord for supplying Tenant with electric current as an additional
service by the sum of $8,964.00 per annum commencing on the Commencement Date
and continuing until such time as such sum may be increased as hereinafter
provided. Landlord will furnish electricity to Tenant through presently
installed electrical facilities for Tenant's reasonable use of such lighting,
electrical appliances, air conditioning systems and equipment as presently exist
or as Landlord may permit to be installed in the Premises. Tenant agrees that an
electrical engineer or utility consultant, selected by Landlord, may make a
survey of the electric lighting and power load Jo determine Tenant's average
monthly energy consumption in the Premises ("Tenants Electric Consumption")
based upon (i) the connected load rating of each item consuming electric energy,
(ii) Tenant's usage which shall be determined by multiplyin the connected load
rating of each item by the hours of usage as determined by the consultant and
(iii) the Electric Rates which Tenant would pay if it were the sole user of
electrical energy in the Building utilizing the rate schedule applicable to
Landlord. The findings of such engineers or consultant as to the proper cFixed
Rent increase based on Tenant's Electric Consumption shall be conclusive and
binding upon the parties and the amount thereof shall be added to the Fixed Rent
payable monthly on the first day of each and every month in advance for each
month from the Commencement Date (except that if the amount of such rent
increase shall not have been determined on the Commencement Date, then, upon
such subsequent determination, Tenant shall pay for the period from the
Commencement Date to the date of such determination the uncollected amount of
such increase in Fixed Rent). If the
<PAGE>
Electric Rates (as hereinafter defined) on which the initial determination of
said consultant were based shall be increased or decreased, then the Fixed Rent
attributable to electricity shall be increased or decreased by the same
percentage, retroactive if necessary to the date of such increase or decrease in
such Electric Rates; provided, however, that in no event shall the amount of
Fixed Rent reserved herein to compensate Landlord for supplying Tenant with
electric current ever be reduced below $8,964.00. Tenant shall make no
alterations or additions to the electric equipment or appliances without first
obtaining written consent from Landlord in each instance. Tenant agrees neither
to connect any additional electrical equipment of any type to the Building
electric distribution system, other than lamps, typewriters and other small
office machines and equipment relevant to the conduct of Tenant's business at
the demised premises, nor make or perform or permit the making or performing of,
any alterations to the wiring installations or other electrical facilities in or
serving the demised premises, without the prior written consent of Landlord in
each instance, which consent shall not be unreasonably withheld or delayed. If
Tenant installs additional or substituted electrical equipment or appliances or
otherwise increases its use of electric current, then the Fixed Rent shall be
increased by an amount determined by Landlord's electrical engineer or
consultant, at Tenant's expense, and such determination shall be conclusive and
binding upon Landlord and Tenant. Landlord, its engineer o r consultant, is
given the right to make surveys from time to time of the Premises covering the
electrical equipment and fixtures, and use of current. Any increase in Fixed
Rent resulting from an increase in Tenant's consumption or the addition of
equipment or appliances shall be effective as of the date of such increase or
addition, retroactive if necessary. Landlord shall not in any way be liable or
responsible to Tenant for any loss or damage or expense which Tenant may sustain
or incur reason of any change, failure or defect in the supply or character of
the electric energy furnished to the remises or if the quantity or character of
the electrical energy supplied by the electrical utility is no longer available
or suitable for tenant's requirements, and no such change, failure, defect,
unavailability or unsuitability shall constitute an actual or constructive
eviction, in whole or part, or entitle Tenant to any abatement or diminution of
rent, or relieve Tenant from any of its obligations under this lease. Tenant
covenants and agrees that at all times its use of electric current shall never
exceed the capacity of existing feeders to the Building or the risers or wiring
installation. Any riser or risers to supply Tenant's electrical requirements,
upon written request of Tenant, will be installed by Landlord, at the sole cost
and expense of Tenant, if, in Landlord's sole judgment, the same are necessary
and will not cause or increase a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants or occupants. Rigid conduit only will be allowed. In
addition to the installation of such riser or risers, Landlord will also, at the
sole cost and expense of Tenant, install all other equipment proper and
necessary in connection therewith subject to the aforesaid terms and conditions.
Landlord reserves the right to terminate the furnishing of electricity to the
Premises if required by law at any time, upon sixty (60) days' written notice to
Tenant in which event, Tenant shall make application directly to the utility
company serving the Building for Tenant's entire separate supply of electricity.
Landlord, upon the expiration of the aforesaid sixty (60) days' written notice
to Tenant, may discontinue furnishing the electric current, in which event,
Tenant's liability for increased Fixed Rent provided for in this paragraph B
shall terminate as of the date of discontinuance of the supplying of electric
current, but this lease shall otherwise remain in full force and effect. The
term "Electric Rates" shall mean the rates at which Landlord purchases electric
energy from the public utility supplying electrical service to the Building
(without regard to time of day or similar rate schedules), including but not
limited to, any charges incurred or taxes payable Landlord in connection
therewith or increase or decrease thereof by reason of fuel adjustment or any
substitutions for such Electric Rates or additions thereto. Except as provided
in the next sentence or as otherwise expressly provided herein, any and all
surveys made pursuant to this Article by Landlord's engineer or consultant with
respect to the Premises shall be made at the sole cost and expense of Tenant. In
the event that Landlord has its engineer or consultant make any surveys with
respect to the Premises more than one time in any twelve (12) month period and
such survey shows that Tenant's consumption of electricity in the Premises has
increased by an amount less than five (5%) percent over the immediately
preceding survey made during such twelve (12) month period. Landlord agrees that
any such survey shall be at the sole cost and expense of Landlord.
C. If Landlord discontinues the furnishing of electricity, as provided in
this
Article, then, and in such event, Landlord shall permit Tenant to receive
electrical service directly from the public utility supplying electrical service
to the Building and shall permit the existing feeders, risers, wiring and other
electrical facilities serving the Premises to be used by Tenant for such
purposes to the extent that they are available, suitable and safe. Tenant shall,
at its own expense, install any necessary electrical meter equipment, panel
boards, feeders, risers, wiring and other conductors and equipment which may be
required to obtain electrical energy directly from the public utility supplying
the same. Landlord shall have no liability whatsoever to Tenant by reason of
Landlord's discontinuance of electrical service.
D. Landlord, at Tenant's reasonable expense; shall furnish and install all
lamps
(including incandescent and fluorescent), starters and ballast's used in the
Premises.
E. In the event Tenant shall dispute any survey obtained by Landlord in
accordance
with paragraph B of this Article, Tenant shall have the right within thirty (30)
days after the receipt of the results of landlord's survey to elect by notice to
Landlord to have a survey completed by an electrical engineer or utility
consultant selected by Tenant from a list of three (3) electrical engineers
and/or utility consultants provided by Landlord to Tenant, at Tenant's sole cost
and expense, to determine Tenant's electrical current consumption as of the date
of Landlord's survey. In the event that Tenant's electrical engineer or utility
consultant disagrees with the survey prepared at the request of Landlord in
accordance with paragraph B of this Article and Landlord and Tenant cannot agree
on the amount of the appropriate increase in Fixed Rent, either party shall have
the right to submit such dispute to arbitration. If either the agreement reached
between Landlord and Tenant or the final decision of the arbitrator(s)
determines that Landlord's survey was in error by more than twenty-five percent
(25%), Landlord shall pay the reasonable fees of Tenant's electrical engineer or
utility consultant, Notwithstanding the provisions of this paragraph, Tenant
shall pay any and all items of Fixed Rent as calculated by Landlord until the
amount of such payment shall be finally determined.
F. If a arty desires arbitration pursuant to paragraph E above, such party
shall
give notice to that effect to the other party and shall in such notice appoint a
person as arbitrator on its behalf. Within fifteen (15) days after the giving of
such notice the other party shall likewise appoint a person as arbitrator on its
behalf. If the second arbitrator shall not have been appointed as aforesaid, the
first arbitrator shall proceed to determine such matter.
In the event that the two arbitrators appointed by the parties shall be unable
to agree within ten (10) days after the appointment of the second arbitrator,
they shall give written notice of such failure to agree to the parties and shall
within ten (10) days after the giving of such notice, appoint a third
arbitrator. If the two arbitrators fail to agree upon the selection of such
third arbitrator within the ten (10) days following their notice as aforesaid,
then within five (5) days thereafter either of the parties upon notice to the
other party hereto may request such appointment by the American Arbitration
Association (or any organization successor thereto), or in its absence, refusal,
failure or inability to act, may apply for a court appointment of such
arbitrator.
The three arbitrators shall render their decision and award, upon the
concurrence
of at least two of their number, within thirty (30) days after the appointment
of the third arbitrator. Such decision and award shall be in writing and shall
be final and conclusive on the parties, and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award, the
arbitrators shall not add to, subtract from or otherwise modify the provisions
of this lease. Judgment may be had on the decision and award of the arbitrators
so rendered in any court of competent jurisdiction end may be enforced in
accordance with the laws of the State of New York. Each party shall pay the fees
and expenses of the one of the two original arbitrators appointed by or for such
party and the fees and expenses of the third arbitrator and all other expenses
of the arbitration shall be borne by the parties equally. Each arbitrator shall
be a fair and impartial person who shall have had at least ten (10) years
experience in the County of New York as an electrical engineer or utility
consultant. The arbitration shall be conducted to the extent consistent with
this paragraph in accordance with the then prevailing rules of the American
Arbitration Association (or any organization successor thereto).
<PAGE>
F. Following a determination of an increase or decrease in Fixed Rent
attributable to the furnishing of electrical energy to the Premises by Landlord
as set forth in this Article, Landlord and Tenant shall, upon request of either
party, execute, acknowledge, and deliver to each other a supplemental agreement
in such form as Landlord shall reasonably require to reflect such change in the
Fixed Rent, but any such change shall be effective even if such agreement is not
executed and delivered.
H. If submetering of electricity is legally permitted in the Building,
Landlord
shall have the option of installing submeters at Landlord's expense to measure
Tenant's consumption of electrical energy and Tenant shall pay, as Additional
Rent, on demand, for its consumption of electrical energy at the then applicable
rate, if any, for submetered electrical energy, or, if no such rate is
promulgated, then at the same rate and frequency that Tenant would be obligated
to pay if Tenant were a direct customer of the local utility company furnishing
electrical energy to the Premises and in such event Tenant's liability for Fixed
Rent attributable to electrical energy, as the same may be increased pursuant to
this Article, shall terminate as of commencement of the operation of such
submeters. In no event, however, shall the amount payable by Tenant per square
foot be less than Landlord's cost per
square foot utilizing the then current Electrical Rates) of electrical energy
for the entire Building. For the purpose of this paragraph, the rate to be paid
by Tenant in the event of submetering shall include all of the components of
Electrical Rates. In the event that any tax shall be imposed upon Landlord's
receipts from the sale or resale of electrical energy to Tenant, the pro rata
share allocable to the electrical energy service received by Tenant shall be
passed on to, included in the bill of, and paid by Tenant, if and to the extent
permitted by law.
<PAGE>
STANDARD ASSIGNMENT/SUBLETTING RIDER TO
AGREEMENT OF LEASE BETWEEN
DAH CHONG HONG TRADING CORPORATION,
AS LANDLORD, AND, 2THEMART.COM, INC.,
AS TENANT
SUBLETTING AND ASSIGNMENT:
50. A. Provided that any such assignee or sublessee shall use the
premises and each
portion thereof for offices, Tenant may, without Landlord's consent:
(a) Assign this lease to a corporation or other business entity then having
a
net worth at least equal to that, of Tenant prior to such merger or
consolidation (herein called a "successor corporation") into or with which,
Tenant shall be merged or consolidated or to which substantially all of Tenant's
assets may be transferred, provided that such successor corporation shall have
effectively assumed all of Tenant's obligations and liabilities, including those
under this lease, by operation of law, or appropriate instrument of merger,
consolidation or transfer;
(b) Sublet any parts) of the demised premises to a corporation or other
business entity (herein called a "related corporation") which shall control, be
controlled by, or be under common control with, Tenant, but only for so long as
said sublessee shall control, be controlled by, or be under the common control
with, the Tenant. Tenant hereby covenants that such sublessee shall at all times
remain a corporation or entity which shall control, be controlled by, or be
under common control with Tenant and a breach of such covenant shall constitute
a material default under this lease for which Tenant shall not be given any
opportunity to cure;
(c) Permit any related corporation of Tenant to use the demised premises or
any part thereof, but only for so long as said occupant continues to be a
related corporation. Tenant hereby covenants that such use may only continue for
such period as such related corporation shall control, be controlled by or be
under common control with Tenant and a breach of such covenant shall constitute
a material default under this lease for which Tenant shall not be given an
opportunity to cure; and
(d) Assign this lease to a related corporation of Tenant. Tenant
hereby covenants that subsequent to such assignment the assignee shall remain a
corporation or entity which shall control, be controlled by or under common
control with Tenant and a breach of such covenant shall constitute a material
default under this lease for which Tenant and such assignee shall not be given
an opportunity to cure.
B. Concurrently with assigning this lease to a successor corporation, the
making of
a sublease to a related corporation, or permitting a related corporation to
occupy all or part of the demised premises, or assigning this lease to a related
corporation, (all as set forth in Section A(a), (b), (c) or (d) of this Article,
as the case may be); Tenant shall be required to submit proof that (i) the
successor corporation comes within the definition thereof and shall use the
Premises for general offices; or (ii) the sublessee, occupant or assignee is a
related corporation and will use the Premises for general offices, all in form
satisfactory to Landlord. As used herein in defining related corporation,
control must include over fifty (50%) per cent of the stock or other voting
interest of the controlled corporation or other business entity. Similar proof
that such sublessee, occupant or assignee continues to be a related corporation
shall be furnished by Tenant to Landlord within fifteen (15) days after written
request therefor.
C. If Tenant shall desire to sublet the demised premises in whole or in part
or to
assign this lease to anyone other than a related corporation of Tenant, Tenant
shall submit to Landlord a written request for Landlord's consent to such
subletting or assignment, which request shall contain or be accompanied by the
following information: (i) the name and
address of the proposed subtenant or proposed assignee; (ii) in the case of a
sublet, a description identifying the space to be sublet; (iii) the terms and
conditions of the proposed subletting or proposed assignment; (iv) the nature
and character of the business of the proposed subtenant or proposed assignee and
of its proposed use of the demised
premises; and (v) current financial information and any other information as
Landlord may reasonably request with respect to the proposed subtenant or
proposed assignee. Landlord shall have the option, to be exercised by notice
given to Tenant within ten (10) days after the later of (a) receipt of Tenant's
request for consent or (b) receipt of such further information as Landlord may
reasonably request pursuant to clause (v) above either (x) to require a
surrender of the demised premises as of a date to be specified in said notice
(the "Termination Date") which shall be not earlier than one (1) da before the
effective date of
<PAGE>
the proposed subletting or proposed assignment or later than sixty-one (61) day
before after said effective date, in which event Tenant shall vacate and
surrender the demised premises on or before the Termination Date and the term of
this lease shall end on the Termination Date as If that were the Expiration
Date, or (y) with respect to a proposed subletting, to obtain a sublet from
Tenant of the demised premises, including Tenant's leasehold improvements
therein, upon the terms and conditions hereinafter set forth as of a date
to be specified in said notice (the "Leaseback Date") which shall be not earlier
than one (1) day before the effective date of the proposed subletting or later
than sixty-one (61) days after said effective date, in which event Tenant shall
deliver possession of the demised premises, or part thereof involved, as the
case may be, to Landlord on or before the Leaseback Date. Landlord's consent
shall not be unreasonably withheld. If tenant subleases the part of their
premises for a short term (maximum of one year) than Landlord will not recapture
that part of the space.
D. (a) If Landlord shall exercise its option, pursuant to Section C
above to
lease back the demised premises together with all leasehold improvements made by
Tenant therein (herein collectively called the "Leaseback Area), Tenant shall be
deemed automatically to have subleased the Leaseback Area to Landlord (herein
sometimes called "Backleasing" or "Backlease") for the remaining balance of the
term (the "Backlease Term") for Fixed Rent at the same annual rate applicable to
such Leaseback Area, and with Additional Rent, all prorated to the Leaseback
area, and otherwise on the same terms, covenants and conditions, as are provided
in this lease, except such as by their nature or purport are inapplicable or
inappropriate to such Backleasing or are inconsistent with the further
provisions of the following Subsections of this Section, which further
provisions shall be deemed to be part of the terms, covenants and conditions of
such Backleasing.
(b) Landlord shall have the unqualified , without Tenant's permission or
consent and to underlet the Leaseback Area in whole or in part to any person or
entity, including Tenant's proposed subtenant or proposed assignee, for any
period or periods of time not extending beyond one day before the expiration of
the Backlease Term, at such rentals and on such terms and conditions (including
any alterations required to render the Leaseback Area suitable for occupancy by
an undertenant of Landlord) as Landlord shall determine. Landlord may underlet
the Leaseback Area or parts thereof separately or in combinations, as Landlord
sees fit. The Backlease may be assigned by Landlord to any person, including
Tenant's proposed subtenant or proposed assignee, without Tenant's consent but
such assignment shall not be effective unless the transferee executes and
delivers to Tenant a written agreement assuming all of Landlord's obligations
under the Backlease, and in such event Landlord shall continue to be fully
responsible jointly and severally with such assignee for all of Landlord's
obligations under the Backlease. Tenant shall not be responsible for furnishing
to the Leaseback Area or the occupants thereof any of the services undertaken in
this lease to be furnished by Landlord or for the making of any repairs or
alterations, or the incurrence of any expense with respect to the Leaseback Area
during the Backlease Term applicable thereto, but shall only make available that
which it receives from Landlord. At the expiration or earlier termination of the
Backlease Term, Landlord shall have no obligation to restore or alter or improve
the Leaseback Area and Tenant shall take possession of the Leaseback Area in the
condition that the same shall then be in, provided only that all facilities
necessary for the use and occupancy of the Leaseback Area, or any subdivisions
thereof as they then exist, such as ceilings, lighting fixtures, electrical
outlets, and heating, ventilating and air conditioning systems, shall be in
place and in good working order subject to reasonable wear and tear, and the
Leaseback Area shall be otherwise in good repair and tenantable condition for
general office use subject to reasonable wear and tear.
(c) Tenant shall furnish to Landlord or its assignee or sub-subtenant under
the Backlease any consents or approvals requested under the Backlease so long as
(i) Landlord furnishes such consents or approvals to Tenant and (ii) Tenant
incurs no expense by reason of any such consent or approval,
(d) Landlord and Tenant expressly negate any intention that any estate
created
by or under the Backlease shall be merged with any other estate held by either
of them. At the request of either party, Landlord and Tenant shall mutually
execute, acknowledge and deliver an instrument or instruments of sublease and/or
assignment to confirm and separately set forth the demise, rent, terms,
conditions and other provisions of the Backleasing of any Leaseback Area as may
be appropriate.
E. If Landlord shall not exercise any of its options under Section C above,
Landlord
shall not unreasonably withhold or delay its consent to the Proposed subletting
or proposed assignment referred to in Tenants notice given pursuant to Section
above, provided that the following further conditions shall be fulfilled:
(a) there shall be no advertisement or public communication of any kind
whatever relating to the proposed subletting or proposed assignment which
mentions or refers to a rental rate (but nothing herein contained shall be
deemed to prohibit Tenant from negotiating or consummating a sublease at a
lesser rate of rent) or to any other matter which directly or indirectly might
adversely reflect on the dignity or prestige of the Building; without limiting
the foregoing restrictions, no such advertisement or other public communication
shall be released without Landlord's prior written approval, which shall not be
unreasonably withheld or delayed;
(b) no subletting or assignment shall be to a person or entity which has a
<PAGE>
financial standing, is of a character, is engaged in a business, or proposes to
use the demised premises or any portion thereof in a manner not in keeping with
the standards in such respects of the other tenancies in the Building;
(c) the subletting or assignment shall be expressly subject to all of the
obligations of Tenant under this lease except that the demised premises shall be
used for general offices and for no other purpose and shall specifically provide
that there shall be no further subletting of the sublet premises and, with
respect to an assignment, the assignee shall comply with the provisions of
Section F below;
(d) with respect to any subletting, that part, if any, of the term of any
such
sublease or any renewal or extension thereof which shall extend beyond a date
one (1) day prior to the expiration or earlier termination of the term shall be
a nullity; ,
(e) with respect to any subletting, that the subletting shall not have the
effect,or give the utility serving the Building with electricity cause to claim,
that Landlord will not be permitted to serve the demised premises or the portion
thereof so sublet, or any of the other leased portions of the Building, with
electricity, on a "rent inclusion" basis as provided for herein;
(f) with respect to any subletting, the rent for such subletting is not less
than the then going market rental rate for comparable space and for a comparable
term, and, with respect to any assignment, the consideration received by Tenant
for the assignment is not less than the fair market value for the transfer of
Tenant's leasehold estate; .
(g) Tenant shall pay all reasonable costs that may be incurred by Landlord
in
connection with said sublease or assignment, including the costs of making
investigations as to the acceptability of a proposed subtenant or proposed
assignee and the reasonable fees of Landlord's attorneys;
(h) The proposed subtenant or proposed assignee shall not be a person then
negotiating with Landlord for rental of any space in the Building;
(i) Landlord shall be furnished with duplicate original of the sublease or
assignment agreement within ten (10) days after the date of its execution;
(j) Tenant shall pay to Landlord a sum equal to (x) any fixed rent and
additional rent or other consideration paid to Tenant by any assignee or
subtenant which in excess of the Fixed Rent and Additional Rent then payable by
Tenant to Landlord pursuant to the terms hereof, and (y) any other profit or
gain realized by Tenant from any such assignment or subletting. All sums payable
hereunder by Tenant shall be paid to Landlord as additional rent. If only a part
of the demised premises is sublet, then the rent paid therefor by Tenant to
Landlord shall be deemed to be that fraction thereof that the area of said
sublet space bears to the entire demised premises; and
(k) There shall be no default beyond any applicable notice and/or grace period
by Tenant under any of the terms, covenants and conditions of this lease at the
time that Landlord's consent to any such subletting or assignment is requested
or on the date of the commencement of the term of any such. proposed sublease or
as of the effective date of any such proposed assignment.
F. No assignment of this lease, whether to a successor corporation or a
related
corporation or otherwise, shall be binding upon Landlord unless the assignee
shall execute, acknowledge and deliver to Landlord (a) a duplicate original
instrument of assignment in form and substance satisfactory to Landlord, duly
executed by Tenant, and (b) an agreement, in form and substance satisfactory to
Landlord, duly executed by the assignee, whereby the assignee shall
unconditionally assume observance and performance of, and agree to be personally
bound by all of the terms, covenants and conditions of this lease on Tenant's
part to be observed or performed, including, without limitation, the provisions
of this Article with respect to all future assignments; but the failure or
refusal of the assignee to execute or deliver such an agreement shall not
release the assignee from its liability for the obligations of Tenant hereunder
assumed by acceptance of the assignment of this lease.
G. If this lease is assigned, whether or not in violation of the terms of
this
<PAGE>
lease, Landlord may collect rent from the assignee. If the demised premises or
any part thereof be sublet or be used or occupied by anybody other than Tenant,
whether or not in violation of this lease, Landlord may, after default by Tenant
and expiration of Tenant's time to cure such default, if any, collect rent from
the subtenant or occupant. In either event, Landlord may apply the net amount
collected to the rent herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of any of the provisions of
Article 11 or this Article, or the acceptance of the assignee, subtenant or
occupant as a tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this lease. The consent by Landlord to an
assignment, transfer, encumbering or subletting pursuant to any provision of
this lease shall not in any way be considered to relieve Tenant from obtaining
the express prior consent of Landlord to any other or further assignment,
transfer, encumbering or subletting. References in this lease to use or
occupancy by anyone other than Tenant shall not be construed as limited to
subtenants and those claiming under or through subtenants but as including also
licensees and others claiming under Tenant, immediately or remotely. The listing
of any name other than that of Tenant on any door of the demised premises or on
any directory or in any, elevator in the Building, or otherwise, shall not
operate to vest in the person so named any right or interest in this lease or
the demised premises, or be deemed to constitute, or serve as a substitute for,
any consent of Landlord required under Article 11 or this Article, and it is
understood that any such listing shall constitute a privilege extended by
Landlord, revocable at Landlord's will by notice to Tenant. Tenant agrees to pay
to Landlord reasonable attorneys' fees and disbursements incurred by Landlord in
connection with any proposed assignment of this lease or any proposed subletting
of the demised premises or any part thereof. Neither any assignment of this
lease nor any subletting, occupancy or use of the demised remises or any part
thereof by any person other than Tenant, nor any collection of rent by Landlord
from any person other than Tenant, nor any application of any such rent as
provided in this Article shall, under any circumstances except as set forth in
Section A above, relieve, impair, release or discharge Tenant of its obligations
fully to perform the terms of this lease on Tenant's part to be performed.
H. If Tenant or any assignee of Tenant is a corporation, the terms "assign"
and
"assignment". shall, for purposes of this lease, be deemed to include the
transfer of a majority of the stock of Tenant or uch assignee of Tenant.
I. If required by applicable law in connection with any termination of this
lease,
assignment of this lease to Landlord or its designee, or subletting of all or
any portion of the Premises to Landlord or its designee, Tenant shall compete,
swear to and file any questionnaires, tax returns, affidavits or other
documentation which may be required to be filed a) with the New York State
Department of Taxation and Finance in connection with Article 31-B of the 'flax
Law of the State of New York, (b) with the Commissioner of Finance of the City
of New York in connection with the New York City Real Property Transfer Tax and
(c) with the appropriate governmental agency in connection with any other tax
which may now or hereafter be in effect. Tenant further agrees to pay any
amounts which may be assessed in connection with any of such taxes and to
indemnify Landlord against and to hold Landlord harmless from any claims for
payment of such taxes as a result of such transactions.
<PAGE>
EXHIBIT A
{Diagram of Plan for 12th Floor}
EXHIBIT B
RULES AND REGULATIONS
1. The sidewalks, entrances, lobby, elevators, vestibules, stairways, and halls
shall not be obstructed or encumbered by Tenant or used for any purpose other
than ingress and egress to and from the Premises, and Tenant shall not permit
any of its employees, agents or invitees to congregate in any of said,areas.
Tenant shall not invite to the Premises, or permit the visit of persons in such
numbers or under such conditions as to interfere with the use and enjoyment of
any of the entrances, corridors, stairways, elevators, or other facilities in
the Building by other tenants. Fire exits and stairways are for emergency use
only, and they shall not be used for any other purpose by Tenant, its employees,
licensees or invitees. Landlord reserves the right to control and operate the
public portions of the Building and the public facilities, as, well as
facilities furnished for the common use of the tenants, in such manner as it
deems best for the enefit of the tenants generally. No doormat of any kind
whatsoever shall be placed or left in any public hall or outside any entry door
of the Premises.
<PAGE>
2. No awnings or other projections shall be attached to the outside walls or
windows of the Building or any entrance to the Premises. No curtains, blinds,
shades, or screens shall be attached to or hung in, or used in connection with,
any window or door of the Premises, without the prior written consent of
Landlord. No sign, insignia, advertisement, object, notice or other lettering
shall be exhibited, inscribed, painted or affixed by Tenant on any part of the
outside or inside of the Premises or Building. In the event of the violation of
the foregoing by Tenant, Landlord may remove same without any liability, and may
charge the expense incurred by such removal to Tenant. Interior signs on doors
and directory tablet, if any, shall be inscribed, painted or affixed for Tenant
by Landlord at the expense of Tenant, and shall be of a size, color and style
acceptable to the Landlord. Only Tenant named in the Lease shall be entitled to
appear on the directory tablet. Additional names may be added in Landlord's sole
discretion under such terms and conditions as Landlord may approve.
3. No acids, vapors or other materials which may damage the waste lines, vents
or flues of the Building shall be discharged or permitted to be discharged. The
water and wash closets and other plumbing fixtures shall not be used for any
purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. Alt damages
resulting from any misuse of the fixtures shall be borne by the Tenant who, or
whose servants, employees, agents, visitors or licensees shall have caused the
same.
4. Tenant shall not drill into or in any way deface any part of the Premises or
the Building other than normal hanging of pictures on the interior walls or
installation of partitions within the Premises. Tenant shall not lay linoleum,
or other similar floor covering, so that the same shall come in direct contact
with the floor of the Premises, and if linoleum or other similar floor covering
is desired to be used, an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
5. No bicycles, vehicles or animals of any kind shall be brought into or kept in
or about the Premises. Tenant shall not cause or permit any unusual or
objectionable odors to be produced upon or permeate from the Premises. Tenant
shall not throw anything out of the doors, windows, or skylights, or down the
passageways. No noise, which, in the judgment of Landlord, might disturb other
tenants in the Building, shall be made or permitted by Tenant. No cooking shall
be done in the Premises. Nothing shall be done or permitted in the Premises, and
nothing shall be brought into or kept in the Premises, which might impair or
interfere with any of the building services or the proper and economic heating,
cleaning or other servicing of the Building or the Premises, or the use or
enjoyment by any other tenant of any other premises. Tenant shall not install
any ventilating, air conditioning, and electrical or other equipment of any
kind, which, in the judgment of the Landlord; might cause any such impairment or
interference. No dangerous, inflammable, combustible or explosive object or
material shall be brought into the Building by Tenant or with the permission of
Tenant.
6. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by Tenant, nor shall any changes be made in existing locks or
the mechanism thereof. Tenant must, upon the termination of this tenancy,
restore to Landlord all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, Tenant, and in the event of the loss of
any keys so furnished, Tenant shall pay to Landlord the cost thereof.
7. Landlord may require any person leaving the Building with any package or
other object or matter to submit a pass, listing such package or object or
matter, from the tenant from whose Premises the package or object or matter is
being removed, but the establishment and enforcement of such requirement shall
not impose any responsibility on Landlord for the protection of any tenant
against the removal of property from the Premises of such tenant. Landlord
shall, in no way, be liable to Tenant for damages or loss arising from the
admission, exclusion or ejection of any person to or from the Premises or the
Building under provisions of this Rule. Landlord may refuse admission to the
Building outside of ordinary business hours to any person not known to the
watchman in charge or not having a pass issued by Landlord, or not otherwise
properly identified, and may require all persons admitted to or leaving the
Building outside of ordinary business days to register. Landlord will furnish
passes to persons from whom Tenant requests same in writing. Tenant shall be
responsible for all persons for whom Tenant has requested a pass and shall be
liable to Landlord for all acts of such persons. Any person, whose presence in
the Building at any time shall, in the judgment of Landlord, be prejudicial to
the safety, character, reputation or interest of the Building or its tenants may
be denied access to the Building or may be ejected therefrom. In case of
invasion, riot, public excitement or other commotion Landlord may prevent all
access to the Building during the continuance of the same, by closing the doors
or otherwise, for the safety of the tenants and protection of property in the
Building.
8. Tenants shall not engage or pay any employees on Premises, except those
actually working for Tenant on the Premises, nor advertise
for employees who will work at locations other than the Premises.
9. Tenant, before closing and leaving the Premises at any time, shall see that
all windows are closed, and all lights are turned out. All entrance doors in the
Premises shall be left locked by Tenant when the Premises are not in use.
Entrance doors shall not be left open at any time.
10. Unless Landlord shall furnish electrical energy hereunder as a service
included in the Fixed Rent, Tenant shall, at its expense, provide artificial
light for the employees of Landlord or of Landlord's independent contractor
while doing janitor service or other cleaning, and in making repairs or
alterations in the Premises.
<PAGE>
11. The Premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose ,
12. The requirements of Tenant will be attended to only upon application at
the office of the Building. Employees of Landlord shall not be required to
perform, and shall not be requested by Tenant to perform, any work or do
anything outside of their regular duties, unless under special instructions from
the office of Landlord.
13. Canvassing, soliciting and peddling in the Building are prohibited and
Tenant shall cooperate to prevent the same.
14. There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, at any time,
any hand trucks, except those equipped with rubber tires and side guards, and
such other safeguards as Landlord shall require. Hand trucks shall be used only
in the Building's service elevators.
15. Tenant shall cooperate with Landlord in obtaining maximum effectiveness
of the air conditioning system by lowering and closing
venetian blinds and/or drapes and curtains when the sun's rays fall directly on
the windows of the Premises.
16. Tenant shall at no time leave any merchandise, supplies, materials or
refuse in the hallways or other common portions of the
Building or in any other area of the Building other than the demised premises.
Tenant covenants that all garbage and refuse shall be kept in proper containers,
securely covered, until removed from the Building so as to prevent the escape of
objectionable fumes and odors and the spread of vermin, and Tenant further
covenants that no refuse and/or garbage shall be permitted to remain on the
sidewalks adjacent to the Building.
17. Landlord reserves the right to rescind, alter, waive or add any Rule or
Regulation at
any time prescribed for the Building when,in the exercise of its reasonable
judgment, it deems it necessary or desirable for the reputation, safety, care or
appearance of the Building, or the preservation of good order therein, or the
operation or maintenance of the Building or the equipment thereof, or the
comfort of tenants or others in the Building. No rescission, alteration, waiver,
or addition of any Rule or Regulation in favor of one tenant shall operate as a
rescission, alteration, waiver or addition in favor of any other tenant.
<PAGE>
EXHIBIT C
C-1
CLEANING STANDARDS
I. GENERAL CLEANING - Nightly - Five Times a Week.
1. Empty all waste receptacles.
3. Place waste in bags furnished by Landlord and place in a designated
area.
4. Dust all areas within reaching distance, which areas include window
sills, wall ledges, desks, tables, file cabinets, and all office furniture,
provided no items shall be moved or lifted to accomplish such dusting.
5. Wipe all glass top desks and tables.
6. Sweep all tile flooring.
7. Vacuum or carpet sweep all carpeted areas:
8. Dust interior surfaces of elevator cabs and sweep tile flooring, or
vacuum carpet.
9. Refill toilet tissue dispensers as needed.
10. Set out foul weather mats at Building entrance when necessary, and
clean when necessary.
11. Dust glass on Building directory,
12. Lavatories:
(a) Clean all bowls, seats, urinals, washbasins and mirrors as necessary.
(b) Clean all metal work as necessary.
8 Empty paper towel and sanitary napkin receptacles and remove to designated
area.
(d) Insert toilet tissue, to be furnished by Landlord.
(e) Sweep and mop floors.
(f) Dust all sills, partitions and ledges within reaching distance as
necessary.
II. FLOOR MAINTENANCE (Common Area)
Elevator Corridors (and Public Corridors on Multi-Tenanted Floors,
excluding subtenants of Tenant or related
corporations thereof).
(a) Sweep and mop all stone floors weekly.
(b) Damp mop and buff all composition flooring twice monthly.
8 Clean and wax all composition tile flooring monthly.
III. LIGHTS (Common Area)
Dust all lighting fixtures quarterly in the public areas.
<PAGE>
IV. MAINTENANCE OF LAVATORIES
1. Damp-wipe booth partitions monthly.
2. Wash tile walls quarterly.
3. Wash interior of waste cans and sanitary containers bimonthly.
V. STAIRWAYS
1. Sweep and dust stairways weekly.
2. Mop stairways weekly.
VI. WINDOWS
Clean all windows inside and outside every quarterly subject to Unavoidable
Delays.
VII. EXTERMINATION
Provide extermination services for public areas monthly.
VIII. SNOW REMOVAL
Remove snow, if necessary, during usual business hours.
AMENDMENT # 1 TO AGREEMENT
AND PLAN OF REORGANIZATION
DATED APRIL 14, 2000
INTERIM OPERATING AGREEMENT
This Amendment # 1 to the Agreement and Plan of Reorganization dated April
14, 2000, the Interim Operating Agreement ("Agreement"), is entered into
effective as of the 19th day of April, 2000 (the "Effective Date") by and
between 2TheMart.com, Inc., an Oklahoma corporation ("2TM") and GoToWorld.com,
Inc., a Delaware corporation ("GTW"). Each of 2TM and GTW shall be referred to
as a "Party" and collectively as the "Parties".
RECITALS
WHEREAS, 2TM and GTW have entered into an Agreement and Plan of
Reorganization dated April 14, 2000 (the "Reorganization Agreement");
WHEREAS, as part of the Reorganization Agreement, the Parties have agreed
that 2TM will merge with GTW upon completion of shareholder approval by the
shareholders of 2TM;
WHEREAS, the board of directors of the 2TM and GTW each agree that it is in
the best interests of the parties for GTW to provide operational support from
the Effective Date through the closing of the merger as contemplated by the
Reorganization Agreement (the "Interim Period") .
WHEREAS, the parties to the Reorganization Agreement wish to amend the
Reorganization Agreement as hereinafter stated.
<PAGE>
AMENDMENT
NOW, THEREFORE, the parties agree as follows:
1. Conflict. In the event there is a conflict between the terms of the
Reorganization Agreement and this Amendment No. 1, the terms of this Amendment
No. 1 shall control any interpretation. Unless this Amendment No. 1 expressly
amends the language of the Reorganization Agreement, the Reorganization
Agreement shall remain in full force and effect.
2. Operating Expenses. GTW hereby agrees to pay operating expenses, as
enumerated in Schedule "A" for the day-to-day operation of the Orange County, CA
2TM facility during the Interim Period (the "Operating Funds").
3. Interim Management. 2TM authorizes the retention of the services of a
management company ("Interim Management Company") to manage 2TM's daily
operations during the Interim Period, subject to the approval of the 2TM Board
of Directors. Fees required for such Interim Management Company shall be paid
by GTW as part of the Operating Funds. 2TM shall delegate all day-to-day
management responsibility of 2TM to the Interim Management Company if one is
retained pursuant to this Agreement.
4. Indemnity. 2TM hereby agrees to indemnify, defend and hold harmless any
Interim Management Company retained pursuant to this Agreement for all acts
performed by it during the Interim Period.
5. Offices and Facilities. GTW is hereby authorized to place its personnel at
2TM's offices and facility. Such GTW personnel shall have the authority to
operate 2TM systems and equipment under the direction of GTW or the Interim
Management Company, if applicable.
6. Equipment. GTW and its personnel are hereby authorized to configure,
program and operate 2TM's computers, equipment, and systems. However, GTW and
its personnel are not authorized to sell, pledge, hypothecate, encumber,
transfer, or move any such computers, equipment, systems, or any other assets of
2TM without 2TM's prior written approval.
7. Investment Relations. GTW shall be authorized and instructed to retain the
services of an investment relations firm on behalf of 2TM. Fees required for
such Investment Relations Firm shall be paid by GTW as part of the Operating
Funds.
8. Term and Termination. This Agreement shall be in effect for a period of 60
days from the Effective Date and thereafter month to month until either approval
or disapproval of the merger contemplated by the Reorganization Agreement by the
shareholders of 2TM or GTW.
9. Representations and Warranties. Each Party hereby represents, warrants and
covenants as follows:
a. When executed and delivered, the terms hereof shall constitute a valid
and legally binding agreement enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency or other laws affecting generally
the enforceability of creditors rights and by limitations on the availability of
equitable remedies.
b. Neither the execution and delivery of this Agreement nor the consummation
or performance of the transactions contemplated herein will violate any law,
rule, regulation, writ, judgment, injunction, decree, determination, or other
order of any court, government or governmental agency or instrumentality,
domestic or foreign, or conflict with or result in any breach of any of the
terms of or the creation or imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance of any nature pursuant to
the terms of any contract or agreement
10. Severability. If any portion of this Agreement is found by a court of
competent jurisdiction to be void or unenforceable, that portion shall be deemed
to be reformed to the extent necessary to cause such portion to be enforceable
and the same shall not affect the remainder of this Agreement, which shall be
given full force and effect without regard to the invalid or unenforceable
portions.
<PAGE>
11. Confidential Information.
a. 2TM, GTW, their agents and employees, and each of them, shall not, during
the term of this Agreement and thereafter, communicate, divulge, or use for the
benefit of itself or any other person, partnership, association, or corporation,
either directly or indirectly, any information or knowledge concerning the any
Party and any information, including but not limited to technical information,
computer specifications, employee lists, customer lists, communication
techniques, invoicing, billing, and schematics, which may be communicated to one
Party by the other Party during the term of this Agreement.
b. 2TM and GTW, and each of them, covenants and agrees that during the term
of this Agreement and for a period of five (5) years thereafter, such party will
not do any act or fail to do any act which may be prejudicial or injurious to
the business and goodwill of the other Party.
12. Entire Agreement. This Agreement, together with the Reorganization
Agreement, along with the exhibits attached hereto, which may be signed in
duplicate or counterparts, contains the entire understanding between the
Parties, and may not be changed, altered, amended, or modified, except in
writing, duly executed by each of the Parties.
13. Assignment; Survival. This Agreement may not be assigned or transferred by
either Party hereto without the prior written consent of all other Parties
hereto. The obligations of the Parties under this Agreement shall survive in the
event of a sale, merger, transfer of substantially all the assets, or change in
control of either Party.
14. Governing Law; Venue. This Agreement shall be governed by the laws of the
State of California, United States of America. Any cause of action brought by
an Party hereunder shall be brought in the court of proper jurisdiction in
Orange County, California.
15. Attorneys' Fees. Should any action be commenced between the Parties to
this Agreement concerning the matters set forth in this Agreement or the rights
and duties of either in relation thereto, the prevailing Party in such action
shall be entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its Attorney's Fees and Costs.
16. Headings/Captions. The titles and headings are for reference purposes
only and shall not in any way limit the construction or interpretation of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed and delivered as of the date first written above.
2TM GTW
2TheMart.com, Inc., GoToWorld.com, Inc.,
an Oklahoma corporation a Delaware corporation
/s/ Steven W. Rebeil /s/ Ian S. Simpson
_____________________________ _____________________________
By: Steven W. Rebeil By: Ian S. Simpson
Its: Chairman and Sole Director Its: Chief Executive
Officer
2THEMART.COM, INC.
2000 STOCK INCENTIVE PLAN
1. THE PLAN.
1.1 PURPOSE . The purpose of this Plan is to promote the success
of the Company and the interests of its stockholders by providing an additional
means through the grant of Awards to attract, motivate, retain and reward key
employees, including officers, whether or not directors, of the Company with
awards and incentives for high levels of individual performance and improved
financial performance of the Company. "CORPORATION" means2TheMart.com, Inc., an
Oklahoma corporation, and "COMPANY" means the Corporation and its Subsidiaries,
collectively. These terms and other capitalized terms are defined in Section 7.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
1.2.1 COMMITTEE. This Plan will be administered by and all Awards to
Eligible Employees shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by unanimous written consent of its members.
1.2.2 PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan and any express limitations on the delegated
authority of the Committee, the Committee shall have the authority:
(1) to determine eligibility and, from among those persons determined to be
eligible, the particular Eligible Persons who will receive Awards;
(2) to grant Awards to Eligible Persons, determine the price at which
securities will be offered or awarded and the amount of securities to be offered
or awarded to any of such persons, and determine the other specific terms and
conditions of such Awards consistent with the express limits of this Plan, and
establish the installments (if any) in which such Awards will become exercisable
or will vest, or determine that no delayed exercisability or vesting is
required, and establish the events of termination or reversion of such Awards;
(3) to approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
(4) to construe and interpret this Plan and any Award or other
agreements defining the rights and obligations of the Company and Participants
under this Plan, further define the terms used in this Plan, and prescribe,
amend and rescind rules and regulations relating to the administration of this
Plan;
(5) to cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding Awards
held by Eligible Persons, subject to any required consent under Section 6.6;
(6) to accelerate or extend the exercisability or extend the term of
any or all outstanding Awards within the maximum ten-year term of Awards under
Section 1.6; and
(7) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
1.2.3 BINDING DETERMINATIONS/LIABILITY LIMITATION. Any action taken by, or
inaction of, the Corporation, any Subsidiary, the Board or the Committee
relating or pursuant to this Plan and within its authority hereunder or under
applicable law shall be within the absolute discretion of that entity or body
and shall be conclusive and binding upon all persons. Neither the Board nor any
Committee, nor any member thereof or person acting at the direction thereof,
shall be liable for any act, omission, interpretation, construction or
determination made in good faith in connection with this Plan (or any Award made
under this Plan), and all such persons shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, attorneys' fees) arising or resulting therefrom
to the fullest extent permitted by law and/or under any directors and officers
liability insurance coverage that may be in effect from time to time.
1.2.4 RELIANCE ON EXPERTS. In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including employees of
and professional advisors to the Corporation. No director, officer or agent of
the Company shall be liable for any such action or determination taken or made
or omitted in good faith.
1.2.5 DELEGATION. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
1.3 PARTICIPATION.Awards may be granted by the Committee only to those
persons that the Committee determines to be Eligible Persons. An Eligible
Person who has been granted an Award may, if otherwise eligible, be granted
additional Awards if the Committee so determines.
1.4 SHARES AVAILABLE FOR AWARDS; SHARE LIMITS.
1.4.1 SHARES AVAILABLE. Subject to the provisions of Section 6.2, the
capital stock that may be delivered under this Plan will be shares of the
Corporation's authorized but unissued Common Stock and any shares of its Common
Stock held as treasury shares. The shares may be delivered for any lawful
consideration.
1.4.2 SHARE LIMITS. The maximum number of shares of Common Stock that
may be delivered pursuant to Awards granted under this Plan (the "SHARE LIMIT")
shall not exceed the lesser of (1) 15 million (15,000,000) shares, or (2) the
Percentage Limit. The "Percentage Limit" at any time will equal 20% of the
total number of shares of Common Stock that are outstanding on the effective
date of the Plan determined under Section 6.8, plus 20% of any increase in the
total number of shares of Common Stock after the effective date of the Plan;
provided, that the Percentage Limit will not contract if shares are reacquired
by the Corporation after an increase has been made, but neither shall the
Percentage Limit increase if the reacquired shares are reissued. The maximum
number of shares of Common Stock that may be delivered pursuant to options
qualified as Incentive Stock Options granted under this Plan is 15,000,000
shares, subject to the Share Limit. The maximum number of shares subject to
those options and stock appreciation rights that are granted during any calendar
year to any individual shall be limited to 2,500,000 shares and the maximum
individual limit on the number of shares in the aggregate subject to all Awards
that are granted during any calendar year to any individual shall be limited to
2,500,000 shares, in each case subject to the Share Limit. Each of the four
foregoing numerical limits shall be subject to adjustment as contemplated by
this Section 1.4 and Section 6.2.
1.4.3 SHARE RESERVATION; REPLENISHMENT AND REISSUE OF UNVESTED AWARDS.
No Award may be granted under this Plan unless, on the date of grant, the sum of
(1) the maximum number of shares of Common Stock issuable at any time pursuant
to such Award, plus (2) the number of shares of Common Stock that have
previously been issued pursuant to Awards granted under this Plan, other than
reacquired shares available for reissue consistent with any applicable legal
limitations, plus (3) the maximum number of shares of Common Stock that may be
issued at any time after such date of grant pursuant to Awards that are
outstanding on such date, does not exceed the Share Limit. Shares of Common
Stock that are subject to or underlie Awards that expire or for any reason are
cancelled or terminated, are forfeited, fail to vest, or for any other reason
are not paid or delivered under this Plan, as well as reacquired shares, shall
again, except to the extent prohibited by law, be available for subsequent
Awards under the Plan. Except as limited by law, if an Award is or may be
settled only in cash, such Award need not be counted against any of the limits
under this Section 1.4.
1.5 GRANT OF AWARDS. Subject to the express provisions of this Plan,
the Committee will determine the number of shares of Common Stock subject to
each Award, the price (if any) to be paid for the shares or the Award and, in
the case of performance share awards, in addition to matters addressed in
Section 1.2.2, the specific objectives, goals and performance criteria (such as
an increase in sales, market value, earnings or book value over a base period,
the years of service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
performance share award. Each Award will be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
The Award Agreement will set forth the material terms and conditions of the
Award established by the Committee consistent with the specific provisions of
this Plan.
1.6 AWARD PERIOD. Each Award and all executory rights or obligations
under the related Award Agreement shall expire on such date (if any) as shall be
determined by the Committee, but in the case of Options or other rights to
acquire Common Stock not later than ten (10) years after the Award Date;
provided, however, that any payment of cash or delivery of stock pursuant to an
Award may be delayed until a future date if specifically authorized by the
Committee; provided further, that each Award will be subject to earlier
termination as provided in or pursuant to Sections 6.2 and 6.3.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
1.7.1 PROVISIONS FOR EXERCISE. Unless the Committee otherwise expressly
provides, no Award will be exercisable or will vest until at least six months
after the initial Award Date, and once exercisable an Award will remain
exercisable until the expiration or earlier termination of the Award.
1.7.2 PROCEDURE. Any exercisable Award will be deemed to be exercised when
the Secretary of the Corporation receives written notice of such exercise from
the Participant (on a form and in such manner as may be required by the
Committee), together with any required payment made in accordance with Section
2.2 and Section 6.5, and delivery of any written statement required pursuant to
Section 6.4.
1.7.3 FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests shall be
disregarded, but may be accumulated. The Committee, however, may determine in
the case of Eligible Persons that cash, other securities, or other property will
be paid or transferred in lieu of any fractional share interests. No fewer than
100 shares may be purchased on exercise of any Award at one time unless the
number purchased is the total number at the time available for purchase under
the Award.
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE. The Corporation may, with
the Committee's approval, accept one or more notes from any Eligible Person in
connection with the exercise or receipt of any outstanding Award; provided that
any such note shall be subject to the following terms and conditions:
(1) The principal of the note shall not exceed the amount required to be
paid to the Corporation upon the exercise or receipt of one or more Awards under
the Plan and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.
(2) The initial term of the note shall be determined by the Committee;
provided that the term of the note, including extensions, shall not exceed a
period of five years.
(3) The note shall provide for full recourse to the Participant and shall
bear interest at a rate determined by the Committee but not less than the
interest rate necessary to avoid the imputation of interest under the Code.
(4) If the employment of the Participant terminates, the unpaid principal
balance of the note shall become due and payable on the 10th business day after
such termination; provided, however, that if a sale of such shares would cause
such Participant to incur liability under Section 16(b) of the Exchange Act, the
unpaid balance shall become due and payable on the 10th business day after the
first day on which a sale of such shares could have been made without incurring
such liability assuming for these purposes that there are no other transactions
(or deemed transactions in securities of this Corporation) by the Participant
subsequent to such termination.
(5) If required by the Committee or by applicable law, the note shall be
secured by a pledge of any shares or rights financed thereby in compliance with
applicable law.
(6) The terms, repayment provisions, and collateral release provisions of
the note and the pledge securing the note shall conform with applicable rules
and regulations of the Federal Reserve Board as then in effect and
applicable state law.
1.9 NO TRANSFERABILITY; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS.
1.9.1 LIMIT ON EXERCISE AND TRANSFER. Unless otherwise expressly provided
in (or pursuant to) this Section 1.9, by applicable law and by the Award
Agreement, as the same may be amended:
(1) all Awards are non-transferable and will not be subject in any manner to
sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or
charge;
(2) Awards will be exercised only by the Participant; and
(3) amounts payable or shares issuable pursuant to an Award will be
delivered only to (or for the account of) the Participant.
1.9.2 EXCEPTIONS. The Committee may permit an Award to be exercised by and
paid only to a person or entity that is a "family member" (as such term is
defined in the General Instructions to Form S-8 Registration Statements under
the Securities Act) of the Participant; provided that the transfer will not
adversely affect the Corporation's eligibility to use Form S-8 to register under
the Securities Act the offering of shares issuable under this Plan by the
Corporation. Any permitted transfer shall be subject to the condition that the
Committee receive evidence satisfactory to it that the transfer is being made
for essentially estate and/or tax planning purposes on a gratuitous or donative
basis and without consideration (other than nominal consideration or in exchange
for an interest in a qualified transferee).
Notwithstanding the foregoing or anything in Section 1.9.3 to the contrary,
Incentive Stock Options and Restricted Stock Awards will be subject to any and
all additional transfer restrictions under the Code applicable to such Awards.
1.9.3 FURTHER EXCEPTIONS TO LIMITS ON TRANSFER. The exercise and transfer
restrictions in Section 1.9.1 shall not apply to:
(1) transfers to the Corporation,
(2) the designation of a beneficiary to receive benefits in the event of the
Participant's death or, if the Participant has died, transfers to or exercises
by the Participant's beneficiary, or, in the absence of a validly designated
beneficiary, transfers by will or the laws of descent and distribution,
(3) transfers pursuant to a QDRO if approved or ratified by the Committee,
(4) if the Participant has suffered a disability, permitted transfers or
exercises on behalf of the Participant by the Participant's duly authorized
legal representative, or
(5) the authorization by the Committee of "cashless exercise"
procedures with third parties who provide financing for the purpose of (or who
otherwise facilitate) the exercise of Awards consistent with applicable laws and
the express authorization of the Committee.
2. OPTIONS.
2.1 GRANTS. One or more Options may be granted under this Plan to any
Eligible Person. Each Option granted shall be designated in the applicable
Award Agreement, by the Committee, as either an Incentive Stock Option, subject
to Section 2.3, or a Nonqualified Stock Option.
2.2 OPTION PRICE.
2.2.1 PRICING LIMITS. The purchase price per share of the Common Stock
covered by each Option will be determined by the Committee at the time of grant
of the Award, but in the case of Incentive Stock Options will not be less than
100% (110% in the case of a Participant described in Section 2.3.4) of the Fair
Market Value of the Common Stock on the date of grant and in all cases will not
be less than the par value thereof.
2.2.2 PAYMENT PROVISIONS. The purchase price of any shares of Common Stock
purchased on exercise of an Option granted under this Plan must be paid in full
at the time of each purchase in one or a combination of the following methods:
(1) in cash or by electronic funds transfer;
(2) by check payable to the order of the Corporation;
(3) if authorized by the Committee or specified in the applicable Award
Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8;
(4) by notice and third party payment in such manner as may be authorized by
the Committee; or
(5) by the delivery of shares of Common Stock of the Corporation already
owned by the Participant, provided, however, that the Committee may in its
absolute discretion limit the Participant's ability to exercise an Award by
delivering previously owned shares, and provided further that any shares
delivered that were initially acquired upon exercise of a stock option must have
been owned by the Participant at least six months as of the date of delivery.
Shares of Common Stock used to satisfy the exercise price of an Option will be
valued at their Fair Market Value on the date of exercise. The Corporation will
not be obligated to deliver certificates for the shares unless and until it
receives full payment of the exercise price therefor, and all related
withholding obligations under Section 6.5 and other conditions to the exercise
are satisfied.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
2.3.1 $100,000 LIMIT. To the extent that the aggregate fair market value of
stock with respect to which incentive stock options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company or any
parent corporation, such options will be treated as Nonqualified Stock Options.
For this purpose, the fair market value of the stock subject to options will be
determined as of the date the options were awarded. In reducing the number of
options treated as incentive stock options to meet the $100,000 limit, the most
recently granted options will be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
2.3.2 OPTION PERIOD. Each Option and all rights thereunder shall expire no
later than 10 years after the Award Date.
2.3.3 OTHER CODE LIMITS. Incentive Stock Options may only be granted to
Eligible Employees of the Corporation or a Subsidiary that satisfies the other
eligibility requirements of the Code. There will be imposed in any Award
Agreement relating to Incentive Stock Options such other terms and conditions as
from time to time are required in order that the Option be an "incentive stock
option" as that term is defined in Section 422 of the Code.
2.3.4 LIMITS ON 10% HOLDERS. No Incentive Stock Option may be granted to
any person who, at the time the Option is granted, owns (or is deemed to own
under Section 424(d) of the Code) shares of outstanding stock of the Corporation
(or a parent or subsidiary of the Corporation) possessing more than 10% of the
total combined voting power of all classes of stock of that entity, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.3.5 INCENTIVE STOCK OPTION NOTICE OF SALE REQUIREMENT. Any Participant
who exercises an Incentive Stock Option shall give prompt written notice to the
Corporation of any sale or other transfer of the shares acquired on exercise of
the Option if such sale or other transfer occurs within one year after the
exercise date of the Option or within two years after the Award Date.
2.4 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF
RESTRICTIONS.Subject to Section 1.4 and Section 6.6 and the specific limitations
on Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Person any
adjustment in the exercise or purchase price, the vesting schedule, the number
of shares subject to, or the restrictions upon or the term of, an Award granted
under this Plan by cancellation of an outstanding Award and a subsequent
regranting of an Award, by amendment, by substitution of an outstanding Award,
by waiver or by other legally valid means. Such amendment or other action may
result among other changes in an exercise or purchase price that is higher or
lower than the exercise or purchase price of the original or prior Award,
provide for a greater or lesser number of shares subject to the Award, or
provide for a longer or shorter vesting or exercise period.
2.5 EFFECTS OF TERMINATION OF EMPLOYMENT ON OPTIONS.
2.5.1 DISMISSAL FOR CAUSE. Unless otherwise provided in the Award Agreement
and subject to earlier termination pursuant to or as contemplated by Section 1.6
or 6.2, if a Participant's employment by (or other service specified in the
Award Agreement to) the Company is terminated by the Company for Cause, the
Participant's Option will terminate on his or her Severance Date, whether or not
the Option is then vested and/or exercisable.
2.5.2 RESIGNATION OR DISMISSAL. Unless otherwise provided in the Award
Agreement and subject to earlier termination pursuant to or as contemplated by
Section 1.6 or 6.2, if a Participant's employment by (or other service specified
in the Award Agreement to) the Company terminates for any reason other than the
Participant's Retirement, Total Disability or death, or a termination by the
Company for Cause:
(1) the Participant's Option will terminate on his or her Severance Date to
the extent that it is not vested on that date;
(2) the Participant will have until the date that is 3 months after his or
her Severance Date to exercise his or her Option to the extent that it is vested
on the Severance Date; and
(3) any portion of the Participant's Option that is vested on the Severance
Date will terminate, to the extent not previously exercised, at the close of
business on the last day of the 3-month period.
2.5.3 RETIREMENT. Unless otherwise provided in the Award Agreement and
subject to earlier termination pursuant to or as contemplated by Section 1.6 or
6.2, if a Participant's employment by (or other service specified in the Award
Agreement to) the Company terminates due to the Participant's Retirement:
(1) the Participant's Option will terminate on his or her Severance Date to
the extent that it is not vested on that date;
(2) the Participant will have until the date that is 12 months (3 months in
the case of an Incentive Stock Option) after his or her Severance Date to
exercise his or her Option to the extent that it is vested on the Severance
Date; and
(3) any portion of the Participant's Option that is vested on the Severance
Date will terminate, to the extent not previously exercised, at the close of
business on the last day of the 12-month (or 3-month, as applicable) period.
2.5.4 DEATH OR TOTAL DISABILITY. Unless otherwise provided in the Award
Agreement and subject to earlier termination pursuant to or as contemplated by
Section 1.6 or 6.2, if a Participant's employment by (or other service specified
in the Award Agreement to) the Company terminates due to the Participant's Total
Disability or death:
(1) the Participant's Option will terminate on his or her Severance Date to
the extent that it is not vested on that date;
(2) the Participant (or the Participant's Beneficiary or Personal
Representative, as the case may be) will have until the date that is 12 months
after the Participant's Severance Date to exercise the Participant's Option to
the extent that it is vested on the Severance Date; and
(3) any portion of the Participant's Option that is vested on the Severance
Date will terminate, to the extent not previously exercised, at the close of
business on the last day of the 12-month period.
3. STOCK APPRECIATION RIGHTS (INCLUDING LIMITED STOCK APPRECIATION
RIGHTS).
3.1 GRANTS. In its discretion, the Committee may grant to any Eligible
Person Stock Appreciation Rights either concurrently with the grant of another
Award or in respect of an outstanding Award, in whole or in part, or
independently of any other Award. Any Stock Appreciation Right granted in
connection with an Incentive Stock Option will contain such terms as may be
required to comply with the provisions of Section 422 of the Code and the
regulations promulgated thereunder, unless the holder otherwise agrees.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
3.2.1 EXERCISABILITY. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another Award will be
exercisable at such time or times, and to the extent, that the related Award
will be exercisable.
3.2.2 EFFECT ON AVAILABLE SHARES. To the extent that a Stock Appreciation
Right is exercised, only the actual number of delivered shares of Common Stock
will be charged against the maximum amount of Common Stock that may be delivered
pursuant to Awards under this Plan. The number of shares subject to the Stock
Appreciation Right and the related Option of the Participant will, however, be
reduced by the number of underlying shares as to which the exercise related,
unless the Award Agreement otherwise provides.
3.2.3 STAND-ALONE STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
granted independently of any other Award will be exercisable pursuant to the
terms of the Award Agreement, but in no event earlier than six months after the
Award Date unless the Committee otherwise provides.
3.3 PAYMENT.
3.3.1 AMOUNT. Unless the Committee otherwise provides, upon exercise of a
Stock Appreciation Right and the attendant surrender of an exercisable portion
of any related Award, the Participant will be entitled to receive, subject to
Section 6.5, payment of an amount determined by multiplying:
(1) the difference (which shall not be less than zero) obtained by
subtracting the exercise price per share of Common Stock under the related Award
(if applicable) or the initial share value specified in the Award from the Fair
Market Value of a share of Common Stock on the date of exercise of the Stock
Appreciation Right, by
(2) the number of shares with respect to which the Stock Appreciation
Right shall have been exercised.
3.3.2 FORM OF PAYMENT. The Committee, in its sole discretion, will
determine the form in which payment will be made of the amount determined under
Section 3.3.1, either solely in cash, solely in shares of Common Stock (valued
at Fair Market Value on the date of exercise of the Stock Appreciation Right),
or partly in such shares and partly in cash, provided that the Committee shall
have determined that such exercise and payment are consistent with applicable
law. If the Committee permits the Participant to elect to receive cash or
shares (or a combination thereof) on such exercise, any such election will be
subject to such conditions as the Committee may impose.
3.4 LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant to any
Eligible Person Stock Appreciation Rights exercisable only upon or in respect of
a change in control or any other specified event ("LIMITED SARS") and such
Limited SARs may relate to or operate in tandem or combination with or
substitution for Options, other Stock Appreciation Rights or other Awards (or
any combination thereof), and may be payable in cash or shares based on the
spread between the base price of the Stock Appreciation Right and a price based
upon the Fair Market Value of the Common Stock during a specified period or at a
specified time within a specified period before, after or including the date of
such event.
4. RESTRICTED STOCK AWARDS.
4.1 GRANTS. The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Person. Each Restricted Stock Award
Agreement will specify the number of shares of Common Stock to be issued to the
Participant, the date of such issuance, the consideration for such shares (but
not less than the minimum lawful consideration under applicable state law) to be
paid by the Participant, the extent (if any) to which and the time (if ever) at
which the Participant will be entitled to dividends, voting and other rights in
respect of the shares prior to vesting, and the restrictions (which may be based
on performance criteria, passage of time or other factors or any combination
thereof) imposed on such shares and the conditions of release or lapse of such
restrictions. Such restrictions will not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("RESTRICTED SHARES") will bear a legend making appropriate
reference to the restrictions imposed hereunder and will be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares have lapsed and the shares have vested in accordance
with the provisions of the Award and Section 1.7. Upon issuance of the
Restricted Stock Award, the Participant may be required to provide such further
assurances and documents as the Committee may require to enforce the
restrictions.
4.2 RESTRICTIONS.
4.2.1 PRE-VESTING RESTRAINTS. Except as provided in Section 4.1 and 1.9,
restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until the restrictions on such shares have lapsed
and the shares have become vested.
4.2.2 DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
will be entitled to vote such shares but will not be entitled to dividends on
any of the shares until the shares have vested; provided that such voting rights
will terminate immediately as to any Restricted Shares that cease to be eligible
for vesting. Such dividends shall be retained in a restricted account until the
shares have vested and shall revert to the Corporation if they fail to vest.
4.2.3 CASH PAYMENTS. If the Participant has paid or received cash
(including any dividends) in connection with the Restricted Stock Award, the
Award Agreement will specify whether and to what extent such cash will be
returned (with or without an earnings factor) as to any restricted shares that
cease to be eligible for vesting.
4.3 RETURN TO THE CORPORATION. Unless the Committee otherwise
expressly provides, Restricted Shares that remain subject to restrictions at the
time of termination of employment (or specified services) or are subject to
other conditions to vesting that have not been satisfied by the time specified
in the applicable Award Agreement will not vest and will be returned to the
Corporation in such manner and on such terms as the Committee provides in the
Award Agreement.
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES.
5.1 GRANTS OF PERFORMANCE SHARE AWARDS. The Committee may, in its
discretion, grant Performance Share Awards to Eligible Persons based upon such
factors as the Committee deems relevant in light of the specific type and terms
of the award. An Award Agreement will specify the maximum number of shares of
Common Stock (if any) subject to the Performance Share Award, the consideration
(but not less than the minimum lawful consideration) to be paid for any such
shares as may be issuable to the Participant, the duration of the Award and the
conditions upon which delivery of any shares or cash to the Participant will be
based. The amount of cash or shares or other property that may be deliverable
pursuant to such Award will be based upon the degree of attainment over a
specified period of not more than 10 years (a "performance cycle") as may be
established by the Committee of such measure(s) of the performance of the
Company (or any part thereof) or the Participant as may be established by the
Committee. The Committee may provide for full or partial credit, prior to
completion of such performance cycle or the attainment of the performance
achievement specified in the Award, in the event of the Participant's death,
Retirement, or Total Disability, a Change in Control Event or in such other
circumstances as the Committee (consistent with the second clause of Section
6.10.3, if applicable) may determine.
5.2 SPECIAL PERFORMANCE-BASED SHARE AWARDS. Without limiting the
generality of the foregoing, and in addition to Options and Stock Appreciation
Rights granted at an exercise or base price at least equal to the Fair Market
Value of the underlying shares on the date of grant, other performance-based
awards within the meaning of Section 162(m) of the Code ("PERFORMANCE-BASED
AWARDS"), whether in the form of restricted stock, performance stock, phantom
stock or other rights, the vesting of which depends on the performance of the
Company on a consolidated, segment, subsidiary, division, or station basis with
reference to revenue growth, net earnings (before or after taxes or before or
after taxes, interest, depreciation, and/or amortization), cash flow, return on
equity or on assets or on net investment, or cost containment or reduction, or
any combination thereof (the business criteria) relative to preestablished
performance goals, may be granted under this Plan. The applicable business
criteria and the specific performance goals must be approved by the Committee in
advance of applicable deadlines under the Code and while the performance
relating to such goals remains substantially uncertain. The applicable
performance measurement period may be not less than one nor more than 10 years.
Performance targets may be adjusted to mitigate the unbudgeted impact of
material, unusual or nonrecurring gains and losses, accounting changes or other
extraordinary events not foreseen at the time the targets were set. Other types
of performance and non-performance awards may also be granted under the other
provisions of this Plan.
5.2.1 ELIGIBLE CLASS. The eligible class of persons for Awards under this
Section shall be key employees (including officers) of the Company.
5.2.2 MAXIMUM AWARD. In no event shall grants in any calendar year to a
Participant under this Section 5.2 relate to more than 2,500,000 shares, subject
to the Share Limit, or a cash amount of more than $1,000,000.
5.2.3 COMMITTEE CERTIFICATION. Before any Performance-Based Award under
this Section 5.2 is paid, the Committee must certify that the material terms of
the Performance-Based Award were satisfied.
5.2.4 TERMS AND CONDITIONS OF AWARDS. The Committee will have discretion to
determine the restrictions or other limitations of the individual Awards under
this Section 5.2 (including the authority to reduce Awards, payouts or vesting
or to pay no Awards, in its sole discretion, if the Committee preserves such
authority at the time of grant by language to this effect in its authorizing
resolutions or otherwise).
5.2.5 STOCK PAYOUT FEATURES. In lieu of cash payment of an Award, the
Committee may require or allow a portion of the Award to be paid in the form of
stock, Restricted Shares or an Option.
5.3 GRANTS OF STOCK BONUSES. The Committee may grant a Stock Bonus to
any Eligible Person to reward exceptional or special services, contributions or
achievements in the manner and on such terms and conditions (including any
restrictions on such shares) as determined from time to time by the Committee.
The number of shares so awarded will be determined by the Committee. The Award
may be granted independently or in lieu of a cash bonus.
5.4 DEFERRED PAYMENTS. The Committee may authorize for the benefit of
any Eligible Person the deferral of any payment of cash or shares that may
become due or of cash otherwise payable under this Plan, and provide for
benefits thereon based upon such deferment, at the election or at the request of
such Participant, subject to the other terms of this Plan. Such deferral will
be subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
6. OTHER PROVISIONS.
6.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
6.1.1 EMPLOYMENT STATUS. Status as an Eligible Person will not be construed
as a commitment that any Award will be granted under this Plan to an Eligible
Person or to Eligible Persons generally.
6.1.2 NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in any
other documents under this Plan or in any Award) shall confer upon any Eligible
Person or Participant any right to continue in the employ or other service of
the Company, constitute any contract or agreement of employment or other service
or affect an employee's status as an employee at will, nor shall interfere in
any way with the right of the Company to change a person's compensation or other
benefits, or to terminate his or her employment or other service, with or
without cause. Nothing in this Section 6.1.2, however, is intended to adversely
affect any express independent right of such person under a separate employment
or service contract other than an Award Agreement.
6.1.3 PLAN NOT FUNDED. Awards payable under this Plan will be payable in
shares of Common Stock or from the general assets of the Corporation, and
(except as provided in Section 1.4.3) no special or separate reserve, fund or
deposit will be made to assure payment of such Awards. No Participant,
Beneficiary or other person will have any right, title or interest in any fund
or in any specific asset (including shares of Common Stock, except as expressly
otherwise provided) of the Company by reason of any Award hereunder. Neither
the provisions of this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan will create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company and any Participant, Beneficiary or other
person. To the extent that a Participant, Beneficiary or other person acquires
a right to receive payment pursuant to any Award hereunder, such right will be
no greater than the right of any unsecured general creditor of the Company.
6.2 ADJUSTMENTS; ACCELERATION.
6.2.1 ADJUSTMENTS. Upon or in contemplation of any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend) or reverse stock split; any merger, combination, consolidation, or
other reorganization; any spin-off, split-up, or similar extraordinary dividend
distribution ("spin-off") in respect of the Common Stock (whether in the form of
securities or property); any exchange of Common Stock or other securities of the
Corporation, or any similar, unusual or extraordinary corporate transaction in
respect of the Common Stock; or a sale of all or substantially all the assets of
the Corporation as an entirety ("asset sale"); then the Committee shall, in such
manner, to such extent (if any) and at such time as it deems appropriate and
equitable in the circumstances:
(1) proportionately adjust any or all of (a) the number and type of shares
of Common Stock (or other securities) that thereafter may be made the subject of
Awards (including the specific maxima and numbers of shares set forth elsewhere
in this Plan), (b) the number, amount and type of shares of Common Stock (or
other securities or property) subject to any or all outstanding Awards, (c) the
grant, purchase, or exercise price of any or all outstanding Awards, (d) the
securities, cash or other property deliverable upon exercise of any outstanding
Awards, or (e) (subject to limitations under Section 6.10.3) the performance
standards appropriate to any outstanding Awards, or
(2) make provision for a cash payment or for the assumption, substitution or
exchange of any or all outstanding share-based Awards or the cash, securities or
property deliverable to the holder of any or all outstanding share-based Awards,
based upon the distribution or consideration payable to holders of the Common
Stock upon or in respect of such event.
The Committee may adopt such valuation methodologies for outstanding Awards as
it deems reasonable in the event of a cash or property settlement and, in the
case of Options, Stock Appreciation Rights or similar rights, but without
limitation on other methodologies, may base such settlement solely upon the
excess (if any) of the amount payable upon or in respect of such event over the
exercise or strike price of the Award.
In each case, with respect to Awards of Incentive Stock Options, no adjustment
shall be made in a manner that would cause the Plan to violate Section 422 or
424(a) of the Code or any successor provisions without the written consent of
holders materially adversely affected thereby.
In any of such events, the Committee may take such action prior to such event to
the extent that the Committee deems the action necessary to permit the
Participant to realize the benefits intended to be conveyed with respect to the
underlying shares in the same manner as is or will be available to stockholders
generally.
6.2.2 POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any Option
or other right to acquire Common Stock under this Plan has been fully
accelerated as required or permitted by Section 6.2.3 but is not exercised prior
to (1) a dissolution of the Company, or (2) an event described in Section 6.2.1
that the Company does not survive, or (3) the consummation of an event described
in Section 6.2.1 involving a Change of Control Event approved by the Board, such
Option or right shall terminate, subject to any provision that has been
expressly made by the Board or the Committee, through a plan of reorganization
or otherwise, for the survival, substitution, assumption, exchange or other
settlement of such Option or right.
6.2.3 ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. Unless prior to a
Change in Control Event the Committee determines that, upon its occurrence,
benefits under any or all Awards will not accelerate or determines that only
certain or limited benefits under any or all Awards will accelerate and the
extent to which they will accelerate, and/or establishes a different time in
respect of such Event for such acceleration, then upon the occurrence of a
Change in Control Event:
(1) each Option and Stock Appreciation Right will become immediately
exercisable,
(2) Restricted Stock will immediately vest free of restrictions, and
(3) each Performance Share Award will become payable to the Participant.
Any discretion with respect to these events shall be limited to the extent
required by applicable accounting requirements in the case of a transaction
intended to be accounted for as a pooling of interests transaction.
The Committee may override the limitations on acceleration in this Section 6.2.3
by express provision in the Award Agreement and may accord any Eligible Person a
right to refuse any acceleration, whether pursuant to the Award Agreement or
otherwise, in such circumstances as the Committee may approve. Any acceleration
of Awards will comply with applicable legal requirements and, if necessary to
accomplish the purposes of the acceleration or if the circumstances require, may
be deemed by the Committee to occur (subject to Section 6.2.4) a limited period
of time not greater than 30 days before the event. Without limiting the
generality of the foregoing, the Committee may deem an acceleration to occur
immediately prior to the applicable event and/or reinstate the original terms of
an Award if an event giving rise to an acceleration does not occur.
6.2.4 POSSIBLE RESCISSION OF ACCELERATION. If the vesting of an Award has
been accelerated expressly in anticipation of an event or upon stockholder
approval of an event and the Committee or the Board later determines that the
event will not occur, the Committee may rescind the effect of the acceleration
as to any then outstanding and unexercised or otherwise unvested Awards.
6.2.5 ACCELERATION UPON TERMINATION OF SERVICE IN ANTICIPATION OF OR
FOLLOWING A CHANGE IN CONTROL.
Early Termination. Unless the Committee otherwise provides prior to a Change in
Control, if any Participant's employment is terminated by the Company for any
reason other than death, Total Disability, Retirement, or for Cause after the
announcement of but within 30 days before consummation of a Change in Control
Event, then upon or immediately prior to the consummation of the Event and
subject to its consummation, any Awards held by the Participant prior to the
Change in Control that were terminated shall be deemed reinstated to the extent
previously vested and Awards previously unvested shall be deemed vested to the
extent that the vesting of other Awards of the same type are accelerated in
connection with the Event, irrespective of the vesting and early termination
provisions of the Participant's Award Agreement. Any such reinstated Awards
shall remain subject to the other adjustment, termination and settlement
provisions of this Section 6.2 in connection with the subject Change in Control
Event or any applicable, subsequent Change in Control Event.
Termination After Change in Control. If any Participant's employment is
terminated by the Company upon or within 30 days after a Change in Control
Event, and the termination is not the result of death, Total Disability,
Retirement or a termination for Cause, then, subject to the other provisions of
this Section 6.2 (including without limitation Section 6.2.2 and Section 6.4),
all outstanding Options held by the Participant shall be deemed fully vested
immediately prior to the Severance Date, irrespective of the vesting provisions
of the Participant's Award Agreement, unless the Award Agreement specifies a
different result in the case of a Change in Control Event.
No Extension Beyond Expiration. Notwithstanding the foregoing, in no event
shall an Award be reinstated or extended beyond its final expiration date.
6.2.6 GOLDEN PARACHUTE LIMITATION. In no event shall an Award be
accelerated under this Plan to an extent or in a manner that would not be fully
deductible by the Company for federal income tax purposes because of Section
280G of the Code, nor will any payment hereunder be accelerated if any portion
of such accelerated payment would not be deductible by the Company because of
Section 280G of the Code. If a holder would be entitled to benefits or payments
hereunder and under any other plan or program that would constitute "parachute
payments" as defined in Section 280G of the Code, then the holder may by written
notice to the Company designate the order in which such parachute payments will
be reduced or modified so that the Company is not denied federal income tax
deductions for any "parachute payments" because of Section 280G of the Code.
Notwithstanding the foregoing, an employment or other agreement with the
Participant may expressly provide for benefits in excess of amounts determined
by applying the foregoing Section 280G limitations.
6.3 EFFECT OF TERMINATION OF SERVICE ON AWARDS.
6.3.1 GENERAL. The Committee shall establish the effect of a termination of
employment or service on the rights and benefits under each Award granted under
this Plan and in so doing may make distinctions based upon the cause of
termination and the nature of the Award. Unless otherwise provided in the
applicable Award Agreement and subject to the other provisions of this Plan: (1)
the provisions of Section 2.6 shall apply to Options, (2) any Stock Appreciation
Right granted concurrently or in tandem with an Option shall be subject to the
same post-termination provisions and exercisability periods as the Option to
which it relates, and (3) Restricted Stock Awards, Performance Share Awards, and
other Stock Appreciation Rights shall, to the extent that they are not vested on
the Participant's Severance Date, terminate and be forfeited on such date.
6.3.2 TERMINATION OF CONSULTING OR AFFILIATE SERVICES. If the Participant
is not an Eligible Employee or director and provides services as an Other
Eligible Person, the Committee shall be the sole judge of whether the
Participant continues to render services to the Company, unless a contract or
the Award otherwise provides. If in these circumstances the Company notifies
the Participant in writing that a termination of services of the Participant for
purposes of this Plan has occurred, then (unless the contract or Award otherwise
expressly provides), the Participant's termination of services for purposes of
Section 2.6, 3, 4.3, 5 and this Section 6.3 shall be the date which is 10 days
after the Company's mailing of the notice or, in the case of a termination for
Cause, the date of the mailing of the notice.
6.3.3 EVENTS NOT DEEMED TERMINATIONS OF SERVICE. Unless Company policy or
the Committee otherwise provides, a Participant's employment or service
relationship shall not be considered terminated solely due to any (1) sick
leave, (2) military leave, or (3) any other leave of absence authorized by the
Company or the Committee; provided that unless reemployment upon the expiration
of such leave is guaranteed by contract or law, such leave is for a period of
not more than 90 days. In the case of any Eligible Employee on an approved
leave of absence, continued vesting of the Award while on leave from the employ
of the Company shall be suspended, unless the Committee otherwise provides or
applicable law otherwise requires. In no event shall an Award be exercised
after the expiration of the term set forth in the Award Agreement.
6.3.4 EFFECT OF CHANGE OF SUBSIDIARY STATUS. For purposes of this Plan and
any Award, if an entity ceases to be a Subsidiary, a termination of employment
or service will be deemed to have occurred with respect to each Eligible Person
in respect of the Subsidiary who does not continue as an Eligible Person in
respect of another entity within the Company.
6.3.5 COMMITTEE DISCRETION. Notwithstanding the foregoing provisions of
this Section 6.3 or anything in Section 2.5 to the contrary, in the event of, or
in anticipation of, a termination of employment with the Company for any reason,
other than discharge for Cause, the Committee may, in its discretion, increase
the portion of the Participant's Award available to the Participant (or the
Participant's Beneficiary or Personal Representative, as the case may be) or,
subject to the provisions of Sections 1.6 and 6.2, extend the exercisability
period upon such terms as the Committee determines and expressly sets forth in
or by amendment to the Award Agreement.
6.4 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Awards under this Plan, the offer, issuance and delivery of shares of Common
Stock, the acceptance of promissory notes and/or the payment of money under this
Plan or under Awards, are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state and
federal securities law, and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
In addition, any securities delivered under this Plan may be subject to any
special restrictions that the Committee may require to preserve a pooling of
interests under generally accepted accounting principles. The person acquiring
any securities under this Plan will, if requested by the Corporation, provide
such assurances and representations to the Corporation as the Committee may deem
necessary or desirable to assure compliance with all applicable legal and
accounting requirements.
6.5 TAX MATTERS.
6.5.1 PROVISION FOR TAX WITHHOLDING OR OFFSET. Upon any exercise,
vesting, or payment of any Award or upon the disposition of shares of Common
Stock acquired pursuant to the exercise of an Incentive Stock Option prior to
satisfaction of the holding period requirements of Section 422 of the Code, the
Company shall have the right at its option to:
(1) require the Participant (or Personal Representative or Beneficiary, as
the case may be) to pay or provide for payment of the minimum amount of any
taxes which the Company may be required to withhold with respect to such Award
event or payment;
(2) deduct from any amount payable in cash the minimum amount of any taxes
which the Company may be required to withhold with respect to such cash payment;
and/or
(3) in any case where a tax is required to be withheld in connection with
the delivery of shares of Common Stock under this Plan, reduce the number of
shares to be delivered by (or otherwise reacquire) the appropriate number of
shares, valued at their then Fair Market Value, to satisfy such minimum
withholding obligation.
The Committee may in its sole discretion (subject to Section 6.4) grant (either
at the time of grant of the Award or thereafter) to the Participant the right to
elect, pursuant to such rules and subject to such conditions as the Committee
may establish, to have the Corporation utilize the withholding offset under
clause (3) above. In no event shall shares be withheld in excess of the minimum
number required for tax withholding under these provisions.
6.5.2 TAX LOANS. If so provided in the Award Agreement or otherwise
expressly authorized by the Committee, the Company may, to the extent permitted
by law, authorize a short-term loan of not more than nine months to an Eligible
Person in the amount of any taxes that the Company may be required to withhold
with respect to shares of Common Stock received (or disposed of, as the case may
be) pursuant to a transaction described in Section 6.5.1. Such a loan will be
for a term, at a rate of interest and pursuant to such other terms and
conditions as the Committee, under applicable law, may establish and such loan
need not comply with the other provisions of Section 1.8.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
6.6.1 BOARD AUTHORIZATION. The Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan, in whole or in part. No
Awards may be granted during any suspension of this Plan or after termination of
this Plan, but the Committee will retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
6.6.2 STOCKHOLDER APPROVAL. To the extent then required under Sections 162,
422 or 424 of the Code or any other applicable law, or deemed necessary or
advisable by the Board, any amendment to this Plan shall be subject to
stockholder approval.
6.6.3 AMENDMENTS TO AWARDS. Without limiting any other express authority of
the Committee under (but subject to) the express limits of this Plan, the
Committee by agreement or resolution may waive conditions of or limitations on
Awards to Participants that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and (subject to
the requirements of Section 1.2.2) may make other changes to the terms and
conditions of Awards that do not affect in any manner materially adverse to the
Participant, the Participant's rights and benefits under an Award.
6.6.4 LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of this Plan or change of or affecting any outstanding
Award shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Company under any Award granted under this Plan prior to
the effective date of such change. Changes contemplated by Section 6.2 shall
not be deemed to constitute changes or amendments for purposes of this Section
6.6.
6.7 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly
authorized by the Committee or this Plan, a Participant shall not be entitled to
any privilege of stock ownership as to any shares of Common Stock not actually
delivered to and held of record by the Participant. No adjustment will be made
for dividends or other rights as a stockholder for which a record date is prior
to such date of delivery.
6.8 EFFECTIVE DATE OF THE PLAN. This Plan is effective as of February
14, 2000 the date of approval by the Board. The Plan shall be submitted for and
subject to stockholder approval no later than twelve months after such date.
6.9 TERM OF THE PLAN. No Award will be granted under this Plan after
February 13, 2010 (the "termination date"). Unless otherwise expressly provided
in this Plan or in an applicable Award Agreement, any Award granted prior to the
termination date may extend beyond such date, and all authority of the Committee
with respect to Awards hereunder, including the authority to amend an Award,
shall continue during any suspension of this Plan and in respect of Awards
outstanding on the termination date.
6.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
6.10.1 CHOICE OF LAW. This Plan, the Awards, all documents evidencing
Awards and all other related documents shall be governed by, and construed in
accordance with the laws of the State of California.
6.10.2 SEVERABILITY. If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of this Plan shall
continue in effect.
6.10.3 PLAN CONSTRUCTION.
Rule 16b-3. It is the intent of the Corporation that the Awards and
transactions permitted by Awards be interpreted in a manner that, in the case of
Participants who are or may be subject to Section 16 of the Exchange Act,
satisfies the applicable requirements for exemptions under Rule 16b-3. The
exemption will not be available if the authorization of actions by any Committee
of the Board with respect to such Awards does not satisfy the applicable
conditions of Rule 16b-3. Notwithstanding the foregoing, the Corporation shall
have no liability to any Participant for Section 16 consequences of Awards or
events under Awards.
Section 162(m). It is the further intent of the Company that (to the extent the
Company or Awards under this Plan may be or become subject to limitations on
deductibility under Section 162(m) of the Code), Options or Stock Appreciation
Rights granted with an exercise or base price not less than Fair Market Value on
the date of grant and performance-based awards under Section 5.2 of this Plan
that are granted to or held by a person subject to Section 162(m) of the Code
will qualify as performance-based compensation or otherwise be exempt from
deductibility limitations under Section 162(m) of the Code, to the extent that
the authorization of the Award (or the payment thereof, as the case may be)
satisfies any applicable administrative requirements thereof.
6.11 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
6.12 STOCK-BASED AWARDS IN SUBSTITUTION FOR STOCK OPTIONS OR AWARDS GRANTED
BY OTHER CORPORATION.Awards may be granted to Eligible Persons under this Plan
in substitution for employee stock options, Stock Appreciation Rights,
restricted stock or other stock-based awards granted by other entities to
persons who are or who will become Eligible Persons in respect of the Company,
in connection with a distribution, merger or other reorganization by or with the
granting entity or an affiliated entity, or the acquisition by the Company,
directly or indirectly, or all or a substantial part of the stock or assets of
the employing entity.
6.13 NON-EXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Committee to grant awards or
authorize any other compensation, with or without reference to the Common Stock,
under any other plan or authority.
6.14 NO CORPORATE ACTION RESTRICTION. The existence of the Plan, the Award
Agreements and the Awards granted hereunder shall not limit, affect or restrict
in any way the right or power of the Board or the stockholders of the
Corporation to make or authorize: (1) any adjustment, recapitalization,
reorganization or other change in the Corporation's or any Subsidiary's capital
structure or its business, (2) any merger, amalgamation, consolidation or change
in the ownership of the Corporation or any Subsidiary, (3) any issue of bonds,
debentures, capital, preferred or prior preference stock ahead of or affecting
the Corporation's or any Subsidiary's capital stock or the rights thereof, (4)
any dissolution or liquidation of the Corporation or any Subsidiary, (5) any
sale or transfer of all or any part of the Corporation or any Subsidiary's
assets or business, or (6) any other corporate act or proceeding by the
Corporation or any Subsidiary. No Participant, Beneficiary or any other person
shall have any claim under any Award or Award Agreement against any member of
the Board or the Committee, or the Corporation or any employees, officers or
agents of the Corporation or any Subsidiary, as a result of any such action.
6.15 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAM. Payments and other
benefits received by a Participant under an Award made pursuant to this Plan
shall not be deemed a part of a Participant's compensation for purposes of the
determination of benefits under any other employee welfare or benefit plans or
arrangements, if any, provided by the Corporation or any Subsidiary, except
where the Committee or the Board expressly otherwise provides or authorizes in
writing. Awards under this Plan may be made in addition to, in combination
with, as alternatives to or in payment of grants, awards or commitments under
any other plans or arrangements of the Company or any Subsidiary.
7. DEFINITIONS.
"AWARD" means an award of any Option, Stock Appreciation Right, Restricted
Stock, Stock Bonus, Performance Share Award, dividend equivalent or deferred
payment right or other right or security that would constitute a "derivative
security" under Rule 16a-1(c) of the Exchange Act, or any combination thereof,
whether alternative or cumulative, authorized by and granted under this Plan.
"AWARD AGREEMENT" means any writing setting forth the terms of an Award that has
been authorized by the Committee.
"AWARD DATE" means the date upon which the Committee took the action granting an
Award or such later date as the Committee designates as the Award Date at the
time of grant of the Award.
"BENEFICIARY" means the person, persons, trust or trusts designated by a
Participant or, in the absence of a designation, entitled by will or the laws of
descent and distribution, to receive the benefits specified in the Award
Agreement and under this Plan if the Participant dies and means the
Participant's executor or administrator if no other Beneficiary is designated
and able to act under the circumstances.
"BOARD" means the Board of Directors of the Corporation.
"CAUSE" with respect to a Participant means (unless otherwise expressly provided
in the applicable Award Agreement or another applicable contract with the
Participant) a termination of service based upon a finding by the Company that
the Participant:
(1) has been negligent in the discharge of his or her duties to the Company,
has refused to perform stated or assigned duties or is incompetent in or (other
than by reason of a disability or analogous condition) incapable of performing
those duties; or
(2) has been dishonest or committed or engaged in an act of theft,
embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure
or use of inside information, customer lists, trade secrets or other
confidential information; has breached a fiduciary duty, or willfully and
materially violated any other duty, law, rule, regulation or policy of the
Company or an affiliate; or has been convicted of a felony or misdemeanor (other
than minor traffic violations or similar offenses); or
(3) has materially breached any of the provisions of any agreement with
the Company or an affiliated entity; or
(4) has engaged in unfair competition with, or otherwise acted
intentionally in a manner injurious to the reputation, business or assets of,
the Company or an affiliate; has improperly induced a vendor or customer to
break or terminate any contract with the Company or an affiliate or induced a
principal for whom the Company or an affiliate acts as agent to terminate such
agency relationship. A termination for Cause shall be deemed to occur (subject
to reinstatement upon a contrary final determination by the Committee) on the
date on which the Company first delivers written notice to the Participant of a
finding of termination for Cause.
"CHANGE IN CONTROL EVENT" means any of the following:
(1) Approval by the stockholders (or, if no stockholder approval is
required, by the Board) of the Corporation of the dissolution or liquidation of
the Corporation, other than in the context of a transaction that does not
constitute a Change in Control Event under clause (2) below.
(2) Consummation of a merger, consolidation, or other reorganization, with
or into, or the sale of all or substantially all of the Corporation's business
and/or assets as an entirety to, one or more entities that are not Subsidiaries
or other affiliates (a "BUSINESS COMBINATION"), unless (a) as a result of the
Business Combination at least 50% of the outstanding securities voting generally
in the election of directors of the surviving or resulting entity or a parent
thereof (the "SUCCESSOR ENTITY") immediately after the reorganization are, or
will be, owned, directly or indirectly, by stockholders of the Corporation
immediately before the Business Combination; and (b) no "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) (excluding the
Successor Entity or an Excluded Person) beneficially owns, directly or
indirectly, more than 50% of the outstanding shares of the combined voting power
of the outstanding voting securities of the Successor Entity, after giving
effect to the Business Combination, except to the extent that such ownership
existed prior to the Business Combination; and (c) at least 50% of the members
of the board of directors of the entity resulting from the Business Combination
were members of the Board at the time of the execution of the initial agreement
or of the action of the Board approving the Business Combination.
(3) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) other than an Excluded Person becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 50% of the combined voting
power of the Corporation's then outstanding securities entitled to then vote
generally in the election of directors of the Corporation, other than as a
result of (a) an acquisition directly from the Company, (b) an acquisition by
the Company, (c) an acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or a Successor Entity, or (d) an
acquisition by any entity pursuant to a transaction which is expressly excluded
under clause (2) above.
"CODE" means the Internal Revenue Code of 1986, as amended from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITTEE" means the Board or one or more committees appointed by the Board to
administer all or certain aspects of this Plan, each committee to be comprised
solely of one or more directors or such number as may be required under
applicable law. Each member of a Committee in respect of his or her
participation in any decision with respect to an Award intended to satisfy the
requirements of Section 162(m) of the Code must satisfy the requirements of
"outside director" status within the meaning of Section 162(m) of the Code;
provided, however, that the failure to satisfy such requirement shall not affect
the validity of the action of any committee otherwise duly authorized and acting
in the matter. As to Awards, grants or other transactions that are authorized
only by a committee and that are intended to be exempt under Rule 16b-3, the
requirements of Rule 16b-3(d)(1) with respect to committee action must also be
satisfied.
"COMMON STOCK" means the Common Stock, par value $0.0001 per share, of the
Corporation and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 6.2 of this Plan.
"COMPANY" means, collectively, the Corporation and its Subsidiaries.
"CORPORATION" means 2TheMart.com, Inc., an Oklahoma corporation, and its
successors.
"ELIGIBLE EMPLOYEE" means an officer (whether or not a director) or employee of
the Company.
"ELIGIBLE PERSON" means an Eligible Employee or any Other Eligible Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time
to time.
"EXCLUDED PERSON" means (1) any person described in and satisfying the
conditions of Rule 13d-1(b)(1) under the Exchange Act, (2) any person who is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than
10% of the outstanding Shares of Common Stock at the time of adoption of this
Plan (or an affiliate, successor, heir, descendant or related party of or to any
such person), (3) the Company, or (4) an employee benefit plan (or related
trust) sponsored or maintained by the Company or the Successor Entity.
"FAIR MARKET VALUE" on any date means:
(1) if the stock is listed or admitted to trade on a national securities
exchange, the closing price of the stock on the Composite Tape, as published in
the Western Edition of The Wall Street Journal, of the principal national
securities exchange on which the stock is so listed or admitted to trade, on
such date, or, if there is no trading of the stock on such date, then the
closing price of the stock as quoted on such Composite Tape on the next
preceding date on which there was trading in such shares;
(2) if the stock is not listed or admitted to trade on a national securities
exchange, the last price for the stock on such date, as furnished by the
National Association of Securities Dealers, Inc. (the "NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information;
(3) if the stock is not listed or admitted to trade on a national securities
exchange and is not reported on the National Market Reporting System, the mean
between the bid and asked price for the stock on such date, as furnished by the
NASD or a similar organization; or
(4) if the stock is not listed or admitted to trade on a national securities
exchange, is not reported on the National Market Reporting System and if bid and
asked prices for the stock are not furnished by the NASD or a similar
organization, the value as established by the Committee at such time for
purposes of this Plan.
"INCENTIVE STOCK OPTION" means an Option which is intended, as evidenced by its
designation, as an incentive stock option within the meaning of Section 422 of
the Code, the award of which contains such provisions (including but not limited
to the receipt of stockholder approval of this Plan, if the Award is made prior
to such approval) and is made under such circumstances and to such persons as
may be necessary to comply with that section.
"NONQUALIFIED STOCK OPTION" means an Option that is designated as a Nonqualified
Stock Option and shall include any Option intended as an Incentive Stock Option
that fails to meet the applicable legal requirements thereof. Any Option
granted hereunder that is not designated as an incentive stock option shall be
deemed to be designated a nonqualified stock option under this Plan and not an
incentive stock option under the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board of Directors of the
Corporation who is not an officer or employee of the Company.
"OPTION" means an option to purchase Common Stock granted under this Plan. The
Committee shall designate any Option granted to an Eligible Employee as a
Nonqualified Stock Option or an Incentive Stock Option.
"OTHER ELIGIBLE PERSON" means any Non-Employee Director or any individual
consultant or advisor who renders or has rendered bona fide services (other than
services in connection with the offering or sale of securities of the Company in
a capital raising transaction or as a market maker or promoter of the Company's
securities) to the Company, and who is selected to participate in this Plan by
the Committee. An advisor or consultant may be selected as an Other Eligible
Person only if such person's participation in this Plan would not adversely
affect (1) the Corporation's eligibility to use Form S-8 to register under the
Securities Act of 1933, as amended, the offering of shares issuable under this
Plan by the Company or (2) the Corporation's compliance with any other
applicable laws.
"PARTICIPANT" means an Eligible Person who has been granted an Award under this
Plan.
"PERFORMANCE SHARE AWARD" means an Award of a right to receive shares of Common
Stock under Section 5.1, or to receive shares of Common Stock or other
compensation (including cash) under Section 5.2, the issuance or payment of
which is contingent upon, among other conditions, the attainment of performance
objectives specified by the Committee.
"PERSONAL REPRESENTATIVE" means the person or persons who, upon the disability
or incompetence of a Participant, shall have acquired on behalf of the
Participant, by legal proceeding or otherwise, the power to exercise the rights
or receive benefits under this Plan and who shall have become the legal
representative of the Participant.
"PLAN" means this 2TheMart.com, Inc. 2000 Stock Incentive Plan, as it may be
amended from time to time.
"QDRO" means a qualified domestic relations order.
"RESTRICTED SHARES" or "RESTRICTED STOCK" means shares of Common Stock awarded
to a Participant under this Plan, subject to payment of such consideration, if
any, and such conditions on vesting (which may include, among others, the
passage of time, specified performance objectives or other factors) and such
transfer and other restrictions as are established in or pursuant to this Plan
and the related Award Agreement, for so long as such shares remain unvested
under the terms of the applicable Award Agreement.
"RETIREMENT" means retirement with the consent of the Company or from active
service as an employee or officer of the Company on or after attaining age 55
with 10 or more years of service or after age 65 or, in the case of a
Non-Employee Director, a retirement or resignation as a director after at least
5 years service as a director.
"RULE 16B-3" means Rule 16b-3 as promulgated by the Commission pursuant to the
Exchange Act, as amended from time to time.
"SECTION 16 PERSON" means a person subject to Section 16(a) of the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time.
"SEVERANCE DATE" means the date that the Participant's employment by (or other
service specified in the Award Agreement to) the Company terminates for any
reason.
"STOCK APPRECIATION RIGHT" means a right authorized under this Plan to
receive a number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Common
Stock.
"STOCK BONUS" means an Award of shares of Common Stock granted under this Plan
for no consideration other than past services and without restriction other than
such transfer or other restrictions as the Committee may deem advisable to
assure compliance with law.
"SUBSIDIARY" means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
"TOTAL DISABILITY" means a "permanent and total disability" within the meaning
of Section 22(e)(3) of the Code and such other disabilities, infirmities,
afflictions or conditions as the Committee by rule may include.
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<CIK> 0001081192
<NAME> 2TheMart.com, Inc.
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-22-1998
<PERIOD-END> DEC-31-1999
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<CURRENT-ASSETS> 16076528
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<BONDS> 0
0
0
<COMMON> 2948
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16076528
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 117030
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