SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL 23, 1999
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COMPUTER MARKETPLACE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-14731 33-0558415
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(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
FORMATION)
1171 RAILROAD STREET, CORONA, CA 91720
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (909) 735-2102
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(FORMER NAME OR FORMER ADDRESS, IF CHANGES SINCE LAST REPORT)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
As of April 21, 1999, Computer Marketplace, Inc. (the "Company") 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 Company issued an aggregate of 9,074,000 shares of
the Company's common stock, par value $.0001 per share (the "Common Shares"),
and 400,000 shares of the Company's Series A Preferred Stock, par value $.0001
per share (the "Preferred Shares").
As of the Closing Date, (i) E-Taxi is a wholly owned subsidiary of the
Company, (ii) the stockholders of E-Taxi are the beneficial owners of (a) the
Common Shares, or 81.8% of the shares of Company's common stock outstanding, and
(b) the Preferred Shares, or 100% of the shares of Company's preferred stock
outstanding, and (iii) two of the four existing members of the Company's Board
of Directors resigned and Robert M. Wallace was appointed as Chairman of the
Board of Directors. L. Wayne Kiley and Thomas Evans remain as directors of the
Company. As of the Closing Date, Mr. Wallace beneficially owns 6,426,800 shares
of the Company's common stock, or 51.0% of the shares outstanding, which
includes (i) 24,000 shares of Common Stock held by Gateway Advisors, Inc.
("Gateway Advisors"), a company owned and controlled by Mr. Wallace, (ii)
102,800 shares of Common Stock owned by the Gateway Advisors Profit Sharing
Plan, and (iii) 1,500,000 shares of Common Stock issuable upon the exercise of a
Common Stock Purchase Warrant owned by Gateway Advisors. L. Wayne Kiley will
remain as the Company's Chief Executive Officer, President and Chief Accounting
Officer until the Company hires suitable replacements which the Company expects
to occur in the near future. The E-Taxi Acquisition will be accounted for as a
reverse acquisition. The Company also granted to each of the former holders of
E-Taxi capital stock the right to have the Common Shares and the shares of
Common Stock issuable upon conversion of the Preferred Shares included in the
next registration statement filed by the Company with the Securities and
Exchange Commission (other than on a Form S-4 or Form S-8), subject to certain
limitations and restrictions.
The number of shares constituting the Series A Preferred Stock is
400,000, $.0001 par value per share, all of which were issued to the former
holders of Series A Preferred Stock of E-Taxi. The Company may pay preferential
dividends to the holders of the Series A Preferred Stock, as, if and when
declared by the Board of Directors of the Company. Each share of Series A
Preferred Stock is convertible, at the option of the holder, at any time into
four (4) shares of Common Stock, subject to adjustment. The shares of Series A
Preferred Stock are also automatically converted into shares of Common Stock in
the event that the closing price for the shares of Common Stock equals or
exceeds $3.75 per share for three (3) consecutive trading days. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, each share of Series A Preferred Stock has a liquidation
preference of $10.00. Each share of Series A Preferred Stock shall not be
entitled to vote, except as otherwise provided by law. The Series A Preferred
Stock shall be redeemed by the Company on the third anniversary of the date of
issuance at a price of $10.00 per share (subject to adjustment) from funds
legally available therefor. As of the close of business on April 28, 1999, the
shares of Common Stock had a closing price of greater than $3.75 per share for
more than three (3) consecutive days, and therefore, as of May 3, 1999, the
Preferred Shares were automatically converted into 1,600,000 shares of Common
Stock.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See Item 1. above for a description of the Acquisition.
E-Taxi was incorporated in April 1998 to develop a vertical internet
portal for the small office, home office ("SOHO") market. Immediately prior to
the closing of the E-Taxi Acquisition, E-Taxi closed (i) a private offering of
its shares of preferred stock and common stock raising an aggregate of
approximately $1,400,000 therefrom and (ii) on the acquisition of all of the
outstanding limited liability company interests of TechStore LLC, a California
limited liability company ("TechStore"). As of March 31, 1999 Gateway Advisors,
Inc., Bejan Aminifard, Mosen Aminifard and Derek Wall entered into a
Contribution Agreement, pursuant to which each of the owners of Techstore
contributed their ownership interest in the Company to E-Taxi in exchange for
shares of Common Stock and Preferred Stock of the Company. Since its
incorporation in March 1998, TechStore has been engaged in the business of
selling computer hardware and software as well as consumer electronics products
through its world wide web site, HTTP://WWW.TECHSTORE.COM. Through the
acquisition of E-Taxi and TechStore, and additional planned acquisitions, joint
ventures and other combined marketing efforts, the Company intends to provide
products, services and information specifically tailored to the needs of the
SOHO community. Eventually, the Company anticipates creating a one-stop, all
inclusive internet site where small business persons can access products,
services, information and advice necessary to operate and improve their
businesses.
ITEM 5. OTHER EVENTS.
As of April 15, 1999, E-Taxi entered into letters of intent with all of
the outstanding shareholders of SSPS, Inc., a California corporation ("SSPS"),
pursuant to which E-Taxi has agreed to purchase, and the shareholders of SSPS
have agreed to sell, 14,706 shares of the capital stock of SSPS, Inc. or
approximately 89.9% of the shares of SSPS capital stock outstanding. The letters
of intent are non-binding and subject to the satisfaction of certain conditions,
including the execution and delivery of a definitive purchase agreement which
the Company anticipates will be finalized in the next couple of weeks. The four
operating divisions of SSPS, TRISTEP, GIG2GIG.COM, IT WORLDNET.COM, and IMPACT
TEAM INTERNATIONAL, provide short term and long term temporary workforce
solutions primarily to rapidly growing technology firms. In furtherance of the
Company's new strategic plan to serve the SOHO market, the Company believes that
SSPS will partially fulfill the demand for temporary workers and other personnel
related services needed by the SOHO community.
As of April 9, 1999, the Company and Gateway Advisors, Inc. ("Gateway
Advisors"), a company owned and controlled by Robert M. Wallace (the Company's
current Chairman of the Board), entered into a Financial Advisory Agreement,
pursuant to which Gateway Advisors agreed to provide certain business
development and financial advisory services for a period of two (2) years in
exchange for the issuance by the Company of 1,500,000 Common Stock Purchase
Warrants. Each warrant entitles the holder to purchase one (1) share of the
Company's Common Stock at an exercise price of $2.50 per share until April 8,
2000.
As of April 9, 1999, the Company and each of the holders of 1,500,000
Class D Common Stock Purchase Warrants entered into a Settlement Agreement,
pursuant to which the Company issued 375,000 shares of the Company's Common
Stock in exchange for (i) the cancellation of all Class D Common Stock Purchase
Warrants, (ii) the surrender and transfer to the Company of an aggregate of
500,000 shares of Common Stock of Medical Marketplace, Inc. (a majority owned
subsidiary of the Company), and (iii) a general release, releasing the Company
from all liabilities. In addition, as of April 9, 1999, the Company and Victoria
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Holdings, Inc., the Company's former financial advisor, entered into a
Settlement Agreement, pursuant to which the Company issued 250,000 shares of the
Company's Common Stock in exchange for (i) the cancellation of Options
exercisable for 1,000,000 shares of the Company's Common Stock at an exercise
price of $1.00 per share, and (ii) a general release, releasing the Company from
all liabilities. As part of the foregoing Settlement Agreements, the Company
agreed to include the shares issued in connection therewith in the next
registration statement filed by the Company with the Securities and Exchange
Commission (other than on a Form S-4 or Form S-8), subject to certain
limitations and restrictions.
As of April 9, 1999, the Company entered into an Agreement with L.
Wayne Kiley, the Company's President, Chief Executive Officer and at that time
Chairman of the Board, pursuant to which Mr. Kiley waived (i) his rights to
accrued and unpaid salary in the amount of $279,423 (ii) all of his rights under
his employment agreement with the Company, including without limitation, all
future compensation, and (iii) on behalf of Quality Associates, Inc. (a company
owned and controlled by Mr. Kiley) its rights to accrued and unpaid rent with
respect to the Company's executive offices, in the amount of $53,536. In
exchange for the foregoing, the Company reduced the exercise price of (a)
661,667 options held by Mr. Kiley from $1.00 to $.60 per share and (b) 29,167
options held by Mr. Kiley from $1.68 to $.60 per share. In addition, the Company
agreed to include the shares issuable upon the exercise of such options and
other options held by Management and other consultants under a Registration
Statement on Form S-8 to be filed with the Commission in the near future.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS.
Financial Statements required under this Item 7 will be filed upon
completion, but not later than sixty (60) days from the date this report is
required to be filed.
Exhibits
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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.
C. Form of Settlement Agreement with the Class D Common Stock
Warrantholders.
D. Settlement Agreement, dated as of April 9, 1999, between the Company
and Victoria Holdings, Inc.
E. Press Release dated April 26, 1999.
F. Certificate of Designation with respect to the Series A Preferred
Stock.
G. Contribution Agreement dated as of March 31, 1999 by and among Gateway
Advisors, Inc., Bejan Aminifard, Mose Aminifard and Derek Wall
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly authorized and caused the undersigned to sign this
Report on the Registrant's behalf.
COMPUTER MARKETPLACE, INC.
By: /s/ L. WAYNE KILEY
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Name: L. Wayne Kiley
Title: Chief Executive Officer and President
Dated: May 10, 1999
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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
A-7
<PAGE>
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.
A-8
<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
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<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
EXHIBIT C
FORM OF SETTLEMENT AGREEMENT
WITH CLASS D WARRANTHOLDERS
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is made as of this 9th day of April 1999, by
and between Computer Marketplace, Inc., a Delaware corporation (the "Company")
and (the "Investor").
WHEREAS, in December 1996 the Investor acquired Class D Common Stock
Purchase Warrants (the "Class D Warrants") from the Company and shares (the
"Medical Marketplace Shares") of common stock, par value $.0001 per share, of
Medical Marketplace, Inc., a subsidiary of the Company ("Medical Marketplace"),
from Medical Marketplace; and
WHEREAS, the parties desire to fully and finally terminate and cancel
all controversies, disputes, claims, debts, obligations and matters of whatever
nature existing between them, or which may heretofore have arisen between the
Investor, the Company and Medical Marketplace; and
WHEREAS, this Agreement is executed in compromise and settlement of
potential claims brought by the Investor against the Company and/or Medical
Marketplace in order to avoid the continued uncertainty, expense and
inconvenience of potential litigation.
NOW, THEREFORE, in consideration of the premises and of the terms,
covenants and conditions hereinafter contained, the parties hereto agree as
follows:
1. ISSUANCE OF THE COMPANY SHARES; FORFEIT OF CLASS D WARRANTS
AND MEDICAL MARKETPLACE SHARES; VOTING AGREEMENT.
1.1 Subject to and on the terms and conditions hereof, in reliance
on the representations and warranties contained herein, (i) the Company agrees
to issue on the Closing Date (as hereinafter defined) to the Investor shares of
the Company's unregistered common stock, par value $.0001 per share (the
"Company Shares"), and (ii) the Investor shall deliver to the Company and
Medical Marketplace for cancellation the Class D Warrants and the Medical
Marketplace Shares.
1.2 The Investor hereby grants its/his proxy to vote the Company
Shares to L. Wayne Kiley, the Company's Chief Executive Officer. Further, the
Investor agrees to sign and deliver on the Closing Date a proxy, a form of which
is attached hereto as Exhibit A. Any third party who acquires the Company Shares
in a private transaction shall be bound by the terms and provisions of this
Section 1.2.
2. GENERAL RELEASE OF THE COMPANY AND MEDICAL MARKETPLACE. The
Investor, and each of its affiliates, as Releasors, hereby and forever discharge
the Company, Medical Marketplace, and each of its affiliates, and their
respective heirs, executors, administrators, successors, assigns, officers,
directors, counsel and stockholders, as Releasees, from any and all claims,
actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, extent,
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<PAGE>
executions, claims, and demands whatsoever, in law, admiralty or equity, which
they, and their heirs, executors, administrators, successors and assigns may
ever have had or may then have for, upon, or by reason of any matter, cause or
thing whatsoever from the beginning of the world to and including the Closing
Date.
3. CLOSING.
3.1 The closing of the transactions provided for herein
(hereinafter referred to as the "Closing") shall be held at the offices of the
Company's legal counsel on the date hereof.
3.2 At the Closing:
(a) the Investor shall deliver to the Company and Medical
Marketplace (i) an executed copy of this Agreement, (ii) an executed
proxy and (iii) certificate(s) evidencing the Class D Warrants the
Medical Marketplace Shares duly endorsed in blank with signature
guaranteed, or with stock power attached, duly endorsed in blank with
signature guaranteed;
(b) the Company shall deliver to the Investor (i) an
executed copy of this Agreement and (ii) certificates evidencing the
number of Company Shares.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
represents and warrants to the Company and Medical Marketplace that the
following are true and correct as at the date hereof:
(a) The Investor is the sole owners of, and has good and
marketable title to, the Class D Warrants and the Medical Marketplace
Shares, free and clear of any and all liens, pledges, charges,
encumbrances, options or claims whether or not of record and have the
absolute and unrestricted right and power, authority and capacity to
consummate the transactions contemplated hereby.
(b) The Investor has the full power and authority to
execute, deliver and perform this Agreement. The Investor is not a
party to any agreement, contract or understanding pursuant to which the
Investor is or may be obligated to sell the Class D Warrants and/or the
Medical Marketplace Shares, and none of the terms, conditions and
provisions hereof conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation of any agreement, corporate charter or by-law to which the
Investor is a party.
(c) The Investor 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 the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Investor
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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<PAGE>
(d) 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. The Investor is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under the Act.
(e) The Investor 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 owning the Company Shares.
(f) The Investor has carefully reviewed such information
as the Investor deemed necessary to evaluate the Company Shares. To the
full satisfaction of the Investor, it has been furnished all materials
that it has requested relating to the Company and the issuance of the
Company Shares hereunder, and the Investor 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 Investor.
(g) The Investor 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.
(h) The Investor acknowledges and understands that
certificates for the Company Shares to be issued and delivered to them
hereunder will bear substantially the following legend:
"The securities represented by this Certificate have been
acquired without registration under the Securities Act of
1933, as amended. No transfer, sale or distribution of these
securities or any interest therein may be made except under an
effective registration statement under said Act covering such
securities unless the Corporation has received an opinion of
counsel satisfactory to it that such transfer or sale does not
require registration under said Act.
The right to vote the securities represented by this
Certificate is subject to the terms and provisions of a
Settlement Agreement and Irrevocable Proxy."
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<PAGE>
5. ENTIRE AGREEMENT. This Agreement and any document referred to
herein constitutes the entire Agreement among the parties hereto with respect to
the subject matter hereof and supersedes all prior written or oral warranties,
representations, inducements, understandings, commitments, agreements or
contracts. No amendment to or modification of the terms or conditions hereof
shall be binding unless it is in writing and signed by the party against whom
the amendment or modification is charged.
6. NO ADMISSIONS. This Agreement effects the settlement of
potential claims which are denied, disputed and contested, and nothing contained
herein shall be construed as an admission of wrongdoing by any party hereto or
as an admission of any liability of any kind to any other party. Each of the
Parties hereto denies any liability in connection with any potential claim and
intends merely to avoid the uncertainties of litigation and to buy its peace.
7. LEGAL ADVICE. The Parties hereto received independent legal
advice from their attorneys with respect to the advisability of making this
Agreement.
8. INVESTIGATION. The Parties hereto have made such investigation
of the facts pertaining to this settlement and this Agreement, and of all the
matters pertaining thereto, as they deem necessary.
9. AFTER-ACQUIRED FACTS. The Parties hereto are aware that they
may hereafter discover or become aware of facts, circumstances, or
interpretations thereof in addition to or different from those they now know or
believe to be true with respect to the subject matter hereof. Nevertheless, it
is their intention fully, finally, and forever to settle and release all
matters, claims, and disputes which do now exist, heretofore have existed, or
may hereafter arise between them and any or all of the released parties with
respect to the subject matter of this Agreement, except as provided herein. In
furtherance of this intention, the releases given in this Agreement shall be and
remain in effect as a full and complete release of all such matters,
notwithstanding the discovery or existence of any additional or different claims
or facts relative thereto, except as provided herein.
10. CORPORATE AND PARTNERSHIP AUTHORIZATION. Each corporate and
partnership party to this Agreement represents and warrants that (a) all
corporate or partnership action necessary for the execution, delivery and
performance of this Agreement has been taken and this Agreement constitutes the
valid, binding and enforceable agreement of such party, (b) neither the
execution or delivery of this Agreement nor the performance of its terms will
violate its certificate or articles of incorporation or by-laws or partnership
agreement or any agreement to which such party is a party.
11. GOVERNANCE OF DELAWARE LAW. The laws of the State of Delaware
applicable to contracts made and fully to be performed therein shall govern the
validity, construction, performance, and effect of this Agreement, although
without regard to any choice of law provisions thereof or principles of
conflicts of law as might otherwise be applied by courts applying Delaware law.
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<PAGE>
12. NON-ASSIGNABILITY OF AGREEMENT. This Agreement may not be
assigned by any party without the prior written consent of all other parties.
13. NO PRESUMPTION AGAINST ANY PARTY AS DRAFTER. This Agreement
represents the joint product of each of the parties after fully informed and
vigorous arms length negotiation and no presumption may drawn against any party
as the putative drafter of the Agreement.
14. EXCLUSION OF THIRD-PARTY BENEFICIARIES. The provisions of this
Agreement are not intended to and shall not be deemed to confer any rights or to
inure to the benefit of any third-party directly or indirectly, extent as
otherwise set forth herein.
15. BINDING ON SUCCESSORS AND OTHERS. This Agreement and the
covenants and conditions contained herein shall apply to, be binding upon and
inure to the administrators, executors, conservators, trustees, legal
representatives, assignees, successors, agents and assigns of the Parties.
16. FEES AND COSTS. The Parties agree to bear their own costs and
attorneys' fees incurred with respect to the preparation and negotiation of this
Agreement and the settlement herein contained.
17. ATTORNEYS' FEES. In the event any party brings a claims
arising from or relating to this Agreement, the "prevailing party" shall be
entitled to recover all its reasonable attorneys' fees and costs incurred as a
result of such a claim as costs of suit or as damages.
18. FURTHER DOCUMENTS. The Parties shall execute and deliver all
documents and perform all further acts that may be reasonably necessary to
effectuate the provisions of this Agreement.
19. MEANING OF TERMS. When necessary herein, all terms used in the
singular shall apply to the plural, and vice versa, and all terms used in the
masculine shall apply to the neuter and feminine genders, and vice versa. The
headings of paragraphs of this Agreement are inserted solely for convenience of
reference and are not a part of and are not intended to govern, limit or aid in
the construction of any term or provision hereof.
20. COUNTERPARTS. Each party to this Agreement may sign a copy of
this Agreement and each such executed copy shall have the same force and effect
as if each party had signed the original.
21. NOTICES. Any notices under this Agreement shall be personally
served and/or mailed and/or transmitted via facsimile to the Parties and their
counsel as follows:
If to the Company or Medical Marketplace: L. Wayne Kiley
President
Computer Marketplace, Inc.
1171 Railroad Street
Corona, CA 91720
Telephone: (909) 735-0452
Facsimile: (909) 735-2102
If to the Investor ___________________________
___________________________
___________________________
C-5
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this
Agreement as of the date set forth above.
COMPUTER MARKETPLACE, INC.
By: /s/ L. WAYNE KILEY
--------------------------------------
Name: L. Wayne Kiley
Title: President
[THE INVESTOR]
By:
--------------------------------------
Name:
Title:
C-6
Exhibit D
SETTLEMENT AGREEMENT
WITH VICTORIA HOLDINGS, INC.
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is made as of this 9th day of April 1999, by
and between Computer Marketplace, Inc., a Delaware corporation (the "Company")
and VICTORIA HOLDINGS, INC. ("Victoria Holdings").
WHEREAS, in December 1996 the Company issued an Option to Purchase
1,000,000 shares of the Company's common stock, par value $.0001 per share (the
"Option"); and
WHEREAS, the parties desire to fully and finally terminate and cancel
all controversies, disputes, claims, debts, obligations and matters of whatever
nature existing between them, or which may heretofore have arisen between
Victoria Holdings, the Company and Medical Marketplace; and
WHEREAS, this Agreement is executed in compromise and settlement of
potential claims brought by Victoria Holdings against the Company in order to
avoid the continued uncertainty, expense and inconvenience of potential
litigation.
NOW, THEREFORE, in consideration of the premises and of the terms,
covenants and conditions hereinafter contained, the parties hereto agree as
follows:
1. ISSUANCE OF THE COMPANY SHARES; FORFEIT OF OPTION;
REGISTRATION RIGHTS.
1.1 Subject to and on the terms and conditions hereof, in reliance
on the representations and warranties contained herein, (i) the Company agrees
to issue on the Closing Date (as hereinafter defined) to Victoria Holdings
250,000 shares of the Company's unregistered common stock, par value $.0001 per
share (the "Company Shares"), and (ii) Victoria Holdings shall deliver to the
Company for cancellation the Option.
1.2 The Company agrees to include the Company Shares in the first
registration statement filed with the Securities and Exchange Commission
following the Closing Date, other than registration statements filed on Forms
S-4, S-8 ("Registration Statement"), at no cost or expense to Investors (other
than such Investor's legal fees). In the event that the offering covered by the
Registration Statement is underwritten by a registered broker/dealer (the
"Underwriter"), and such Underwriter informs the Company in writing that the
inclusion of the Company Shares in the Registration Statement will result in the
inability to effect the Registration Statement or qualify the Registration
Statement in one or more states which the Underwriter, in its sole discretion,
deems necessary for such offering to proceed, the Investor shall agree to
withhold some or all of the Company Shares from registration in accordance with
the instructions of such Underwriter. In such event, the Company shall file not
more than one registration statement with the Securities and Exchange Commission
for the purpose of registering the Company Shares as soon as practicable after
the closing date of such offering at no cost or expense to the Investor.
2. GENERAL RELEASE OF THE COMPANY. Victoria Holdings, and each of
its affiliates, as Releasors, hereby and forever discharge the Company, and its
affiliates, and their respective heirs, executors, administrators, successors,
D-1
<PAGE>
assigns, officers, directors, counsel and stockholders, as Releasees, from any
and all claims, actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
extent, executions, claims, and demands whatsoever, in law, admiralty or equity,
which they, and their heirs, executors, administrators, successors and assigns
may ever have had or may then have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to and including the Closing
Date.
3. CLOSING.
3.1 The closing of the transactions provided for herein
(hereinafter referred to as the "Closing") shall be held at the offices of the
Company's legal counsel on the date hereof.
3.2 At the Closing:
(a) Victoria Holdings shall deliver to the Company (i) an
executed copy of this Agreement, (ii) an executed proxy and (iii) the
Option;
(b) the Company shall deliver to Victoria Holdings (i) an
executed copy of this Agreement and (ii) certificates evidencing the
number of Company Shares.
4. REPRESENTATIONS AND WARRANTIES OF VICTORIA HOLDINGS. Victoria
Holdings represents and warrants to the Company and Medical Marketplace that the
following are true and correct as at the date hereof:
(a) Victoria Holdings is the sole owners of, and has good
and marketable title to, the Option, free and clear of any and all
liens, pledges, charges, encumbrances, options or claims whether or not
of record and have the absolute and unrestricted right and power,
authority and capacity to consummate the transactions contemplated
hereby.
(b) Victoria Holdings has the full power and authority to
execute, deliver and perform this Agreement. Victoria Holdings is not a
party to any agreement, contract or understanding pursuant to which
Victoria Holdings is or may be obligated to sell the Company Shares,
and none of the terms, conditions and provisions hereof conflict with,
result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights
of acceleration, termination or cancellation of any agreement,
corporate charter or by-law to which Victoria Holdings is a party.
(c) Victoria Holdings 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 Victoria Holdings has no present intention of selling, granting any
participation in, or otherwise distributing the same. Victoria Holdings
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.
D-2
<PAGE>
(d) Victoria Holdings 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. Victoria Holdings is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D under the Act.
(e) Victoria Holdings 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 owning the Company Shares.
(f) Victoria Holdings has carefully reviewed such
information as Victoria Holdings deemed necessary to evaluate the
Company Shares. To the full satisfaction of Victoria Holdings, it has
been furnished all materials that it has requested relating to the
Company and the issuance of the Company Shares hereunder, and Victoria
Holdings 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 Victoria Holdings. Further, the Investor understands that the
Company is presently exploring opportunities to acquire one or more
entities engaged in business on the world wide web.
(g) Victoria Holdings 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.
(h) Victoria Holdings acknowledges and understands that
certificates for the Company Shares to be issued and delivered to them
hereunder will bear substantially the following legend:
"The securities represented by this Certificate have been
acquired without registration under the Securities Act of
1933, as amended. No transfer, sale or distribution of these
securities or any interest therein may be made except under an
effective registration statement under said Act covering such
securities unless the Corporation has received an opinion of
counsel satisfactory to it that such transfer or sale does not
require registration under said Act."
5. ENTIRE AGREEMENT. This Agreement and any document referred to
herein constitutes the entire Agreement among the parties hereto with respect to
the subject matter hereof and supersedes all prior written or oral warranties,
D-3
<PAGE>
representations, inducements, understandings, commitments, agreements or
contracts. No amendment to or modification of the terms or conditions hereof
shall be binding unless it is in writing and signed by the party against whom
the amendment or modification is charged.
6. NO ADMISSIONS. This Agreement effects the settlement of
potential claims which are denied, disputed and contested, and nothing contained
herein shall be construed as an admission of wrongdoing by any party hereto or
as an admission of any liability of any kind to any other party. Each of the
Parties hereto denies any liability in connection with any potential claim and
intends merely to avoid the uncertainties of litigation and to buy its peace.
7. LEGAL ADVICE. The Parties hereto received independent legal
advice from their attorneys with respect to the advisability of making this
Agreement.
8. INVESTIGATION. The Parties hereto have made such investigation
of the facts pertaining to this settlement and this Agreement, and of all the
matters pertaining thereto, as they deem necessary.
9. AFTER-ACQUIRED FACTS. The Parties hereto are aware that they
may hereafter discover or become aware of facts, circumstances, or
interpretations thereof in addition to or different from those they now know or
believe to be true with respect to the subject matter hereof. Nevertheless, it
is their intention fully, finally, and forever to settle and release all
matters, claims, and disputes which do now exist, heretofore have existed, or
may hereafter arise between them and any or all of the released parties with
respect to the subject matter of this Agreement, except as provided herein. In
furtherance of this intention, the releases given in this Agreement shall be and
remain in effect as a full and complete release of all such matters,
notwithstanding the discovery or existence of any additional or different claims
or facts relative thereto, except as provided herein.
10. CORPORATE AND PARTNERSHIP AUTHORIZATION. Each corporate and
partnership party to this Agreement represents and warrants that (a) all
corporate or partnership action necessary for the execution, delivery and
performance of this Agreement has been taken and this Agreement constitutes the
valid, binding and enforceable agreement of such party, (b) neither the
execution or delivery of this Agreement nor the performance of its terms will
violate its certificate or articles of incorporation or by-laws or partnership
agreement or any agreement to which such party is a party.
11. GOVERNANCE OF DELAWARE LAW. The laws of the State of Delaware
applicable to contracts made and fully to be performed therein shall govern the
validity, construction, performance, and effect of this Agreement, although
without regard to any choice of law provisions thereof or principles of
conflicts of law as might otherwise be applied by courts applying Delaware law.
12. NON-ASSIGNABILITY OF AGREEMENT. This Agreement may not be
assigned by any party without the prior written consent of all other parties.
D-4
<PAGE>
13. NO PRESUMPTION AGAINST ANY PARTY AS DRAFTER. This Agreement
represents the joint product of each of the parties after fully informed and
vigorous arms length negotiation and no presumption may drawn against any party
as the putative drafter of the Agreement.
14. EXCLUSION OF THIRD-PARTY BENEFICIARIES. The provisions of this
Agreement are not intended to and shall not be deemed to confer any rights or to
inure to the benefit of any third-party directly or indirectly, extent as
otherwise set forth herein.
15. BINDING ON SUCCESSORS AND OTHERS. This Agreement and the
covenants and conditions contained herein shall apply to, be binding upon and
inure to the administrators, executors, conservators, trustees, legal
representatives, assignees, successors, agents and assigns of the Parties.
16. FEES AND COSTS. The Parties agree to bear their own costs and
attorneys' fees incurred with respect to the preparation and negotiation of this
Agreement and the settlement herein contained.
17. ATTORNEYS' FEES. In the event any party brings a claims
arising from or relating to this Agreement, the "prevailing party" shall be
entitled to recover all its reasonable attorneys' fees and costs incurred as a
result of such a claim as costs of suit or as damages.
18. FURTHER DOCUMENTS. The Parties shall execute and deliver all
documents and perform all further acts that may be reasonably necessary to
effectuate the provisions of this Agreement.
19. MEANING OF TERMS. When necessary herein, all terms used in the
singular shall apply to the plural, and vice versa, and all terms used in the
masculine shall apply to the neuter and feminine genders, and vice versa. The
headings of paragraphs of this Agreement are inserted solely for convenience of
reference and are not a part of and are not intended to govern, limit or aid in
the construction of any term or provision hereof.
20. COUNTERPARTS. Each party to this Agreement may sign a copy of
this Agreement and each such executed copy shall have the same force and effect
as if each party had signed the original.
21. NOTICES. Any notices under this Agreement shall be personally
served and/or mailed and/or transmitted via facsimile to the Parties and their
counsel as follows:
If to the Company or Medical Marketplace: L. Wayne Kiley
President
Computer Marketplace, Inc.
1171 Railroad Street
Corona, CA 91720
Telephone: (909) 735-0452
Facsimile: (909) 735-2102
If to Victoria Holdings: Elliot Loewenstern
6700 N. Andrews Avenue
Suite 500
Ft. Lauderdale, FL 33309
D-5
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this
Agreement as of the date set forth above.
COMPUTER MARKETPLACE, INC.
By: /s/ L. WAYNE KILEY
--------------------------------------
Name: L. Wayne Kiley
Title: President
VICTORIA HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
D-6
Exhibit E
PRESS RELEASE
<PAGE>
COMPUTER MARKETPLACE, INC.
1171 Railroad Street
Corona, CA 91720
PRESS RELEASE
For Immediate Release
Contact Person: Brian Burns
Gateway Advisors, Inc.
(408) 280-0800, Ext. 321
OTC BB Symbol: MKPL
COMPUTER MARKETPLACE ACQUIRES E-TAXI AND TECHSTORE
Corona, Calif. (OTC BB: MKPL) April 26, 1999 --- Computer Marketplace,
Inc., a seller of new and used medical equipment through its Medical Marketplace
subsidiary, announced today that it has completed its acquisition of E-Taxi,
Inc., a company developing a vertical portal for small office, home office
(SOHO) businesses. In addition, E-Taxi concurrently completed its acquisition of
TechStore, LLC, an online reseller of computer hardware and software and certain
consumer electronics products.
E-Taxi, Inc. Acquisition
On April 23, 1999, Marketplace completed its acquisition of E-Taxi,
resulting in E-Taxi becoming a wholly owned subsidiary of Marketplace.
Immediately prior to its acquisition, E-Taxi completed a private placement to
fund its working capital needs.
E-Taxi has developed a strategic plan to launch an Internet portal.
E-Taxi's business strategy recognizes that traditional horizontal portals, such
as AOL (NYSE: AOL), Yahoo (NASDAQ: YHOO), and MSN (NASDAQ: MSFT), have not
effectively addressed the unique needs of a large segment of the business
community. In response, E-Taxi has developed a plan to launch an Internet web
site community, which is commonly referred to as a vertical portal, dedicated to
the 43.5 million-member SOHO market in the United States. The Company intends to
develop a large affinity group from this highly fragmented market by providing
this group content (product, services, and information) to improve their
businesses. To execute this strategy, the Company intends to make acquisitions,
arrange marketing alliances with organizations desiring to reach the SOHO
audience, and develop proprietary content useful to SOHO businesses.
In connection with the adoption of the E-Taxi business strategy,
Marketplace intends to classify its subsidiary, Medical Marketplace, as an asset
held for sale.
E-1
<PAGE>
Acquisition of TechStore
On April 23, 1999, E-Taxi completed its acquisition of TechStore,
resulting in TechStore becoming an indirect, wholly owned subsidiary of
Marketplace. The Company believes this acquisition will accelerate its effort to
aggregate SOHO useful content (information, products, and services). "Being a
part of a successful launch of a SOHO community (vertical portal) should provide
TechStore a visible gateway to this valuable consumer group," explained Derek
Wall, President of TechStore.
Founded in 1997, TechStore offers through its web site,
http://www.techstore.com, over 40,000 name brand computer hardware and software
and consumer electronics products. The techstore.com web site has distinguished
itself by offering consumers a user-friendly Web site, low prices, large
selection, detailed product information, real-time availability, online secure
ordering, online invoice history, and online order tracking.
TechStore was recently selected as a Charter Merchant at Amazon.com
Auctions, the new shopping service from Amazon.com (NASDAQ: AMZN), the No. 1
online video, music, and book retailer. With almost 8 million customers,
Amazon.com is the premier destination for techstore.com to reach qualified and
experienced online shoppers and have auctions featured across millions of
Amazon.com's pages. Jeff Blackburn, Director of Merchant Services at Amazon.com
recognized techstore.com as having "played a key role in the development of the
Amazon online auction marketplace."
In addition, TechStore was recently selected by Entrepreneur Magazine
as one of the Top 100 fastest-growing new, small businesses in America.
Appointment of Robert M. Wallace as Chairman of the Board
In connection with the acquisition, Robert M. Wallace has been
appointed Chairman of the Board of Directors of Marketplace. Since 1986, Mr.
Wallace has served as President of Gateway Advisors, Inc., a provider of
strategic business and financial advisory services. Mr. Wallace has served as an
advisor and Board member of numerous public companies, including International
Family Entertainment, Media Arts Group, Inc. and Zycon. "We are extremely
pleased Mr. Wallace has agreed to serve as Chairman of the Board; the breadth of
his business experience, particularly in broadcast media should allow him to
make valuable contributions to the Company's Internet strategy," explained L.
Wayne Kiley, Chief Executive Officer of Marketplace.
Letters of Intent to Acquire SSPS, Inc.
E-Taxi has entered into letters of intent with all of the outstanding
shareholders of SSPS, Inc ("SSPS"). The operating divisions of SSPS, which
consist of TriStep, Gig2Gig.com, ITWorldnet.com, and Impact Team International,
provide contingent workforce solutions, primarily to rapidly growing technology
firms. E-Taxi believes that the market potential of SSPS' services could be
greatly enhanced by the integration of SSPS into a portfolio of SOHO businesses.
The consolidated revenues for SSPS were $39 million for the calendar year end
1998.
E-2
<PAGE>
The letters of intent are subject to certain contingencies and to
execution of a definitive agreement among the parties embodying the material
terms. E-Taxi hopes to finalize its due diligence review, including a financial
audit, and enter into a definitive agreement with the shareholders of SSPS in
the near future. The letters of intent evidence the mutual intent of the parties
to negotiate in good faith toward reaching a definitive agreement.
SAFE HARBOR STATEMENT
STATEMENTS IN THIS PRESS RELEASE AND ORAL STATEMENTS THAT MAY BE MADE
BY THE COMPANY OR BY OFFICERS, DIRECTORS OR EMPLOYEES OF THE COMPANY ACTING ON
THE COMPANY'S BEHALF THAT ARE NOT STATEMENTS OF HISTORICAL OR CURRENT FACT
CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER UNKNOWN FACTORS THAT
COULD CAUSE THE ACTUAL RESULTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM
THE HISTORICAL RESULTS OR FROM ANY FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. IN ADDITION TO STATEMENTS WHICH EXPLICITLY DESCRIBE
SUCH RISKS AND UNCERTAINTIES, READERS ARE URGED TO CONSIDER STATEMENTS LABELED
WITH THE TERMS "BELIEVES," "EXPECTS," "INTENDS," "MAY," "SHOULD," OR
"ANTICIPATES" TO BE UNCERTAIN FORWARD-LOOKING STATEMENTS. THE FORWARD LOOKING
STATEMENTS CONTAINED HEREIN ARE ALSO SUBJECT GENERALLY TO OTHER RISKS AND
UNCERTAINTIES THAT ARE DESCRIBED FROM TIME TO TIME IN THE COMPANY'S REPORTS AND
REGISTRATION STATEMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
E-3
Exhibit F
CERTIFICATE OF DESIGNATION
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK OF
COMPUTER MARKETPLACE, INC.
Acting pursuant to Sections 151(a) and (g) of the Delaware General
Corporation Law, the undersigned hereby certifies that the Board of Directors of
Computer Marketplace, Inc. (the "Corporation") duly approved the following
Certificate of Designation of Series A Preferred Stock of the Corporation, and
that the Certificate of Incorporation of the Corporation expressly authorizes
the Board to so designate and issue one or more series of preferred stock. The
designations, powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations and restrictions thereof in
respect of the Preferred Stock are as follows:
1. NUMBER OF SHARES; PAR VALUE. The Corporation shall be
authorized to issue 400,000 shares of Series A Preferred Stock, par value $.0001
per share (the "Preferred Stock").
2. DIVIDEND PROVISIONS.
The holders of shares of Preferred Stock shall not be entitled to receive any
dividends, except when and as lawfully declared by the Company's Board of
Directors.
3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
subject to the rights of series of preferred stock that may from time to time
come into existence, the holders of Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to the sum of Ten Dollars ($10.00) for each
outstanding share of Preferred Stock (the "Original Issue Price"). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amounts, then, subject to the
rights of series of preferred stock that may from time to time come into
existence, the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Preferred
Stock in proportion to the amount of such stock owned by each such holder.
(b) Upon completion of the distribution required by subsection (a) of this
Section 3 and any other distribution that may be required with respect to a
series of preferred stock that may from time to time come into existence, all of
the remaining assets of the Corporation available for distribution to
stockholders shall be distributed among the holders of Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming full
conversion of all such Preferred Stock).
(i) For purposes of this Section 3, a liquidation, dissolution or winding
up of the Corporation shall be deemed to be occasioned by, or to include (unless
the holders of at least a majority of the Preferred Stock then outstanding shall
determine otherwise), (A) the acquisition of the Corporation by another entity
by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation) that results in
the transfer of fifty percent (50%) or more of the outstanding voting power of
F-1
<PAGE>
the Corporation (other than the transactions contemplated by that certain Stock
Purchase Agreement dated as of April 21, 1999 among the Corporation and the
stockholders of E-Taxi, Inc.); or (B) a sale of all or substantially all of the
assets of the Corporation.
(ii) In any of such events, if the consideration received by the Corporation
is other than cash, its value will be deemed its fair market value. Any
securities shall be valued as follows:
(A) Securities not subject to investment letter or other similar
restrictions on free marketability are covered by (B) below:
(1) If traded on a securities exchange or through the
Nasdaq market, the value shall be deemed to be
the average of the closing prices of the
securities on such exchange or system over the
thirty (30) day period ending three (3) days
prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing
bid or sale prices (whichever is applicable) over
the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as
mutually determined by the Corporation and the
holders of at least a majority of the voting
power of all then outstanding shares of Preferred
Stock.
(B) The method of valuation of securities subject to investment letter or
other restrictions on free marketability (other than restrictions arising solely
by virtue of a stockholder's status as an affiliate or former affiliate) shall
be to make an appropriate discount from the market value determined as above in
(A) (1), (2) or (3) to reflect the approximate fair market value thereof, as
mutually determined by the Corporation and the holders of at least a majority of
the voting power of all then outstanding shares of such Preferred Stock.
(iii) In the event the requirements of this subsection 3(b) are not complied
with, the Corporation shall forthwith either:
(A) cause such closing to be postponed until such time as the requirements
of this Section 3 have been complied with; or
(B) cancel such transaction, in which event the right., preferences and
privileges of the holders of the Preferred Stock shall revert to and be the same
as such rights, preferences and privileges existing immediately prior to the
date of the first notice referred to in Subsection 3(b) (iv) hereof.
(iv) The Corporation shall give each holder of record of Preferred Stock
written notice of such impending transaction not later than twenty (20) days
prior to the stockholders' meeting called to approve such transaction, or twenty
(20) days prior to the closing of such transaction, whichever is earlier, and
shall also notify such holders in writing of the final approval of such
transaction. The first of such notices shall describe the material terms and
F-2
<PAGE>
conditions of the impending transaction and the provisions of this Section 3,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than
twenty (20) days after the Corporation has given the first notice provided for
herein or sooner than ten (10) days after the Corporation has given notice of
any material changes provided for herein; provided, however, that such periods
may be shortened upon the written consent of the holders of Preferred Stock that
are entitled to such notice rights or similar notice rights and that represent
at least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
4. CONVERSION. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share or Preferred Stock shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such share at the office of the Corporation or any transfer agent for such
stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing the Original Issue Price by the Conversion Price
applicable to such share, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion. The initial Conversion Price
per share for shares of Preferred Stock shall be Two and 50/100 Dollars ($2.50);
provided, however, that the Conversion Price for the Preferred Stock shall be
subject to adjustment as set forth in subsection 4(d).
(b) AUTOMATIC CONVERSION. Each share of Preferred Stock shall automatically
be converted into shares of Common Stock at the Conversion Price three (3)
business days following the date on which the Common Stock has a Fair Market
Value (as hereinafter defined) of three dollars and seventy-five cents ($3.75).
"Fair Market Value" shall mean the average closing price for the Common Stock
for three (3) consecutive days as reported by the OTC Bulletin Board, the NASDAQ
Stock Market or any stock exchange.
(c) MECHANICS OF CONVERSION. Before any holder of Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he or she shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Preferred Stock, and shall
give written notice to the Corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled am aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.
(d) CONVERSION PRICE ADJUSTMENT FOR CERTAIN SPLITS AND COMBINATIONS. The
Conversion Price of the Preferred Stock shall be subject to adjustment from time
to time as follows:
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(i) In the event the Corporation should at any time or from time to time
after the issuance date fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock, then, as
of such record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price of the Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding.
(ii) If the number of shares of Common Stock outstanding at any time after
the issuance date is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price for the Preferred Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in outstanding
shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall declare a
distribution payable in securities of other entities, evidences of indebtedness
issued by the Corporation or other entities, assets (excluding cash dividends)
or options or rights not referred to in subsection 3 (d), then, in each such
case for the purpose of this subsection 4(e), the holders of the Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of common stock of the Corporation
into which their shares of Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of the Corporation
entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 4 or
Section 3) provision shall be made so that the holders of the Preferred Stock
shall thereafter be entitled to receive upon conversion of the Preferred Stock
the number of shares of stock or other securities or property of the corporation
or otherwise, to which a holder of Common Stock deliverable upon conversion
would have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the conversion price then in effect and the number of shares
purchasable upon conversion of the Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable
(g) NO IMPAIRMENT. The Corporation will not, by amendment of its
certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
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Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
holders of the Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion of any share
or shares of the Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Preferred Stock the holder is at the time converting
into Common Stock and the number of shares of Common Stock issuable Upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Preferred Stock pursuant to this Section 4, the Corporation,
at its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time or any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property that at the time would be received upon the conversion of a share of
Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Preferred Stock, at least ten (10) days prior to the date
specified therein, a notice specifying the date an which any such record is to
be taken far the purpose of such dividend, distribution or right, and the amount
and character of ouch dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall he sufficient for such
purposes.
(k) NOTICES. Any notice required by the provisions of this Section 4 to be
given to the holders of shares of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his or her address appearing on the books of the
Corporation.
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5. VOTING RIGHTS. Except as otherwise required by law, holders of
the Preferred Stock shall have no voting rights.
6. REDEMPTION. The Corporation shall redeem, from any source of
funds legally available therefor, the Preferred Stock on such date as is three
years from the date of issuance of the Preferred Stock (the "Series A Redemption
Date"). The Corporation shall effect such redemption on the Original Redemption
Date by paying in cash in exchange for the shares of Preferred Stock to be
redeemed as sum equal to Original Issue Price (as adjusted for any stock
dividends, combinations or splits with respect to such shares).
7. PROTECTIVE PROVISIONS. Subject to the rights of a series of
preferred stock that may from time to time come into existence, so long as any
shares of Preferred Stock are outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the then outstanding shares of Preferred
Stock:
(a) alter or change the rights, preferences or privileges or the shares of
Preferred Stock so as to affect adversely the shares;
(b) increase or decrease (other than by redemption or conversion) the total
number of authorized shares of Preferred Stock;
8. STATUS OF REDEEMED OR CONVERTED STOCK. In the event any shares
of Preferred Stock shall be converted pursuant to Section 4 hereof, the shares
so redeemed or converted may, in the discretion of the Company's Board of
Directors, be canceled or issued by the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Designation this 23rd day of April, 1999.
COMPUTER MARKETPLACE, INC.
By: /s/ L. WAYNE KILEY
----------------------------------------
Name: L. Wayne Kiley
Title: President
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Exhibit G
CONTRIBUTION AGREEMENT
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
March 31, 1999, by and among, Gateway Advisors ("Gateway"), Bejan Aminifard
("Bejan"), Mosen Aminifard ("Mosen"), and Derek Wall ("Derek") (collectively,
the "Contributors") and E-Taxi, Inc., a Delaware corporation (the "Company").
For purposes of this Agreement, Gateway shall include its affiliates. The
Company and the Contributors are referred to collectively herein as the
"Parties."
RECITALS
A. Gateway, Bejan, Mosen, and Derek own 24%, 52%, 12% and 12%,
respectively, of TechStore LLC, a California limited liability company
("TechStore"), representing all of the ownership interest in TechStore, as of
the date hereof.
B. Each of the Contributors desires to contribute to the Company his
or her equity interest in TechStore (collectively, the "Contributed
Interests"), in exchange for (i) shares of common stock of the Company (the
"Common Exchange Shares"); and (ii) shares of preferred stock of the Company
(the "Series A Preferred Stock") (together, the "Exchange Shares").
C. The exchange of shares of common stock (the "Exchange") and the
subsequent acquisitions of other e-commerce companies will be effected in
preparation for the merger of the Company with and into a publicly traded
company (the "Roll-Up").
AGREEMENT
The Parties hereby agree as follows:
ARTICLE I - CONTRIBUTION AND EXCHANGE
1.1 EXCHANGE. On the date hereof (the "Exchange Date"), the
Contributors shall contribute to the Company all of their respective interests
in TechStore and the Company shall (i) issue 480,000, 1,040,000, 240,000 and
240,000 shares of common stock of the Company to Gateway, Bejan, Mosen and
Derek, respectively; and (ii) issue 96,000, 208,000, 48,000 and 48,000 shares
of the Series A Preferred Stock to Gateway, Bejan, Mosen and Derek,
respectively. The foregoing amounts of Series A Preferred Stock convert into
384,000, 832,000, 192,000, and 192,000 shares of common stock of E-Taxi,
respectively. The Series A Preferred Stock shall have the rights, preferences,
privileges and restrictions set forth in the Company's Certificate or
Incorporation, a copy of which is attached hereto as Exhibit A. (the
"Certificate"). The Company's issuance of the Common Exchange Shares, and the
issuance of the Series A Preferred Stock to each of the Contributors, shall be
the sole consideration for the Contributed Interests by the Company.
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1.2 STOCK CERTIFICATES. On the Exchange Date, the Seller shall deliver
to Buyer documents evidencing ownership in Purchased Interest (as hereinafter
defined).The Company will deliver to each Contributor on the Exchange Date a
duly issued and authenticated certificate evidencing the Common Exchange Shares
and the Series A Preferred Stock issuable to such Contributor pursuant to
Section 1.1.
ARTICLE 2 - CONTRIBUTORS' REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Each of the Contributor's represents, warrants and agrees, severally
for himself or herself, as follows:
2.1 OWNERSHIP OF CONTRIBUTED INTERESTS DELIVERED IN EXCHANGE. All
ownership interests in TechStore shall tbe delivered by the Contributor in
exchange for the Exchange Shares are owned by the Contributor, of record and
beneficially, free and clear of any pledge, lien, security interest, charge,
claim, option or encumbrance of any kind, and upon the delivery of documents
evidencing such Contributed Interests, all of the Contributor's right, title
and interest in and to such Contributed Interests shall have been contributed,
transferred and assigned to the Company free and clear of any pledge, lien,
security interest, charge, claim, option or encumbrance of any kind.
2.2 LEGEND. The certificate representing the Exchange Shares to be
issued to the Contributor hereunder shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IF SO
REGISTERED OR IF EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE AVAILABLE.
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE COMPANY HAS BEEN FURNISHED
WITH AN OPINION OF COUNSEL FOR THE HOLDER (WHICH COUNSEL SHALL BE ACCEPTABLE TO
THE COMPANY), SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, TO THE EFFECT
THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND
THE RULES AND REGULATIONS IN EFFECT THEREUNDER.
2.3 SECURITIES UNREGISTERED. The Contributor acknowledges that he or
she has been advised that (a) the Exchange Shares have not been registered
under the Securities Act of 1933, as amended, and the rules and regulations
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promulgated thereunder (the "Act"), (b) the Exchange Shares must be held
indefinitely, and the Contributor must continue to bear the economic risk of
the investment in the Exchange Shares unless they are subsequently registered
under the Act or an exemption from such registration is available, (c) there
currently is no public market for the Exchange Shares, (d) when and if Exchange
Shares can be transferred pursuant to this Agreement, Rule 144 promulgated
under the Act is not presently available with respect to the sale of any
securities of the Company, and the Company has made no covenant to make such
Rule available, (e) when and if Exchange Shares may be disposed of pursuant to
this Agreement without registration in reliance on Rule 144, such disposition
can be made only in limited amounts in accordance with the terms and conditions
of such Rule, (f) if the Rule 144 exemption is not available, public sale
without registration will require compliance with Regulation A or some other
exemption under the Act, (g) a restrictive legend in the form heretofore set
forth shall be placed on the certificates or instruments representing the
Exchange Shares, and (h) a notation shall be made in the appropriate records of
the Company indicating that the Exchange Shares are subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a stock transfer agent, appropriate stop transfer restrictions will
be issued to such transfer agent with respect to the Exchange Shares.
2.4 SALES. If any of the Exchange Shares are to be disposed of in
accordance with Rule 144 under the Act or otherwise, the Contributor shall
promptly notify the Company of such intended disposition and shall deliver to
the Company at or prior to the time of such disposition such documentation as
the Company may reasonably request in connection with such sale and, in the
case of a disposition pursuant to Rule 144, shall deliver to the Company an
executed copy of any notice on Form 144 required to be filed with the
Securities and Exchange Commission.
2.5 INVESTMENT REPRESENTATIONS. Contributor is acquiring the Exchange
Shares for investment for his or her own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof. The
Contributor further represents and warrants that (a) Contributor has been given
the opportunity to obtain any information or documents relating to (and to ask
questions and receive answers about such documents) the Company and the business
and prospects of the Company which Contributor deems necessary to evaluate the
merits and risks related to his investment in the Exchange Shares and to verify
the information received; (b) Contributor's financial condition is such that
Contributor can afford to bear the economic risk of holding the unregistered
Exchange Shares for an indefinite period of time and has adequate means for
providing for his current needs and personal contingencies; (c) Contributor can
afford to suffer a complete loss of the investment in the Exchange Shares; (d)
all information which Contributor has provided to the Company concerning
Contributor and his financial position is correct and complete as of the date of
this Agreement; (e) Contributor understands and has taken cognizance of all risk
factors related to the acquisition of the Exchange Shares; (f) Contributor's
knowledge and experience in financial and business matters are such that
Contributor is capable of evaluating the merits and risks of Contributor's
acquisition of the Exchange Shares as contemplated by this Agreement.
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ARTICLE 3 - ADDITIONAL REPRESENTATIONS OF CONTRIBUTORS
Each of Bejan, Mosen, and Derek represents, warrants and agrees,
severally for himself or herself, as follows, subject to the Representations
Schedule attached hereto as an Exhibit and incorporated by reference:
3.1. PRESIDENT OF TECHSTORE. Derek Wall is the duly elected President
of TechStore.
3.2. BUSINESS. TechStore is in the business of selling computer
related equipment and software over the internet (the "Business").
3.3. ORGANIZATION AND GOOD STANDING. TechStore is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of California and has the corporate power and authority to own,
lease and operate its properties and to transact its business as it is now
being conducted, holds all material franchises, licenses and permits necessary
and required therefor, and is duly qualified or licensed to do business and is
in good standing in each jurisdiction where the nature of the business
conducted by it or the ownership, lease or operation of its properties
requires a license or qualification.
3.4. CONSENTS AND APPROVALS. Except as set forth in Schedule 3.4,
execution and delivery of this Agreement and the transactions contemplated
hereby will not: (a) violate any provision of the Articles of Organization or
Bylaws of TechStore; (b) violate any statute, rule, regulation, order or
decree of any public body or authority (including governmental self-regulatory
agencies) by which TechStore, any of its properties or assets, or the Seller
may be bound; (c) require any filing with or permit, consent or approval of
any public body or authority (including non-governmental self-regulatory
agencies); or (d)result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, pledge, indenture,
license, franchise, permit, agreement or other instrument or obligation to
which TechStore or the Seller, or any of the properties or assets of TechStore
or any shareholder, may be bound.
3.5. CAPITALIZATION. Immediately following the consummation of the
Purchase Agreements, by and between each of Bejan and TechStore and Gateway,
dated as of the date hereof (the "Purchase Agreements") and prior to the
consummation of the Roll-Up Transactions, all the issued and outstanding
Members' interest, on a percentage basis, will be as follows: Gateway=24%,
Bejan=52%, Mosen=12%, and Derek=12%. Since December 1, 1998, and except for
interests issued to Gateway, no ownership interest in TechStore has been
issued or have been transferred to or from TechStore. All issued and
outstanding ownership interests in TechStore have been validly issued and are
fully paid and non-assessable, have not been issued in violation of and are
not currently subject to, any preemptive rights. Except as disclosed in
Schedule 3.5, there are not, as of the date hereof, any outstanding or
authorized convertible securities, subscriptions, options, warrants, calls,
rights, commitments, or any other agreements of any character to which
TechStore is a party that, directly
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orindirectly (i) obligate TechStore to issue any ownership interests or any
securities convertible into, or exercisable or exchangeable for, or evidencing
the right to subscribe for any shares of capital stock, (ii)call for or relate
to the sale, pledge, transfer or other disposition by TechStore of its
ownership interests, or (iii)relate to the voting or control of the ownership
interests.
3.6 FINANCIAL STATEMENTS.
(a)TechStore has previously provided to the
Company audited financial statements of TechStore
since its inception, including Balance Sheets as of
December 31, 1998, and the related Statements of
Operations and Statements of Cash Flow for the year
then ended (collectively, "TechStore Financial
Statements").
(b)TechStore Financial Statements have been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis
(except as may be indicated therein or in the
accompanying notes or schedules thereto) and fairly
present the financial position of TechStore as of
the dates thereof and the results of operations and
changes in financial position of TechStore for then
ended, subject to any other adjustments described
therein.
3.7. STATUS OF LIABILITIES. Since December 1, 1998, and except as set
forth on Schedule 3.7, TechStore has paid all normal and recurring
installments (i) of bank and other long term debt, (ii) under leases and
contractual obligations and (iii) any and all other amounts due and payable to
any persons or entities. TechStore does not have any liabilities (whether
absolute, accrued, contingent, unliquidated or otherwise) except (a)
liabilities, obligations or contingencies which are accrues or reserved
against in the balance sheet of TechStore as of December 31, 1998 ("TechStore
Balance Sheet"), (b) normally recurring liabilities incurred after the date of
the TechStore Balance Sheet in the ordinary course of business and consistent
with past practice, and (c) liabilities incurred after the date of the
TechStore Balance Sheet not incurred in the ordinary course of business which
do not exceed $25,000.
3.8. ASSETS. Except as set forth in Schedule 3.8, TechStore, has good,
valid and marketable title to all of the assets, properties (tangible and
intangible) and rights used in or related to the business as presently
conducted (the "Assets"), free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions, and encumbrances of any
nature whatsoever ("Encumbrances"), except for liens for current taxes not yet
due and payable.
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3.9. TAXES AND TAX RETURNS. Except as set forth in Schedule 3.9,
TechStore has filed or caused to be filed on a timely basis all federal,
state, local, foreign and other tax returns, reports and declarations
(collectively, "Tax Returns") required to be filed by TechStore in connection
with the Business. All Tax Returns filed by or on behalf of TechStore in
connection with the Business are materially complete in all respects. To the
knowledge of each of the Contributors, TechStore has paid all income,
estimated, excise, franchise, gross receipts, capital stock, profits, stamp,
occupation, sales, use, transfer, value added, property (whether real,
personal or mixed), employment, unemployment, disability, withholding, social
security, workers' compensation and other taxes, and interest, penalties,
fines, costs and assessments (collectively, "Taxes"), due and payable with
respect to the periods covered by such Tax Returns (whether or not reflected
thereon). To the knowledge of each of the Contributors, there are no tax liens
on any of the properties or assets, real, personal or mixed, tangible or
intangible, of TechStore. Since January 1, 1999, TechStore has not incurred
any Tax liability in connection with the Business other than in the ordinary
course of business. No deficiency in Taxes for any period has been asserted in
writing by any taxing authority which remains unpaid at the date hereof, no
written inquiries or notices have been received by TechStore from any taxing
authority with respect to possible claims for Taxes, each Contributor has no
reason to believe or has knowledge that such an inquiry or notice is pending
or threatened, and, to the knowledge of each Contributor, there is no basis
for additional claims or assessments for Taxes. TechStore has not agreed to
the extension of the statute of limitations with respect to any Tax Return or
tax period.
3.10. MATERIAL CHANGES. Since January 1, 1999 and except as set forth
in Schedule 3.10, there has not been (i) any material adverse change in the
Assets, the operations, prospects, or condition (financial or otherwise) of
the Business or of TechStore, (ii) any damage, destruction or loss, whether or
not covered by insurance, affecting the Assets, the operations, prospects or
condition (financial or otherwise) of the Business, (iii) any material
increase in the rate of compensation payable or to become payable by either of
TechStore to any of its employees engaged in the conduct of the Business or
any material increase in the rate of the amounts paid, payable or to become
payable under any bonus, insurance, pension or other benefit plan, or any
arrangement made for or with any such employees, (iv) any material actual or
threatened trouble or disruption of TechStore's relations with its agents,
customers, or suppliers, with respect to the Business, (v) any resignations or
threatened resignations of employees of the Business with salaries exceeding
$50,000; or (vi) any material liability incurred with respect to the Business,
other than liabilities incurred in the ordinary course of business consistent
with past practice, or any lien or encumbrance discharged or satisfied with
respect to the Business or the Assets, or any failure to pay or discharge when
due any liability of which the failure to pay or discharge has caused or will
cause any material damage or risk of material loss to the Business or any of
the Assets. There has been no amendment, waiver or termination of any material
agreement, contract, commitment, lease, plan, permit, authorization or
arrangement ("Contract or License") which has been delivered to the Company in
connection with its due diligence review, or any other Contract or License,
which materially relates to TechStore or the Business, or any waiver of any
rights of substantial value with respect to the Business or the Assets,
whether or not in the ordinary course of business.
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3.11. LEGAL PROCEEDINGS; COMPLIANCE WITH LAW.
(a)Except as set forth in Schedule 3.11(a), to the
knowledge of each of the Contributors, there is no lawsuit, action,
arbitration, administrative or other proceeding, criminal prosecution or
governmental investigation or inquiry ("Litigation") that is pending or, to
the knowledge of each of the Contributors, threatened against or related to or
otherwise affecting TechStore, the Business, the Assets or any property leased
or rented to TechStore. There has been no material Default (defined below)
under any Regulations (defined below) applicable to TechStore with respect to
the Business or the Assets, including Regulations relating to pollution or
protection of the environment. As used in this Agreement, "Default" means (a)
a breach, default or violation, or (b) the occurrence of an event that with
the passage of time or the giving of notice, or both, would constitute a
breach, default or violation. As used in this Agreement, "Regulation" means
any statute, law, ordinance, regulation, order or rule of any federal, state,
local, foreign or other governmental agency or body or of any other type of
regulatory body, including, without limitation, those covering environmental,
energy, safety, health, transportation, bribery, record keeping, zoning,
anti-discrimination, antitrust, wage and hour, and price and wage control
matters.
(b) Except as set forth in Schedule 3.11(b) and without
limiting the generality of subsection (a), there has not been at any time
since TechStore's inception, or otherwise, to the knowledge of each of the
Contributors (i) any Environmental Condition (defined below) at or relating to
the premises at which the Business has been conducted, or at or relating to
any property owned, leased or operated by TechStore (or any predecessor
thereof) with respect to the Business at any time, or at or relating to any
property at which wastes generated by TechStore or the Business have been
deposited or disposed of, nor have TechStore received written notice of any
such Environmental Condition, or (ii) any written notice received by TechStore
that TechStore violated any Regulation or Environmental Law governing the
shipment or storage of hazardous materials. "Environmental Condition" means
any condition or circumstance, whether created by TechStore or any third
party, that (i) requires abatement or correction under an Environmental Law
(defined below), (ii) is reasonably likely to give rise to any civil or
criminal liability under an Environmental Law, or (iii) is reasonably likely
to create a public or private nuisance, including, but not limited to, the
presence of asbestos, PCBs, hazardous substances, radioactive waste or radon.
"Environmental Law" includes all Statutes and Regulations relating to
pollution or protection of the environment as well as any principles of common
law under which a party may be held liable for the release or discharge of any
materials into the environment including, but not limited to, nuisance and
trespass.
(c) Except as set forth in Schedule 3.11(c), TechStore has
obtained all governmental permits, licenses, registrations, certificates of
occupancy, approval and other authorizations (the "Governmental Permits") that
are required for the complete operation of the Business as presently operated
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and that if not obtained could have a material adverse effect on the Business.
To the knowledge of each of the Contributors all of the material Governmental
Permits are presently in full force, and, to the knowledge of each of the
Contributors, no revocation, modification, cancellation or withdrawal thereof
has been threatened. TechStore has filed such timely and complete renewal
applications as may be required with respect to their Governmental Permits
that if not obtained would have a material adverse effect on the Business.
TechStore are in full compliance with their Governmental Permits.
3.12. INTELLECTUAL PROPERTY.
(a) Except as set forth in Schedule 3.12(a), TechStore owns
or has the legal right to use without limitation and payment of royalties, the
patents, patent applications, inventions, copyrights, trademarks, trade names,
licenses, software (whether existing and under development) and other legally
protectable rights used in the Business (the "Intellectual Properties"). All
the Intellectual Properties are valid and in good standing, freely assignable,
and are subject to no material liens, charges, contractual rights or, to the
knowledge of each of the Contributors, claims or other interests of any other
person and are adequate and sufficient to permit TechStore to conduct the
Business. No rights under any patents, inventions, copyrights, trademarks,
trade names, licenses or other legally protectable rights owned solely or
partially by others, including directors, officers or employees of TechStore,
are required by TechStore in connection with the conduct of the Business, and
the consummation of the transactions contemplated by this Agreement will not
materially alter or impair any such rights.
(b) Except as set forth in Schedule 3.12(b), each of the
Contributors has no knowledge of, and has received no notice to the effect
that any product TechStore manufactures or sells or distributes or any
services TechStore provides, or the marketing or use by TechStore of any such
product or service, may infringe any patent, trademark, trade name, copyright
or legally protectable right of another. All trade secrets, if any, owned or
used by TechStore are, to the knowledge of each Contributor, owned free of any
adverse claims, rights or encumbrances as to its exclusive rights thereto, and
TechStore has used reasonable efforts to protect its rights to continued
secrecy thereof.
3.13. DISTRIBUTORS, CUSTOMERS OR SUPPLIERS. Neither of the
Contributors is aware that any customer, distributor or supplier intends to
cease doing business with TechStore or to alter materially the amount of
business done with TechStore due to consummation of the transactions
contemplated by this Agreement or any other reason.
3.14. REAL PROPERTY.
(a) TechStore operates the Business on parcels of real
property located at 14 Commercial Blvd., Novato, California 94949
(collectively, the "Leased Parcels").
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(b) TechStore has not received written notice of any
governmental assessments made against the Leased Parcels which are unpaid
(except any ad valorem taxes for the current tax year which are due or payable
and not delinquent).
(c) TechStore has not received any written notice of any
violation of any laws, rules, regulations or ordinances (including, without
limitation, zoning and environmental laws, regulations or ordinances) relating
to the Leased Parcels or requesting or requiring the performance of any
repairs, alterations or other work in order so to comply.
(d) TechStore has not received written notice of any
assessment for public improvements or otherwise which is due and remains
unpaid with respect to any portion of the Leased Parcels and TechStore has not
received any written notice of any currently proposed or pending assessment
for public improvements or otherwise with respect to the Leased Parcels.
(e) The plumbing, heating, electrical, ventilation and air
conditioning systems, elevator systems and all other mechanical systems and
equipment at the buildings and other improvements constituting of the Leased
Parcels are in good working order, subject to normal wear and tear and the age
and condition of the Leased Parcels.
(f) To the knowledge of each Contributor, the Leased
Parcels (or uses to which they are put) materially conform in all respects
with all applicable zoning regulations or ordinances.
3.15. LICENSES. TechStore has the right to use all computer software,
including all property rights constituting part of the computer software, used
in connection with and material to the operation of the Business (the
"Computer Software").
3.16. ACCOUNTS RECEIVABLE; INVENTORIES AND EQUIPMENT. Except as set
forth in Schedule 3.16, the accounts receivable of the Business are in their
entirety valid accounts receivable, arising in the ordinary course of
business. The inventories and equipment of the Business are in all material
respects merchantable and fully usable in the ordinary course of business.
3.17. COMPENSATION. Each of the Contributors warrants that the
transactions contemplated by this Agreement will not result in any liability
for severance or separation pay to any employee or independent contractor of
the Business.
3.18. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 3.18,
TechStore does not maintain or sponsor, nor are they required to make
contributions to, any pension, profit-sharing, savings, bonus, incentive or
deferred compensation, severance pay, medical, life insurance, welfare or
other employee benefit plan. All pension, profit-sharing, savings, bonus,
incentive or deferred compensation, severance pay, medical, life insurance,
welfare or other employee benefit plans within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (hereinafter
referred to as "ERISA"), in which the employees participate (such plans and
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related trust, insurance and annuity contracts, funding media and related
agreements and arrangements being hereinafter referred to as the "Benefit
Plans") materially comply with all requirements of the Department of Labor and
the Internal Revenue Service, and with all other applicable laws, and
TechStore has not taken or failed to take any action with respect to the
Benefit Plans which might create any liability on the part of the Contributors
or the Company. Each "fiduciary" (within the meaning of Section 3(21)(A) of
ERISA) as to each Benefit Plan has materially complied with all requirements
of ERISA and all other applicable laws in respect of each such Benefit Plan.
In addition:
(i) TechStore does not maintain, sponsor or contribute to,
and has never maintained, sponsored or contributed to, any "defined benefit
plan" (within the meaning of Section 3 (35) of ERISA);
(ii) TechStore does not maintain, sponsor, contribute to,
and has never maintained, sponsored or contributed to, any "Multiemployer
Plan" (within the meaning of Section 3(37) or 4001(a)(3) of ERISA;
(iii) Except as set forth on Schedule 3.18(iii), TechStore
does not maintain, sponsor or contribute to, and has never maintained,
sponsored or contributed to, any "defined contribution plan" (within the
meaning of Section 3(34),of ERISA);
(iv) other than claims in the ordinary course for benefits
with respect to the Benefit Plans, to the knowledge of each Contributor there
are no actions, suits or claims (including claims for income Taxes, interest,
penalties, fines or excise Taxes with respect thereto) pending with respect to
any Benefit Plan, or any circumstances which might give rise to any such
action, suit or claim (including claims for income Taxes, interest, penalties,
fines or excise Taxes with respect thereto);
(v) all materially required reports, returns and similar
documents with respect to the Benefit Plans required to be filed with any
governmental agency have been so filed on or before their due date; or
(vi) TechStore has no obligation to provide health or other
welfare benefits to former, retired or terminated employees, except as
specifically required under Section 4980B of the Code or Section 601 of ERISA.
TechStore has materially complied with the notice and continuation
requirements of Section 4980B of the Code or Section 601 of ERISA and the
regulations thereunder.
3.19. LABOR RELATIONS AND EMPLOYMENT MATTERS.
(a) LABOR RELATIONS. Except as set forth in Schedule
3.19(a), none of TechStore's employees is represented by any labor union.
There have been no material violations of any federal, state or local
statutes, laws, ordinances, rules, regulations, orders or directives with
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respect to the employment of individuals by, or the employment practices or
work conditions of TechStore in connection with the Business or the terms and
conditions of employment or wages and hours. Except as set forth in Schedule
3.19(a), TechStore, in connection with the Business, is not engaged in any
unfair labor practice or other unlawful employment practice and there has not
been, nor to the knowledge of each of the Contributors is there threatened or
contemplated any charges of unfair labor practices or other employee-related
complaints or investigations pending or threatened against TechStore before
the National Labor Relations Board, the Equal Employment Opportunity
Commission, the Occupational Safety and Health Review Commission, the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, the Immigration and
Naturalization Service, the Department of Labor, the state or local equal
employment opportunity authority, state department of labor (or labor
commission or wage and hour occupational safety and health authority, state
authority), state workers' compensation authority, state unemployment
insurance/ compensation authority or any other federal, state, local or other
governmental authority. Except as set forth in Schedule 3.19(a), there is no
strike, picketing, slowdown, work stoppage, grievance or organizational
attempt pending against TechStore nor, to the knowledge of each of the
Contributors, threatened against or involving the Business. No issue with
respect to union representation is pending against TechStore nor to the
knowledge of each of the Contributors, threatened with respect to the
employees of the Business. Except as set forth in Schedule 3.19(a), no union
or collective bargaining unit or other labor organization has ever been
certified or recognized by the Business as the representative of any of the
employees of the Business.
(b) NO LITIGATION. Except as set forth in Schedule 3.19(b),
to the best of each Contributor's knowledge, no wrongful discharge, breach of
contract (written, oral or implied), discrimination, defamation or other
employment-related litigation of any kind is pending or threatened against
TechStore, nor does any basis therefor exist.
(c) COMPLIANCE WITH IRCA AND COBRA. Each of the
Contributors warrants that TechStore has complied with all requirements and
regulations under the Immigration Reform and Control Act of 1986 ("IRCA"),
concerning the review, collection and retention of evidence of the legal right
of each of TechStore's covered employees to live and work in the United States
(including, but not limited to, Immigration and Naturalization Service "I-9"
forms), and under Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), concerning providing eligible employees and dependents notice of
their rights to continue group health insurance coverage, if any, at rates
permitted by COBRA in the event of certain qualifying events.
3.20. INCREASES IN COMPENSATION OR BENEFITS. Subsequent to December
1, 1998 and except as set forth in Schedule 3.20, there have been no increases
in the compensation of any TechStore's employees' current salary payable or to
become payable to any of the employees of TechStore in connection with the
Business and there have been no payments or provisions for any awards,
bonuses, stock options, loans, profit sharing, pension, retirement or welfare
plans or similar or other disbursements or arrangements for or on behalf of
such employees (or related parties thereof), in each case, other than (i)
pursuant to currently existing plans or arrangements, or (ii) as was required
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from time to time by governmental legislation affecting wages. All bonuses
heretofore granted to employees of the Business have been paid in full to such
employees.
3.21. INSURANCE. TechStore, in connection with the Business,
maintains insurance policies covering all the material Assets and properties
of the Business and the various occurrences that may arise in connection with
the operation of the Business. Such policies are in full force and effect and
no premiums are more than thirty (30) days past due. TechStore, in connection
with the Business, has complied with all the material provisions of such
policies. To the knowledge of each Contributor, such insurance is of
comparable amounts and coverage as that which companies engaged in similar
businesses maintain in accordance with reasonable business practices. Each of
the Contributors has no knowledge of any written notices of any pending or
threatened termination or premium increases with respect to any of such
policies. Neither TechStore, in connection with the Business, nor the Business
has had any casualty loss or occurrence which may give rise to any claim of
any kind not covered by insurance and each of the Contributors has no
knowledge of any occurrence which may give rise to any claim of any kind not
covered by insurance, subject to a reasonable deductible. To the knowledge of
each Contributor, all claims against TechStore, in connection with the
Business, or the Business covered by insurance have been reported to the
insurance carrier on a timely basis. To the knowledge of each Contributor,
none of the insurance policies of TechStore, in connection with the Business,
or the Business will terminate or be adversely affected by the consummation of
the transactions contemplated by this Agreement.
3.22. CONDUCT OF BUSINESS. TechStore is not restricted from conducting
the Business in any location by agreement or court decree.
3.23. ACCOUNTS PAYABLE, INDEBTEDNESS, ETC. The accounts and notes
payable and accrued expenses reflected on the most recent balance sheet of
TechStore and the accounts and notes payable and accrued expenses incurred by
TechStore in connection with the Business after the date of such balance sheet
are in all respects valid claims that arose in the ordinary course of
business. Since December 31, 1998, the accounts and notes payable, accrued
expenses and debts of the Contributor in connection with the Business have
been paid in a manner consistent with past practice.
3.24. LICENSURE, ETC. To the knowledge of each Contributor, each
individual employed or contracted with by TechStore in connection with the
Business, who is required to be licensed by any governmental entity to perform
his or her job services is duly licensed to provide such services and is
otherwise in material compliance with all federal, state and local laws, rules
and regulations relating to such professional licensure and otherwise meets
the qualifications to provide such services.
3.25. BOOKS AND RECORDS. The books and records of TechStore are
complete and correct in all material respects and have been maintained in
accordance with good business practices.
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3.26. ACCURACY OF INFORMATION. No representation or warranty by the
Contributors in this Agreement and no information contained herein or
otherwise delivered to the Company contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading.
3.27. TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth in
Schedule 3.27, none of the directors or officers of TechStore, nor any of the
Contributors or members of their respective families, is a party to any
transaction with TechStore, including, without limitation, any contract,
agreement or other arrangement (i)providing for the furnishing of services by,
(ii)providing for the rental of real estate or personal property from, or
(iii) otherwise requiring payments (other than for services as an officer,
director or employee) to any such person or to any corporation, partnership,
trust or other entity in which any such person has, directly or indirectly, an
interest as an officer, director, trustee, stockholder or partner. There is no
property, tangible or intangible, real or personal, valued in excess of
$10,000 which is (a) owned by any Contributor or member of his family, any
current or former officer, director or stockholder of the Company, or persons
not dealing with any of them at arms length, and (b) which is presently used
by TechStore in connection with its business.
3.28. NO BROKERS. Neither of the Contributors has entered into any
agreement, arrangement or understanding with any person or firm which will
result in an obligation of any of the parties to this Agreement to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
ARTICLE 4 - THE COMPANY'S REPRESENTATIONS AND WARRANTIES
As a condition to the performance by the Contributors of their
obligations under this Agreement, the Company hereby represents and warrants
to the Contributors as follows as of the execution date of this Agreement:
4.1. EXECUTION AND DELIVERY. This Agreement has been duly executed and
delivered by the Company and is valid and binding obligation enforceable
against the Company in accordance with its terms.
4.2. CONSENTS AND APPROVALS. Except for filings required by applicable
securities laws, no consent, approval or authorization of, or declaration,
filing or registration with, any United States federal or state governmental
or regulatory authority is required to be made or obtained by the Company in
connection with the execution, delivery and performance of this Agreement and
the consummation of the acquisition of the Contributed Interests.
4.3. NO BROKERS. The Company has not employed, and is not subject to
the valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission in connection with such transactions.
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4.4. NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the sale of the Contributed Interests
will result in a violation by the Company of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award.
4.5. ACQUISITION FOR INVESTMENT. The Contributed Interests being
purchased by the Company hereunder are being purchased by the Company in good
faith for investment for its own account and not with a view to a distribution
or resale of any of such Contributed Interests in violation of any applicable
securities laws, subject nevertheless to any requirement at law that the
disposition of the Company's property shall at all times be within the
Company's control.
4.6. ACCREDITED INVESTOR. The Company acknowledges that it is an
"accredited investor" as defined in Rule 501 under the Securities Act of 1933,
as amended (the "Securities Act").
4.7. LEGEND. The certificates representing the Contributed Interests
to be delivered to the Company hereunder shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS AND MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IF SO
REGISTERED OR IF EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE AVAILABLE.
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER (WHICH COUNSEL SHALL BE
ACCEPTABLE TO THE COMPANY), SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY,
TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER."
4.8. SECURITIES UNREGISTERED. The Company acknowledges that it has
been advised that (a) the Contributed Interests to be delivered to the Company
hereunder will not have been registered under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Act"), (b)
such Contributed Interests must be held indefinitely, and the Company must
continue to bear the economic risk of the investment in such Contributed
Interests unless they are subsequently registered under the Act or an
exemption from such registration is available, (c) there may not be a public
market for such Contributed Interests, (d) Rule 144 promulgated under the Act
is not presently available with respect to the sale of any securities of the
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Company, and the Company has made no covenant to make such Rule available, (e)
when and if the Contributed Interests may be disposed of without registration
in reliance on Rule 144, such disposition can be made only in limited amounts
in accordance with the terms and conditions of such Rule, (f) if the Rule 144
exemption is not available, public sale without registration will require
compliance with Regulation A or some other exemption under the Act and (g) a
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Contributed Interests.
4.9. ISSUANCE OF EXCHANGE SHARES. The Exchange Shares have been duly
authorized by all necessary corporate action on the part of the Company and
are validly issued, fully paid, and non-assessable, and each of the
Contributors will acquire valid title to such shares, free and clear of any
encumbrances.
4.10. STOCK. All issued and outstanding shares of Company Common Stock
and the Series A Preferred Stock have been validly issued and are fully paid
and non-assessable, have not been issued in violation of and are not currently
subject to, any preemptive rights.
4.11. BOOKS AND RECORDS. The books and records of the Company are
complete and correct in all material respects and have been maintained in
accordance with good business practices.
4.12. ACCURACY OF INFORMATION. No representation or warranty by the
Company in this Agreement and no information contained herein or otherwise
delivered to the Contributors contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE 5 - ROLL-UP COVENANT OF THE CONTRIBUTORS
Each Contributor hereby covenants to the Company to use the
Contributor's good faith, reasonable efforts to effect the Roll-Up as soon as
practicable.
ARTICLE 6 - CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF THE CONTRIBUTORS AND THE COMPANY. The
respective obligations of each party to consummate the Exchange shall be subject
to the fulfillment, at or prior to the Closing, of the following conditions:
(a) NO INJUNCTION. Neither the Company nor
TechStore shall be suject any order, decree or
injunction of a court of compenent jurisdiction
within the Unitd States which i) prevents or
materially delays the consummaion of the Exchange,
or (ii) would impose any material limitation on the
ability of the Company effectively to exercise full
rights of
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ownership of TechStore or the assets or business of
TechStore.
(b) NO GOVERNMENTAL PROCEEDING OR LITIGATION.
No investigation and no suit, action or proceeding
before any court or any governmental or regulatory
authority shall be pending or threatenened by any
state or federal governmental or regulatory
authority against the Company, TechStore, or any of
their affiliates, associates, officers or directors
seeking to restrain, prevent or change in any
material respect the transaction contemplated hereby
or seeking damages in connection with such
transactions.
(c) CONSENTS. TechStore shall have
obtained all permits, authorizations, consents and
approvals referred to in Section 3.4 hereof in form
and substance satisfactory to such parties, and they
shall have received evidence satisfactory to them of
the receipt of such permits, authorizations,
consents and approvals.
(d) TRANSACTION. A definitive agreement
to merge with and into Computer Marketplace, Inc. or
TriStep shall be executed.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Exchange shall be subject to the fulfillment, at or
prior to the Closing, of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of the Contributors
contained herein shall be true and correct in all
material respects on the date of this Agreement, and
(except as to representations that specify a
particular time) on the Closing Date as though such
representations and warranties were made on that
date.
(b) PERFORMANCE. The Contributors shall have performed
and complied in all material respects with all
agreements, obligations and conditions required by
this Agreement to be performed or complied with by
them on or prior to the Closing.
(c) ABSENCE OF MATERIAL ADVERSE CHANGE. Since December
31, 1998, there has been no material adverse change,
nor the occurrence of any event reasonably likely to
cause a material adverse change, in the business,
operations, properties, assets, liabilities,
condition (financial or otherwise), or future
prospects of the TechStore, whether or not occurring
in the ordinary course of business, except for any
change directly resulting from action of TechStore
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that was disclosed to the Company and to which the
Company consented.
6.3 CONDITIONS TO OBLIGATIONS OF THE CONTRIBUTORS. The obligations of
the Contributors to consummate the Exchange shall be subject to the fulfillment
at or prior to the Closing of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of the Company
contained herein shall be true and correct in all
material respects on the date of this Agreement and
on the Closing Date (except as to representations
that specify a particular time) as though such
representations and warranties were made on that
date.
(b) PERFORMANCE. The Company shall have performed and
complied in all material respects with all
agreements obligations and conditions required by
this Agreement to be performed or complied with by
them on or prior to the Closing.
ARTICLE 7 - CLOSING
Subject to the provisions of Articles 6, the closing of the Exchange
(the "Closing") shall take place at the offices of Gateway Advisors, Inc., 675
North 1st Street, 10th Floor, San Jose, California, at 11:00 a.m., on March
31, 1999, or at such other time and place as the Contributors and the Company
mutually agree upon orally or in writing (which time and place are designated
as the "Closing") The date on which the Closing actually occurs is herein
referred to as the "Closing Date."
ARTICLE 8 - MISCELLANEOUS
8.1 BINDING EFFECT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
heirs, legal representatives, successors and assigns.
8.2 AMENDMENT. This Agreement may be amended only by a written
instrument signed by the Parties hereto which specifically states that it is
amending this Agreement.
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8.3 APPLICABLE LAW. The laws of the State of California shall govern
the interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
8.4 NOTICES. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid, to the Party to whom it is directed at the address set forth
below each party's signature, or such other address as the Company shall have
specified by notice in writing to the Contributors or an Contributor shall
have specified by notice in writing to the Company.
8.5 RECAPITALIZATIONS, ETC. The provisions of this Agreement shall
apply, to the full extent set forth herein with respect to the Exchange
Shares, to any and all shares of capital stock of the Company or any capital
stock, partnership units or any other security evidencing ownership interests
in any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise) which may be issued in respect of, in exchange
for, or in substitution of the Common Stock by reason of any stock dividend,
split, reverse split, combination, recapitalization, liquidation,
reclassification, merger, consolidation or otherwise.
8.6 REMEDIES. The Parties acknowledge that it would be impossible to
fix money damages and that violations of this Agreement will cause irreparable
injury for which adequate remedy at law is not available and, therefore, this
Agreement must be enforced by specific performance or injunctive relief. The
Parties agree that any Party may, in its sole discretion, apply to any court
of competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable law, each Party waives any objection or defense to the imposition
of such relief. Nothing herein shall be construed to prohibit any party from
bringing any action for damages in addition to an action for specific
performance or an injunction for a breach of this Agreement.
8.7 DOMAIN NAMES. The Parties hereto agree and acknowledge that the
following domain names are the personal property of Bejan Aminifard:
Sharam.com, mosen.com, mohsen.com, houtsma.com, mswallet.com,
techdeveloper.com, techcompare.com, techjournal.com, paid2much.com,
paidtoomuch.com, paidtomuch.com, msnstore.com, intelliprice.com,
inteliprice.com, builditbest.com, and vwallet.com.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date hereof.
CONTRIBUTORS:
E-Taxi, Inc.:
- -------------------------------------------
Gateway Advisors Inc.
By:___________________________
Robert M. Wallace
President
- -------------------------------------------
Bejan Aminifard
- -------------------------------------------
Mosen Aminifard
- -------------------------------------------
Derek Wall
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