UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(RULE 13D - 101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(a) AND
AMENDMENTS THERETO PURSUANT TO RULE 13D-2(a)
COMPUTER MARKETPLACE, INC.
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(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $.0001 PER SHARE
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(TITLE OF CLASS OF SECURITIES)
205-216302
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CUSIP NUMBER)
L. Wayne Kiley, Computer Marketplace, Inc.
1171 Railroad Street, Corona, CA 91720
(909) 735-2102
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS)
APRIL 23, 1999
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(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
|_|.
(Page 1 of 5 Pages)
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SCHEDULE 13D
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CUSIP NO. 205-216302 PAGE 2 OF 5 PAGES
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1 NAME OF REPORTING PERSON: ROBERT M. WALLACE
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
SC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS (2)(D) OR (E) [ ]
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6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
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7 SOLE VOTING POWER
NUMBER OF 6,426,800*
SHARES ---------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY NONE
EACH ---------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 6,426,800*
WITH ---------------------------------------------
10 SHARED DISPOSITIVE POWER
NONE
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,426,800*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51%**
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14 TYPE OF REPORTING PERSON
IN
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* Includes (i) 24,000 shares of the Issuer's common stock issuable to Gateway
Advisors, Inc. ("Gateway Advisors"), a company owned and controlled by Mr.
Wallace, upon the conversion of 6,000 shares of the Issuer's Series A Preferred
Stock, (ii) 1,500,000 shares of Common Stock issuable to Gateway Advisors upon
the exercise of a Common Stock Purchase Warrant held thereby, and (iii) 102,800
shares of Common Stock held by the Gateway Advisors Profit Sharing Plan.
** Based upon 11,091,459 shares of Common Stock outstanding as of April 23,
1999.
(Page 2 of 5 Pages)
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, par value $.0001 per share
("Common Stock"), of Computer Marketplace, Inc., a Delaware corporation (the
"Issuer"). The Issuer's principal executive offices are presently located at
1171 Railroad Street, Corona, CA 91270.
ITEM 2. IDENTITY AND BACKGROUND.
(a) Robert M. Wallace
(b) 675 North First Street, 10th Floor, San Jose, CA 95112
(c) President of Gateway Advisors and Chairman of the Board of the
Issuer. Gateway Advisors is a merchant banking firm which makes equity
investments in various businesses and provides advice on financial and strategic
planning matters. Gateway Advisors is located at the address set forth in 1(b)
above.
(d) Mr. Wallace has not, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) Mr. Wallace has not, during the last five years, been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in Mr. Wallace being subject to a judgment, decree
or a final order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or State securities laws or finding any violation
with respect to such laws.
(f) Mr. Wallace is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As of April 21, 1999, the Issuer and each of the stockholders of
E-Taxi, Inc., a Delaware corporation ("E-Taxi"), entered into a Stock Purchase
Agreement, pursuant to which the Company acquired all of the issued and
outstanding capital stock of E-Taxi (the "E-Taxi Acquisition") on April 23, 1999
(the "Closing Date"). As consideration for 9,074,000 shares of the E-Taxi's
common stock and 400,000 shares of the E-Taxi's Series A Preferred Stock, the
Issuer issued an aggregate of 9,074,000 shares of the Common Stock and 400,000
shares of the Issuer's Series A Preferred Stock. Prior to the closing of the
E-Taxi Acquisition, Mr. Wallace beneficially owned 4,926,000 shares of E-Taxi
common stock.
As of a result of the E-Taxi Acquisition, Mr. Wallace became the
Chairman of the Board of the Issuer and the beneficial owner of 4,926,800 shares
of Common Stock which includes (i) 24,000 shares of Common Stock issuable upon
the conversion of 6,000 shares of the Issuer's Series A Preferred Stock owned by
Gateway Advisors and (ii) 102,800 shares of Common Stock owned by the Gateway
Advisors Profit Sharing Plan. Mr. Wallace disclaims beneficial ownership of (i)
600,000 shares of Common Stock owned by Cameo Wallace, Mr. Wallace's adult
daughter, (ii) 600,000 shares of common Stock owned by Charity Wallace, Mr.
Wallace's adult daughter, (iii) 260,000 shares of Common Stock owned by Maxine
Wallace, Mr. Wallace's mother and (iv) 120,000 owned by Brian P. Burns, an
employee of Gateway Advisors.
(Page 3 of 5 Pages)
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In addition, as of April 9, 1999, the Issuer and Gateway Advisors
entered into a Financial Advisory Agreement, pursuant to which Gateway Advisors
agreed to provide certain business development and financial advisory services
to the Issuer for a period of two (2) years in exchange for the issuance by the
Issuer of 1,500,000 Common Stock Purchase Warrants. Each warrant entitles the
holder to purchase one (1) share of Common Stock at an exercise price of $2.50
per share until April 8, 2000.
ITEM 4. PURPOSE OF TRANSACTION.
The E-Taxi Acquisition was consummated so that the Issuer will have an
opportunity to expand its business by further developing E-Taxi's goal of
creating a comprehensive, vertical internet portal for the Small Office/Home
Office market, and E-Taxi will have the opportunities available to public
companies.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As of April 23, 1999, Mr. Wallace beneficially owned 6,426,800 shares
of Common Stock which includes (i) 24,000 shares of the Common Stock issuable to
Gateway Advisors, a company owned and controlled by Mr. Wallace, upon the
conversion of 6,000 shares of Series A Preferred Stock, (ii) 1,500,000 shares of
Common Stock issuable to Gateway Advisors upon the exercise of a Common Stock
Purchase Warrant held thereby, and (iii) 102,800 shares of Common Stock held by
the Gateway Advisors Profit Sharing Plan. Based upon 11,091,459 shares of common
Stock outstanding as of April 23, 1999, Mr. Wallace beneficially owned 51% of
the shares of Common Stock outstanding as of such date. As of May 3, 1999, each
share of the Series A Preferred Stock outstanding was automatically converted
into four (4) shares of Series A Preferred Stock, or an aggregate of 1,600,000
shares of Common Stock, including the 6,000 shares of Series A Preferred Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
See Item 3 above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Stock Purchase Agreement, dated as of April 21, 1999, among the
Company and the stockholders of E-Taxi, Inc.
B. Financial Advisory Agreement, dated as of April 9, 1999, between the
Company and Gateway Advisors, Inc.
(Page 4 of 5 Pages)
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
MAY 10, 1999
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(Date)
/s/ ROBERT M. WALLACE
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Robert M. Wallace
(Page 5 of 5 Pages)
EXHIBIT A
STOCK PURCHASE AGREEMENT
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[Execution Copy]
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of April 21, 1999, by and
among Computer Marketplace, Inc., a Delaware corporation (the "Company"), and
each of the stockholders of E-Taxi, Inc., a Delaware corporation ("E-Taxi"), set
forth on Schedule I (each of whom is a "Seller" and, collectively, the
"Sellers").
W I T N E S S E T H:
WHEREAS, each of the Sellers owns the number of shares of
common stock, par value $.001 per share, and preferred stock, par value $.001
per share ('E-Taxi Preferred Shares"), of E-Taxi, set forth opposite their
respective names on Schedule I to this Agreement which shares constitute all of
the issued and outstanding shares of capital stock of E-Taxi; and
WHEREAS, the Company desires to acquire from the Sellers, and
the Sellers desire to sell to the Company, all of the E-Taxi Shares in exchange
for the issuance by the Company of an aggregate of 9,074,000 shares (the
"Company Shares") of the Company's common stock, par value $.0001 per share (the
"Company Common Stock") and 400,000 shares of Company preferred stock, par value
$.001 per share (the "Company Preferred Stock"), in exchange for the E-Taxi
Common Shares and E-Taxi Preferred Shares, respectively, on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties and agreements set forth herein, the parties
hereto agree as follows:
ARTICLE I
EXCHANGE OF SHARES
1.1 EXCHANGE OF SHARES. Subject to the terms and conditions of
this Agreement, including without limitation the satisfaction of the conditions
set forth in Article V and the execution and delivery of the documents
contemplated thereby, by the Closing Date (as hereinafter defined) (a) the
Company shall issue and deliver to each of the Sellers the number of authorized
but unissued shares of Company Common Stock and Company Preferred Stock set
forth opposite such Seller's name set forth on Schedule I hereto, and (b) each
Seller agrees to deliver to the Company, the number of authorized and but
unissued shares of E-Taxi Common Stock and E-Taxi Preferred Stock set forth
opposite such Seller's name on Schedule I hereto along with an appropriately
executed stock power endorsed in favor of the Company.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of the
Company's counsel on April 23, 1999 (the "Closing Date") at 10:00 A.M., New York
time, or at such other place as the Company and the Sellers may agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Sellers that:
2.1 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; DUE
AUTHORIZATION.
(a) The Company and each Subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of formation, with full corporate power and authority
to own, lease and operate its respective business and properties and to carry on
its respective business in the places and in the manner as presently conducted
or proposed to be conducted. The Company and each Subsidiary is in good standing
as a foreign corporation in each jurisdiction in which the properties owned,
leased or operated, or the business conducted, by it requires such qualification
except for any such failure, which when taken together with all other failures,
is not likely to have a material adverse effect on the business of the Company
and its Subsidiaries taken as a whole.
(b) The Company does not own, directly or indirectly, any capital
stock, equity or interest in any corporation, firm, partnership, joint venture
or other entity, other than those (each, a "Subsidiary" and together, the
"Subsidiaries") set forth in Item 2.1 of the Disclosure Schedule of even date
herewith, which accompanies this Agreement and is incorporated herein by
reference (the "Disclosure Schedule"). Except as set forth in Item 2.1 of the
Disclosure Schedule, each Subsidiary is wholly owned by the Company, all the
outstanding shares of capital stock of each Subsidiary are owned free and clear
of all Liens (as hereinafter defined), there is no contract, agreement,
arrangement, option, warrant, call, commitment or other right of any character
obligating or entitling any Subsidiary to issue, sell, redeem or repurchase any
of its securities, and there is no outstanding security of any kind convertible
into or exchangeable for securities of any Subsidiary.
(c) The Company has all requisite corporate power and authority to
execute and deliver this Agreement, and to consummate the transactions
contemplated hereby and thereby. The Company has taken all corporate action
necessary for the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, and this Agreement constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its respective terms, except as may be affected by bankruptcy,
insolvency, moratoria or other similar laws affecting the enforcement of
creditors' rights generally and subject to the qualification that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
2.2 NO CONFLICTS OR DEFAULTS. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby do not and shall not (a) contravene the Certificate of Incorporation or
By-laws of the Company or (b) with or without the giving of notice or the
passage of time and subject to obtaining such consents prior to the Closing as
are set forth in Item 2.2 of the Disclosure Schedule, (i) violate, conflict
with, or result in a breach of, or a default or loss of rights under, any
material covenant, agreement, mortgage, indenture, lease, instrument, permit or
license to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries or any of their respective assets are
bound, or any judgment, order or decree, or any law, rule or regulation to which
the Company or any of the Subsidiaries or any of their respective assets are
subject, (ii) result in the creation of, or give any party the right to create,
any lien, charge, encumbrance or any other right or adverse interest ("Liens")
upon any of the assets of the Company or any of the Subsidiaries, (iii)
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terminate or give any party the right to terminate, amend, abandon or refuse to
perform, any material agreement, arrangement or commitment to which the Company
or any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or any of their respective assets are bound, or (iv) accelerate or
modify, or give any party the right to accelerate or modify, the time within
which, or the terms under which, the Company or any of the Subsidiaries is to
perform any duties or obligations or receive any rights or benefits under any
material agreement, arrangement or commitment to which it is a party.
2.3 CAPITALIZATION. The authorized capital stock of the Company
immediately prior to giving effect to the transactions contemplated hereby
consists of 1,000,000 shares of Preferred Stock, par value $.0001 per share, of
which no shares are issued and outstanding as of the date hereof, 50,000,000
shares of Common Stock of which 1,352,424 shares of Common Stock are issued and
outstanding as of the date hereof (excluding an aggregate of 625,000 shares of
Common Stock issued to the Class D Warrantholders and Victoria Holdings, Inc.).
All of the outstanding shares of Common Stock are, and the Company Shares when
issued in accordance with the terms hereof, will be, duly authorized, validly
issued, fully paid and nonassessable, and have not been or, with respect to the
Company Shares, will not be issued in violation of any preemptive right of
stockholders. In addition, Item 2.3 of the Disclosure Schedule sets forth all
options to purchase shares of the Company's common stock. The Company Shares are
not subject to any preemptive or subscription right, any voting trust agreement
or other contract, agreement, arrangement, option, warrant, call, commitment or
other right of any character obligating or entitling the Company to issue, sell,
redeem or repurchase any of its securities, and there is no outstanding security
of any kind convertible into or exchangeable for Common Stock.
2.4 FINANCIAL STATEMENTS. Exhibit 1 to the Disclosure Schedule
contains copies of the consolidated balance sheets of the Company at March 31,
1999, and the related statements of operations, stockholders' equity and cash
flows for the fiscal quarter then ended, including the notes thereto, as
reviewed by Moore Stephens, LLP, certified public accountants (all such
statements being the "Company Financial Statements"). Except as set forth in
Item 2.4 of the Disclosure Schedule, the Financial Statements, together with the
notes thereto, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout all periods
presented, subject to audit adjustments, which are not expected to be material.
Such statements present fairly the financial position of the Company as of the
dates and for the periods indicated. The books of account and other financial
records of the Company have been maintained in accordance with good business
practices.
2.5 FURTHER FINANCIAL MATTERS. (a) Except as set forth in Item 2.5
of the Disclosure Schedule, neither the Company nor any of the Subsidiaries has
any material liabilities or obligations, whether secured or unsecured, accrued,
determined, absolute or contingent, asserted or unasserted or otherwise, which
are required to be reflected or reserved in a balance sheet or the notes thereto
under generally accepted accounting principles, but which are not reflected in
the Financial Statements.
2.6 TAXES. Except as indicated in Item 2.6 of the Disclosure
Schedule, each of the Company and the Subsidiaries has filed all United States
federal, state, county, local and foreign national, provincial and local returns
and reports which were required to be filed on or prior to the date hereof in
respect of all income, withholding, franchise, payroll, excise, property, sales,
use, value-added or other taxes or levies, imposts, duties, license and
registration fees, charges, assessments or withholdings of any nature whatsoever
(together, "Taxes"), and has paid all Taxes (and any related penalties, fines
and interest) which have become due pursuant to such returns or reports or
pursuant to any assessment which has become payable, or, to the extent its
liability for any Taxes (and any related penalties, fines and interest) has not
been fully discharged, the same have been properly reflected as a liability on
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the books and records of the Company and adequate reserves therefor have been
established. All such returns and reports filed on or prior to the date hereof
have been properly prepared and are true, correct (and to the extent such
returns reflect judgments made by the Company or a Subsidiary, as the case may
be, such judgments were reasonable under the circumstances) and complete in all
material respects. Except as indicated in 2.6 of the Disclosure Schedule, no
extension for the filing of any such return or report is currently in effect.
Except as indicated in Item 2.6 of the Disclosure Schedule, no tax return or tax
return liability of the Company or any Subsidiary has been audited or, presently
under audit. All taxes and any penalties, fines and interest which have been
asserted to be payable as a result of any audits have been paid. Except as
indicated in Item 2.6 of the Disclosure Schedule, neither the Company nor any
Subsidiary has given or been requested to give waivers of any statute of
limitations relating to the payment of any Taxes (or any related penalties,
fines and interest). There are no claims pending or, to the knowledge of the
Company, threatened, against the Company or any Subsidiary for past due Taxes.
Except as indicated in Item 2.6 of the Disclosure Statement, all payments for
withholding taxes, unemployment insurance and other amounts required to be paid
for periods prior to the date hereof to any governmental authority in respect of
employment obligations of the Company and each Subsidiary, including, without
limitation, amounts payable pursuant to the Federal Insurance Contributions Act,
have been paid or shall be paid prior to the Closing and have been duly provided
for on the books and records of the Company and in the Financial Statements.
2.7 INDEBTEDNESS; CONTRACTS; NO DEFAULTS.
(a) Item 2.7 of the Disclosure Schedule sets forth a true,
complete and correct list of all material instruments, agreements, indentures,
mortgages, guarantees, notes, commitments, accommodations, letters of credit or
other arrangements or understandings, whether written or oral, to which the
Company or any Subsidiary is a party (collectively, the "Operating Agreements").
An agreement shall not be considered material for the purposes of this Section
2.7(a) if it provides for expenditures or receipts of less than $50,000 and has
been entered into by the Company or a Subsidiary in the ordinary course of
business. The Operating Agreements constitute all of the contracts, agreements,
understandings and arrangements required for the operation of the business of
the Company and the Subsidiaries or which have a material effect thereon. Copies
of all such material written Operating Agreements have previously been delivered
or otherwise made available to the Sellers and such copies are true, complete
and correct as of the date hereof.
(b) Except as disclosed in Item 2.7 of the Disclosure Schedule,
neither the Company, any Subsidiary, nor, to the Company's knowledge, any other
person or entity is in breach in any material respect of, or in default in any
material respect under, any material contract, agreement, arrangement,
commitment or plan to which the Company or any Subsidiary is a party, and no
event or action has occurred, is pending or is threatened, which, after the
giving of notice, passage of time or otherwise, would constitute or result in
such a material breach or material default by the Company or any Subsidiary or,
to the knowledge of the Company, any other person or entity. Neither the Company
nor any Subsidiary has received any notice of default under any contract,
agreement, arrangement, commitment or plan to which it is a party, which default
has not been cured to the satisfaction of, or duly waived by, the party claiming
such default on or before the date hereof.
2.8 PERSONAL PROPERTY. Except as set forth in Item 2.8 of the
Disclosure Schedule, each of the Company and the Subsidiaries has good and
marketable title to all of its tangible personal property and assets, including,
without limitation, all of the assets reflected in the Financial Statements that
have not been disposed of in the ordinary course of business since March 31,
1999, free and clear of all Liens or mortgages, except for any Lien for current
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taxes not yet due and payable and such restrictions, if any, on the disposition
of securities as may be imposed by federal or applicable state securities laws.
2.9 REAL PROPERTY. Item 2.9 of the Disclosure Schedule sets forth
a true and complete list of all real property owned by, or leased or subleased
by or to, the Company and its Subsidiaries (the "Company Real Property"). Except
as set forth in Item 2.9 of the Disclosure Schedules, each lease to which the
Company is a party is valid, binding and in full force and effect with respect
to the Company or a Subsidiary, as the case may be, and, to the knowledge of the
Company no notice of default or termination under any such lease is outstanding.
2.10 COMPLIANCE WITH LAW. (a) Except as set forth in Item 2.10 of
the Disclosure Schedule, neither the Company nor any Subsidiary is conducting
its respective business or affairs in material violation of any applicable
federal, state or local law, ordinance, rule, regulation, court or
administrative order, decree or process, or any requirement of insurance
carriers. Neither the Company nor any Subsidiary has received any notice of
violation or claimed violation of any such law, ordinance, rule, regulation,
order, decree, process or requirement.
(b) Each of the Company and the Subsidiaries is in compliance in
all material respects with all applicable federal, state, local and foreign laws
and regulations relating to the protection of the environment and human health.
There are no claims, notices, actions, suits, hearings, investigations,
inquiries or proceedings pending or, to the knowledge of the Company, threatened
against the Company or any of the Subsidiaries that are based on or related to
any environmental matters or the failure to have any required environmental
permits, and there are no past or present conditions that the Company has reason
to believe are likely to give rise to any material liability or other
obligations of the Company or any Subsidiary under any environmental laws.
2.11 PERMITS AND LICENSES. Except as set forth in Item 2.11 of the
Disclosure Schedule, each of the Company and the Subsidiaries has all
certificates of occupancy, rights, permits, certificates, licenses, franchises,
approvals and other authorizations as are reasonably necessary to conduct its
respective business and to own, lease, use, operate and occupy its assets, at
the places and in the manner now conducted and operated, except those the
absence of which would not materially adversely affect its respective business.
Except as set forth in Item 2.11 of the Disclosure Schedule, as of the date
hereof, neither the Company nor any Subsidiary has received any written or oral
notice or claim pertaining to the failure to obtain any material permit,
certificate, license, approval or other authorization required by any federal,
state or local agency or other regulatory body, the failure of which to obtain
would materially and adversely affect its business.
2.12 ORDINARY COURSE. Except as set forth in Item 2.12 of the
Disclosure Schedule, since March 31, 1999, each of the Company and the
Subsidiaries has conducted its business, maintained its real property and
equipment and kept its books of account, records and files, substantially in the
same manner as previously conducted, maintained or kept and solely in the
ordinary course; it being understood and acknowledged that the Company has been
substantially reducing its operations for some time.
2.13 NO ADVERSE CHANGES. Except as set forth in Item 2.13 of the
Disclosure Schedule, since March 31, 1999, there has not been (a) any material
adverse change in the business, prospects, the financial or other condition, or
the respective assets or liabilities of the Company and the Subsidiaries as
reflected in the Financial Statements, (b) any material loss sustained by the
Company or any Subsidiary, including, but not limited to any loss on account of
theft, fire, flood, explosion, accident or other calamity, whether or not
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insured, which has materially and adversely interfered, or may materially and
adversely interfere, with the operation of the Company's or any Subsidiary's
business, or (c) to the best knowledge of the Company, any event, condition or
state of facts, including, without limitation, the enactment, adoption or
promulgation of any law, rule or regulation, the occurrence of which materially
and adversely does or would affect the results of operations or the business or
financial condition of the Company or any Subsidiary; it being understood and
acknowledged that the Company has been substantially reducing its operations for
some time.
2.14 LITIGATION. (a) Except as set forth in Item 2.14 of the
Disclosure Schedule, there is no claim, dispute, action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
or affecting the business of the Company or any Subsidiary, or challenging the
validity or propriety of the transactions contemplated by this Agreement, at law
or in equity or admiralty or before any federal, state, local, foreign or other
governmental authority, board, agency, commission or instrumentality, nor to the
knowledge of the Company, has any such claim, dispute, action, suit, proceeding
or investigation been pending or threatened, during the 12-month period
preceding the date hereof; (b) there is no outstanding judgment, order, writ,
ruling, injunction, stipulation or decree of any court, arbitrator or federal,
state, local, foreign or other governmental authority, board, agency, commission
or instrumentality, against or materially affecting the business of the Company
or any Subsidiary; and (c) neither the Company nor any Subsidiary has received
any written or verbal inquiry from any federal, state, local, foreign or other
governmental authority, board, agency, commission or instrumentality concerning
the possible violation of any law, rule or regulation or any matter disclosed in
respect of its business.
2.15 INSURANCE. The Company and the Subsidiaries maintain insurance
against all risks customarily insured against by companies in its industry. All
such policies are in full force and effect, and neither the Company nor any
Subsidiary has received any notice from any insurance company suspending,
revoking, modifying or canceling (or threatening such action) any insurance
policy issued to the Company.
2.16 CERTIFICATE OF INCORPORATION AND BY-LAWS; MINUTE BOOKS. The
copies of the Certificate of Incorporation and By-laws (or similar governing
documents) of the Company and each Subsidiary, and all amendments to each are
true, correct and complete. The minute books of the Company and each Subsidiary
contain true and complete records of all meetings and consents in lieu of
meetings of their respective Board of Directors (and any committees thereof), or
similar governing bodies, since the time of their respective organization. The
stock books of the Company and each Subsidiary are true, correct and complete.
2.17 EMPLOYEE BENEFIT PLANS. Except as set forth in Item 2.17 of
the Disclosure Schedule, neither the Company nor any Subsidiary maintains, nor
has the Company or any Subsidiary maintained in the past, any employee benefit
plans ("as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), or any plans, programs, policies, practices,
arrangements or contracts (whether group or individual) providing for payments,
benefits or reimbursements to employees of the Company or any Subsidiary, former
employees, their beneficiaries and dependents under which such employees, former
employees, their beneficiaries and dependents are covered through an employment
relationship with the Company, any Subsidiary or any entity required to be
aggregated in a controlled group or affiliated service group with the Company
for purposes of ERISA or the Internal Revenue Code of 1986 (the "Code")
(including, without limitation, under Section 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA, at any relevant time ("Benefit Plans").
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2.18 PATENTS; TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS. Each of
the Company and the Subsidiaries owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, internet web site(s), proprietary rights and processes
necessary for its business as now conducted without any conflict with or
infringement of the rights of others. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing, and neither the Company nor
any Subsidiary is bound by, or a party to, any options, licenses or agreements
of any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity.
2.19 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Company directly
with the Sellers without the intervention of any Person on behalf of the Company
in such a manner as to give rise to any valid claim by any Person against any
Seller for a finder's fee, brokerage commission or similar payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers represents and warrants, jointly and severally to
the Company that:
3.1 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; DUE
AUTHORIZATION.
(a) E-Taxi and each Subsidiary of E-Taxi is a corporation duly
incorporated organized, validly existing and in good standing under the laws of
its jurisdiction of formation with full corporate power and authority to own,
lease and operate its respective business and properties and to carry on its
respective business in the places and in the manner as presently conducted or
proposed to be conducted; provided, however, TechStore LLC, a California limited
liability company ("TechStore"), is duly organized as a limited liability
company under the laws of the State of California. E-Taxi and each Subsidiary is
in good standing as a foreign corporation in each jurisdiction in which the
properties owned, leased or operated, or the business conducted, by it requires
such qualification except for any such failure, which when taken together with
all other failures, is not likely to have a material adverse effect on the
business of E-Taxi and its Subsidiaries taken as a whole.
(b) E-Taxi does not own, directly or indirectly, any capital
stock, equity or interest in any corporation, firm, partnership, joint venture
or other entity, other than those (each, a "Subsidiary" and together, the
"Subsidiaries") set forth in Item 3.1 of the Disclosure Schedule of even date
herewith, which accompanies this Agreement and is incorporated herein by
reference (the "Disclosure Schedule"). Except as set forth in Item 3.1 of the
Disclosure Schedule, each Subsidiary is wholly owned by E-Taxi, all the
outstanding shares of capital stock of or, in the case of a limited liability
company, ownership interests in, of each Subsidiary are owned free and clear of
all Liens (as hereinafter defined), there is no contract, agreement,
arrangement, option, warrant, call, commitment or other right of any character
obligating or entitling any Subsidiary to issue, sell, redeem or repurchase any
of its securities, and there is no outstanding security of any kind convertible
into or exchangeable for securities of any Subsidiary.
(c) Each of E-Taxi and the Sellers has all requisite power and
authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby and thereby. Each of E-Taxi and the Sellers has
taken all corporate action necessary for the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and this
Agreement constitutes the valid and binding obligation of each of E-Taxi and the
Sellers, enforceable against each of E-Taxi and the Sellers in accordance with
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its respective terms, except as may be affected by bankruptcy, insolvency,
moratoria or other similar laws affecting the enforcement of creditors' rights
generally and subject to the qualification that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought.
3.2 NO CONFLICTS OR DEFAULTS. The execution and delivery of this
Agreement by each of E-Taxi and the Sellers and the consummation of the
transactions contemplated hereby do not and shall not (a) contravene the
Certificate of Incorporation or By-laws of E-Taxi or the governing documents of
any Seller, if applicable, or (b) with or without the giving of notice or the
passage of time, (i) violate, conflict with, or result in a breach of, or a
default or loss of rights under, any material covenant, agreement, mortgage,
indenture, lease, instrument, permit or license to which E-Taxi, any of the
Subsidiaries or any Seller is a party or by which E-Taxi, any of the
Subsidiaries or any Seller or any of their respective assets are bound, or any
judgment, order or decree, or any law, rule or regulation to which E-Taxi, any
of the Subsidiaries or any Seller or any of their respective assets are subject,
(ii) result in the creation of, or give any party the right to create, any Lien
upon any of the assets of E-Taxi or any of the Subsidiaries, (iii) terminate or
give any party the right to terminate, amend, abandon or refuse to perform, any
material agreement, arrangement or commitment to which E-Taxi or any of the
Subsidiaries is a party or by which E-Taxi or any of the Subsidiaries or any of
their respective assets are bound, or (iv) accelerate or modify, or give any
party the right to accelerate or modify, the time within which, or the terms
under which, E-Taxi or any of the Subsidiaries is to perform any duties or
obligations or receive any rights or benefits under any material agreement,
arrangement or commitment to which it is a party.
3.3 CAPITALIZATION. The authorized capital stock of E-Taxi
immediately prior to giving effect to the transactions contemplated hereby
consists of 10,000,000 shares of Preferred Stock, par value $.001 per share, of
which One Million (1,000,000) shares have been designated Series A Preferred
Stock of which 400,000 shares are issued and outstanding as of the date hereof,
20,000,000 shares of E-Taxi Common Stock of which as of the date hereof
9,074,000 shares of Common Stock are issued and outstanding; provided, however,
an additional Three Million (3,000,000) shares are reserved for issuance in
connection with the acquisition of SSPS under the Letters (See Item 3.1(a) of
the Disclosure Schedules). Set forth in Item 32.3 of the Disclosure Schedule is
a list of all Stockholders of E-Taxi, setting forth their names, addresses and
number of shares owned. All of the outstanding shares of E-Taxi Common Stock
are, and E-Taxi Shares when transferred in accordance with the terms hereof,
will be, duly authorized, validly issued, fully paid and nonassessable, and have
not been or, with respect to E-Taxi Shares, will not be transferred in violation
of any rights of third parties. Except for shares that may be issued upon the
achievement of certain performance objectives under employment agreements, by
and between E-Taxi and Derek Wall and Bejan Aminifard, copies of which have been
provided to the Company, the E-Taxi Shares are not subject to any preemptive or
subscription right, any voting trust agreement or other contract, agreement,
arrangement, option, warrant, call, commitment or other right of any character
obligating or entitling E-Taxi to issue, sell, redeem or repurchase any of its
securities, and there is no outstanding security of any kind convertible into or
exchangeable for Common Stock.
3.4 FINANCIAL STATEMENTS. Exhibit 2 to the Disclosure Schedule
contains copies of the balance sheets of E-Taxi at April 16, 1999. Exhibit 2 to
the Disclosure Schedule contains copies of the balance sheets of TechStore as of
March 31, 1999 and the audited financials statements of TechStore for the year
end December 31, 1998, including Balance Sheets and the related statements of
operations, stockholders' equity and cash flows, including the notes thereto, as
reviewed by Pricewaterhouse-Coopers, L.L.P., certified public accountants (all
such statements being the "E-Taxi Financial Statements"). Except as set forth in
Item 3.4 to the Disclosure Schedule, the Financial Statements, together with the
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notes thereto, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout all periods
presented, subject to audit adjustments, which are not expected to be material.
Such statements present fairly the financial position of E-Taxi and TechStore as
of the dates and for the periods indicated. The books of account and other
financial records of E-Taxi and TechStore have been maintained in accordance
with good business practices.
3.5 FURTHER FINANCIAL MATTERS. (a) Except as set forth in Item 3.5
to the Disclosure Schedule, neither E-Taxi nor any of the Subsidiaries has any
material liabilities or obligations, whether secured or unsecured, accrued,
determined, absolute or contingent, asserted or unasserted or otherwise, which
are required to be reflected or reserved in a balance sheet or the notes thereto
under generally accepted accounting principles, but which are not reflected in
the Financial Statements.
(b) The forecasted operations statements and cash flow statements
of E-Taxi, true and complete copies of which have been delivered to the Company,
were prepared in good faith on the assumptions stated therein, which assumptions
were believed to be reasonable in light of conditions existing at the time of
delivery of such forecasts, and represented, at the time of delivery, E-Taxi's
best estimate of its future financial performance, it being recognized that such
forecasts do not constitute a warranty as to the future performance of E-Taxi
and that actual results may vary from forecasted results.
3.6 TAXES. Except as indicated in Item 3.6 of the Disclosure
Schedule, each of E-Taxi and the Subsidiaries has filed all United States
federal, state, county, local and foreign national, provincial and local tax
returns and reports which were required to be filed on or prior to the date
hereof, and has paid all Taxes (and any related penalties, fines and interest)
which have become due pursuant to such returns or reports or pursuant to any
assessment which has become payable, or, to the extent its liability for any
Taxes (and any related penalties, fines and interest) has not been fully
discharged, the same have been properly reflected as a liability on the books
and records of E-Taxi and adequate reserves therefor have been established. All
such returns and reports filed on or prior to the date hereof have been properly
prepared and are true, correct (and to the extent such returns reflect judgments
made by E-Taxi or a Subsidiary, as the case may be, such judgments were
reasonable under the circumstances) and complete in all material respects.
Except as indicated in 3.6 of the Disclosure Schedule, no extension for the
filing of any such return or report is currently in effect. Except as indicated
in Item 3.6 of the Disclosure Schedule, no tax return or tax return liability of
E-Taxi or any Subsidiary has been audited or, presently under audit. All taxes
and any penalties, fines and interest which have been asserted to be payable as
a result of any audits have been paid. Except as indicated in Item 3.6 of the
Disclosure Schedule, neither E-Taxi nor any Subsidiary has given or been
requested to give waivers of any statute of limitations relating to the payment
of any Taxes (or any related penalties, fines and interest). There are no claims
pending or, to the knowledge of E-Taxi, threatened, against E-Taxi or any
Subsidiary for past due Taxes. Except as indicated in Item 3.6 of the Disclosure
Statement, all payments for withholding taxes, unemployment insurance and other
amounts required to be paid for periods prior to the date hereof to any
governmental authority in respect of employment obligations of E-Taxi and each
Subsidiary, including, without limitation, amounts payable pursuant to the
Federal Insurance Contributions Act, have been paid or shall be paid prior to
the Closing and have been duly provided for on the books and records of E-Taxi
and in the Financial Statements.
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3.7 INDEBTEDNESS; CONTRACTS; NO DEFAULTS.
(a) Item 3.7 of the Disclosure Schedule sets forth a true,
complete and correct list of all material instruments, agreements, indentures,
mortgages, guarantees, notes, commitments, accommodations, letters of credit or
other arrangements or understandings, whether written or oral, to which E-Taxi
or any Subsidiary is a party (collectively, the "E-Taxi Operating Agreements").
An agreement shall not be considered material for the purposes of this Section
3.7(a) if it provides for expenditures or receipts of less than $50,000 and has
been entered into by E-Taxi or a Subsidiary in the ordinary course of business.
The E-Taxi Operating Agreements constitute all of the contracts, agreements,
understandings and arrangements required for the operation of the business of
E-Taxi and the Subsidiaries or which have a material effect thereon. Copies of
all such material written E-Taxi Operating Agreements have previously been
delivered or otherwise made available to the Company and such copies are true,
complete and correct as of the date hereof.
(b) Except as disclosed in Item 3.7 of the Disclosure Schedule,
neither E-Taxi, any Subsidiary, nor, to E-Taxi's knowledge, any other person or
entity is in breach in any material respect of, or in default in any material
respect under, any material contract, agreement, arrangement, commitment or plan
to which E-Taxi or any Subsidiary is a party, and no event or action has
occurred, is pending or is threatened, which, after the giving of notice,
passage of time or otherwise, would constitute or result in such a material
breach or material default by E-Taxi or any Subsidiary or, to the knowledge of
E-Taxi, any other person or entity. Neither E-Taxi nor any Subsidiary has
received any notice of default under any contract, agreement, arrangement,
commitment or plan to which it is a party, which default has not been cured to
the satisfaction of, or duly waived by, the party claiming such default on or
before the date hereof.
3.8 PERSONAL PROPERTY. Except as set forth in Item 3.8 of the
Disclosure Schedule, each of E-Taxi and the Subsidiaries has good and marketable
title to all of its tangible personal property and assets, including, without
limitation, all of the assets reflected in the Financial Statements that have
not been disposed of in the ordinary course of business since March 31, 1999,
free and clear of all Liens or mortgages, except for any Lien for current taxes
not yet due and payable and such restrictions, if any, on the disposition of
securities as may be imposed by federal or applicable state securities laws.
3.9 REAL PROPERTY. (a) Item 3.9 of the Disclosure Schedule sets
forth a true and complete list of all real property owned by, or leased or
subleased by or to, E-Taxi and its Subsidiaries (the "E-Taxi Real Property").
(b) Except as set forth in Item 3.9 of the Disclosure Statement,
each lease to which E-Taxi is a party is valid, binding and in full force and
effect with respect to E-Taxi or a Subsidiary, as the case may be, and, to the
knowledge of E-Taxi, all other parties thereto; no notice of default or
termination under any such lease is outstanding.
3.10 COMPLIANCE WITH LAW. (a) Except as set forth in Item 3.10 of
the Disclosure Schedule, neither E-Taxi nor any Subsidiary is conducting its
respective business or affairs in material violation of any applicable federal,
state or local law, ordinance, rule, regulation, court or administrative order,
decree or process, or any requirement of insurance carriers. Neither E-Taxi nor
any Subsidiary has received any notice of violation or claimed violation of any
such law, ordinance, rule, regulation, order, decree, process or requirement.
(b) Each of E-Taxi and the Subsidiaries is in compliance in all
material respects with all applicable federal, state, local and foreign laws and
regulations relating to the protection of the environment and human health.
There are no claims, notices, actions, suits, hearings, investigations,
inquiries or proceedings pending or, to the knowledge of E-Taxi, threatened
against E-Taxi or any of the Subsidiaries that are based on or related to any
environmental matters or the failure to have any required environmental permits,
and there are no past or present conditions that E-Taxi has reason to believe
are likely to give rise to any material liability or other obligations of E-Taxi
or any Subsidiary under any environmental laws.
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3.11 PERMITS AND LICENSES. Except as set forth in Item 3.11 of the
Disclosure Schedule, each of E-Taxi and the Subsidiaries has all certificates of
occupancy, rights, permits, certificates, licenses, franchises, approvals and
other authorizations as are reasonably necessary to conduct its respective
business and to own, lease, use, operate and occupy its assets, at the places
and in the manner now conducted and operated, except those the absence of which
would not materially adversely affect its respective business. Except as set
forth in Item 3.11 of the Disclosure Schedule, as of the date hereof, neither
E-Taxi nor any Subsidiary has received any written or oral notice or claim
pertaining to the failure to obtain any material permit, certificate, license,
approval or other authorization required by any federal, state or local agency
or other regulatory body, the failure of which to obtain would materially and
adversely affect its business.
3.12 ORDINARY COURSE. Except as set forth in Item 3.12 of the
Disclosure Schedule, since March 31, 1999, each of E-Taxi and the Subsidiaries
has conducted its business, maintained its real property and equipment and kept
its books of account, records and files, substantially in the same manner as
previously conducted, maintained or kept and solely in the ordinary course; it
being understood and acknowledged that E-Taxi has been substantially reducing
its operations for some time.
3.13 NO ADVERSE CHANGES. Except as set forth in Item 3.13 of the
Disclosure Schedule, since March 31, 1999, there has not been (a) any material
adverse change in the business, prospects, the financial or other condition, or
the respective assets or liabilities of E-Taxi and the Subsidiaries as reflected
in the Financial Statements, (b) any material loss sustained by E-Taxi or any
Subsidiary, including, but not limited to any loss on account of theft, fire,
flood, explosion, accident or other calamity, whether or not insured, which has
materially and adversely interfered, or may materially and adversely interfere,
with the operation of E-Taxi's or any Subsidiary's business, or (c) to the best
knowledge of E-Taxi, any event, condition or state of facts, including, without
limitation, the enactment, adoption or promulgation of any law, rule or
regulation, the occurrence of which materially and adversely does or would
affect the results of operations or the business or financial condition of
E-Taxi or any Subsidiary.
3.14 LITIGATION. (a) Except as set forth in Item 3.14 of the
Disclosure Schedule and to the best of the Sellers' knowledge, there is no
claim, dispute, action, suit, proceeding or investigation pending or, to the
knowledge of E-Taxi, threatened, against or affecting the business of E-Taxi or
any Subsidiary, or challenging the validity or propriety of the transactions
contemplated by this Agreement, at law or in equity or admiralty or before any
federal, state, local, foreign or other governmental authority, board, agency,
commission or instrumentality, nor to the knowledge of E-Taxi, has any such
claim, dispute, action, suit, proceeding or investigation been pending or
threatened, during the 12-month period preceding the date hereof; (b) there is
no outstanding judgment, order, writ, ruling, injunction, stipulation or decree
of any court, arbitrator or federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, against or materially
affecting the business of E-Taxi or any Subsidiary; and (c) neither E-Taxi nor
any Subsidiary has received any written or verbal inquiry from any federal,
state, local, foreign or other governmental authority, board, agency, commission
or instrumentality concerning the possible violation of any law, rule or
regulation or any matter disclosed in respect of its business.
3.15 INSURANCE. E-Taxi and the Subsidiaries maintain insurance
against all risks customarily insured against by companies in its industry. All
such policies have previously been delivered or otherwise made available to the
Company and are in full force and effect, and neither E-Taxi nor any Subsidiary
has received any notice from any insurance company suspending, revoking,
modifying or canceling (or threatening such action) any insurance policy issued
to E-Taxi.
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3.16 CERTIFICATE OF INCORPORATION AND BY-LAWS; MINUTE BOOKS. The
copies of the Certificate of Incorporation and By-laws (or similar governing
documents) of E-Taxi and each Subsidiary, and all amendments to each are true,
correct and complete. The minute books of E-Taxi and each Subsidiary contain
true and complete records of all meetings and consents in lieu of meetings of
their respective Board of Directors (and any committees thereof), or similar
governing bodies, since the time of their respective organization. The stock
books of E-Taxi and each Subsidiary are true, correct and complete.
3.17 EMPLOYEE BENEFIT PLANS. Except as set forth in Item 3.17 of
the Disclosure Schedule, neither E-Taxi nor any Subsidiary maintains, nor has
E-Taxi or any Subsidiary maintained in the past, any employee benefit plans ("as
defined in Section 3(3) of the "ERISA"), or any plans, programs, policies,
practices, arrangements or contracts (whether group or individual) providing for
payments, benefits or reimbursements to employees of E-Taxi or any Subsidiary,
former employees, their beneficiaries and dependents under which such employees,
former employees, their beneficiaries and dependents are covered through an
employment relationship with E-Taxi, any Subsidiary or any entity required to be
aggregated in a controlled group or affiliated service group with E-Taxi for
purposes of ERISA or the Internal Revenue Code of 1986 (the "Code") (including,
without limitation, under Section 414(b), (c), (m) or (o) of the Code or Section
4001 of ERISA, at any relevant time ("E-Taxi Benefit Plans").
3.18 PATENTS; TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS. Each of
E-Taxi and the Subsidiaries owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, internet web site(s) proprietary rights and processes
necessary for its business as now conducted without any conflict with or
infringement of the rights of others. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing, and neither E-Taxi nor any
Subsidiary is bound by, or a party to, any options, licenses or agreements of
any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity.
3.19 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by E-Taxi directly with
the Sellers without the intervention of any Person on behalf of E-Taxi in such a
manner as to give rise to any valid claim by any Person against any Seller for a
finder's fee, brokerage commission or similar payment.
3.20 SUBSIDIARIES. Item 3.20 of the Disclosure Statements sets
forth all the Subsidiaries of E-Taxi. All the outstanding shares of capital
stock of, or other equity interests in, each such subsidiary have been validly
issued and are fully paid and nonassessable and are owned directly or indirectly
by E-Taxi, free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). Each Subsidiary of E-Taxi is
wholly owned by E-Taxi. 3.21 PURCHASE FOR INVESTMENT.
(a) Such Seller is acquiring the Company Shares for investment for
such Seller's own account and not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and such Seller has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Such Seller further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
a participation to such person or to any third person, with respect to any of
the Company Shares.
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(b) Such Seller understands that the Company Shares are not
registered under the Act on the ground that the sale and the issuance of
securities hereunder is exempt from registration under the Act pursuant to
Section 4(2) thereof, and that the Company's reliance on such exemption is
predicated on such Seller's representations set forth herein. Such Seller is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the Act.
3.22 INVESTMENT EXPERIENCE. Such Seller acknowledges that it can
bear the economic risk of its investment, and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the investment in the Company Shares.
3.23 INFORMATION. The Sellers have carefully reviewed such
information as each Seller deemed necessary to evaluate an investment in the
Company Shares. To the full satisfaction of each Seller, it has been furnished
all materials that it has requested relating to the Company and the issuance of
the Company Shares hereunder, and each Seller has been afforded the opportunity
to ask questions of representatives of the Company to obtain any information
necessary to verify the accuracy of any representations or information made or
given to the Sellers. Notwithstanding the foregoing, nothing herein shall
derogate from or otherwise modify the representations and warranties of the
Company set forth in this Agreement, on which each of the Sellers has relied in
making an exchange of the E-Taxi Shares of the Company Shares.
3.24 RESTRICTED SECURITIES. Such Seller understands that the
Company Shares may not be sold, transferred, or otherwise disposed of without
registration under the Act or an exemption therefrom, and that in the absence of
an effective registration statement covering the Company Shares or any available
exemption from registration under the Act, the Company Shares must be held
indefinitely. Such Seller is aware that the Company Shares may not be sold
pursuant to Rule 144 promulgated under the Act unless all of the conditions of
that Rule are met. Among the conditions for use of Rule 144 may be the
availability of current information to the public about the Company.
ARTICLE IV
COVENANTS PENDING THE CLOSING
SECTION 4. COVENANTS OF THE PARTIES PENDING THE CLOSING. Each party
hereto hereby agrees and covenants to the other party that prior to the Closing
Date:
4.1 OPERATION OF THE COMPANY AND E-TAXI PRIOR TO CLOSING. Between
the date of this Agreement and the Closing Date, the Sellers shall cause E-Taxi
and its Subsidiaries to, and the Company will:
(a) continue to operate its business in the usual and ordinary
course and in substantial conformity with all applicable laws, ordinances,
regulations, rules, or orders, and will use its best efforts to preserve its
business and preserve the continued operation of the business with its
customers, suppliers, and others having business relations with it;
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(b) not assign, sell, lease, or otherwise transfer or dispose of
any of the its assets, whether now owned or hereafter acquired, except in the
normal and ordinary course of business and in connection with its normal
operation;
(c) maintain all of its assets other than inventories in their
present condition, reasonable wear and tear and ordinary usage excepted, and
maintain the inventories at levels normally maintained; and
(d) not (i) incur any liabilities (contingent or otherwise)
outside of the ordinary course of business, or (ii) engage in any transaction
which could adversely affect the transactions contemplated by this Agreement;
and
(e) promptly notify the other parties hereto in writing of any
variances from the representations and warranties contained in Article III
hereof.
4.2 CONFIDENTIALITY. The parties agree not to disclose the
existence of this Agreement, any negotiations between the parties or any details
of the transactions contemplated herein to any Person, other than their related
legal, financial or expert advisors; provided that such advisors have agreed in
advance to maintain any such information in strict confidence; provided however,
that the Company may issue a press release and make appropriate filings with the
Securities and Exchange Commission with the prior approval of the President of
E-Taxi, which approval will not be unreasonably withheld or delayed.
4.3 CONDITIONS AND BEST EFFORTS. The parties will use its best
efforts to effectuate the transactions contemplated by this Agreement and to
fulfill all the conditions of the obligations of the parties under this
Agreement, and will do all acts and things as may be required to carry out its
obligations under this Agreement and to consummate and complete the transactions
contemplated hereby.
ARTICLE V
CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE. The respective
obligation of each party to close the transactions contemplated by this
Agreement is subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) NO INJUNCTIONS OR RESTRAINTS. No judgment, order,
decree, statute, law, ordinance, rule or regulation, entered, enacted,
promulgated, enforced or issued by any court or other governmental entity of
competent jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the
transactions contemplated hereby, or (ii) which otherwise is reasonably likely
to have a material adverse effect on the Company or E-Taxi or its subsidiaries,
as applicable; provided, however, that each of the parties shall have used its
best efforts to prevent the entry of any such Restraints and to appeal as
promptly as possible any such Restraints that may be entered.
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5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to close the transactions contemplated by this Agreement is further
subject to satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Sellers set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) does not have, and
is not likely to have, individually or in the aggregate, a material adverse
effect on E-Taxi or its subsidiaries.
(b) PERFORMANCE OF OBLIGATIONS OF SELLERS. Each of the
Sellers shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. At any time after the date
of this Agreement there shall not have occurred any material adverse change
relating to the Sellers, E-Taxi or its subsidiaries.
5.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligation of
the Sellers to close the transactions contemplated by this Agreement is further
subject to satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) does not have, and
is not likely to have, individually or in the aggregate, a material adverse
effect on E-Taxi or its subsidiaries.
(b) CORPORATE GOVERNANCE. The Company shall have taken all
such actions as shall be necessary so that (i) a Certificate of Designation
assigning rights, limitations and preferences to the Company's Series A
Preferred Stock, a form of which is attached hereto as Exhibit B, shall become
effective not later than the Closing Date, and (ii) the resolutions of the
Company's Board of Directors set forth as Exhibit C shall have been adopted, to
be effective upon the Closing Date.
(c) TERMINATION OF EMPLOYEE STOCK OPTIONS. The Company and
the holders of employee stock options exercisable for not less than 1,000,000
shares of the Company's Common Stock shall enter into a transaction pursuant to
which the Company shall issue a number of shares of the Company's Common Stock,
other securities of the Company or other consideration in exchange for the
cancellation of such options or otherwise amend such options; such transaction
to be reasonably acceptable to holder of the majority of the E-Taxi Shares (the
"Majority Seller").
(d) SETTLEMENT AGREEMENTS WITH CLASS D WARRANTHOLDERS AND
VICTORIA HOLDINGS. The Company shall enter into a Settlement Agreement with the
Class D Warrantholders and Victoria Holdings, Inc. in form and substance
reasonably acceptable to the Majority Seller.
(e) CANCELLATION OF CERTAIN OBLIGATIONS. The Company shall
enter into an agreement or agreements with the Company's President and his
affiliates canceling as of the Closing Date the Company's obligation to make any
future payments under (i) that certain employment agreement between the Company
and L. Wayne Kiley, and (ii) that certain lease between the Company and Quality
Associates, Inc. relating to the Company's executive offices located at 1171
Railroad Street, Corona, CA 91720.
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(f) CANCELLATION OF CERTAIN LIABILITIES. The Company shall
enter into an agreement with the Company's President of the Company canceling as
of the Closing Date certain accrued and unpaid liabilities of the Company
thereto, in form and substance reasonably acceptable to the Company and the
Majority Seller.
(g) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(h) NO MATERIAL ADVERSE CHANGE. At any time after the date
of this Agreement there shall not have occurred any material adverse change
relating the Company.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNITY OF SELLERS. The Company agrees to defend, indemnify
and hold harmless each Seller from and against, and to reimburse each Seller
with respect to, all liabilities, losses, costs and expenses, including, without
limitation, reasonable attorneys' fees and disbursements, asserted against or
incurred by such Seller by reason of, arising out of, or in connection with any
material breach of any representation or warranty contained in this Agreement
made by the Company or in any document or certificate delivered by the Company
pursuant to the provisions of this Agreement or in connection with the
transactions contemplated thereby.
6.2 INDEMNITY OF THE COMPANY. Each of the Sellers agrees to
jointly and severally defend, indemnify and hold harmless the Company from and
against, and to reimburse the Company with respect to, all liabilities, losses,
costs and expenses, including, without limitation, reasonable attorneys' fees
and disbursements, asserted against or incurred by such Seller by reason of,
arising out of, or in connection with any material breach of any representation
or warranty contained in this Agreement and made by the Company or in any
document or certificate delivered by the Company pursuant to the provisions of
this Agreement or in connection with the transactions contemplated thereby.
6.3 INDEMNIFICATION PROCEDURE.
A party (an "Indemnified Party") seeking indemnification shall give
prompt notice to the other party (the "Indemnifying Party") of any claim for
indemnification arising under this Article 6. The Indemnifying Party shall have
the right to assume and to control the defense of any such claim with counsel
reasonably acceptable to such Indemnified Party, at the Indemnifying Party's own
cost and expense, including the cost and expense of reasonable attorneys' fees
and disbursements in connection with such defense, in which event the
Indemnifying Party shall not be obligated to pay the fees and disbursements of
separate counsel for such in such action. In the event, however, that such
Indemnified Party's legal counsel shall determine that defenses may be available
to such Indemnified Party that are different from or in addition to those
available to the Indemnifying Party, in that there could reasonably be expected
to be a conflict of interest if such Indemnifying Party and the Indemnified
Party have common counsel in any such proceeding, or if the Indemnified Party
has not assumed the defense of the action or proceedings, then such Indemnifying
Party may employ separate counsel to represent or defend such Indemnified Party,
and the Indemnifying Party shall pay the reasonable fees and disbursements of
counsel for such Indemnified Party. No settlement of any such claim or payment
in connection with any such settlement shall be made without the prior consent
of the Indemnifying Party which consent shall not be unreasonably withheld.
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ARTICLE VII
MISCELLANEOUS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties and statements made by a party to in this
Agreement or in any document or certificate delivered pursuant hereto shall
survive the Closing Date until one year from the Closing Date.
7.2 NOTICE. All communications, notices, requests, consents or
demands given or required under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered to, or received by prepaid
registered or certified mail or recognized overnight courier addressed to, or
upon receipt of a facsimile sent to, the party for whom intended, as follows, or
to such other address or facsimile number as may be furnished by such party by
notice in the manner provided herein:
If to the Company:
1171 Railroad Street
Corona, CA 91720
Attention: President
Tel: (909) 735-2102
Fax: (909) 735-0452
with a copy to:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Alan N. Forman, Esq.
Tel.: (212) 704-0100
Fax: (212) 704-0196
If to the Sellers:
At the respective addresses of the Sellers set forth on
Schedule 1 hereto.
7.3 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule and
any instruments and agreements to be executed pursuant to this Agreement, sets
forth the entire understanding of the parties hereto with respect to its subject
matter, merges and supersedes all prior and contemporaneous understandings with
respect to its subject matter and may not be waived or modified, in whole or in
part, except by a writing signed by each of the parties hereto. No waiver of any
provision of this Agreement in any instance shall be deemed to be a waiver of
the same or any other provision in any other instance. Failure of any party to
enforce any provision of this Agreement shall not be construed as a waiver of
its rights under such provision.
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7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
enforceable against and inure to the benefit of, the parties hereto and their
respective heirs, administrators, executors, personal representatives,
successors and assigns, and nothing herein is intended to confer any right,
remedy or benefit upon any other person. This Agreement may not be assigned by
any party hereto except with the prior written consent of the other parties,
which consent shall not be unreasonably withheld.
7.5 GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Delaware
applicable to agreements made and fully to be performed in such state, without
giving effect to conflicts of law principles.
7.6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 CONSTRUCTION. Headings contained in this Agreement are for
convenience only and shall not be used in the interpretation of this Agreement.
References herein to Articles, Sections and Exhibits are to the articles,
sections and exhibits, respectively, of this Agreement. The Disclosure Schedule
is hereby incorporated herein by reference and made a part of this Agreement. As
used herein, the singular includes the plural, and the masculine, feminine and
neuter gender each includes the others where the context so indicates.
7.8 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, this Agreement
shall be interpreted and enforceable as if such provision were severed or
limited, but only to the extent necessary to render such provision and this
Agreement enforceable.
7.9 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of the Company and the Majority Seller; or
(b) by either the Company or Majority Seller if the Closing has
not occurred on or before [April 30, 1999], unless the reason that the Closing
has not occurred shall be the failure of the party seeking to terminate this
Agreement to fulfill its obligations hereunder; or
(c) by either the Company or the Majority Seller if there has been
a material misrepresentation or material breach on the part of the other party
in the representations, warranties or covenants set forth in this Agreement
which is not cured within five (5) days after such other party has been notified
of the intent to terminate this Agreement pursuant to this clause (c); or
(d) by either the Company or the Majority Seller if any legal
proceeding is commenced or threatened by any governmental or regulatory body or
other person directed against the consummation of the Closing or any other
material transaction contemplated under this Agreement and the Company or the
Majority Seller, as the case may be, reasonably and in good faith deems it
impractical or inadvisable to proceed in view of such legal proceeding or threat
thereof.
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7.10 REGISTRATION RIGHTS. The Company shall provide the Sellers
with the registration rights described in Exhibit A attached hereto.
7.11 AMENDMENTS. This Agreement may be modified or amended only in
a writing executed by the Company and the Majority Seller.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the date first set forth above.
COMPUTER MARKETPLACE, INC.
By:
------------------------------
Name: L. Wayne Kiley
Title: Chief Executive Officer
E-TAXI STOCKHOLDERS:
- ---------------------
Name:
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EXHIBIT A
REGISTRATION RIGHTS
1. DEFINITIONS.
Capitalized terms used herein without definition shall have the
respective meanings given such terms as set forth in the Stock Purchase
Agreement dated as of April , 1999 among Computer Marketplace, Inc. and the
stockholders of E-Taxi listed on Schedule 1 thereto (the "Purchase Agreement").
As used herein, the following terms shall have the following meanings:
BUSINESS DAY: Any day other than a day on which banks are authorized
or required to be closed in the State of New York.
COMMISSION: The Securities and Exchange Commission.
COMMON STOCK: The common stock, par value $0.0001 per share,
of the Company.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated
thereunder.
HOLDER or HOLDERS: Any holder of the Registrable Securities.
OBJECTING NOTICE: See Section 3(a).
OBJECTING PARTY: See Section 3(a).
PERSON: Any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or other agency or political subdivision
thereof.
PIGGYBACK REGISTRATION RIGHTS: See Section 2(a).
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part
of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all
other amendments and supplements to the prospectus, including
post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
prospectus.
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RECORDS: See Section 3(m).
REGISTRABLE SECURITIES: The shares of Common Stock (i) issued pursuant
to the Purchase Agreement and (ii) issuable upon conversion of
the Series A Preferred Stock issued pursuant to the Purchase
Agreement, until such time as (i) a Registration Statement
covering such Registrable Securities has been declared
effective by the Commission and such Registrable Securities
have been disposed of pursuant to such effective Registration
Statement or (ii) such Registrable Securities are held by one
or more Persons who could sell all Registrable Securities held
by each such Person in a single sale pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act,
whichever is earlier.
REGISTRATION EXPENSES: See Section 4.
REGISTRATION STATEMENT: Any registration statement of the Company that
covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statements,
including posteffective amendments, all exhibits, and all
material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
SELLING HOLDERS: See Section 3(a).
SHELF REGISTRATION: See Section 2.
TARGET EFFECTIVE PERIOD: See Section 2.
2. (a) PIGGYBACK REGISTRATION . If, at any time prior to
April , 2000, the Company proposes to register any of its
securities under the Securities Act for sale to the public for
its own account or for the account of other security holders
(except with respect to registration statements on Forms S-4
or S-8 or another form not available for registering the
Registrable Securities for sale to the public), each such time
it will give written notice thereof to Holders of its
intention so to do (such notice to be given at least fifteen
(15) days prior to the filing thereof). Upon the written
request of any such Holder (which request shall specify the
number of Registrable Securities intended to be disposed of by
such Holder and the intended method of disposition thereof,
received by the Company within ten (10) days after giving of
any such. notice by the Company, to register any of such
Holder's Registrable Securities, the Company will use its
reasonable efforts, subject to Section 2(b) below, to cause
the Registrable Securities as to which registration shall have
been so requested to be included in the securities to be
covered by the Registration Statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or
other disposition by the Holder (in accordance with its
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written request) of such Registrable Securities so registered
("Piggyback Registration Rights"); PROVIDED, that (i) if such
registration involves an underwritten offering, all Holders
requesting to be included in the Company's registration must
sell their Registrable Securities to the underwriters selected
by the Company on the same terms and conditions as apply to
the Company; and (ii) if, at any time after giving written
notice of its intention to register any securities pursuant to
this Section 2(a) and prior to the effective date of the
Registration Statement filed in connection with such
registration, the Company shall determine for any reason not
to register such securities, the Company shall give written
notice to all Holders and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in
connection with such registration. If a registration pursuant
to this Section 2(a) involves an underwritten public offering,
any Holder requesting to be included in such registration may
elect, in writing prior to the effective date of the
registration statement filed in connection with such
registration, not to register such securities in connection
with such registration. The foregoing provisions
notwithstanding, (i) the Company may withdraw any registration
statement referred to in this Section 2(a) without thereby
incurring any liability to the Holders, and (ii) the inclusion
of shares of Registrable Securities under such Piggyback
Registration Rights is subject to the cut-back provisions of
Section 2(b) below.
(b) PRIORITY IN PIGGYBACK REGISTRATION. If a registration
pursuant to Section 2(a) hereof involves an underwritten
offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of equity securities
(including all Registrable Securities) which the Company, the
Holders and any other persons intended to be included in such
registration exceeds the largest number of securities which
can be sold without having an adverse effect on such offering,
including the price at which such securities can be sold, the
Company will include in such registration (i) first, all the
securities the Company proposes to sell for its own account,
and (ii) second, to the extent that the number of securities
which the Company proposes to sell for its own account
pursuant to Section 2(a) hereof is less than the number of
securities which the Company has been advised can be sold in
such offering without having the adverse effect referred to
above, the number of securities requested to be included in
such registration by security holders as a result of their
exercise of "demand" registration rights by such other
holders. Any such reductions shall be pro rata in relation to
the number of shares of Common Stock to be registered by each
person participating in the offering.
(c) HOLDBACK AGREEMENTS. If any registration of
Registrable Securities shall be in connection with an
underwritten public offering, each Holder agrees not to effect
any public sale or distribution, including any sale pursuant
to Rule 144 under the Securities Act, of any Registrable
Securities, and not to effect any such public sale or
distribution of any other equity security of the Company or of
any security convertible into or exchangeable or exercisable
for any equity security of the Company (in each case, other
than as part of such underwritten public offering) during the
thirty (30) days prior to, and during the ninety (90) day
period beginning on, the effective date of such Registration
Statement (except as part of such registration).
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(d) EXCEPTIONS. Notwithstanding the foregoing, the Company
may delay the registration of Registrable Securities following
a written request pursuant to Section 2(a) hereof for the time
periods described in Section 2(e) hereof upon the occurrence
of any of the following:
(i) The Company shall have previously entered into
an agreement or letter of intent contemplating an
underwritten public offering on a firm commitment
basis of Common Stock or securities convertible into
or exchangeable for Common Stock and the managing
underwriter of such proposed public offering advises
the Company in writing that in its opinion such
proposed underwritten offering would be materially and
adversely affected by a concurrent registered offering
of Registrable Securities (such opinion to state the
reasons therefor);
(ii) During the two (2) month period immediately
preceding such request, the Company shall have entered
into an agreement or letter of intent, which has not
expired or otherwise terminated, contemplating a
material business acquisition by the Company or its
subsidiaries whether by way of merger, consolidation,
acquisition of assets, acquisition of securities or
otherwise;
(iii) The Company is in possession of material
nonpublic information that the Company would be
required to disclose in the Registration Statement and
that is not, but for the registration, otherwise
required to be disclosed at the time of such
registration, the disclosure of which, in its good
faith judgment, would have a material adverse effect
on the business, operations, prospects or competitive
position of the Company;
(iv) The Company shall receive the written opinion
of the managing underwriter of the underwritten public
offering pursuant to which Common Stock has been
registered within the three (3) month period prior to
the receipt of a registration request that the
registration of additional Common Stock will
materially and adversely affect the market for the
Common Stock (such opinion to state the reasons
therefor); or
(v) At the time of receipt of a registration
request, the Company is engaged, or its board of
directors has adopted by resolution a plan to engage,
in any program for the purchase of shares of Common
Stock or securities convertible into or exchangeable
for shares of Common Stock and, in the opinion of
counsel, reasonably satisfactory to the requesting
Holders, the distribution of the Common Stock to be
registered would cause such purchase of shares to be
in violation of Regulation M promulgated under the
Exchange Act.
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(e) PERIOD OF DELAY. If an event described in clauses (i)
through (iv) of Section 2(d) shall occur, the Company may, by
written notice to the Holders, delay the filing of a
Registration Statement with respect to the Registrable
Securities to be covered thereby for a period of time not
exceeding ninety (90) days.
If an event described in clause (v) of Section 2(d)
shall occur, the filing of a Registration Statement with
respect to the Registrable Securities to be covered thereby
shall be delayed until the first date that the Registrable
Securities to be covered thereby can be sold without violation
of Regulation M of the Exchange Act.
3. REGISTRATION PROCEDURES.
In connection with the registration obligations of the Company
pursuant to the terms and conditions of this Agreement, the Company shall:
(a) prior to filing a Registration Statement or Prospectus
or any amendments or supplements thereto, including documents
incorporated by reference after the initial filing of the
Registration Statement, the Company will furnish to the
Holders covered by such Registration Statement (the "Selling
Holders"), Holders' Counsel and the underwriters, if any,
draft copies of all such documents proposed to be filed at
least three (3) Business Days prior thereto, which documents
will be subject to the review of such Holders' Counsel and the
underwriters, if any, and the Company will not, unless
required by law, file any Registration Statement or amendment
thereto or any Prospectus or any supplement thereto (including
such documents incorporated by reference) to which Selling
Holders of at least a majority of the Registrable Securities
(the "Objecting Party") shall object, pursuant to notice given
to the Company prior to the filing of such amendment or
supplement (the "Objection Notice"). The Objection Notice
shall set forth the objections and the specific areas in the
draft documents where such objections arise. The Company shall
have five (5) Business Days after receipt of the Objection
Notice to correct such deficiencies to the satisfaction of the
Objecting Party, and will notify each Selling Holder of any
stop order issued or threatened by the Commission in
connection therewith and take all reasonable actions required
to prevent the entry of such stop order or to remove it if
entered;
(b) as promptly as practicable prepare and file with the
Commission such amendments and post-effective amendments to
the Registration Statement as may be necessary to keep such
Registration Statement effective for the period required
pursuant to Section 2; cause the Prospectus to be supplemented
by any required Prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the
Securities Act applicable to it with respect to the
disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in
accordance with the intended methods of disposition by the
Selling Holders set forth in such Registration Statement or
supplement to the Prospectus;
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(c) as promptly as practicable furnish to any Selling
Holder and the underwriters, if any, without charge, such
number or conformed copies of such Registration Statement and
any post-effective amendment thereto and such number of copies
of the Prospectus (including each preliminary Prospectus) and
any amendments or supplements thereto, and any documents
incorporated by reference therein, as such Selling Holder or
underwriter may reasonably request in order to facilitate the
disposition of the Registrable Securities being sold by such
Selling Holder (it being understood that the Company consents
to the use of the Prospectus and any amendment or supplement
thereto by each Selling Holder and the underwriters, if any,
in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or
supplement thereto); PROVIDED, that before filing a
Registration Statement or Prospectus relating to the
Registrable Securities or any amendments or supplements
thereto, the Company will furnish to Holders' Counsel copies
of all documents proposed to be filed at least three (3)
Business Days prior to the filing thereof, which documents
will be subject to the review of such counsel;
(d) on or prior to the date on which the Registration
Statement is declared effective, register or qualify such
Registrable Securities under such other securities or "blue
sky" laws of such jurisdictions as any Selling Holder,
Holders' Counsel or underwriter reasonably requests and do any
and all other acts and things which may be necessary or
advisable to enable such Selling Holder to consummate the
disposition in such jurisdictions of such Registrable
Securities owned by such Selling Holder; keep each such
registration or qualification (or exemption therefrom)
effective during the period which the Registration Statement
is required to be kept effective; and do any and all other
acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement;
PROVIDED that the Company shall not be required to (i) qualify
to do business as a foreign corporation or as a broker-dealer
in any jurisdiction where it is not then so qualified or (ii)
take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not
then so subject;
(e) cause the Registrable Securities covered by such
Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the
Company to enable the Selling Holders to consummate the
disposition of such Registrable Securities;
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(f) as promptly as practicable notify each Selling Holder,
Holders' Counsel and any underwriter and (if requested by any
such Person) confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective
amendment has been filed and, with respect to a Registration
Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission or any
other federal or state governmental authority for amendments
or supplements to a Registration Statement or related
Prospectus or for additional information to be included in any
Registration Statement or Prospectus or otherwise, (iii) of
the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose,
(iv) of the issuance by any state securities commission or
other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky"
laws or the initiation of any proceedings for that purpose and
(v) of the happening of any event which makes any statement
made in a Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated by
reference therein untrue or which requires the making of any
changes in such Registration Statement, Prospectus or
documents so that they will not contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a
supplement or amendment to such Prospectus so that, as
thereafter deliverable to the purchasers of such Registrable
Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(g) make generally available to the Holders an earnings
statement satisfying the provisions of Section II (a) of the
Securities Act no later than thirty (30) days after the end of
the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective
date of a Registration Statement;
(h) use its reasonable efforts to prevent the issuance of
any order suspending the effectiveness of a Registration
Statement, and, if one is issued, to obtain the withdrawal of
any order suspending the effectiveness of a Registration
Statement at the earliest possible moment;
(i) as promptly as practicable after filing with the
Commission of any document which is incorporated by reference
into a Registration Statement, deliver a copy of such document
to Holders' Counsel;
(j) cooperate with the Selling Holders and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (which shall not bear
any restrictive legends and shall be in a form eligible for
deposit with the Depository Trust Company) representing
securities sold under such Registration Statement, and enable
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such securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if
any, or such Selling Holders may request and make available
prior to the effectiveness of such Registration Statement a
supply of such certificates;
(k) if applicable, enter into such customary agreements
(including an underwriting agreement in customary form) and
take such other actions as the Selling Holders of at least a
majority of the aggregate number of the Registrable Securities
being sold or the underwriters retained by the Selling Holders
participating in an underwritten public offering, if any, may
request in order to expedite or facilitate the disposition of
such Registrable Securities;
(l) if requested by Selling Holders of at least a majority
of the aggregate amount of the Registrable Securities being
sold to cause the Registrable Securities included in such
Registration Statement to be (i) listed or admitted for
trading or otherwise included on each securities exchange, if
any, (including, without limitation, the Nasdaq Stock Market)
on which similar securities issued by the Company are then
listed or (ii) authorized to be quoted on the National
Association of Securities Dealers, Inc. Automated Quotation if
the Registrable Securities so qualify;
(m) cooperate with each Selling Holder and each
underwriter participating in the disposition of such
Registrable Securities and their respective counsel in
connection with any filings required to be made with the
National Association of Securities Dealers, Inc. ("NASD"); and
(n) during the period when the Prospectus is required to
be delivered under the Securities Act, ,rapidly file all
documents required to be filed with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
Each Selling Holder, upon receipt of any notice from the
Company of the happening of any event of the kind described in
subsection (f) of this Section 3, shall forthwith discontinue
disposition of the Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended Prospectus
contemplated by subsection (f) of this Section 3 or until it is advised
in writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by the Company, such Selling Holder
will, or will request the managing underwriter or underwriters, if any,
to, deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Selling Holder's possession, of
the Prospectus covering such Registrable Securities current at the time
of receipt of such notice. In the event that the Company shall give any
such notice, the time periods for which a Registration Statement is
required to be kept effective pursuant to Section 2 hereof shall be
extended by the number of days during the period from and including the
date of the giving of such notice to and including the date when each
Selling Holder shall have received (i) the copies of the supplemented
or amended Prospectus contemplated by Section 3(f) or (ii) the Advice.
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<PAGE>
4. REGISTRATION EXPENSES.
All expenses incident to the Company's performance of, or
compliance with, the provisions hereof, including without
limitation, all Commission and securities exchange or NASD
registration and filing fees, fees and expenses of compliance
with securities or "blue sky" laws (including fees and
disbursements of counsel in connection with "blue sky"
qualifications of the Registrable Securities), printing
expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or
accounting duties), fees and expenses incurred in connection
with the listing of the securities to be registered, if any,
on each securities exchange on which similar securities issued
by the Company are then listed, fees and disbursements of
counsel for the Company and its independent certified public
accountants (including the expense of any special audit or
"cold comfort" letters required by, or incident to, such
performance), Securities Act liability insurance (if the
Company elects to obtain such insurance), reasonable fees and
expenses of any special experts retained by the Company in
connection with such registration, fees and expenses of other
Persons retained by the Company in connection with each
registration hereunder (but not including the fees and expense
of legal counsel retained by a Holder or Holders, or any
underwriting fees, discounts or commissions attributable to
the sale of Registrable Securities) are herein called
"Registration Expenses."
The Company will pay all Registration Expenses in connection
with each Registration Statement filed pursuant to Section 2
or Section 3 except as otherwise set forth therein. All
expenses to be borne by the Holders in connection with any
Registration Statement filed pursuant to Section 2 (including,
without limitation, all underwriting fees, discounts or
commissions attributable to such sale of Registrable
Securities) shall be borne by the participating Holders pro
rata in relation to the number of shares of Registrable
Securities to be registered by each Holder.
5. INDEMNIFICATION- CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnity and hold harmless, to the full extent permitted by
law, each Holder, its officers, directors and each Person who
controls such Holder (within the meaning of the Securities
Act), and any agent or investment adviser thereof, against all
losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and costs of investigation) arising
out of or based upon any untrue or alleged untrue statement of
A-9
<PAGE>
material fact contained in any Registration Statement, any
amendment or supplement thereto, any Prospectus or preliminary
Prospectus or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
except insofar as the same arise out of or are based upon any
such untrue statement or omission based upon information with
respect to such Holder furnished in writing to the Company by
or on behalf of such Holder expressly for use therein;
PROVIDED that, in the event that the Prospectus shall have
been amended or supplemented and copies thereof as so amended
or supplemented, shall have been furnished to a Holder prior
to the confirmation of any sales of Registrable Securities,
such indemnity with respect to the Prospectus shall not inure
to the benefit of such Holder if the Person asserting such
loss, claim, damage or liability and who purchased the
Registrable Securities from such holder did not, at or prior
to the confirmation of the sale of the Registrable Securities
to such Person, receive a copy of the Prospectus as so amended
or supplemented and the untrue statement or omission of a
material fact contained in the Prospectus was corrected in the
Prospectus as so amended or supplemented.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES.
In connection with any Registration Statement in which a
Holder is participating, each such Holder will furnish to the
Company in writing such information with respect to the name
and address of such Holder and such other information as may
be reasonably required for use in connection with any such
Registration Statement or Prospectus and agrees to indemnity,
to the full extent permitted by law, the Company, its
directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting
from any untrue statement of a material fact or any omission
of a material fact required to be stated in the Registration
Statement or Prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such
untrue or alleged untrue statement is contained in or such
omission or alleged omission relates to any information with
respect to such Holder so furnished in writing by such Holder
specifically for inclusion in any Prospectus or Registration
Statement; PROVIDED, HOWEVER, that such Holder shall not be
liable in any such case to the extent that prior to the filing
of any such Registration Statement or Prospectus or amendment
thereof or supplement thereto, such Holder has furnished in
writing to the Company information expressly for use in such
Registration Statement or Prospectus or any amendment thereof
or supplement thereto which corrected or made not misleading
information previously furnished to the Company. In no event
shall the liability of any Selling Holder hereunder be greater
in amount than the dollar amount of the proceeds received by
such Selling Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
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<PAGE>
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder agrees to give prompt
written notice to the indemnifying party after the receipt by
such Person of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof
made in writing for which such Person will claim
indemnification or contribution pursuant to the provisions
hereof and, unless in the judgment of counsel of such
indemnified party a conflict of interest may exist between
such indemnified party and the indemnifying party with respect
to such claim, permit the indemnifying party to assume the
defense of such claim. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be
subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld).
No indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. If the
indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel (plus such
local counsel, if any, as may be reasonably required in other
jurisdictions) with respect to such claim, unless in the
judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels. For the
purposes of this Section 5(c), the term "conflict of interest"
shall mean that there are one or more legal defenses available
to the indemnified party that are different from or additional
to those available to the indemnifying party or such other
indemnified parties, as applicable, which different or
additional defenses make joint representation inappropriate.
(d) CONTRIBUTION. If the indemnification from the
indemnifying party provided for in this Section 5 is
unavailable to an indemnified party hereunder in respect of
any losses, claims, damages, liabilities or expenses referred
to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined
by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of
a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties,
and the parties intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in
Section 5(c), any reasonable legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding.
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<PAGE>
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section
5(d), no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and
distributed to the public were offered to the public exceeds
the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, and no
Selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the
Registrable Securities of such Selling Holder were offered to
the public exceeds the amount of any damages which such
Selling Holder has otherwise been required to pay by reason of
such untrue statement or omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section I
l(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(e) If indemnification is available under this Section 5,
the indemnifying parties shall indemnity each indemnified
party to the full extent provided in Sections 5(a) and (b)
without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable
consideration provided for in this Section 5(d).
6. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell its Registrable
Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
7. TRANSFER OR AS AN IMMINENT RIGHT,.
The rights to cause the Company to register Registrable
Securities granted pursuant to the provisions hereof may be transferred
or assigned by any Holder to a transferee or assignee; PROVIDED;
HOWEVER, that the transferee or assignee of such rights assumes the
obligations of such transferor or assignor, as the case may be,
hereunder.
9. AMENDMENT
Except as otherwise provided herein, the provisions hereof may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of at least a majority of the aggregate number of the
Registrable Securities then
A-12
EXHIBIT B
FINANCIAL ADVISORY AGREEMENT
<PAGE>
FINANCIAL ADVISORY AGREEMENT
This Agreement is made as of this 9th day of April 1999 by and between
Computer Marketplace, Inc., Inc. located at 1171 Railroad Street, Corona, CA
91720 (the "Company") and Gateway Advisors, Inc. located at 675 North First
Street, 10th Floor, San Jose, CA 95112 (the "Financial Advisor").
W I T N E S S E T H:
WHEREAS, the Company desires to retain the Financial Advisor and the
Financial Advisor desires to be retained by the Company, all pursuant to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, it is agreed as follows:
1. RETENTION. The Company hereby retains the Financial Advisor to
perform non-exclusive consulting services related to corporate finance and other
matters, and the Financial Advisor hereby accepts such retention and shall
perform for the Company the duties described herein, faithfully and to the best
of its ability. In this regard, the Financial Advisor shall devote such time and
attention to the business of the Company as shall be determined by the Financial
Advisor and the Company, subject to the direction of the President or Chief
Financial Officer of the Company.
a) The Financial Advisor agrees, to the extent reasonably
required in the conduct of the business of the Company, and at the Company's
request, to place at the disposal of the Company its judgment and experience and
to provide business development services to the Company including the following:
(i) Review business plans and projections;
(ii) Review financial data as it relates to raising
financing;
(iii) Advise on the Company's capital structure and
on alternatives for raising capital;
(iv) Review and advise on prospective mergers and
acquisitions, and on any financing required to
complete such transactions;
(v) Advise on issues relating to public and private
offerings;
(vi) Review managerial needs;
(vii) Advise on issues relating to public relations;
and
(viii) assist the company in raising funds through the
public or private issuance of its securities.
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<PAGE>
2. TERM. The Financial Advisor's retention hereunder shall be for
a term of two years commencing on the date of this Agreement.
3. COMPENSATION. The Company shall pay to the Financial Advisor
1,500,000 Common Stock Purchase Warrants (the "Warrants"). Each Warrant shall
entitle the holder to purchase one (1) share of the Company's Common Stock, par
value $.0001 per share, at any time prior to the end of business on April 8,
2000 at an exercise price of $2.50 per share. A form of the Warrant is attached
hereto as Exhibit A.
4. EXPENSES. The Company agrees to reimburse the Financial
Advisor for reasonable expenses incurred by the Financial Advisor in connection
with the services rendered hereunder, including but not limited to the Financial
Advisor's due diligence activities with respect to the Company. Any such
expenses shall require the prior approval of the Company.
5. ARBITRATION. All disputes arising under this Agreement shall
be submitted to arbitration before the American Arbitration Association and the
decision of such arbitrator(s) shall be final, binding and non-appealable.
6. STATUS OF FINANCIAL ADVISOR. The Financial Advisor shall be
deemed to be an independent contractor and, except as expressly provided or
authorized in this Agreement, shall have no authority to act for or represent
the Company.
7. OTHER ACTIVITIES OF FINANCIAL ADVISOR. The Company recognizes
that the Financial Advisor now renders and may continue to render financial
consulting and other investment banking services to other companies which may or
may not conduct business and activities similar to those of the Company. The
Financial Advisor shall not be required to devote its full time and attention to
the performance of its duties under this Agreement, but shall devote only so
much of its time and attention as it deems reasonable or necessary for such
purposes.
8. NOTICES. Any notices hereunder shall be sent to the Company
and the Financial Advisor at their respective addresses above set forth. Any
notice shall be given by registered or certified mail, postage prepaid, and
shall be deemed to have been given when deposited in the United States or
Canadian mail. Either party may designate any other address to which notice
shall be given, by giving written notice to the other of such change in address
in the manner herein provided.
9. GOVERNING LAW. This Agreement has been made in the State of
Delaware and shall be construed and governed in accordance with the laws thereof
without regard to conflicts of laws.
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<PAGE>
10. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties, may not be altered or modified, except in writing and
signed by the party to be charged thereby, and supersedes any and all previous
agreements between the parties.
11. BINDING EFFECT. This Agreement shall be binding upon the
parties hereto and their respective heirs, administrators, successors, and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year above first written.
COMPUTER MARKETPLACE, INC.
By: /s/ L. WAYNE KILEY
------------------------------
Name: L. Wayne Kiley
Title: Chief Executive Officer
GATEWAY ADVISORS, INC.
By: /s/ ROBERT M. WALLACE
------------------------------
Name: Robert M. Wallace
Title: President
B-3
