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As filed with the Securities & Exchange Commission on September 2, 1999
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_________________________
ONLINE SYSTEM SERVICES, INC. (d/b/a/ Webb Interactive Services, Inc.*)
(Exact name of issuer as specified in its charter)
Colorado 84-1293864
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
(303) 296-9200
(Address and telephone number of principal executive offices)
_________________________
R. Steven Adams
Online System Services, Inc.
1800 Glenarm Place, Suite 700
Denver, Colorado 80202
(303) 296-9200
(Name, address and telephone number of agent for service)
Copy to:
Lindley S. Branson
Steven J. Price
Gray, Plant, Mooty, Mooty & Bennett, P.A.
33 South Sixth Street
3400 City Center
Minneapolis, Minnesota 55402
(612) 343-2800
_________________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for same offering. [_]_______________________________________________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for same offering. [_]____________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of securities Amount to be Proposed maximum Proposed maximum aggregate Amount of
to be registered registered offering price (1) offering price (1) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value (2) 907,975 $10.00 $ 9,079,750 $2,524.17
Common Stock, no par value (3) 240,420 $10.00 $ 2,404,200 $ 668.37
----------------- -------------------------- ------------------
Total 1,148,395 $11,483,950 $3,192.54
</TABLE>
_______________________________
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of Regulation C as of the close of the market on
August 26, 1999.
(2) Common stock and convertible securities issued by OSS pursuant to conversion
of securities of Durand Communications, Inc. ("DCI") pursuant to the terms
of an Agreement and Plan of Merger between OSS, Durand Acquisition
Corporation, and DCI dated March 19, 1998 (the "Merger") and as
compensation.
(3) Common stock issuable by OSS upon conversion of options and warrants to
purchase common stock of OSS issued pursuant to the terms of the Merger.
_______________________________
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
* We are in the process of changing our name to Webb Interactive Services, Inc.
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PROSPECTUS
ONLINE SYSTEM SERVICES, INC.
This is a public offering of a maximum of 1,148,395 shares of common stock
of Online System Services, Inc. The selling shareholders are offering all of the
shares to be sold. We will not receive any of the proceeds from the offer and
sale of the shares, however, 240,420 of the shares offered by the selling
shareholders are issuable upon the exercise of issued and outstanding
transferable options and warrants of OSS at various exercise prices. If all of
these options and warrants are exercised in full, we will receive proceeds of
$2,217,692.
The Nasdaq SmallCap Market lists our common stock under the symbol WEBB.
Investing in our common stock involves risks. You should not purchase our
common stock unless you can afford to lose your entire investment. See "Risk
Factors" beginning on page 4 of this prospectus.
Because the selling shareholders will offer and sell the shares at various
times, we have not included in this prospectus information about the price to
the public of the shares or the proceeds to the selling shareholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed on the
adequacy of the disclosures in this prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is September 2, 1999.
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ONLINE SYSTEM SERVICES, INC.
Online System Services, Inc. (d/b/a Webb Interactive Services, Inc.)
(NASDAQ: WEBB) ("OSS" or "Webb") is developing a new generation of Internet
applications that simplify and support e-commerce transactions in local markets.
Our products provide an interactive framework of local commerce and community-
based services comprised of publishing content management, community-building
and communications. Branded CommunityWare/XML, our products generally are
offered on a private-labeled, application service basis through high-volume
distribution partners such as yellow page publishers, newspapers, city guides
and search engines.
To date, we have generated revenues through the sale of design and
consulting services for Web site development and network engineering services,
resale of software licenses, mark-ups on computer hardware and software sold to
customers, maintenance fees charged to customers to maintain computer hardware
and Web sites, license fees based on a percentage of revenues from our products
and services, training course fees, and monthly fees paid by customers for
Internet access which we have provided. We commenced sales in February 1995 and
have incurred losses from operations since inception. At June 30, 1999, we had
an accumulated deficit of $30,620,542. The reports of our independent public
accountants for the years ended December 31, 1998 and 1997 contained a paragraph
noting substantial doubt regarding our ability to continue as a going concern.
Based on our current projections, we have cash on hand at August 27, 1999,
which will allow us to operate through February, 1999. Accordingly, we will
need to raise additional capital, which could involve the issuance of dilutive
equity securities and/or reduce our operating activity to conserve cash.
Prior to the third quarter of 1997, our focus generally was on three
markets: general Web site development, maintenance and hosting; rural or small
market Internet service providers ("ISPs"); and healthcare information services
and continuing medical education. Each of these activities involved, to varying
degrees, the building of online communities and the development of tools and
services to allow for the building of strategic and customized Web sites. As an
outgrowth of these activities, since mid 1997, our business has evolved to the
development of online communities and more recently, the development of Internet
applications that simplify and support e-commerce transactions in local markets.
Our application services are being developed to solve two of the largest
problems in the local online market; the failure of merchants to have their web
sites found by their target customers, and the inability of customers to find
merchants, compare products and services, and ask questions, or conduct
transactions such as making an appointment or requesting a bid.
The opportunity to connect buyers and sellers in the rapidly emerging local
online market is significant. The Kelsey Group estimates that the number of
U.S. based local businesses that are active advertisers and that have a web
presence will increase from 1.9 million in 1999 to 5.2 million in 2004.
According to Forrester Research, local online sales are projected to grow from
$680 million in 1998 to $6.1 billion in 2003. The local only advertising
dollars spent in support of these web site activities are projected to grow from
$135 million in 1998 to $1.7 billion in 2003.
Our application solutions are intended to provide:
. Local market merchants with advanced yet easy-to-use web site
publishing tools, new ways to have their site found by their target
customers, and services that turn web site visitors into leads,
buyers, and repeat customers.
. Consumers with unique abilities to easily comparison shop and interact
online with merchants in support of e-commerce or in-store
transactions.
. Directory services and yellow page publishers who host local market
merchant sites with enhanced services to attract a larger share of
merchant web sites and command premium fees for site development and
hosting.
In addition to targeting the local directory and e-commerce markets, we
also offer online banking transaction processing and management services to
local-market focused credit unions and community banks. Over
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the next year, we intend to offer a suite of XML-enabled services to these
financial institutions to enhance customer service and support and connect their
loans and other financial services into the local e-commerce marketplace.
We have over five years of experience in web site development and in
developing and marketing community building tools supported by a full suite of
content rich services. Customers have included Citicorp Diners Club, Invesco
Funds Group, TCI International, Intermedia Partners and Bresnan Communications,
Inc.
During the first six months of 1999, we acquired privately held Durand
Communications, Inc. and NetIgnite, Inc.
We have contracted with Switchboard, Inc. as a key anchor distribution
partner in the online local directories market and with CU Cooperative Systems,
Inc. in the community banking arena. We believe these partners provide a
critical mass of end users that will generate sustainable and recurring revenue
for Webb and a strong foundation on which to build enhanced distribution
relationships with other market leaders. As a result of these agreements, we
expect our revenues to increase during the remainder of fiscal 1999 and beyond.
Our strategy is to develop a competitive advantage and build a leadership
position in local e-commerce by:
. Delivering leading-edge technical solutions that provide first mover
advantage and capitalize on our expertise in online community,
communication and XML-based technologies;
. Securing additional distribution partnerships that drive the
deployment of our technologies to a critical mass of end-users; and
. Providing innovative, value-added services to enhance buyer-seller
interaction.
On August 25, 1999, we issued to an investor a three-year Promissory Note
in the amount of $5,000,000 and a five-year Warrant representing the right to
acquire 136,519 shares of our common stock at an exercise price of $11.44 per
share in consideration for which the investor loaned to the Company $5,000,000.
The Note becomes convertible 120 days after issuance if it has not been redeemed
by the Company at a conversion price equal to the lesser of $11.14 or the
average of the five lowest closing bid prices for our common stock during the 15
trading days prior to the date of conversion.
OSS was incorporated under the laws of the State of Colorado on March 22,
1994. Our executive offices are located at 1800 Glenarm Place, Suite 700,
Denver, Colorado 80202, telephone number (303) 296-9200.
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RISK FACTORS
Our limited operating history could affect our business. We were founded
in March 1994 and commenced sales in February 1995. Accordingly, we have a
limited operating history upon which you may evaluate us. Our business is
subject to the risks, expenses and difficulties frequently encountered by
companies with a limited operating history including:
. Limited ability to respond to competitive developments,
. Exaggerated effect of unfavorable changes in general economic and
market conditions,
. Ability to attract qualified personnel, and
. Ability to develop and introduce new product and service offerings.
There is no assurance we will be successful in addressing these risks. If we
are unable to successfully address these risks our business could be
significantly affected.
We have accumulated losses since inception and we anticipate that we will
continue to accumulate losses for the foreseeable future. We have incurred net
losses since inception totaling $30,620,542 through June 30, 1999. In addition,
we expect to incur additional substantial operating and net losses in 1999 and
for one or more years thereafter. We expect to incur these additional losses
because:
. We currently intend to increase our capital expenditures and operating
expenses to expand the functionality and performance of our products
and services,
. We recorded goodwill and other intangible assets in connection with
the DCI and NetIgnite acquisitions which we will amortize over their
estimated useful lives of approximately three years. We have allocated
approximately $14.7 million to goodwill and other intangible assets in
connection with these acquisitions.
Net losses since inception include approximately $10.2 million of non-cash
expenses related to the issuance of preferred stock and warrants in financing
transactions and warrants issued to three customers. The current competitive
business environment may result in our issuance of similar securities in future
financing transactions or to other companies as an inducement for them to enter
into a business relationship with us. While these transactions represent non-
cash charges, to the extent that we enter into similar transaction in the
future, they will increase our expenses and may increase our net loss.
If we are unable to raise additional working capital funds, we may not be
able to sustain our operations. We believe that our present cash and cash
equivalents, working capital and commitments for additional equity investments
will be adequate to sustain our current level of operations only through
February 2000. If we cannot raise additional funds when needed, we may be
required to curtail or scale back our operations. These actions could have a
material adverse effect on our business, financial condition, or results of
operations. We estimate that we will need to raise through equity, debt or
other external financing at least $10 million to sustain operations for the next
12 months. There is no assurance that we will be able to raise additional funds
in amounts required or upon acceptable terms. In addition, we may discover that
we have underestimated our working capital needs, and we may need to obtain
additional funds to sustain our operations. In its report accompanying the
audited financial statements for the years ended December 31, 1998 and 1997, our
auditor, Arthur Andersen LLP, expressed substantial doubt about our ability to
continue as a going concern.
We may never become or remain profitable. Our ability to become profitable
depends on the ability of our products and services to generate revenues. The
success of our revenue model will depend upon many factors including:
. The success of our distribution partners in marketing their products
and services, and
. The extent to which consumers and businesses use our products and
conduct e-commerce transactions and advertising utilizing our
products.
Because of the new and evolving nature of the Internet, we cannot predict
whether our revenue model will prove to be viable, whether demand for our
products and services will materialize at the prices we expect to be charged, or
whether current or future pricing levels will be sustainable. Additionally, our
customer contracts may
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result in significant development revenue in one quarter, which will not recur
in the next quarter for that customer. As a result, it is likely that certain
components of our revenue will be volatile, which may cause our stock price to
be volatile as well.
Our business depends on the growth of the Internet. Our business plan
assumes that the Internet will develop into a significant source of
communication and communication interactivity. However, the Internet market is
new and rapidly evolving and there is no assurance that the Internet will
develop in this manner. If the Internet does not develop in this manner, our
business, operating results and financial condition would be materially
adversely effected. Numerous factors could prevent or inhibit the development
of the Internet in this manner, including:
. The failure of the Internet's infrastructure to support Internet usage
or electronic commerce,
. The failure of businesses developing and promoting Internet commerce
to adequately secure the confidential information, such as credit card
numbers, needed to carry out Internet commerce, and
. Regulation of Internet activity
Use of many of our products and services will be dependent on distribution
partners. Because we have elected to partner with other companies for the
distribution of many of our products and services, many users of our products
and services are expected to subscribe through our distribution partners. As a
result, our distribution partners, and not us, will substantially control the
customer relationship with these users. If the business of the companies with
whom we partner is adversely affected in any manner our business, operating
results and financial condition could be materially adversely effected.
We may be unable to develop desirable products. Our products are subject
to rapid obsolescence and our future success will depend upon our ability to
develop new products and services that meet changing customer and marketplace
requirements. There is no assurance that we will be able to successfully:
. Identify new product and service opportunities, or
. Develop and introduce new products and services to market in a timely
manner.
If we are unable to accomplish these items, our business, operating results
and financial condition could be materially adversely affected.
Our products and services may not be successful. Even if we are able to
successfully identify, develop, and introduce new products and services there is
no assurance that a market for these products and services will materialize to
the size and extent that we anticipate. If a market does not materialize as we
anticipate, our business, operating results, and financial condition could be
materially adversely affected. The following factors could affect the success
of our products and services:
. The failure of our business plan to accurately predict the rate at
which the market for Internet products and services will grow,
. The failure of our business plan to accurately predict the types of
products and services the future Internet marketplace will demand,
. Our limited experience in marketing our products and services,
. The failure of our business plan to accurately predict our future
participation in the Internet marketplace,
. The failure of our business plan to accurately predict the estimated
sales cycle, price, and acceptance of our products and services,
. The development by others of products and services that renders our
products and services noncompetitive or obsolete, or
. Our failure to keep pace with the rapidly changing technology,
evolving industry standards, and frequent new product and service
introductions that characterize the Internet marketplace.
The intense competition that is prevalent in the Internet market could have
a material adverse effect on our business. Our current and prospective
competitors include many companies whose financial, technical, marketing and
other resources are substantially greater than ours. There is no assurance that
we will have the financial resources, technical expertise, or marketing, sales
and support capabilities to compete successfully. The
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presence of these competitors in the Internet marketplace could have a material
adverse effect on our business, operating results, or financial condition by
causing us to:
. Reduce the average selling price of our products and services, or
. Increase our spending on marketing, sales, and product development.
There is no assurance that we would be able to offset the effects of any
such price reductions or increases in spending through an increase in the number
of our customers, higher sales from premium services, cost reductions or
otherwise. Further, our financial condition may put us at a competitive
disadvantage relative to our competitors. If we fail to, or cannot, meet
competitive challenges, our business, operating results and financial condition
could be materially adversely affected.
A limited number of our customers generate a significant portion of our
revenues. We had four customers representing 77% of revenues for the June 30,
1999 three-month period and four customers representing 82% of net revenues for
the similar 1998 period. We had four customers representing 83% of revenues for
the June 30, 1999 six-month period and three customers representing 74% of
revenues for the similar 1998 period. There is no assurance that we will be able
to attract or retain major customers. The loss of, or reduction in demand for
products or related services from major customers could have a material adverse
effect on our business, operating results, cashflows, and financial condition.
The sales cycle for our products and services is lengthy and unpredictable.
While our sales cycle varies from customer to customer, it typically has ranged
from one to six months for projects. Our pursuit of sales leads typically
involves an analysis of our prospective customer's needs, preparation of a
written proposal, one or more presentations and contract negotiations. We often
provide significant education to prospective customers regarding the use and
benefits of our Internet technologies and products. Our sales cycle may also be
affected by a prospective customer's budgetary constraints and internal
acceptance reviews, over which we have little or no control. In order to
quickly respond to, or anticipate, customer requirements, we may begin
development work prior to having a signed contract, which exposes us to the risk
that the development work will not be recovered from revenue from that customer.
We may be unable to adjust our spending to account for potential
fluctuations in our quarterly results. As a result of our limited operating
history, we do not have historical financial data for a sufficient number of
periods on which to base planned operating expenses. Therefore, our expense
levels are based in part on our expectations as to future sales and to a large
extent are fixed. We typically operate with little backlog and the sales cycles
for our products and services may vary significantly. As a result, our
quarterly sales and operating results generally depend on the volume and timing
of and the ability to close customer contracts within the quarter, which are
difficult to forecast. We may be unable to adjust spending in a timely manner
to compensate for any unexpected sales shortfalls. If we were unable to so
adjust, any significant shortfall of demand for our products and services in
relation to our expectations would have an immediate adverse effect on our
business, operating results and financial condition. Further, we currently
intend to increase our capital expenditures and operating expenses to fund
product development and increase sales and marketing efforts. To the extent
that such expenses precede or are not subsequently followed by increased sales,
our business, operating results and financial condition will be materially
adversely affected.
We may be unable to retain our key executives and research and development
personnel. Our future success also depends in part on our ability to identify,
hire and retain additional personnel, including key product development, sales,
marketing, financial and executive personnel. Competition for such personnel is
intense and there is no assurance that we can identify or hire additional
qualified personnel.
Executives and research and development personnel who leave us may compete
against us in the future. We generally enter into written nondisclosure and
nonsolicitation agreements with our officers and employees
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which restrict the use and disclosure of proprietary information and the
solicitation of customers for the purpose of selling competing products or
services. However, we generally do not require our employees to enter into non-
competition agreements. Thus, if any of these officers or key employees left,
they could compete with us, so long as they did not solicit our customers. Any
such competition could have a material adverse effect on our business.
We may be unable to manage our expected growth. If we are able to
implement our growth strategy, we will experience significant growth in the
number of our employees, the scope of our operating and financial systems, and
the geographic area of our operations. There is no assurance that we will be
able to implement in whole or in part our growth strategy or that our management
or other resources will be able to successfully manage any future growth in our
business. Any failure to do so could have a material adverse effect on our
operating results and financial condition.
We may be unable to protect our intellectual property rights. Intellectual
property rights are important to our success and our competitive position.
There is no assurance that the steps we take to protect our intellectual
property rights will be adequate to prevent the imitation or unauthorized use of
our intellectual property rights. Policing unauthorized use of proprietary
systems and products is difficult and, while we are unable to determine the
extent to which piracy of our software exists, we expect software piracy to be a
persistent problem. In addition, the laws of some foreign countries do not
protect software to the same extent as do the laws of the United States. Even
if the steps we take to protect our proprietary rights prove to be adequate, our
competitors may develop products or technologies that are both non-infringing
and substantially equivalent or superior to our products or technologies.
Computer viruses and similar disruptive problems could have a material
adverse effect on our business. Our software and equipment may be vulnerable to
computer viruses or similar disruptive problems caused by our customers or other
Internet users. Our business, financial condition or operating results could be
materially adversely effected by:
. Losses caused by the presence of a computer virus that causes us or
third parties with whom we do business to interrupt, delay or cease
service to our customers,
. Losses caused by the misappropriation of secured or confidential
information by a third party who, in spite of our security measures,
obtains illegal access to this information,
. Costs associated with efforts to protect against and remedy security
breaches, or
. Lost potential revenue caused by the refusal of consumers to use our
products and services due to concerns about the security of
transactions and commerce that they conduct on the Internet.
Future government regulation could materially adversely effect our
business. There are currently few laws or regulations directly applicable to
access to, communications on, or commerce on the Internet. Therefore, we are
not currently subject to direct regulation of our business operations by any
government agency, other than regulations applicable to businesses generally.
Due to the increasing popularity and use of the Internet, however, federal,
state, local, and foreign governmental organizations are currently considering a
number of legislative and regulatory proposals related to the Internet. The
adoption of any of these laws or regulations may decrease the growth in the use
of the Internet, which could, in turn:
. Decrease the demand for our products and services,
. Increase our cost of doing business, or
. Otherwise have a material adverse effect on our business, results of
operations and financial condition.
Moreover, the applicability to the Internet of existing laws governing
issues such as property ownership, copyright, trademark, trade secret,
obscenity, libel and personal privacy is uncertain and developing. Our
business, results of operations and financial condition could be materially
adversely effected by the application or interpretation of these existing laws
to the Internet.
Our systems may not be year 2000 compliant. We have reviewed our internal
software and hardware systems. Based on this review, we believe that our
internal software and hardware systems will function properly with respect to
dates in the year 2000 and thereafter. We expect to incur no significant costs
in the future for Year 2000 problems. Nonetheless, there is no assurance in
this regard until our internal software and hardware systems are operational in
the year 2000.
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The failure to correct material Year 2000 problems by our suppliers and
vendors could result in an interruption in, or a failure of, certain of our
normal business activities or operations. Due to the general uncertainty
inherent in the Year 2000 problem, resulting from the uncertainty of the Year
2000 readiness of third-party suppliers and vendors and of our customers, we are
unable to determine at this time that the consequences of Year 2000 failures
will not have a material impact on our results of operations, liquidity or
financial condition.
Our articles of incorporation and bylaws may discourage lawsuits and other
claims against our directors. Our articles of incorporation provide, as
permitted by Colorado law, that our directors shall have no personal liability
for certain breaches of their fiduciary duties to us. In addition, our bylaws
provide for mandatory indemnification of directors and officers to the fullest
extent permitted by Colorado law. These provisions may reduce the likelihood of
derivative litigation against directors and may discourage shareholders from
bringing a lawsuit against directors for a breach of their duty.
The price of our common stock has been highly volatile due to factors that
will continue to effect the price of our stock. Our common stock traded as high
as $19.38 per share and as low as $9.13 between January 1, 1999 and August 6,
1999. Historically, the over-the-counter markets for securities such as our
common stock have experienced extreme price and volume fluctuations. Some of
the factors leading to this volatility include:
. Price and volume fluctuations in the stock market at large that do not
relate to our operating performance,
. Fluctuations in our quarterly revenue and operating results,
. Announcements of product releases by us or our competitors,
. Announcements of acquisitions and/or partnerships by us or our
competitors, and
. Increases in outstanding shares of common stock upon exercise or
conversion of derivative securities.
These factors may continue to affect the price of our common stock in the
future.
The trading volume of our common stock may diminish significantly if our
common stock is prohibited from being traded on the Nasdaq SmallCap Market.
Although our shares are currently traded on The Nasdaq SmallCap Market, there is
no assurance that we will remain eligible to be included on Nasdaq. If our
common stock was no longer eligible for quotation on Nasdaq, it could become
subject to rules adopted by the Securities and Exchange Commission regulating
broker-dealer practices in connection with transactions in "penny stocks." If
our common stock became subject to the penny stock rules, many brokers may be
unwilling to engage in transactions in our common stock because of the added
regulation, thereby making it more difficult for purchasers of our common stock
to dispose of their shares.
We have issued numerous options, warrants, and convertible securities to
acquire our common stock that could have a dilutive effect on our shareholders.
We have issued numerous options, warrants, and convertible securities to acquire
our common stock. During the terms of these outstanding options, warrants, and
convertible securities, the holders of these securities will have the
opportunity to profit from an increase in the market price of our common stock
with resulting dilution to the holders of shares who purchased shares for a
price higher than the respective exercise or conversion price. The existence of
such stock options, warrants and convertible securities may adversely affect the
terms on which we can obtain additional financing, and you should expect the
holders of such options or warrants to exercise or convert those securities at a
time when we, in all likelihood, would be able to obtain additional capital by
offering securities on terms more favorable to us than those provided by the
exercise or conversion of such options or warrants.
As of August 6, 1999, we have issued the following warrants and options to
acquire shares of our common stock:
. Options and warrants to purchase 1,919,228 shares of common stock upon
exercise of such options and warrants, exercisable at prices ranging
from $0.50 to $18.25 per share, with a weighted average exercise price
of approximately $9.08 per share.
. Options issued to EBI Securities Corporation, the representative of
the underwriters involved in our initial public offering (the
"Representative's Option"), to purchase 106,700 shares of common stock
upon exercise of the Representative's Option at a purchase price of
$8.10 per share.
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. Warrants issued in connection with the issuance of the 10% Preferred
Stock to purchase 53,500 shares of common stock upon exercise of such
warrants, exercisable at $15.00 per share.
. Warrants issued in connection with the issuance of the 5% Preferred
Stock to purchase 100,000 shares of common stock upon exercise of such
warrants, exercisable at $16.33 per share.
. Warrants issued to customers to purchase 81,829 shares of common stock
upon exercise of such warrants, exercisable at $8.77 to $9.94
. Warrants issued to purchase 223,700 shares of common stock at prices
ranging from $4.30 to $20.33 assumed in connection with the
acquisition of DCI.
In addition to these warrants and options, we have reserved an
indeterminate number of shares of common stock for issuance upon conversion of
outstanding shares of our 10% and Series C Preferred Stock. Based on the market
value for the common stock as of August 6, 1999, the then outstanding 10%
Preferred Stock and Series C Preferred Stock were convertible into approximately
113,108 shares and 78,853 shares, respectfully, of common stock. The number of
shares of common stock issuable upon conversion of the 10% Preferred Stock and
the Series C Preferred Stock could increase significantly if the market value
for our common stock decreases in the future. Further, there could be issuances
of additional similar securities in connection with our need to raise additional
working capital.
Future sales of our common stock in the public market could adversely
affect the price of our common stock. Sales of substantial amounts of common
stock in the public market that is not currently freely tradable, or even the
potential for such sales, could have an adverse affect on the market price for
shares of our common stock and could impair the ability of purchasers of our
common stock to recoup their investment or make a profit. As of August 6, 1999,
these shares consist of:
. Approximately 630,000 shares owned by our officers, directors and
holders of 10% of our outstanding common stock ("Affiliate Shares"),
and
. The shares being offered pursuant to this Prospectus.
Unless the Affiliate Shares are further registered under the securities
laws, they may not be resold except in compliance with Rule 144 promulgated by
the SEC, or some other exemption from registration. Rule 144 does not prohibit
the sale of these shares but does place conditions on their resale which must be
complied with before they can be resold. The shares of the common stock issued
to the shareholders of DCI in connection with the DCI acquisition are expected
to be registered pursuant to the Securities Act of 1933 by September 30, 1999.
Future sales of our common stock in the public market could limit our
ability to raise capital. Sales of substantial amounts of common stock in the
public market pursuant to Rule 144, upon exercise or conversion of derivative
securities or otherwise, or even the potential for such sales, could affect our
ability to raise capital through the sale of equity securities.
Provisions in our articles of incorporation allow us to issue shares of
stock that could make a third party acquisition of us difficult. Our Articles
of Incorporation authorize our Board of Directors to issue up to 20,000,000
shares of common stock and 5,000,000 shares of preferred stock in one or more
series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by our shareholders. Preferred stock
authorized by the Board of Directors may include voting rights, preferences as
to dividends and liquidation, conversion and redemptive rights and sinking fund
provisions. If the Board of Directors authorizes the issuance of preferred
stock in the future, this authorization could affect the rights of the holders
of common stock, thereby reducing the value of the common stock, and could make
it more difficult for a third party to acquire us, even if a majority of the
holders of our common stock approved of an acquisition.
Our issuance of warrants to a customer will require us to record a non-cash
expense which will, in turn, increase our net loss available to shareholders. We
will record a non-cash expense in the amount of approximately $900,000 during
the quarter ending September 30, 1999 as a result of our issuance of a three-
year warrant to acquire 150,000 shares to a customer. In addition, the agreement
with the customer contemplates the issuance of a second warrant, subject to
certain conditions, to purchase 150,000 shares of common stock which, if issued,
could result in similar charges in the future.
9
<PAGE>
We do not anticipate paying dividends on our common stock for the
foreseeable future. We have never paid dividends on our common stock and do not
intend to pay any dividends on our common stock in the foreseeable future. Any
decision by us to pay dividends on our common stock will depend upon our
profitability at the time, cash available therefor, and other factors. We
anticipate that we will devote profits, if any, to our future operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus and the documents
incorporated by reference in this prospectus under the captions "Online System
Services, Inc.," "Risk Factors," "Recent Developments" and elsewhere in this
prospectus constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are subject
to the safe harbor provisions of the reform act. Forward-looking statements may
be identified by the use of the terminology such as may, will, expect,
anticipate, intend, believe, estimate, should, or continue or the negatives of
these terms or other variations on these words or comparable terminology. To
the extent that this prospectus contains forward-looking statements regarding
the financial condition, operating results, business prospects or any other
aspect of OSS, you should be aware that our actual financial condition,
operating results and business performance may differ materially from that
projected or estimated by OSS in the forward-looking statements. We have
attempted to identify, in context, some of the factors that we currently believe
may cause actual future experience and results to differ from their current
expectations. These differences may be caused by a variety of factors, including
but not limited to adverse economic conditions, intense competition, including
entry of new competitors, ability to obtain sufficient financing to support our
operations, progress in research and development activities, variations in costs
that are beyond our control, changes in capital expenditure budgets for cable
companies, adverse federal, state and local government regulation, inadequate
capital, unexpected costs, lower sales and net income, or higher net losses than
forecasted, price increases for equipment, inability to raise prices, failure to
obtain new customers, the possible fluctuation and volatility of our operating
results and financial condition, inability to carry out marketing and sales
plans, loss of key executives, and other specific risks that may be alluded to
in this prospectus.
USE OF PROCEEDS
We will not receive any of the proceeds from the offer and sale of the
shares, however, 240,420 of the shares offered by the selling shareholders are
issuable upon the exercise of issued and outstanding transferable options of OSS
at various exercise prices, pursuant to the terms of the Merger. If all of
these options are exercised in full, we will receive proceeds of $2,217,692.
SELLING SHAREHOLDERS
The selling shareholders have indicated that the shares offered by this
prospectus may be sold from time to time by them or by their pledgees, donees,
transferees or other successors in interest. The following table shows as of
August 1, 1999:
. The name of each of the selling shareholders,
. The number of shares of our common stock beneficially owned by each of
the selling shareholders, and
. The number and percentage of securities offered by this prospectus
that may be sold from time to time by each of the selling
shareholders.
In addition, under the registration statement of which this prospectus is a
part we have registered an additional number of shares of our common stock that
we may be required to issue to the selling shareholders as a result of any stock
split, stock dividend or similar transaction involving our common stock. In the
following table, we have calculated percentage ownership by assuming that all
shares of common stock which the selling
10
<PAGE>
shareholder has the right to acquire within 60 days from the date of this
prospectus upon the exercise of options, warrants, or convertible
securities are outstanding for the purpose of calculating the percentage of
common stock owned by the selling shareholder.
There is no assurance that the selling shareholders will sell the shares
offered by this prospectus.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage of
Shares of Common Shares of Common Common Stock
Stock Owned Shares of Common Stock Owned Owned Beneficially
Name of Selling Beneficially Before Stock Offered By Beneficially After Before Offering/After
Shareholder Offering This Prospectus Offering Offering
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald S. Armstrong 57,463 57,463 0 * / *
Daniel B. Najor 13,004 13,004 0 * / *
CJ Overseas, Ltd. 94,438 (1) 94,438 0 1.3% / *
Page Whyte 7,668 7,668 0 * / *
David Schmidt 13,523 13,523 0 * / *
Kevin Kimberlin Partners, PL 100,860 (2) 100,860 0 1.3% / *
Chavalit Kanchanachayphoom 9,225 9,225 0 * / *
Chatchawn Kanchanachayphoom 9,225 9,225 0 * / *
Chana Kanchanachayphoom 9,225 9,225 0 * / *
Sally L. Irving Michael Cook 4,920 (3) 4,920 0 * / *
Randall N. Green 23,026 (4) 23,026 0 * / *
Walter Goodman 14,723 14,723 0 * / *
Earnest J. Friedman 6,150 6,150 0 * / *
Bryan Field-Elliot 44,991 (5) 26,991 18,000 * / *
Kristine Esters 7,850 7,850 0 * / *
Elisabeth Esters 7,850 7,850 0 * / *
Fuel Systems Consulting Profit
Sharing Plan 10,022 10,022 0 * / *
Namchai Charnmanoon 9,225 9,225 0 * / *
The Berkus Trust DTD September
17,1993 41,992 (6) 36,088 5,904 * / *
Megumi Armano 6,150 6,150 0 * / *
Andrew F. Pollet and Sally M.
Pollet C -- Trustee of the Andrew
F and Sally M. Pollet Revocable
Trust DTD March 6, 1990 2,460 2,460 0 * / *
Phillip L. Becker 15,540 (7) 9,636 5,904 * / *
Esters Family Partnership 55,308 55,308 0 * / *
Frank Perna 13,542 (8) 7,638 5,904 * / *
Sarah H. Blackmun 24,912 24,912 0 * / *
Irwin Dubinsky 6,111 6,111 0 * / *
Seymour Eskow 24,910 24,910 0 * / *
Harold Goldring 1,272 1,272 0 * / *
AJ Capital, LLC 38,745 38,745 0 * / *
Kendell R. Lang 3,291 3,291 0 * / *
Michael Towbes 6,027 (9) 3,075 2,952 * / *
Continental Far East Inc. 18,450 18,450 0 * / *
Daniel Esters 7,850 7,850 0 * / *
Suncrest Investors Asset, Inc. 52,002 (10) 44,622 7,380 * / *
Amy Belongie 2,952 (11) 2,952 0 * / *
Montecito Bancorp 1,968 (12) 1,968 0 * / *
Morris Asset Management 45,756 (13) 45,756 0 * / *
Casey Hughes 8,620 (14) 8,620 0 * / *
Robert Molnar 9,840 (15) 9,840 0 * / *
Sand Hill Capital 4,920 (16) 4,920 0 * / *
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Mark Cardello 1,968 (17) 1,968 0 * / *
John Cardello 3,936 (18) 3,936 0 * / *
Patric Kealy 7,380 (19) 7,380 0 * / *
National Securities 8,110 (20) 8,110 0 * / *
Andre Durand 112,370 (21) 55,723 56,647 1.5% / *
Jeffrey Schlossberg 349 349 0 * / *
Jim Egide 5,749 5,749 0 * / *
Pamela Dyer 1,014 1,014 0 * / *
Peter J. Sprague 2,881 2,881 0 * / *
Raymond Y. Wong or Rose Marie Wong 10,278 10,278 0 * / *
Rupert Gonsalves 13,523 13,523 0 * / *
Sanford Weiss 2,736 2,736 0 * / *
The Grayson Family Trust DTD
January 20, 1986 49,158 49,158 0 * / *
Wilson Marketing Enterprise Inc. 696 696 0 * / *
Kevin Robinson 608 608 0 * / *
Gerald Morris 3,690 3,690 0 * / *
Lester Leslie 500 500 0 * / *
Lion Sutton 2,214 2,214 0 * / *
Casino World Holdings 4,598 4,598 0 * / *
Arun Pande 3,690 (22) 3,690 0 * / *
Dale Craighead 1,203 1,203 0 * / *
Donna Payne 1,274 1,274 0 * / *
Grand Harvest Limited 12,300 12,300 0 * / *
Craig Wirths 50,265 50,265 0 * / *
Ellen Vuckovich 1,198 1,198 0 * / *
Steven Wells 1,230 1,230 0 * / *
Pollet Law 16,034 16,034 0 * / *
Robert Alan Weiss 6,531 6,531 0 * / *
William Cullen 49,830 (23) 6,497 43,333 * / *
Canterbury Securities Corporation 45,955 (24) 45,955 0 * / *
_______________
* Less than 1% of shares outstanding.
(1) Includes options for the purchase of 32,482 shares.
(2) Includes options for the purchase of 27,060 shares.
(3) Includes options for the purchase of 3,690 shares.
(4) Includes options for the purchase of 3,690 shares.
(5) Includes options for the purchase of 18,000 shares.
(6) Includes options for the purchase of 5,904 shares.
(7) Includes options for the purchase of 5,904 shares.
(8) Includes options for the purchase of 5,904 shares.
(9) Includes options for the purchase of 2,952 shares.
(10) Includes options for the purchase of 7,380 shares.
(11) Includes warrants for the purchase of 2,460 shares and options for the purchase of 492 shares.
(12) Includes options for the purchase of 1,968 shares.
(13) Includes warrants for the purchase of 26,076 shares and options for the purchase of 19,680 shares.
(14) Includes options for the purchase of 8,620 shares.
(15) Includes warrants for the purchase of 4,920 shares and options for the purchase of 4,920 shares.
(16) Includes options for the purchase of 4,920 shares.
(17) Includes warrants for the purchase of 984 shares and options for the purchase of 984 shares.
(18) Includes warrants for the purchase of 1,968 shares and options for the purchase of 1,968 shares.
(19) Includes options for the purchase of 7,380 shares.
(20) Includes warrants for the purchase of 8,110 shares.
(21) Mr. Durand is a Senior Vice President of OSS.
(22) Includes options for the purchase of 3,690 shares.
(23) Includes options for the purchase of 43,333 shares.
Mr. Cullen is Executive Vice President and Chief Financial Officer of OSS
(24) Includes warrants for the purchase of 45,955 shares.
</TABLE>
12
<PAGE>
PLAN OF DISTRIBUTION
The sale of the shares offered by this prospectus may be made in the Nasdaq
SmallCap Market or other over-the-counter markets at prices and at terms then
prevailing or at prices related to the then current market price or in
negotiated transactions. These shares may be sold by one or more of the
following:
. A block trade in which the broker or dealer will attempt to sell
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction.
. Purchases by a broker or dealer as principal and resale by a broker or
dealer for its account using this prospectus.
. Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
. In privately negotiated transactions not involving a broker or dealer.
In effecting sales, brokers or dealers engaged to sell the shares may
arrange for other brokers or dealers to participate. Brokers or dealers engaged
to sell the shares will receive compensation in the form of commissions or
discounts in amounts to be negotiated immediately prior to each sale. These
brokers or dealers and any other participating brokers or dealers may be deemed
to be underwriters within the meaning of the Securities Act of 1933 in
connection with these sales. OSS will receive no proceeds from any resales of
the shares offered by this prospectus, and we anticipate that the brokers or
dealers, if any, participating in the sales of the shares will receive the usual
and customary selling commissions.
To comply with the securities laws of some states, if applicable, the
shares will be sold in these states only through brokers or dealers. In
addition, in some states, the shares may not be sold in those states unless they
have been registered or qualified for sale in these states or an exemption from
registration or qualification is available and is complied with.
DESCRIPTION OF SECURITIES
General
Our articles of incorporation authorize our board of directors to issue
25,000,000 shares of capital stock, including 20,000,000 shares of common stock
and 5,000,000 shares of preferred stock, with rights, preferences and privileges
as are determined by our board of directors.
Common Stock
As of August 6, 1999, we had 7,487,532 shares of common stock outstanding.
All outstanding shares of our common stock are fully paid and nonassessable and
the shares of our common stock offered by this prospectus will be, upon
issuance, fully paid and nonassessable. The following is a summary of the
material rights and privileges of our common stock.
Voting. Holders of our common stock are entitled to cast one vote for each
share held at all shareholder meetings for all purposes, including the election
of directors. The holders of more than 50% of the voting power of our common
stock issued and outstanding and entitled to vote and present in person or by
proxy, together with any preferred stock issued and outstanding and entitled to
vote and present in person or by proxy, constitute a quorum at all meetings of
our shareholders. The vote of the holders of a majority of our common stock
present and entitled to vote at a meeting, together with any preferred stock
present and entitled to vote at a meeting, will decide any question brought
before the meeting, except when Colorado law, our articles of incorporation, or
our bylaws require a greater vote and except when Colorado law requires a vote
of any preferred stock issued and outstanding, voting as a separate class, to
approve a matter brought before the meeting. Holders of our common stock do not
have cumulative voting for the election of directors.
13
<PAGE>
Dividends. Holders of our common stock are entitled to dividends when, as
and if declared by the board of directors out of funds available for
distribution. The payment of any dividends may be limited or prohibited by loan
agreement provisions or priority dividends for preferred stock that may be
outstanding.
Preemptive Rights. The holders of our common stock have no preemptive
rights to subscribe for any additional shares of any class of our capital stock
or for any issue of bonds, notes or other securities convertible into any class
of our capital stock.
Liquidation. If we liquidate or dissolve, the holders of each outstanding
share of our common stock will be entitled to share equally in our assets
legally available for distribution to our shareholders after payment of all
liabilities and after distributions to holders of preferred stock legally
entitled to be paid distributions prior to the payment of distributions to
holders of our common stock.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's public reference rooms located at it's
regional offices in New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0300 for further information on the operation of public
reference rooms. You can also obtain copies of this material from the SEC's
Internet web site located at http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be a part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, file no. 0-28462:
. Our annual report on Form 10-KSB for the year ended December 31, 1998.
. Our quarterly report on Form 10-QSB for the quarter ended March 31,
1999.
. Our quarterly report on Form 10-QSB for the quarter ended June 30,
1999.
. The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on May 22, 1996.
. Our current report on Form 8-K dated January 11, 1999.
. Our current report on Form 8-K dated July 14, 1999.
. Our current report on Form 8-K dated August 25, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and telephone number:
Shareholder Services
Attn: Kim Castillo
Online System Services, Inc.
1800 Glenarm Place
Suite 700
Denver, Colorado 80202
(303) 296-9200
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
The selling shareholders will not make an offer of these shares in any state
where the offer is not permitted. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front page
of this prospectus.
LEGAL MATTERS
Our legal counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis,
Minnesota, will issue an opinion about the legality of the shares registered by
this prospectus.
14
<PAGE>
EXPERTS
The financial statements incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said Firm as
experts in giving said reports. Reference is made to said report, which includes
an explanatory paragraph with respect to the uncertainty regarding the Company's
ability to continue as a going concern as discussed in Note 1 to the financial
statements incorporated by reference.
INDEMNIFICATION
Our articles of incorporation provide that we shall indemnify, to the full
extent permitted by Colorado law, any of our directors, officers, employees or
agents who are made, or threatened to be made, a party to a proceeding by reason
of the fact that he or she is or was one of our directors, officers, employees
or agents against judgments, penalties, fines, settlements and reasonable
expenses incurred by the person in connection with the proceeding if specified
standards are met. Although indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons under these provisions, we have been advised that, in the
opinion of the SEC, indemnification for liabilities arising under the Securities
Act of 1933 is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
Our articles of incorporation also limit the liability of our directors to
the fullest extent permitted by the Colorado law. Specifically, our articles of
incorporation provide that our directors will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for:
. Any breach of the duty of loyalty to OSS or its shareholders,
. Acts or omissions not in good faith or that involved intentional
misconduct or a knowing violation of law,
. Dividends or other distributions of corporate assets that are in
contravention of specified statutory or contractual restrictions,
. Violations of specified laws, or
. Any transaction from which the director derives an improper personal
benefit.
15
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus in connection with the offer made by this prospectus and, if given or
made, the information or representations must not be relied upon as having been
authorized by OSS. This prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than the securities offered
by this prospectus, nor does it constitute an offer to sell or a solicitation of
any offer to buy the securities offered by this prospectus by anyone in any
jurisdiction in which the offer or solicitation is not authorized, or in which
the person making the offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make an offer or solicitation. Neither the
delivery of this prospectus nor any sale made under this prospectus shall, under
any circumstances, create any implication that information contained in this
prospectus is correct as of any time subsequent to the date of this prospectus.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Online System Services, Inc............................................ 2
Risk Factors........................................................... 3
Special Note Regarding Forward-Looking Statements...................... 7
Use of Proceeds........................................................ 8
Recent Developments.................................................... 8
Selling Shareholders................................................... 10
Plan of Distribution................................................... 11
Description of Securities.............................................. 12
Where You Can Find More Information.................................... 14
Legal Matters.......................................................... 15
Experts................................................................ 15
Indemnification........................................................ 15
</TABLE>
ONLINE SYSTEM
SERVICES, INC.
______________
PROSPECTUS
______________
September 2, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses of OSS in connection
with the sale and distribution of the Shares being registered pursuant to this
Form S-3 Registration Statement. All of the amounts shown are estimates, except
for the Securities and Exchange Commission registration fee and the Nasdaq
listing fee. All of such expenses will be paid by OSS.
<TABLE>
<S> <C>
Securities and Exchange Commission fee $ 3,192.54
Accounting fees and expenses $ 2,500.00
Legal fees and expenses $ 7,000.00
Printing, Mailing $ 1,000.00
Transfer Agent fees $ 2,000.00
Miscellaneous $ 4,307.46
----------
TOTAL $20,000.00
</TABLE>
Item 15. Indemnification of Officers and Directors
OSS's articles of incorporation provide that OSS shall indemnify, to the
full extent permitted by Colorado law, any director, officer, employee or agent
of OSS made or threatened to be made a party to a proceeding, by reason of the
fact that such person is or was a director, officer, employee or agent of OSS
against judgments, penalties, fines, settlements and reasonable expenses
incurred by the person in connection with the proceeding if certain standards
are met. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of OSS pursuant to the foregoing provisions, or otherwise,
OSS has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
OSS's articles of incorporation limit the liability of its directors to the
fullest extent permitted by Colorado law. Specifically, the articles of
incorporation provide that directors of OSS will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for (i) any
breach of the duty of loyalty to OSS or its shareholders, (ii) acts or omissions
not in good faith or that involved intentional misconduct or a knowing violation
of law, (iii) dividends or other distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions, (iv) violations
of certain laws, or (v) any transaction from which the director derives an
improper personal benefit. Liability under federal securities law is not
limited by the Articles.
Item 16. Exhibits
2.1 Agreement and Plan of Merger dated March 19, 1998 among OSS, Durand
Acquisition Corporation and Durand Communications, Inc. (1)
3.1 Articles of Incorporation, as amended, of Online System Services, Inc.
(4)
3.2 Bylaws of Online System Services, Inc. (2)
4.1 Specimen form of Online System Services, Inc. Common Stock certificate
(3)
4.2 Form of Warrant issued in connection with Durand Merger**
5.1 Opinion of Counsel*
10.1 Development, Access and License Agreement effective June 30, 1999
between Switchboard, Inc. and OSS*
10.2 Amendment to Development, Access and License Agreement effective June
30, 1999 between Switchboard, Inc. and OSS*
10.3 Engineering Services Agreement effective June 30, 1999 between
Switchboard, Inc. and OSS*
II-1
<PAGE>
10.4 Development, Access and License Agreement effective August 11, 1999
between NetShepherd, Inc. and OSS*
23.1 Consent of Arthur Andersen LLP*
_______________
* Filed herewith
** To be filed via Amendment
(1) Filed with the Form 10-KSB Annual Report for the year ended December 31,
1997, Commission File No. 0-28462.
(2) Filed with the initial Registration Statement on Form SB-2, filed April 5,
1996, Commission File No. 333-3282-D.
(3) Filed with Amendment No. 1 to the Registration Statement on Form SB-2,
filed May 3,1996, Commission File No. 333-3282-D.
(4) Filed with the Registration Statement on Form S-3, filed January 29, 1999,
Commission File No. 333-71503.
Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933,
(b) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or together, represent a fundamental change in
the information in the registration statement, and
(c) to include any additional or changed material information on
the plan of distribution;
(2) to treat, for determining liability under the Securities Act of
1933, each such post-effective amendment as a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
B. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant as discussed above, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on September 2, 1999.
ONLINE SYSTEM SERVICES, INC.
By /s/ R. Steven Adams
-------------------------------------
R. Steven Adams, President and
Chief Executive Officer
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints R. Steven Adams and Lindley S. Branson, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him/her and in his/her name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full powers and authority to do and perform each and
every act and things requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on September 2, 1999, by the
following persons in the capacities indicated:
/s/ R. Steven Adams
- -------------------------------
R. Steven Adams,
(President, Chief Executive Officer and a Director)
/s/ William R. Cullen
- -------------------------------
William R. Cullen
(Executive Vice President, Chief Financial Officer and a Director)
/s/ Stuart J. Lucko
- -------------------------------
Stuart J. Lucko
(Controller)
/s/ Robert J. Lewis
- -------------------------------
Robert J. Lewis
(Director)
- -------------------------------
Richard C. Jennewine
(Director)
II-3
<PAGE>
Online System Services, Inc.
Form S-3
Index to Exhibits
2.1 Agreement and Plan of Merger dated March 19, 1998 among OSS, Durand
Acquisition Corporation and Durand Communications, Inc. (1)
3.1 Articles of Incorporation, as amended, of Online System Services, Inc.
(4)
3.2 Bylaws of Online System Services, Inc. (2)
4.1 Specimen form of Online System Services, Inc. Common Stock certificate
(3)
4.2 Form of Warrant issued in connection with Durand Merger**
5.1 Opinion of Counsel*
10.1 Development, Access and License Agreement effective June 30, 1999
between Switchboard, Inc. and OSS*
10.2 Amendment to Development, Access and License Agreement effective June
30, 1999 between Switchboard, Inc. and OSS*
10.3 Engineering Services Agreement effective June 30, 1999 between
Switchboard, Inc. and OSS*
10.4 Development, Access and License Agreement effective August 11, 1999
between NetShepherd, Inc. and OSS*
23.1 Consent of Arthur Andersen LLP*
_______________
* Filed herewith
** To be filed via Amendment
(1) Filed with the Form 10-KSB Annual Report for the year ended December 31,
1997, Commission File No. 0-28462.
(2) Filed with the initial Registration Statement on Form SB-2, filed April 5,
1996, Commission File No. 333-3282-D.
(3) Filed with Amendment No. 1 to the Registration Statement on Form SB-2,
filed May 3,1996, Commission File No. 333-3282-D.
(4) Filed with the Registration Statement on Form S-3, filed January 29, 1999,
Commission File No. 333-71503.
II-4
<PAGE>
[Letterhead of Gray Plant Mooty Mooty & Bennett]
Exhibit 5.1
Lindley S. Branson
612 343-2827
September 2, 1999
Online System Services, Inc.
1800 Glenarm Place
Suite 800
Denver, CO 80202
RE: Form S-3 Registration Statement
Ladies/Gentlemen:
This opinion is furnished in connection with the registration, pursuant to
the Securities Act of 1933, as amended, of a maximum of 1,148,395 shares of
common stock, no par value (the "Shares"), of Online System Services, Inc. (the
"Company" or "OSS") issued in connection with the merger of Durand Acquisition
Corporation, a wholly-owned subsidiary of the Company, and Durand
Communications, Inc., for services rendered and issuable upon the exercise of
outstanding transferable options and warrants of OSS which may be sold from time
to time by various selling shareholders for their own account.
We have acted as counsel to the Company in connection with the preparation
of the Form S-3 Registration Statement (the "Registration Statement"). We have
examined the Articles of Incorporation, as amended, the Bylaws of the Company,
such records of proceedings of the Company as we deemed material and such other
certificates, records and documents as we considered necessary for the purposes
of this opinion.
Based on the foregoing, we are of the opinion that the Shares issued in
connection with the merger and for services rendered are, and the shares to be
issued upon exercise of options or warrants or conversion of convertible
securities will be, when issued in accordance with the terms of such securities,
legally issued, fully paid and non-assessable securities of the Company. We
understand that this opinion is to be issued in connection with the Registration
Statement. We consent to a filing of a copy of this opinion with the
Registration Statement.
Very truly yours,
GRAY, PLANT, MOOTY,
MOOTY & BENNETT, P.A.
By /s/ Lindley S. Branson
-------------------------------
Lindley S. Branson
<PAGE>
EXHIBIT 10.1
DEVELOPMENT, ACCESS AND LICENSE AGREEMENT
This Development, Access and License Agreement ("Agreement") entered into as of
and effective June 30, 1999 ("Effective Date") between Switchboard, Inc., a
Delaware corporation ("SB") with principal offices located at 115 Flanders Road,
Westboro, MA 01581, and Online System Services, Inc., a Colorado corporation
which plans to change its name to WEBB Interactive Services, Inc. ("WEBB") with
principal offices located at 1800 Glenarm Place, Denver, Colorado 80202
(collectively "the Parties"), determines the rights and obligations of SB and
WEBB with respect to the subject matter of this Agreement.
Section 1: Background
SB sells enhanced directory services, site content services, advertising, and
vertical syndication and aggregation programs to merchants and businesses
through use of SB's interactive site on the World Wide Web ("Web") that is
targeted to consumers. WEBB is developing its XML Site Generation Platform as a
tool to allow web developers and businesses to create Web pages that may be
readily located using XML search technology. SB and WEBB desire to create a
technology and distribution relationship by integrating WEBB's XML Site
Generation Platform technology with SB's consumer site, enhanced directory
services, site content services, advertising, and vertical syndication and
aggregation programs.
Section 2: Definitions
2.1 "Exclusivity Period" means subject to compliance with the terms and
------------------
conditions of this Agreement, the period from the date hereof through June 30,
2000, subject to earlier termination or extensions as provided in Sections 7.3
and 8.
2.2 "Intellectual Property Rights" means all current or future patent
----------------------------
applications, patents, copyrights, trade secrets, trademarks, service marks,
domain names, mask works and other intellectual property rights enforceable at
any time under the laws and regulations of any jurisdiction anywhere in the
world.
2.3 "Modifications" means any error corrections, updates, revisions, new
-------------
versions, new releases, improvements, translations, derivative works, or other
changes or additions to the XML Site Generation Platform and documentation.
"Modifications" include, without limitation, Phase 1/2/3 Modifications.
2.4 "Net Revenues" means gross revenues recognized by SB (including Web site
------------
services and products created by the XML Site Generation Platform), less (i)
applicable amounts payable by SB to third parties, including commissions,
revenue splits, and product, service or license fees; (ii) any refunds, credits,
or uncollectable amounts; and (iii) applicable taxes, if any.
2.5 "Object Code" means machine executable computer software code in binary
-----------
format, typically the result of processing the Source Code with an assembler or
compiler.
2.6 "Phase 1/2/3 Modifications" means the Modifications to the XML Site
-------------------------
Generation Platform created by WEBB in Phases 1, 2 or 3.
2.7 "Programmatic Interfaces" means XML statements developed by SB, WEBB, or
-----------------------
jointly by SB and WEBB, that govern the communication of data or information
between the XML Site Generation Platform and Switchboard designated points, such
as SB's telemarketing, call center or web site fulfillment functions (including
those conducted by SB Contractors), and SB's back-end support tools.
2.8 "Representatives" means an employee, officer, director, consultant,
---------------
attorney, accountant or agent employed or retained by another entity.
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2.9 "SB Confidential Information" includes SB's client list and confidential
---------------------------
information provided by SB Customers or SB Contractors and all existing and
future information identified in writing by SB as confidential. SB Confidential
Information excludes any portion of information which: (1) is or becomes
publicly available through no act or failure of WEBB; (2) was or is rightfully
acquired by WEBB from a source other than SB; (3) is or becomes independently
known or available to WEBB without breach of this Agreement; (4) is
independently developed by WEBB without reference to the SB Confidential
Information; or (5) is required to be disclosed by court order, after giving SB
the opportunity to appear before the court and protect its interests. SB
Confidential Information does not include the identity of SB Customers
introduced to SB by WEBB.
2.10 "SB Customers" means any businesses or other entities to which SB, or a
------------
third party in connection with SB, offers or sells web site creation,
enhancement, hosting and/or related services.
2.11 "SB Contractors" means any third party with which SB (or a subcontractor of
--------------
SB) has a contract for the performance of services by such third party in
connection with SB's offer or sale to SB Customers of web site creation,
enhancement, hosting, and/or related services.
2.12 "SB Sales and Content Materials and Trademarks" means all SB's sales
---------------------------------------------
brochures, marketing materials, content materials and trademarks provided by SB
to WEBB for use pursuant to this Agreement.
2.13 "Source Code" means software in human-readable, high-level language form,
-----------
which when compiled or assembled, becomes the executable Object Code of a
computer software program. Source Code means both human readable (listings) and
machine readable (source files) forms and shall include all tools and
documentation needed to build such computer software, as well as all flow
charts, programmer comments and design specifications for the computer software.
2.14 "Standard Template Sites" means web sites generated through the use of XML
-----------------------
Site Generation Platform based on templates which include information about a
web site owner's business, including name, address and hours of operation, that
can be used to locate and communicate with that web site owner. Such templates
may also include communications and mapping functionality designed to facilitate
interactions between the web site owner and its customers through the web site's
interfaces or output. Standard Template Sites specifically exclude Vertical
Template Sites.
2.15 "Vertical Template Sites" means web sites generated through the use of XML
-----------------------
Site Generation Platform based on templates which may include some or all of the
types of information included in a Standard Template Site, but which are also
designed to integrate and present additional content and/or functionality from
the web site owner, third party sources or SB, which may be associated with or
related to the web site owner's business, a specific business category or
subject area.
2.16 "WEBB Confidential Information" includes all existing and future (i) Source
-----------------------------
Code to the XML Site Generation Platform and Modifications made by WEBB (other
than Modifications jointly owned in accordance with Section 4.2), and (ii)
information identified in writing by WEBB as confidential. WEBB Confidential
Information excludes any portion of information which: (1) is or becomes
publicly available through no act or failure of SB; (2) was or is rightfully
acquired by SB from a source other than WEBB; (3) is or becomes independently
known or available to SB without breach of this Agreement; (4) is independently
developed by SB without reference to the WEBB Confidential Information; or (5)
is required to be disclosed by court order, after giving WEBB the opportunity to
appear before the court and protect its interests.
2.17 "WEBB Trademarks" means the trademarks designated by WEBB for use by SB
---------------
under this Agreement.
2
<PAGE>
2.18 "XML Definitions" means Document Type Definitions (DTDs) created to support
---------------
the XML Site Generation Platform. A DTD is a type of file associated to an XML
document that defines how the markup tags should be interpreted by the XML Site
Generation Platform.
2.19 "XML Site Generation Platform" means the software, including Modifications
----------------------------
made pursuant to this Agreement, that performs, without limitation, all of the
following functions in connection with the creation and output of web sites: (1)
accepts the input of web site and related content through a variety of data
entry and integration techniques; (2) creates, via an XML conversion process, an
XML file and a set of template-driven business web pages or other integrated
content; (3) provides functionality for the editing and updating of this
content; and (4) produces HTML or other output of the resulting web pages in an
FTP format or other internet transport format.
Section 3: XML Site Development and Delivery
3.1 Phase 1. WEBB is developing a base set of design templates and interfaces
-------
and incorporating them into the XML Site Generation Platform ("Phase 1"),
integrating the requirements and specifications provided by SB and attached
hereto as Exhibit A ("Phase 1 Specifications"). WEBB shall complete and deliver
to SB the Integration Enabling Version of the XML Site Generation Platform by
June 30, 1999, and complete and deliver to SB the Production Development Version
of the XML Site Generation Platform by July 31, 1999, both as part of Phase 1.
(Each version referenced in the previous sentence shall be as defined in the
Phase 1 Specification.) In the event that SB requests any reasonable changes to
the Phase 1 Specifications, the completion dates specified above shall be
extended a reasonable amount of time to allow for implementation of such
changes.
3.2 Phase 2. Commencing on the acceptance of Phase 1 in accordance with
-------
Section 3.4, WEBB will develop an expanded version of the XML Site Generation
Platform ("Phase 2"), integrating the requirements and specifications jointly
defined by SB and WEBB ("Phase 2 Specifications") which shall incorporate the
following types of features:
(a) Vertical templates for 10 categories of businesses, including clip art
and design formats and data intake interfaces for each;
(b) Expanded integration capability for third party content into Vertical
Template Sites.
(c) Extension and modification of XML Site Generation Platform required to
support (a) and (b).
(d) Creation of remote monitoring tools required to assure 7x24
notification of service failures.
WEBB and SB will work together to define the Vertical Templates and related
specifications based on the categories specified in the Phase 2 Specification.
Unless otherwise agreed by SB and without limitation, WEBB will be responsible
for providing all design, art, content tagging and other functional elements
that make each Vertical Template. WEBB shall complete and deliver to SB the
Phase 2 deliverables by the later of September 30, 1999 or within sixty (60)
days after the due date for delivery of the Integration Enabling Version of the
XML Site Generation Platform in Phase 1, provided that the Phase 2
Specifications are agreed to by the Parties by July 15, 1999. The parties shall
use good faith efforts to agree to the Phase 2 Specifications by July 15, 1999.
If they fail to do so, the delivery date for Phase 2 deliverables shall be moved
back by the number of days equivalent to the number of days between July 15,
1999 and the completion of the Phase 2 Specifications. In the event that SB
requests any reasonable changes to the Phase 2 Specifications, the completion
dates specified above shall be extended a reasonable amount of time to allow for
implementation of such changes.
3.3 Phase 3. Providing that SB has not elected to terminate the Exclusivity
-------
Period in accordance with the terms of Section 7.3, commencing on SB's
acceptance of Phase 2 in accordance with Section 3.4, WEBB will develop a
further expanded version of the XML Site Generation Platform ("Phase 3"),
integrating the requirements and specifications to be jointly defined by WEBB
and SB ("Phase 3 Specifications") which shall incorporate the following types of
features:
3
<PAGE>
(a) Vertical templates for thirty (30) additional categories of
businesses, including clip art and design formats and data intake
interfaces for each;
(b) Integration of interactive voice recognition (IVR) services for
capturing content and design preference information from merchants;
and
(c) Expanded integration capability for third party content into Vertical
Template Sites.
(d) Extension and modification of XML site generation platform required to
deploy and administer multiple outlet dealer networks from common
templates
Subject, to the foregoing, WEBB shall complete the Phase 3 deliverables on or
before December 31, 1999 provided that the Phase 3 Specifications are agreed to
by the Parties by September 15, 1999. The parties shall use good faith efforts
to agree to the Phase 3 Specifications by September 15, 1999. If they fail to
do so, the delivery date for Phase 3 deliverables shall be moved back by the
number of days equivalent to the number of days between September 15, 1999 and
the completion of the Phase 3 Specifications. In the event that SB requests any
reasonable changes to the Phase 3 Specifications, the completion dates specified
above shall be extended a reasonable amount of time to allow for implementation
of such changes.
3.4 Acceptance. WEBB shall use good faith efforts to ensure that the
----------
developments for each Phase conform to the applicable Specification. Upon
completion of each of Phase 1, 2 and, if applicable, 3, WEBB shall submit such
developments to SB for acceptance by the dates set forth above. SB shall have
ten (10) business days to test such deliverables to determine whether they
conform in all material respects to the applicable Specifications. In the event
that SB reasonably determines that the deliverables associated with any Phase do
not conform in all material respects to the applicable Specification, SB shall
so notify WEBB in writing, indicating the nature of the non-conformities. WEBB
shall then have ten (10) business days to correct any non-conformities so that
the deliverables for such Phase conform in all material respects to the
applicable Specifications. Upon delivery of such corrected Phase developments,
SB shall again have ten (10) business days to test such deliverables to
determine whether they conform in all material respects to applicable
Specifications. If SB reasonably determines that they do not, SB may, at its
election, terminate this Agreement upon ten (10) days' prior written notice to
WEBB, provided that WEBB does not cure such non-conformities during such ten
(10)-day period. In the event that SB does not accept any Phase deliverables in
accordance with this Section, the then-current term of exclusivity, if any,
shall be extended for a period of time equal to the time between the initial
non-conforming delivery and acceptance by SB. Further, SB shall not be
obligated to make the minimum payment due on September 30, 1999 pursuant to
Section 7.3 unless and until it has accepted the Phase 1 development. If SB
does not advise WEBB in writing that the deliverables do not conform in all
material respects to the applicable Specifications within the applicable ten
(10)-day period, the deliverables shall be deemed to be in conformance with the
applicable Specifications.
3.5 Requested Modifications. WEBB hereby agrees to make reasonable changes
-----------------------
requested by SB during the Term of this Agreement to or in connection with the
Programmatic Interfaces or XML Definitions for no additional charge for minor
changes and for a reasonable fee for any other such changes.
Section 4: Ownership, License and Maintenance and Support
4.1 License Grant. WEBB grants to SB and SB accepts, throughout the Term of
-------------
this Agreement, a nonexclusive, nontransferable license to use the XML Site
Generation Platform in Object Code form only, and to allow SB Customers and SB's
Contractors to access the XML Site Generation Platform for the development,
update, modification, and/or enhancement of Web sites for SB Customers or to
access SB Customer account information (the "License").
4.2 Ownership Rights. Subject to the License, WEBB will retain all of its
----------------
ownership rights in all Intellectual Property Rights in the XML Site Generation
Platform, except that Programmatic Interfaces and Phase 1, 2, and 3
Specifications shall be jointly owned by the Parties.
4
<PAGE>
4.3 Restrictions on Transfer. Except as expressly provided by Sections 6.3 and
------------------------
14.5, SB will not sell, assign or otherwise transfer the XML Site Generation
Platform or any portion thereof, to any third party. Notwithstanding the
foregoing, if SB has a right to host XML Site Generation Platform, it may do so
at a third party facility selected by SB provided that SB maintains operational
control of same.
4.4 Restrictions on Disassembly and Reverse Engineering. To the extent that
---------------------------------------------------
restrictions on disassembly and reverse engineering are allowed by applicable
law, SB will not disassemble or reverse engineer the XML Site Generation
Platform.
4.5 SB or Customer Data. WEBB will not claim any ownership in or rights to data
-------------------
or content originated by SB, SB Customers, or SB Contractors, including as same
may be resident on WEBB's XML Site Generation Platform, and WEBB shall assign to
SB or, as directed by SB, it's Customers or Contractors, as applicable, any such
rights it may acquire.
4.6 Restrictions on Modifications. SB will not make any Modifications to Phase
-----------------------------
1/2/3 Modifications unless authorized by WEBB in writing.
4.7 Maintenance and Support. For as long as WEBB is hosting the XML Site
-----------------------
Generation Platform, WEBB shall provide the following Maintenance and Support
Services for the XML Site Generation Platform at no additional charge:
(a) Problem reporting, tracking and monitoring, and communication to SB by
electronic mail via the Internet;
(b) Reasonable telephone support on business days for problem
determination, verification and resolution on a call-back basis during
the hours of 6 a.m. to 9 p.m. Mountain Time; and
(c) Periodic software Modifications made by WEBB, provided that WEBB may
make minor Modifications to the XML Site Generation Platform which do
not impact the XML Site Generation Platform's conformance to the
applicable Specifications without SB's consent. WEBB will inform SB
by e-mail at least 48 hours prior to any major software upgrade to the
XML Site Generation Platform and will not make any such modifications
during any Exclusivity Period without SB's prior consent, which
consent will not be unreasonably withheld.
(d) Shall work diligently during normal business hours to promptly resolve
defects and errors that have been replicated by or for WEBB in the XML
Site Generation Platform and documentation in accordance with the
following schedule, it being understood that the closure periods
commence when the problem has been mutually verified:
ERROR PRIORITY (1) RESPONSE (2) CLOSURE (3)
Emergency (A) 24 hours 7 days
Critical (B) 2 days 14 days
Non-Critical (C) 30 days Next Update
(1) Priority:
-A- Catastrophic product or module failures that do not have a
viable detour or work around available. Catastrophic
failures shall be deemed to include failures which cause an
interruption of service or seriously impair the
functionality of the XML Site Generation Platform.
-B- Problems that have been substantiated as a serious
inconvenience to SB, SB Customers, or SB Contractors. This
includes any priority A failure for which a viable detour or
work around is available.
5
<PAGE>
-C- All other problems which SB, SB Customers, or SB Contractors
can easily avoid or detour for which there is no urgency for
a resolution.
(2) Response: Response consists of providing, as appropriate, one of
the following to SB: an existing correction; a new correction; a
viable detour or work around; a request for more information to
complete analysis of the problem, or a plan on how the problem
will be corrected.
(3) Closure: Closure consists of providing a final correction or
work around of the problem including Modifications of the XML
Site Generation Platform and, to the extent reasonably possible,
revised or new documentation as necessary, it being understood
that the documentation may, to the extent reasonable, be
completed after the applicable closure date.
4.8 [Deleted.]
4.9 Interruption of Service In the event of an interruption of service during
-----------------------
normal business hours caused by WEBB or the XML Site Generation Platform which
renders the XML Site Generation Platform, including without limitation, data
entry interfaces created by WEBB, unavailable to SB, SB Contractors or SB
Customers for reasons other than network or technology components out of the
control of WEBB (subject to WEBB's obligation to comply with the provisions of
Section 4.12), WEBB shall, in addition to its other obligations under this
Agreement, provide services required to restore continuous operation as follows:
a) WEBB shall notify SB within 2 hours of discovering such failure, or
respond to SB within 1 hour after notification by SB.
b) WEBB shall have 4 hours after discovery or notification of
interruption of service to inform SB of the status of its progress in
identifying the problem and its plan for resolution. Switchboard will
provide WEBB with reasonable assistance required to isolate the origin
of such interruption. Until the problem is resolved, WEBB will give SB
regular status updates, no less often than once a day, on
identification of cause, remedies and estimated times to recover.
c) WEBB shall cache all information and data transmitted to the XML
Software up to the point of service interruption relating to web sites
which were not completed due to such interruption. WEBB shall use good
faith efforts to develop in connection with Phase 2 an application to
be used during the period of service interruption that would allow the
XML Site Generation Platform to receive and store the same type of
information and data from SB, SB Contractors, and SB Customers as the
XML Site Generation Platform was able to receive before the service
interruption. During the period of service interruption, until the
installation of an application referred to in this Section, SB and SB
Contractors shall cache all information and data normally transmitted
to the XML Site Generation Platform in a format mutually acceptable to
SB and WEBB. Upon the resolution of the problem causing such service
interruption, the parties shall agree on a method for transmitting to
WEBB any information or data which has been cached by SB or SB
Contractors and WEBB shall ensure that the XML Site Generation
Platform shall process all information and data which has been cached
in the order received by WEBB, unless otherwise mutually agreed by SB
and WEBB.
d) To restore service, WEBB shall have a right to temporarily revert to
the most recent stable version of the XML Software without SB's
consent, provided that such prior version is within the same Phase
implementation. (For example, if SB has accepted the Phase 2 version
of the XML Software prior to the interruption of service, WEBB may
revert only to a prior version of Phase 2, if any. WEBB may not revert
to a Phase 1 version without SB's prior written consent.) WEBB shall
revert back to the most current version of the XML Software promptly
upon resolution of the problem which caused the interruption.
6
<PAGE>
e) WEBB shall use commercially reasonable efforts to remedy the problem
with the then-current version of the XML Software as quickly as
possible.
4.10 Service Interruption Fee. If there is a service interruption after
------------------------
September 1, 1999 or, if later, after SB has completed its required integration
work, and WEBB has not created an application to allow for the receipt and
storage of information and data from SB, SB Contractors, or SB Customers as
described in Section 4.9(c), SB and/or SB Contractors who are denied access to
the XML Site Generation Platform may, upon resumption of service and access to
the XML Site Generation Platform, re-enter such cached data and information into
data entry interfaces provided by the XML Site Generation Platform. SB shall
charge WEBB a fee of $16 for each web site for which SB or SB Contractors re-
enter such data and information as provided above, provided that the customer
for whom such data was required to be re-entered is or becomes a regular paying
customer of SB. WEBB agrees to pay SB the applicable charges within 30 days
after the end of the month in which SB's or SB Contractor's data re-entry
activities are completed.
4.11 Chronic Interruptions of Service. If after September 1, 1999 or, if later,
--------------------------------
after SB has completed its required integration work, the XML Site Generation
Platform is unavailable to SB, SB's Contractors and/or SB Customers for a
continuous period of seven (7) days, or for a cumulative period of 120 hours
over a period of thirty (30) days, then SB may at its election terminate this
Agreement upon written notice to WEBB.
4.12 Maintenance of Performance Standards. During the period when WEBB is
------------------------------------
hosting the XML Site Generation Platform, WEBB shall (a) use commercially
reasonable efforts to keep such XML Site Generation Platform continually
available to SB, SB Contractors and SB Customers, on a 24x7 basis; and (b)
maintain at least the infrastructure and operational standards set forth in
Exhibit B.
Section 5: Restrictive Covenants of the Parties
------------------------------------------------
5.1 Exclusivity. Throughout the Exclusivity Period and to the extent lawful
-----------
under applicable laws and regulations, WEBB covenants and agrees that except as
provided below it will not directly or indirectly license the XML Site
Generation Platform or provide access to its XML Site Generation Platform to (i)
yellow page or business directory publishers, media companies, financial service
organizations, (for the purposes of this Section, "Competitive Entities") or
(ii) other organizations for the purpose of providing web sites to small or
medium-sized businesses with primary markets in the United States. (For the
purposes of this Agreement, a "small or medium-sized business" shall mean
businesses which employ fewer than 200 full or part-time employees.) This
Agreement and this Section 5.1 will not restrict WEBB from licensing or selling
access to its XML Site Generation Platform, during the Exclusivity Period for
the following purposes:
(a) WEBB may, directly or indirectly through distribution partners,
continue to offer and sell a service marketed to web site developers
and/or graphic artists for the production of HTML web site pages (for
Internet and Intranet applications) that also use XML technology, so
long as the services are not made available to the following types of
parties, as end-user customers, developers, or distribution partners:
merchant aggregators, content syndication services, any yellow pages
or other ad-based directory services, or any other Competitive
Entities. Throughout any Exclusivity Period, and to the extent that
WEBB can contractually provide appropriate access, WEBB agrees to
provide SB a client list and/or other means of promotional support, so
that SB may market to such clients or prospects additional products
and services. In the event that SB provides products or services to a
client or prospect as a result of obtaining such client list or
support from WEBB, SB shall pay WEBB 50% of the Net Revenues
recognized by SB from the sale of products or services to such client
or prospect during the first six months of revenue generating services
or product sales.
(b) WEBB may continue to offer and sell access to its XML Site Generation
Platform as a component of custom solutions to websites that aggregate
vertical single-category content, so long as: i) WEBB does not re-use
any jointly created XML Definitions, Programmatic Interfaces, or
7
<PAGE>
integration processes which are unique to SB; ii) WEBB does not create
directory services that incorporate searching for businesses based on
category and location, and iii) WEBB makes a good faith effort to
promote an integrated solution with SB, wherein SB provides directory
services, advertising fulfillment and/or ad placement.
(c) The development of any Web sites focused primarily on individuals and
not businesses (i.e., personal web pages).
(d) WEBB may offer solutions incorporating the XML Site Generation
Platform for the creation and editing of websites/web pages for
individuals and/or businesses published within an Intranet and
Extranet service. Extranet services specifically exclude private
networks that aggregate business-to-business commerce services or
merchants, syndicate content, or offer yellow pages.
(e) WEBB and SB may elect, from time to time, to jointly pursue individual
business opportunities that employ the XML Site Generation Platform
that are outside of the scope of these exclusivity exclusions. Any
such participation must be with the written approval of SB.
5.2 Competing XML Technology by SB. Throughout the Exclusivity Period and to
------------------------------
the extent lawful under applicable laws and regulations, SB covenants and agrees
that it will not make available to end user customers any XML-based Web
technology or software that competes with the XML Site Generation Platform in
the uses licensed pursuant to this Agreement.
5.3 Nonsolicitation or Hiring of Employees of the Other Party. During the Term
---------------------------------------------------------
of this Agreement and for one year thereafter, and to the extent lawful under
applicable laws and regulations, each party covenants and agrees not to solicit
or hire any employees of the other party.
5.4 SB Confidential Information. Throughout the Term of this Agreement and
---------------------------
thereafter, WEBB covenants and agrees not to directly or indirectly: (i) use
any SB Confidential Information except in furtherance of this Agreement (and any
other agreements between the Parties) and the interests of SB and (ii) disclose
the SB Confidential Information except to Representatives of WEBB who have
agreed to keep such information confidential and use such information only as
authorized by this Agreement.
5.5 WEBB Confidential Information. Throughout the Term of this Agreement and
-----------------------------
thereafter, SB covenants and agrees not to directly or indirectly: (i) use any
WEBB Confidential Information except in furtherance of this Agreement (and any
other agreements between the Parties) and the interests of WEBB and (ii)
disclose the WEBB Confidential Information except to Representatives of SB who
have agreed to keep such information confidential and use such information only
as authorized by this Agreement.
Section 6: Hosting of the XML Site Generation Platform
6.1 Hosting Commitment by WEBB. WEBB will host on WEBB servers, operate, and
--------------------------
allow continuing access to the XML Site Generation Platform by and for the
benefit of SB, SB Contractors and SB Customers until the earlier of (a) the
expiration or termination of this Agreement or (b) the changeover to the hosting
of the XML Site Generation Platform on SB's servers under Sections 6.3 or 8(c)
below. If this Agreement and the License continue in effect more than three (3)
years after the Effective Date, WEBB may at any time require SB to take over the
hosting and operation of the XML Site Generation Platform, provided that it
gives SB at least 90 days advance written notice and reasonable assistance and
training.
6.2 Third Party Costs. SB will also be responsible for the costs paid to third
-----------------
parties for third party content, technology and services that SB specifically
requests be integrated into the XML Site Generation Platform.
6.3 Optional Hosting by SB. At any time after the first anniversary of the
----------------------
Effective Date, SB may elect to take over the hosting of the XML Site Generation
Platform from WEBB. Promptly after making that election, WEBB will provide SB
one copy of the Object Code to the XML Site Generation Platform to enable SB to
commence and
8
<PAGE>
continue, at its expense, the hosting and operation of the XML Site Generation
Platform for use in accordance with the License. SB shall have the right to make
one copy of the Object Code for archival purposes. SB shall also have the right
to authorize a third party SB partner to host the XML Site Generation Platform
provided that it obtains the prior written consent of WEBB which will not be
withheld if (a) WEBB has the resources available that are required by such SB
partner and WEBB is reimbursed on a time and materials basis, (b) WEBB is not
required to provide support directly to such SB partner, (c) WEBB does not
reasonably believe that the revenue received by WEBB under this Agreement will
be negatively impacted and (d) such SB partner agrees to maintain the
confidentiality of any WEBB Confidential Information. At SB's request, WEBB
shall also make maintenance and support services available to SB for up to two
(2) years (a one (1) year agreement and one renewal term at SB's election) after
SB takes over the hosting of the XML Site Generation Platform pursuant to the
terms of the Maintenance and Support Agreement attached hereto as Exhibit C. The
Parties agree to negotiate in good faith to establish the fees to be paid for
the services provided pursuant to the Maintenance and Support Agreement.
6.4 Continued Payment of Site General Platform Fees. Unless SB has paid WEBB
-----------------------------------------------
the One Time Fee upon exercise of the Perpetual License Option under Section 8,
SB's or its partner's hosting and operation of the XML Site Generation Platform
will not eliminate or reduce the amount or frequency of payment of the Site
General Platform Fees by SB to WEBB under Section 7 below.
6.5 Reference to "Powered by" WEBB. So long as either WEBB or SB or its
------------------------------
partner is hosting and operating the XML Site Generation Platform for the
benefit of SB or SB's Customers, (a) SB shall include a reference in the
management interfaces for SB Customers that the web site management tools are
"powered by" WEBB or other mutually agreed WEBB branding; and (b) SB shall
include a WEBB icon in the area of the SB site where SB business partners are
listed.
Section 7: XML Site Generation Platform Fee Schedules, Payment and Revenue
Guarantees
7.1 Product Development Fee. For development of the Integration Enabling
-----------------------
Version of the XML Site Generation Platform and the completion of Phases 1 and
2, SB shall pay Webb during the quarter ending September 30, 1999, a one-time
development fee of $250,000. This payment has been determined based on the
following: (i) Integration Enabling Version of the XML Site Generation Platform
- -- $175,000; (ii) completion of Phase I -- $25,000; and (iii) completion of
Phase 2 -- $50,000.
7.2 Site Generation Platform Fee. During the Term of this Agreement, SB shall
-----------------------------
pay WEBB the following Site Generation Platform fees for web site generation or
modification/maintenance and HTML conversion:
(i) $4 per month for each Standard Template Site hosted in such month
during the first two (2) years of the Term of this Agreement and $3
per month thereafter during the Term of this Agreement for each such
site; and
(ii) $5 per month for each Vertical Template Site hosted in such month
during the first two (2) years of the Term of this Agreement and $3
per month thereafter during the Term of this Agreement for each such
site.
In the event that SB elects to terminate the Exclusivity Period effective
September 30, 1999, the monthly payments in (i) and (ii) above shall be
increased for the balance of the year ending June 30, 2000, from the $4.00 per
month amount for the Standard Template Site to $5.00 per month, and for the
Vertical Template Site from the $5.00 per month amount, to $6.00 per month. The
Parties will negotiate in good faith to establish the amount of such monthly
fees for the remaining Term of this Agreement.
In lieu of the monthly payments set forth above for specific sites, during the
Term of this Agreement, SB shall pay WEBB the following Site Generation Platform
Fees for web sites generated by or for SB Customers through the XML Site
Generation Platform using tools and templates developed specifically for
national and/or multi-dealer
9
<PAGE>
systems pursuant to Phase 3 Specifications: (i) the greater of $1 per month for
which each such national or multi-dealer web site is hosted, or (ii) 20% of Net
Revenues recognized therefrom by SB during any such month.
SB shall commence payment of Site Generation Platform Fees upon the earlier of
30 days after SB has sent its first invoice for the applicable Web site to a
customer or 90 days after continual service to a SB customer of a web site.
7.3 Minimum Payments; Termination or Extension of Exclusivity Period. During
----------------------------------------------------------------
the first year of this Agreement, SB guarantees WEBB payments of $250,000 for
the quarters ending on September 30, 1999, December 31, 1999 and March 31, 2000,
such amounts to be due on the last day of the quarter and payable within 10 days
thereafter; subject to (i) SB's right to terminate the quarterly payments for
the quarters ending December 31, 1999 and March 31, 2000 by giving WEBB written
notice of its election to terminate such obligations by no later than August 14,
1999, in which event, SB's obligation to make such payments shall be terminated
and the Exclusivity Period shall terminate on September 30, 1999, rather than
June 30, 2000. In the event that the Site Generation Platform Fees for the
quarters for which SB is obligated to make guaranteed payments exceed such
guaranteed amounts, SB shall pay WEBB within 30 days of the end of such quarter
the difference between the guaranteed amount for such quarter and the Site
Generation Platform Fees payable for such quarter.
Provided that SB (i) is then in compliance with all material terms of this
Agreement, and (ii) has not elected to terminate the guaranteed payments for the
quarters ending December 31, 1999 and March 31, 2000, SB may extend the
Exclusivity Period for up to two additional successive one-year periods by
giving WEBB at least 90 days written notice prior to the end of the then current
Exclusivity Period that SB has elected to extend the Exclusivity Period for a
one-year period commencing on the following July 1 and by guaranteeing the
following minimum payments which shall be due on the last day of the quarter and
payable within 10 days thereafter, against which Site Generation Platform Fees
for such quarter are to be credited:
(i) During the 12-month period commencing on July 1, 2000 -- $250,000 per
quarter; and
(ii) During the 12-month period commencing on July 1, 2001 -- $312,500 per
quarter.
In the event that the Site Generation Platform Fees for the quarters for which
SB is obligated to make guaranteed payments exceed such guaranteed amounts, SB
will pay WEBB within thirty (30) days of the end of such quarter the difference
between the guaranteed amount for such quarter and the Site Generation Platform
Fees payable for such quarter.
Except in the event that SB terminates the initial Exclusivity Period effective
September 30, 1999, during any Exclusivity Period, SB shall be given a credit of
100% of the guaranteed payments during the applicable 12-month period to the
extent of Site Generation Platform Fees payable during such period. In the
event of the early termination of the initial Exclusivity Period, SB shall be
given a credit of 100% of the guaranteed payments for the quarter ending
September 30, 1999 to the extent of Site Generation Platform Fees payable
through December 31, 1999. In the event that SB does not elect to extend the
Exclusivity Period for the year beginning July 1, 2000, it shall not thereafter
have any right to extend the Exclusivity Period, whether pursuant to this
Section 7.3 or Section 8.1(e).
7.4 Taxes. SB will pay or reimburse WEBB for any sales, use or similar taxes,
-----
if any, based on the development of the Phase 1/2/3 Modifications or the
License, excluding taxes based on WEBB's taxable income or gain.
7.5 Late Fee. In addition to WEBB's other remedies, if SB fails to pay WEBB
--------
any amounts when due under this Agreement, SB will pay interest on that amount
at the rate of 1% per month or such lesser maximum rate of interest permitted
under applicable law.
7.6 Bonus Payment. In addition to Site Generation Platform Fees payable
-------------
pursuant to Section 7.2, in consideration for WEBB's continued support and
modification of the XML Site Generation Platform, SB agrees to pay WEBB during
the Exclusivity Period a performance bonus equal to 10 % of the difference
between (i) Net
10
<PAGE>
Revenues recognized by SB from the sale of Vertical Template Sites and
enhancements thereto; and (ii) 150% of the average price paid by SB Customers
for Vertical Template Sites during each 12-month period of the Term of this
Agreement; where (i) is greater than (ii). SB shall make any payments due
hereunder within 30 days after the close of such 12-month period.
Section 8: Optional Purchase of Fully Paid Nonexclusive Perpetual License
8.1 Purchase of Perpetual License. At any time (i) within sixty (60) days
-----------------------------
after June 30, 2001 or June 30, 2002 or the expiration of any renewal Term of
this Agreement or (ii) at the time of termination of this Agreement by SB due to
a breach by WEBB that is not timely cured, SB may notify WEBB of SB's election
to exercise the perpetual license option as described in this Section 8 (the
"Perpetual License Option") if: (1) with respect to (i) above, this Agreement
is then in effect, (2) SB has paid WEBB all of the amounts that are payable to
WEBB from the Effective Date through the date of notice to exercise the
Perpetual License Option, and (3) such notice is given during an Exclusivity
Period, except in the case of an early termination of the initial Exclusivity
Period pursuant to Section 7.3, in which event the notice must be given prior to
February 14, 2000. Within thirty (30) days after WEBB receives a timely notice
of exercise of the Perpetual License Option by SB, WEBB and SB will proceed as
follows:
(a) WEBB shall grant to SB a nonexclusive, worldwide, perpetual license to
use, copy, and modify the Object Code and Source Code to the XML Site
Generation Platform as then in effect or, at WEBB's option, including
one or more Modifications made after the exercise of such option
(provided that such Modifications do not cause a nonconformance with
the applicable specifications), and to operate SB's own version of XML
Site Generation Platform for access by SB's customers and third
parties under contract with SB ("Perpetual License Grant");
(b) SB will pay WEBB a one time perpetual license fee (the "One Time
Fee"), in United States dollars, in the following respective amounts:
(i) If the Perpetual License Option is exercised at any time prior to
August 31, 2001, the One Time Fee will be the greater of (1) $2
million or (2) the Site Generation Platform Fees earned by WEBB
during the 12-month period ending on the earlier of June 30, 2001
or the date of termination; and
(ii) If the Perpetual License Option is exercised at any time after
August 31, 2001, the One Time Fee will be the greater of (1) $2.5
million or (2) the Site Generation Platform Fees earned by WEBB
during the 12-month period ending June 30, 2002.
(c) Promptly after the Perpetual License Grant and payment of the One Time
Fee, WEBB will deliver to SB one copy of the Object Code and Source
Code to the XML Site Generation Platform and SB will commence to host
and operate, at its expense, the XML Site Generation Platform. WEBB
will provide, at no charge and on a timely basis, training and
assistance reasonably required by SB to enjoy the benefits of its
license rights pursuant to this Section 8.
(d) If SB desires to purchase support assistance or future Modifications
from WEBB for the XML Software, WEBB shall make maintenance and
support services available to SB for two (2) years (a one (1) year
agreement and one renewal term) after SB takes over the hosting of the
XML Site Generation Platform pursuant to the terms of the Maintenance
and Support Agreement attached hereto as Exhibit C. Under that
agreement, WEBB will not be obligated to develop Modifications that
are unique to SB.
(e) In the event of the execution and performance of the Perpetual License
Option, the Exclusivity Period, if then in effect, shall be extended
for an additional six (6) months following the date of the Perpetual
License Grant.
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<PAGE>
(f) Notwithstanding anything to the contrary in this Agreement, upon
payment of the One Time Fee, SB shall have no further obligations with
respect to the Site Generation Platform Fees (Section 7.2), Minimum
Payments (Section 7.3) and Bonus Payments (Section 7.6), except for
any such payments earned prior to the effective date of the Perpetual
License Grant.
Section 9: Representations and Agreements of SB
9.1 Authority and Compliance. SB represents and warrants to WEBB that:
------------------------
(a) SB is duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite rights, power and
authority to enter into and perform its obligations under this
Agreement;
(b) The person signing this Agreement for SB is duly authorized to execute
this Agreement on SB's behalf;
(c) SB has secured and will keep in effect throughout the Term of this
Agreement all necessary licenses, permits and authorizations to enable
it, and all Representatives acting on SB's behalf, to perform all of
SB's obligations under this Agreement, and will notify WEBB
immediately should any such license, permit, authorization or rights
no longer be in effect or in good standing;
(d) SB will comply with all applicable laws and regulations in the
performance of its obligations under this Agreement.
9.2 SB Expenses. Unless this Agreement expressly requires reimbursement by
-----------
WEBB, SB will bear and pay all costs and expenses incurred by SB pursuant to
this Agreement.
9.3 Ownership of WEBB Trademarks; Notices. SB acknowledges and agrees that,
-------------------------------------
except for the limited nonexclusive license under this Agreement, SB will not
acquire any Intellectual Property Rights to the WEBB Trademarks and that all
such rights will remain the sole property of WEBB. SB will not remove any
patent, copyright, trademark or other intellectual property notice appearing on
the XML Site Generation Platform or the Phase 1/2/3 Modifications.
9.4 Insurance. During the Term of this Agreement and for one year thereafter,
---------
SB will keep in force and maintain, at its expense, commercial general liability
insurance with minimum primary limits of $1 million ("SB Insurance Coverage").
SB will notify WEBB in writing at least 30 days before any changes in or
termination of SB Insurance Coverage.
9.5 SB's Books and Records; Inspection. During the Term of this Agreement and
----------------------------------
for one year thereafter: (a) SB will maintain true and correct books and
records pertaining to this Agreement and the payments hereunder (b) WEBB shall
have the right to engage an independent certified public accountant, at its
expense, to inspect, copy and audit the books and records of SB pertaining to
this Agreement for the sole purpose of verifying the accuracy of payments made
hereunder, subject to the confidentiality obligations for SB Confidential
Information.
9.6 Contract Administration and Billing and Collection. SB will be responsible
--------------------------------------------------
for the administration of its customer contracts for its customers who use the
XML Site Generation Platform under the License, including without limitation,
all billing and collection of amounts due from customers under those contracts.
Section 10: Representations and Agreements of WEBB
10.1 Authority and Compliance. WEBB represents and warrants to SB that:
------------------------
12
<PAGE>
(a) WEBB is duly organized, validly existing and in good standing under
the laws of the State of Colorado and has all requisite rights, power
and authority to enter into and perform its obligations under this
Agreement;
(b) The person signing this Agreement for WEBB is duly authorized to
execute this Agreement on WEBB's behalf;
(c) WEBB has secured and will keep in effect throughout the Term of this
Agreement all necessary licenses, permits and authorizations to enable
it, and all Representatives acting on WEBB's behalf, to perform all of
WEBB's obligations under this Agreement, and will notify SB
immediately should any such license, permit, authorization or rights
no longer be in effect or in good standing;
(d) Throughout the Term of this Agreement, WEBB will have obtained at its
expense all necessary permissions to use the WEBB Trademarks and XML
Site Generation Platform as described in this Agreement.
(e) WEBB will comply with all applicable laws and regulations in the
performance of its obligations under this Agreement.
10.2 WEBB Expenses. Unless this Agreement expressly requires reimbursement by
-------------
SB, WEBB will bear and pay all costs and expenses incurred by WEBB pursuant to
this Agreement.
10.3 Ownership of SB Sales and Content Materials and Trademarks; Notices. WEBB
-------------------------------------------------------------------
acknowledges and agrees that WEBB will not acquire any Intellectual Property
Rights to any SB Sales and Content and Materials and Trademarks under this
Agreement and that all such rights will remain the sole property of SB or its
suppliers. WEBB will not remove any patent, copyright, trademark or other
intellectual property notice appearing in the SB Sales and Content Materials and
Trademarks.
10.4 Insurance. During the Term of this Agreement and for one year thereafter,
---------
WEBB will keep in force and maintain, at its expense, commercial general
liability insurance with minimum primary limits of $1 million ("WEBB Insurance
Coverage"). WEBB will notify SB in writing at least 30 days before any changes
in or termination of WEBB Insurance Coverage.
10.5 Performance Warranty and Disclaimer of Other Warranties. WEBB hereby
-------------------------------------------------------
warrants that the XML Software shall operate in substantial conformance with the
applicable Phase 1 Specifications, Phase 2 Specifications and/or Phase 3
Specifications during the Term. THE FOREGOING WARRANTIES BY WEBB ARE IN LIEU OF
ALL OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 11: Indemnification
11.1 Indemnification by SB. SB will hold WEBB and its Representatives harmless
---------------------
from, and defend and indemnify WEBB and its Representatives against, any and all
claims, losses, damages and expenses, including reasonable attorneys' fees,
arising from a third party claim against WEBB or its Representatives to the
extent that such third party claim is based on: (a) the negligence or willful
misconduct of SB or its Representatives, or (b) claims of infringement of
Intellectual Property Rights against WEBB or its Representatives for its
authorized use of SB Sales and Content Materials and Trademarks under this
Agreement.
11.2 Indemnification by WEBB. WEBB will hold SB and its Representatives harmless
-----------------------
from, and defend and indemnify SB and its Representatives against, any and all
claims, losses, damages and expenses, including reasonable attorneys' fees,
arising from a third party claim against SB or its Representatives to the extent
that such third party claim is based on: (a) the negligence or willful
misconduct of WEBB or its Representatives or (b) claims of infringement of
Intellectual Property Rights against SB or its Representatives for its
authorized use of the XML Site Generation Platform or WEBB Trademarks under this
Agreement.
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<PAGE>
11.3 Procedure for Indemnification. If a third party asserts a claim that is
-----------------------------
eligible for indemnification under Sections 11.1 or 11.2: (a) the indemnified
Party will promptly notify the indemnifying Party of the suit or claim; (b) the
indemnified Party will give the indemnifying Party sole authority to defend or
settle the suit or claim, provided that the indemnifying Party does not agree to
a settlement of the suit or claim unless the settlement is reasonably acceptable
to the indemnified Party; (c) the indemnified Party will provide to the
indemnifying Party all information in its control concerning the suit or claim;
and (d) the indemnified Party will reasonably cooperate with the defense of the
suit or claim. The indemnification obligations under Sections 11.1 and 11.2 are
subject to and conditioned upon compliance with this Section 11.3 by the
indemnified Party.
Section 12: Limitations of Liability
12.1 Excusable Delay. Neither SB nor WEBB will be deemed to be in default of
---------------
any provision of this Agreement or for any failure in performance, resulting
from acts or events beyond the reasonable control of SB or WEBB, as the case may
be including, without limitation, acts of God, civil or military authority,
civil disturbance, war, strikes, fires, other catastrophes, telecommunication
outages, equipment malfunctions or other such major events beyond SB's or WEBB's
reasonable control. This provision shall not limit WEBB's obligation to comply
during the Term with the provisions of Section 4.12.
12.2 Liability Exclusion. EXCEPT FOR EITHER PARTY'S OBLIGATIONS TO THIRD
-------------------
PARTIES PURSUANT TO SECTION 11, INDEMNIFICATION, IN NO EVENT SHALL SB OR WEBB BE
LIABLE TO EACH OTHER FOR SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, INCLUDING
LOST PROFITS. NEITHER PARTY SHALL SEEK, OR OTHERWISE APPLY FOR, ANY PUNITIVE OR
EXEMPLARY DAMAGES.
Section 13: Term and Termination
13.1 Term. This Agreement will become effective as of the date first written
----
above and will continue in effect until June 30, 2002, subject to renewal or
earlier termination as provided in Sections 13.2 or 13.3 below ("Term").
13.2 Renewal. The Term of this Agreement will automatically renew for
-------
successive 12-month periods unless either Party provides the other Party written
notice of termination at least 120 days before the scheduled expiration of the
then current Term.
13.3 Termination. The Term and this Agreement may be terminated only as
-----------
follows:
(a) Either Party may elect not to renew the Term of this Agreement
pursuant to Section 13.2 above, in which case the Term and this
Agreement will terminate upon expiration of the then current Term.
(b) Either Party may, at its discretion, elect to terminate this Agreement
effective upon 30 days advance written notice to the other Party
stating that such Party is in material default under any of the
provisions of this Agreement, unless such default is timely cured
within such 30-day notice period. Any notice of termination under
this Section 13.3(b) will state the basis for the alleged default and
the measures reasonably necessary to cure such default.
(c) WEBB may elect to terminate the Term and this Agreement upon at least
30 days advance written notice to SB after the end of any calendar
quarter for which WEBB has not received the Minimum Payments under
Section 7.3 above; provided, however, if during such 30-day period SB
elects, at its sole discretion, to pay the balance of such quarterly
Minimum Payments to WEBB or WEBB elects, at its sole discretion, to
waive payment of such Minimum Revenues for that calendar quarter, then
this Agreement will continue in effect pursuant to its terms.
(d) The Parties may terminate this Agreement at any time by mutual written
agreement.
14
<PAGE>
13.4 Rights and Obligations Upon Termination or Nonrenewal. Upon the nonrenewal
-----------------------------------------------------
or earlier termination of the Term and this Agreement by either Party:
(a) Both Parties will be relieved of all obligations under this Agreement,
except for those obligations which expressly survive termination of
this Agreement;
(b) Each Party will, at its expense and at the request of the other,
promptly return to the other any Confidential Information of the
other;
(c) The Parties will promptly pay to each other the payments due and
payable hereunder through the date of termination or expiration.
13.5 Survival. The terms and provisions of Sections 4.2, 4.5, 5.3, 5.4, 5.5, 8,
--------
9, 10, 11, 12, 13.4 and 14 (inclusive) of this Agreement will survive and remain
in effect pursuant to their terms after the expiration or any earlier
termination of the then current Term of this Agreement by either Party. In
addition, in the event that SB has exercised the Perpetual License Option,
Sections 4.1 and 4.3 shall also survive termination of this Agreement.
Section 14: General
14.1 Governing Law. This Agreement is governed by and construed in all respects
-------------
in accordance with the laws of the State of Colorado, without regard to
conflicts of laws principles.
14.2 Dispute Resolution. Parties agree that all disputes arising as a result of
------------------
or in connection with this Agreement will be mutually resolved, except that if
Parties are unable to mutually resolve such disputes within 60 days, one or both
of the Parties will submit the dispute for arbitration. At least 30 days before
either Party initiates an arbitration proceeding, authorized Representatives of
SB and WEBB will review and become familiar with the subject matter of the
dispute, and meet in person or by telephone to review and attempt to resolve the
dispute in good faith. Except only for disputes for which injunctive relief is
sought by either Party, any disputes between the Parties (which are not
otherwise resolved by the Parties) will be submitted to binding arbitration in
before one arbitrator, with the venue and proceedings in accordance with the
then prevailing commercial rules of the American Arbitration Association. SB and
WEBB each waive their right to a trial by jury for any disputes between the
Parties.
14.3 Rights and Remedies. The Parties acknowledge that the unauthorized use or
-------------------
disclosure of Confidential Information, or the unauthorized use of the SB Sales
and Content Materials and Trademarks, the WEBB Trademarks or the WEBB XML Site
Generation Platform may result in immediate and irreparable injury and harm, and
may cause damages in amounts difficult to ascertain. Accordingly, upon such
breach, which has not been timely cured, the owning Party of such property will
be entitled to seek an injunction and other legal or equitable remedies, subject
to the limitations in Sections 11 and 12 above. All rights and remedies will be
cumulative, and the exercise of any one of them will not be deemed to be a
waiver of any other.
14.4 Protection of Trademarks. SB and WEBB will at all times use the trademarks
------------------------
of the other in a manner which will not diminish the rights of the trademark
owner.
14.5 Assignment. Neither Party may assign this Agreement or any of its
----------
respective rights or obligations under this Agreement unless approved in
writing, prior to such assignment, by the other Party, such approval to not be
unreasonably withheld. Notwithstanding the foregoing, either Party may assign
its rights and obligations under this Agreement, upon notice to the other Party
and without the other Party's approval or consent, if such assignment is in
connection with the sale of substantially all of the business of the assigning
Party related to this Agreement.
14.6 Headings. The section headings in this Agreement are for convenient
--------
reference and are not a part of this Agreement.
15
<PAGE>
14.7 Waiver. No waiver of any breach of any provision of this Agreement will
------
constitute a waiver of any prior, concurrent, or subsequent breach of the same
or any other provisions hereof, and no waiver will be effective unless made in
writing.
14.8 Notices. Any notice required or permitted to be given under this
-------
Agreement will be sufficient if in writing and delivered personally or via fax
(all fax notices will also be mailed in accordance with this Section 14.8) or
sent by registered or certified mail, postage prepaid and return receipt
requested, or sent by overnight courier to the attention of the "President" at
the Parties' respective addresses set forth above (or to such other address as
the Parties will designate by notice to the other in accordance with this
Section 14.8) and will be deemed to have been given as of the date of receipt.
14.9 Amendments. This Agreement can be modified or amended only by written
----------
agreement signed by the Parties.
14.10 Severability. If any provision of this Agreement is held to be illegal,
------------
invalid or unenforceable under present or future laws effective during the Term
hereof, such provision will be fully severable; this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of each such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Agreement a provision which
reflects the intent of the Parties and is as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
14.11 Counterparts. This Agreement may be executed manually or via fax and in
------------
one or more counterparts.
14.12 Construction. If an ambiguity or question of intent arises, this
------------
Agreement will be construed as if drafted jointly by the Parities and no
presumption or burden of proof will arise favoring or disfavoring either Party
by virtue of authorship of any of the provisions of this Agreement.
14.13 Agreement Expenses. Each of the Parties will pay their own expenses and
------------------
legal fees incurred before the execution of this Agreement.
14.14 Time Limitation. Except for actions for breach of a Party's intellectual
---------------
property rights and any claims for which either party has an indemnification
obligation pursuant to Section 11, no action arising out of or relating to this
Agreement may be brought later than two (2) years after the cause of action
became known to the injured Party.
14.15 Publicity. Neither Party will make any public release or announcement
---------
regarding the terms or existence of this Agreement except as may be required by
law, including the federal securities laws, without the prior consent of the
other Party, which consent will not be unreasonably withheld.
14.16 Relationship of the Parties. SB and WEBB are each independent businesses.
---------------------------
Neither Party nor its respective employees and representatives can or shall make
any agreements, warranties, representations, promises or covenants on behalf of
or for the other Party or any third party, unless approved in advance in writing
by the other Party. This Agreement shall not be construed as a partnership or
franchise for any purpose or reason, whether implied, expressed or statutory.
14.17 Complete Agreement. This Agreement contains the complete agreement
------------------
between the Parties concerning the subject matter hereof and supersedes all
prior understandings, letters of intent, proposals or agreements, and all prior
communications between the Parties relating to the subject matter of this
Agreement. No representation, warranty, promise, inducement or statement of
intention has been made by either Party which is not embodied in this Agreement.
14.18 Source Code Escrow and License.
------------------------------
16
<PAGE>
(a) Within thirty (30) days after the Effective Date, WEBB and SB agree to
establish a source code account with Data Securities International
("Escrow Agent"). As part of establishing such account, the Parties
shall execute an Escrow License Agreement, substantially in the form
of the Escrow Agent's standard escrow agreement, a copy of which is
attached hereto as Exhibit D, which standard escrow agreement shall be
modified as mutually agreed to reflect the terms of this Section
14.18. Within ten (10) days after the later of (i) establishing such
escrow account and (ii) SB's acceptance of Phase 1 developments, WEBB
shall deposit in the account the then-current Source Code for the XML
Site Generation Platform, including Phase 1 Modifications as accepted
by SB. During the Term of this Agreement, WEBB shall deposit in the
escrow account the Source Code for all Modifications made to the XML
Software, no less frequently than once each calendar quarter unless no
Modifications have been made in such quarter. The escrow agreement
shall provide for the release of the XML Site Generation Platform
Source Code to SB upon SB's request and in accordance with the
provisions of Section 14.18(b), in the event of occurrence of any of
the following events ("Release Events"): (i) SB terminates this
Agreement in accordance with the provisions of Sections 4.11 or
13.3(b); (ii) WEBB institutes a form of bankruptcy or similar
proceeding that would result in WEBB's ceasing to operate as a going
concern; (iii) WEBB commences the dissolution of WEBB that would
result in WEBB's ceasing to operate as a going concern; or (iv) WEBB
has not delivered the Source Code for the XML Site Generation Platform
in accordance with the provisions of Section 8.1(c).
(b) The Escrow License Agreement shall grant SB a non-exclusive license to
use, copy, and modify the XML Site Generation Platform Source Code for
the purpose of (a) creating Web sites and Web site enhancements for SB
Customers; (b) allowing SB Customers and SB's Contractors to access
the XML Site Generation Platform (but not the Source Code) for the
development, update, modification, and/or enhancement of Web sites for
SB Customers or to access SB Customer account information; and (c) any
other purposes for which SB is licensed to use the XML Site Generation
Platform pursuant to this Agreement or for which WEBB is providing
services pursuant to this Agreement at the time of the Release Event.
The term of the Source Code license granted to SB hereunder shall be
for the remainder of the Term if the Release Event is as stated in
Section 14.18(a)(i), and shall be perpetual if the Release Event is as
stated in Section 14.18(a)(ii) or (iii).
14.19 Grant of Warrant to SB. WEBB shall grant to SB warrants representing the
----------------------
right to purchase up to 300,000 shares of WEBB's common stock in accordance with
the following, any such warrant to be in substantially the form of Exhibit E to
this Agreement:
(a) A Warrant for 150,000 shares of WEBB's common stock shall be granted
to SB provided that SB does not elect to terminate the initial
Exclusivity Period effective September 30, 1999 as permitted in
Section 7.3. The warrant shall be granted on the earlier of August 15,
1999 or the date that SB waives its right to so terminate the
Exclusivity Period, at an exercise price equal to 105% of the closing
sale price for WEBB's common stock on the date of the grant as
reported by The Nasdaq Stock Market, provided that if there is no sale
of WEBB's common stock on such date, the last reported sale price
prior to the date of grant; and
(b) A warrant for an additional 150,000 shares of WEBB's common stock
shall be granted to SB provided that SB has been granted the warrant
referred to above and provided further that SB and WEBB have entered
into the Engineering Services Agreement dated as of June 30, 1999, and
an agreement for the integration of WEBB's community building products
and services into SB's products and services. This warrant shall be
granted on the date that all of the foregoing conditions have been
satisfied at an exercise price equal to 105% of the closing sale price
for WEBB's common stock on the date of grant as reported by The Nasdaq
Stock Market, provided that if there is no sale of WEBB's common stock
on such date, the last reported sale price prior to the date of grant.
17
<PAGE>
(c) An appropriate adjustment shall be made in the number of shares of
WEBB common stock to be subject to such warrants in the event that
WEBB pays a dividend on its shares of common stock in common stock,
subdivides or combines its shares of common stock or makes any other
such change in its capital structure prior to the grant of the
warrants.
The Parties have executed this Agreement as of the Effective Date.
SWITCHBOARD, INC. ("SB") ONLINE SYSTEM SERVICES, INC. ("WEBB")
By________________________________ By__________________________________
Title_____________________________ Title_______________________________
18
<PAGE>
EXHIBIT A
Section 3.1
Phase 1 Specifications
A-1
<PAGE>
EXHIBIT B
Section 4.12
Infrastructure and Operational Standards
The Parties agree to negotiate in good faith from the effective date of
this Agreement to complete this Exhibit within five (5) business days.
B-1
<PAGE>
EXHIBIT C
MAINTENANCE AND SUPPORT AGREEMENT
Agreement entered into and effective _________________ ("Effective Date")
between Switchboard, Inc., a Delaware corporation ("SB") with principal offices
located at ________________________________________ and Online System Services,
Inc., a Colorado corporation which plans to change its name to WEBB Interactive
Services, Inc. ("WEBB") with principal offices located at 1800 Glenarm Place,
Denver, Colorado 80202 (collectively "the Parties")
Background
----------
WHEREAS, SB has licensed the XML Site Generation Platform from WEBB and SB
desires to have WEBB maintain and support the XML Site Generation Platform.
WHEREAS, WEBB is willing to offer maintenance and support for the XML Site
Generation Platform.
1. WEBB's Obligations
------------------
Subject to payment of the Support Fee identified in Exhibit C-1, WEBB shall
-----------
provide the following Maintenance and Support Services for the XML Site
Generation Platform. All capitalized terms in this Maintenance and Support
Agreement which are not defined herein shall have the meanings therefor in the
Development Access and License Agreement between the Parties dated as of June
30, 1999.
(a) Problem reporting, tracking and monitoring and communications to SB by
electronic mail via the Internet;
(b) Reasonable telephone support on business days for problem
determination, verification and resolution on a call-back basis during the hours
of 6 a.m. to 9 p.m. Mountain Time; and
(c) Periodic software Modifications made by WEBB.
(d) Shall work diligently during normal business hours to promptly resolve
defects and errors that have been replicated by or for WEBB in the XML Site
Generation Platform and documentation in accordance with the following schedule,
it being understood that the closure periods commence when the problem has been
mutually verified:
ERROR PRIORITY (1) RESPONSE (2) CLOSURE (3)
Emergency (A) 24 hours 7 days
Critical (B) 2 days 14 days
Non-Critical (C) 30 days Next Update
(1) Priority:
-A- Catastrophic product or module failures that do not have a
viable detour or work around available. Catastrophic failure shall be deemed to
include failures which cause an interruption of service or seriously impair the
functionality of the XML Site Generation Platform.
-B- Problems that have been substantiated as a serious
inconvenience to SB or its customers. This includes any priority A failure for
which a viable detour or work around is available.
C-1
<PAGE>
-C- All other problems which SB or its customers can easily
avoid or detour for which there is no urgency for a resolution.
(2) Response: Response consists of providing, as appropriate, one of
the following to SB: an existing correction; a new correction; a viable detour
or work around; a request for more information to complete analysis of the
problem, or a plan on how the problem will be corrected.
(3) Closure: Closure consists of providing a final correction or
work around of the problem including Modifications of the XML Site Generation
Platform and, to the extent reasonably possible, revised or new documentation as
necessary, it being understood that documentation may, to the extent reasonable,
be completed after the applicable closure date.
(e) Shall furnish the maintenance and technical support described above,
for the current release level of the XML Site Generation Platform and the
previous release level thereof.
(f) WEBB shall have the right to outsource its obligations under this
Agreement to a third party, provided that WEBB shall remain responsible for its
obligations under this Agreement that are performed by such third party.
2. SB Obligations
--------------
SB agrees:
(a) that the Designated Contact person(s) identified in Exhibit C-1 (or
-----------
such other replacement individual as SB may designate) shall be the sole contact
for the coordination and receipt of the Maintenance and Support Services set
forth in Section 1 of this Maintenance and Support Agreement, which person shall
---------
be knowledgeable and trained in the XML Site Generation Platform;
(b) to maintain for the term of this Maintenance and Support Agreement, an
electronic mail link-up with WEBB via the Internet;
(c) to provide reasonable supporting data to and aid in the identification
of reported problems;
(d) to treat all periodic software Modifications delivered under this
Support Agreement as XML Site Generation Platform in accordance with the terms
of the Development, Access and License Agreement between WEBB and SB under
which SB obtained rights to the XML Site Generation Platform.
3. Term and Termination
--------------------
3.1 For each item of XML Site Generation Platform covered by this
Maintenance and Support Agreement, the Maintenance and Support Services will
begin on the date this Maintenance and Support Agreement is executed and will
apply to such XML Software for an initial term of twelve months unless an
alternative commencement date is identified in Exhibit D-1. The initial term
-----------
may be extended at SB's option for one additional term of one year.
3.2 If either party is in default of its obligations hereunder and such
default continues for thirty (30) days following receipt of written notice from
the other party, the non-breaching party, in addition to any other remedies it
may have, may terminate this Maintenance and Support Agreement. In such case,
the non-prevailing party will pay the prevailing party all costs and expenses
including reasonable attorneys' fees incurred by the prevailing party in
exercising any of its rights or remedies.
No delay or failure of the non-breaching party to exercise any right or
remedy will operate as a waiver thereof.
C-2
<PAGE>
4. Charges, Taxes and Payments
---------------------------
4.1 The Support Fee set forth on Exhibit C-1 is payable upon the execution
-----------
of this Maintenance and Support Agreement or prior to the commencement of any
additional one year extension term.
4.2 The charges specified in this Support Agreement are exclusive of all
federal, state, local and foreign taxes, levies and assessments. SB agrees to
bear and be responsible for the payment of all such taxes, levies and
assessments imposed on SB or WEBB arising out of this Support Agreement
excluding any income tax imposed on WEBB by a governmental entity of the United
States.
4.3 SB agrees that WEBB will have the right to charge in accordance with
WEBB then current policies for any services resulting from SB's modification of
the XML Site Generation Platform or SB's failure to utilize the current release
of the XML Site Generation Platform provided by WEBB.
5. Warranty, Limitation of Liability and Indemnification
-----------------------------------------------------
5.1 EXCEPT AS STATED IN THIS MAINTENANCE AND SUPPORT AGREEMENT, THERE ARE
NO EXPRESS OR IMPLIED WARRANTIES RESPECTING THIS MAINTENANCE AND SUPPORT
AGREEMENT OR THE SERVICES PROVIDED HEREUNDER (INCLUDING THE FIXING OF ERRORS
THAT MAY BE CONTAINED IN THE APPLICABLE XML SOFTWARE), INCLUDING BUT NOT LIMITED
TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. THE WARRANTIES SET FORTH IN THIS MAINTENANCE AND SUPPORT AGREEMENT ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES WITH RESPECT TO SUCH SERVICES
WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED.
5.2 WEBB WILL NOT BE LIABLE FOR ANY FAILURE OR DELAY IN PERFORMANCE DUE IN
WHOLE OR IN PART TO ANY CAUSE BEYOND WEBB'S REASONABLE CONTROL. IN NO EVENT
SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR (A) ANY SPECIAL, INDIRECT,
INCIDENT OR CONSEQUENTIAL DAMAGES, (B) ANY DAMAGES RESULTING FROM LOSS OF USE,
DATA OR PROFITS OR (C) ANY CLAIM THAT AROSE MORE THAN ONE YEAR PRIOR TO
INSTITUTION OF SUIT THEREON, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER LEGAL
THEORY.
5.3 SB will hold WEBB and its Representatives harmless from, and defend
and indemnify WEBB and its Representatives against, any and all claims, losses,
damages and expenses, including reasonable attorneys' fees, arising from a third
party claim against WEBB or its Representatives to the extent that such third
party claim is based on the negligence or willful misconduct of SB or its
Representatives.
5.4 WEBB will hold SB and its Representatives harmless from, and defend
and indemnify SB and its Representatives against, any and all claims, losses,
damages and expenses, including reasonable attorneys' fees, arising from a third
party claim against SB or its Representatives to the extent that such third
party claim is based on: (a) the negligence or willful misconduct of WEBB or
its Representatives or (b) claims of infringement of Intellectual Property
Rights against SB or its Representatives for its authorized use of the XML Site
Generation Platform.
5.5 If a third party asserts a claim that is eligible for indemnification
under Sections 5.3 or 5.4: (a) the indemnified party will promptly notify the
indemnifying party of the suit or claim; (b) the indemnified party will give the
indemnifying party sole authority to defend or settle the suit or claim,
provided that the indemnifying party does not agree to a settlement of the suit
or claim unless the settlement is reasonably acceptable to the indemnified
party; (c) the indemnified party will provide to the indemnifying party all
information in its control concerning the suit or claim; and (d) the indemnified
party will reasonably cooperate with the defense of the suit or claim. The
indemnification obligations under Sections 5.3 and 5.4 are subject to and
conditioned upon compliance with this Section 5.5 by the indemnified party.
C-3
<PAGE>
6. General
-------
6.1 The waiver by either party of a breach of or a default under any
provision of this Maintenance and Support Agreement by the other party shall not
be construed as a waiver of any subsequent breach of the same or any other
provision of the Maintenance and Support Agreement nor shall any delay or
omission on the part of either party to exercise or avail itself of any right or
remedy it has or may have hereunder operate as a waiver of any right or remedy
by such party.
6.2 This Maintenance and Support Agreement contains the full understanding
of the parties with respect to the support of the XML Site Generation Platform
and supersedes all prior understandings and writings relating thereto. No
waiver, consent modification, amendment or change of the terms of this Support
Agreement shall be binding unless in writing and signed by WEBB and SB. If the
terms and conditions of this Agreement are inconsistent with, or contrary to,
the terms and conditions of the SB License Agreement, the terms and conditions
of the License Agreement shall be controlling.
6.3 This Maintenance and Support Agreement shall be governed by the laws
of the State of Colorado.
6.4 Any notice or other communication in connection with this Maintenance
and Support Agreement shall be furnished in writing and shall be effective upon
receipt.
6.5 Neither SB nor WEBB will be deemed to be in default of any provision
of this Agreement or for any failure in performance, resulting from acts or
events beyond the reasonable control of SB or WEBB, as the case may be
including, without limitation, acts of God, civil or military authority, civil
disturbance, war, strikes, fires, other catastrophes, telecommunication outages,
equipment malfunctions or other such major events beyond SB's or WEBB's
reasonable control.
WEBB Interactive Services, Inc: Switchboard, Inc:
By:________________________________ By:________________________________
Name:______________________________ Name:______________________________
Title:_____________________________ Title:_____________________________
Date:______________________________ Date:______________________________
C-4
<PAGE>
EXHIBIT C-1
SUPPORT ATTACHMENT
Support Fee(s): The SB will pay WEBB the following Support Fee:
- --------------
Commencement Date: _____________________.
- -----------------
SB Designated Contacts:
Primary Contact:______________________________
Phone number:_________________________________
E-Mail address:_______________________________
Secondary Contact:____________________________
Phone number:_________________________________
E-Mail address:_______________________________
C-5
<PAGE>
EXHIBIT D
FORM OF
PREFERRED ESCROW AGREEMENT
Account Number ______________________
This Agreement is effective __________________, 19_____ among Data Securities
International, Inc. ("DSI"), ______________________________________
("Depositor") and ______________________________________ ("Preferred
Beneficiary"), who collectively may be referred to in this Agreement as "the
parties."
A. Depositor and Preferred Beneficiary have entered into a Development and
Access and License Agreement, dated June 30, 1999, (referred to in this
Agreement as "the license agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI
to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
--------------------------
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit D-1.
If Exhibit D-1 is applicable, it is to be prepared and signed by Depositor and
Preferred Beneficiary. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit D-1.
1.2 Identification of Tangible Media. Prior to the delivery of the deposit
--------------------------------
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete Exhibit
D-2 to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit D-2 must be signed
by Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the deposit materials and the
------------------
Exhibit D-2, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Exhibit D-2. In addition to the deposit
inspection, Preferred Beneficiary may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
---------------------
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit D-2, DSI will date and sign the Exhibit D-2 and mail a
copy thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit D-2,
DSI will (a) note the discrepancies in writing on the Exhibit D-2; (b) date and
sign the Exhibit D-2 with the exceptions noted; and (c) provide a copy of the
Exhibit D-2 to Depositor and Preferred Beneficiary. DSI's acceptance of the
deposit occurs upon the signing of the Exhibit D-2 by
D-1
<PAGE>
DSI. Delivery of the signed Exhibit D-2 to Preferred Beneficiary is Preferred
Beneficiary's notice that the deposit materials have been received and accepted
by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
---------------------------
a. Depositor lawfully possesses all of the deposit materials deposited
with DSI;
b. With respect to all of the deposit materials, Depositor has the
right authority to grant to DSI and Preferred Beneficiary the rights
as provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance;
d. The deposit materials consist of the proprietary information and
other identified either in the license agreement or Exhibit D-1, as
the case may be; and
e. The deposit materials are readable and useable in their current form
or, if the deposit materials are encrypted, the decryption tools and
decryption keys have also been deposited.
1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
------------
Beneficiary's expense, to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license agreement,
---------------
Depositor shall update the deposit materials within 60 days of each release of a
new version of the product which is subject to the license agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit D-2 and the new Exhibit D-2 shall be signed by
Depositor. Each Exhibit D-2 will be held and maintained separately within the
escrow account. An independent record will be created which will document the
activity for each Exhibit D-2. The processing of all deposit updates shall be
in accordance with Sections 1.2 through 1.6 above. All references in this
Agreement to the deposit materials shall include the initial deposit materials
and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
----------------------------
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
---------------
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the
responsibility of Depositor and/or Preferred Beneficiary to challenge any such
order; provided, however, that DSI does not waive its rights to present its
position with respect to any such order. DSI will not be required to disobey
any court or other judicial tribunal order. (See Section 7.5 below for notices
of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
--------------
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the Term of this Agreement, Depositor and Preferred
------------
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
D-2
<PAGE>
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the media
--------------
upon which the proprietary information and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
--------------------
deposit materials as reasonably necessary to perform this Agreement. DSI shall
copy all copyright, nondisclosure, and other proprietary notices and titles
contained on the deposit materials onto any copies made by DSI. With all
deposit materials submitted to DSI, Depositor shall provide any and all
instructions as may be necessary to duplicate the deposit materials including
but not limited to the hardware and/or software needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right
------------------------------
to transfer the deposit materials to Preferred Beneficiary upon any release of
the deposit materials for use by Preferred Beneficiary in accordance with
Section 4.5. Except upon such a release or as otherwise provided in this
Agreement, DSI shall not transfer the deposit materials.
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
------------------
mean the following:
(i) Preferred Beneficiary's termination of the license agreement in
accordance with the provisions of Sections 4.11 or 13.3(b) thereof;
(ii) Depositor institutes a form of bankruptcy or similar proceeding
that would result in Depositor's ceasing to operate as a going
concern;
(iii) Depositor commences the dissolution of Depositor that would result
in Depositor's ceasing to operate as a going concern; or
(iv) WEBB has not delivered the Source Code for the XML Site Generation
Platform in accordance with the provisions of Section 8.1(c) of the
license agreement.
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that
------------------
a Release Condition has occurred, Preferred Beneficiary may provide to DSI
written notice of the occurrence of the Release Condition and a request for the
release of the deposit materials. Upon receipt of such notice, DSI shall provide
a copy of the notice to Depositor, by certified mail, return receipt requested,
or by commercial express mail.
4.3 Contrary Instructions. From the date DSI mails the notice requesting
---------------------
release of the deposit materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred or
has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by certified mail, return receipt requested, or by
commercial express mail. Additionally, DSI shall notify both Depositor and
Preferred Beneficiary that there is a dispute to be resolved pursuant to the
Dispute Resolution section (Section 7.3) of this Agreement. Subject to Section
5.2, DSI will continue to store the deposit materials without release pending
(a) joint instructions from Depositor and Preferred Beneficiary; (b) resolution
pursuant to the Dispute Resolution provisions; or (c) order of a court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from
------------------
the Depositor, DSI is authorized to release the deposit materials to the
Preferred Beneficiary or, if more than one beneficiary is registered to the
deposit, to release a copy of the deposit materials to the Preferred
Beneficiary. However, DSI is entitled to receive any fees
D-3
<PAGE>
due DSI before making the release. This Agreement will terminate upon the
release of the deposit materials held by DSI.
4.5 Right to Use Following Release. Unless otherwise provided in the license
------------------------------
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the nonexclusive right to use the deposit
materials for the sole purpose of continuing the benefits afforded to Preferred
Beneficiary by the license agreement. Preferred Beneficiary shall be obligated
to maintain the confidentiality of the released deposit materials.
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The Term of this Agreement shall be equal to the term
-----------------
of the license agreement.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed
--------------------------
to DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement at any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any action
under this Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of
-------------------------------------------------
this Agreement, DSI shall destroy, return, or otherwise deliver the deposit
materials in accordance with Depositor's instructions. Upon termination for
nonpayment, DSI may, at its sole discretion, destroy the deposit materials or
return them to Depositor. DSI shall have no obligation to return or destroy the
deposit materials if the deposit materials are subject to another escrow
agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this
---------------------------------------
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the deposit
materials;
c. The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the deposit materials has occurred prior to
termination;
d. The obligation to pay DSI any fees and expenses due;
e. The provisions of Article 7; and
f. Any provisions in this Agreement which specifically state they
survive the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
------------
applicable to the services provided. DSI shall notify the Preferred
Beneficiary, the party responsible for payment of DSI's fees, at least 90 days
prior to any increase in fees. For any service not listed on DSI's standard fee
schedule, DSI will provide a quote prior to rendering the service, if requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless
-------------
the payment for such service and any outstanding balances owed to DSI are paid
in full. Fees are due upon receipt of a signed contract or receipt of the
deposit materials whichever is earliest. If invoiced fees are not paid, DSI may
terminate this Agreement in
D-4
<PAGE>
accordance with Section 5.2. Late fees on past due amounts shall accrue interest
at the rate of one and one-half percent per month (18% per annum) from the date
of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
-----------------------------
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations
---------------
under this Agreement and to act in a reasonable and prudent manner with regard
to this escrow arrangement. Provided DSI has acted in the manner stated in the
preceding sentence, Depositor and Preferred Beneficiary each agree to indemnify,
defend and hold harmless DSI from any and all claims, actions, damages,
arbitration fees and expenses, costs, attorney's fees and other liabilities
incurred by DSI relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this
------------------
Agreement shall be resolved in the same manner as provided in Section 14.2 of
the license agreement.
7.4 Controlling Law. This Agreement is to be governed and construed in
---------------
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order from
-------------------------
the arbitrator or any court of competent jurisdiction which may direct DSI to
take, or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's
obligation, DSI be paid in full for any past due fees and be paid
for the reasonable value of the services to be rendered pursuant to
such order; and
c. Ensure that DSI not be required to deliver the original (as opposed
to a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other duties.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
----------------
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. DSI is not a party to the license
agreement between Depositor and Preferred Beneficiary and has no knowledge of
any of the terms or provisions of any such license agreement. DSI's only
obligations to Depositor or Preferred Beneficiary are as set forth in this
Agreement. No amendment or modification of this Agreement shall be valid or
binding unless signed by all the parties hereto, except that Exhibit D-1 need
not be signed by DSI, Exhibit D-2 need not be signed by Preferred Beneficiary
and Exhibit D-3 need not be signed.
8.2 Notices. All notices, invoices, payments, deposits and other documents
-------
and communications shall be given to the parties at the addresses specified in
the attached Exhibit D-3. It shall be the responsibility of the parties to
notify each other as provided in this Section in the event of a change of
address. The parties shall have the right to rely on the last known address of
the other parties. Unless otherwise provided in this Agreement, all documents
and communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
------------
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining
D-5
<PAGE>
provisions herein, and the provision in question shall be deemed to be replaced
with a valid and enforceable provision most closely reflecting the intent and
purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
----------
benefit of the successors and assigns of the parties. However, DSI shall have
no obligation in performing this Agreement to recognize any successor or assign
of Depositor or Preferred Beneficiary unless DSI receives clear, authoritative
and conclusive written evidence of the change of parties.
___________________________________ ________________________________
Depositor Preferred Beneficiary
By: _______________________________ By: ____________________________
Name:______________________________ Name:___________________________
Title:_____________________________ Title:__________________________
Date:______________________________ Date:___________________________
D-6
<PAGE>
Data Securities International, Inc.
By:________________________________
Name:______________________________
Title:_____________________________
Date:______________________________
D-7
<PAGE>
EXHIBIT D-1
MATERIALS TO BE DEPOSITED
Account Number ______________________
Depositor represents to Preferred Beneficiary that deposit materials delivered
to DSI shall consist of the following:
__________________________________ _________________________________
Depositor Preferred Beneficiary
By: ______________________________ By: _____________________________
Name:_____________________________ Name:____________________________
Title:____________________________ Title:___________________________
Date:_____________________________ Date:____________________________
D-1-1
<PAGE>
EXHIBIT D-2
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name _____________________________________________________
Account Number _____________________________________________________________
Product Name ________________________________ Version ______________________
(Product Name will appear on Account History report)
DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size Label Description of Each Separate Item
(Please use other side if additional space is
needed)
______ Disk 3.5" or ____
______ DAT tape ____mm
______ CD-ROM
______ Data cartridge tape ____
______ TK 70 or ____ tape
______ Magnetic tape ____
______ Documentation
______ Other ______________________
PRODUCT DESCRIPTION:
Operating System _______________________________________________________________
Hardware Platform ______________________________________________________________
DEPOSIT COPYING INFORMATION:
Hardware required:______________________________________________________________
Software required:______________________________________________________________
I certify for Depositor that the above described DSI has inspected and accepted
the above deposit materials have been transmitted to DSI: materials (any
exceptions are noted above):
Signature _______________________ Signature ___________________________
Print Name ______________________ Print Name __________________________
Date ____________________________ Date Accepted________________________
Exhibit D-2# ________________________
Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
(619) 694-1900
D-2-1
<PAGE>
EXHIBIT D-3
DESIGNATED CONTACT
Account Number ______________________
Notices, deposit material returns and
communications to Depositor Invoices to Depositor should be
should be addressed to: addressed to:
Company Name: ______________________________ _________________________________
Address: ___________________________________ _________________________________
___________________________________ _________________________________
___________________________________ _________________________________
Designated Contact:_________________________ Contact:_________________________
Telephone:__________________________________ _________________________________
Facsimile:_ _________________________________
Notices and communications to Invoices to Preferred Beneficiary
Preferred Beneficiary should be addressed to: should be addressed to:
Company Name:_______________________________ _________________________________
Address:____________________________________ _________________________________
____________________________________ _________________________________
____________________________________ _________________________________
Designated Contact:_________________________ Contact:_________________________
Telephone:__________________________________ _________________________________
Facsimile:__________________________________ _________________________________
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
<TABLE>
<S> <C>
Contracts, deposit materials and notices to Invoice inquiries and fee remittances
DSI should be addressed to: to DSI should be addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
Date:_________________________________
</TABLE>
D-3-1
<PAGE>
Exhibit E
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE SECURITIES ACT (OR ANY SIMILAR
RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) UPON THE DELIVERY OF THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, TO THE EFFECT THAT
THIS WARRANT OR THE SECURITIES TO BE SOLD OR TRANSFERRED MAY BE SOLD OR
TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
ONLINE SYSTEM SERVICES, INC.
WARRANT TO PURCHASE COMMON STOCK
The Transferability of this Warrant is
Restricted as Provided in Section 2.
<TABLE>
<S> <C>
Void after _______________, 2002 Right to Purchase 150,000 Shares of Common Stock
(subject to adjustment)
No. ____
</TABLE>
PREAMBLE
Online System Services, Inc., a Colorado corporation, hereby certifies
that, for value received, Switchboard, Inc., whose address is 115 Flanders Road,
Westboro, MA 01581, or its registered assigns (the "Registered Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or .from time to time on or before 5:00 P.M. Denver time, June 30, 2002
(such time, the "Expiration Time"), 150,000 of the Company's fully paid and
nonassessable shares of Common Stock at the purchase price per share of $_______
(the "Purchase Price"). The number and character of such Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Warrant is a warrant to purchase Common Stock (the "Warrant") of the
Company, contemplated by the Development, Access and License Agreement (the
"Agreement"), dated June 30, 1999 between the Company and Switchboard, Inc.
This Warrant, and any additional warrant issued pursuant to the Agreement are
referred to herein collectively as the "Agreement Warrants."
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" means Online System Services, Inc. and also
includes any corporation which shall succeed to or assume the obligations
of Online System Services, Inc. hereunder.
(b) The term "Common Stock" includes the Company's shares of common
stock, no par value, and also includes all shares of any class or classes
(however designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on
any shares entitled to preference, and the holders of which shall
ordinarily be entitled to vote for the election of directors of the Company
(even though the right so to vote has been suspended by the happening of a
contingency).
<PAGE>
(c) The term "Other Securities" refers to any class of shares (other
than Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of
the Warrants, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 6 or
otherwise.
(d) The term "Shares" means the Common Stock issued or issuable upon
exercise of this Warrant.
1. Registration Rights. At any time after _____________, 2000 [ten months
from the grant of the first of the Agreement Warrants issued], that Registered
Holders of 50% or more of the shares of the Common Stock subject to the
Agreement Warrants plus any shares of Common Stock issued pursuant to the
exercise of the Agreement Warrants (all such shares of Common Stock and the
Registered Holders thereof being referred to herein as the "Registerable
Securities" and "Securities Holders," respectively) make a written request that
the Registerable Securities be registered pursuant to the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Company will prepare and file with the Securities and Exchange Commission
one registration statement relating to the Registerable Securities as are
requested to be included in such registration statement. The Company will file
the registration statement within 45 days of receipt of the written request and
will use its best efforts to see that the registration statement is declared
effective by the Securities and Exchange Commission as soon as practicable
thereafter. The Company will also use reasonable best efforts to (i) register
and qualify the Registerable Securities covered by the registration statement
under such other securities or blue sky laws of such jurisdictions as the
Securities Holders who hold a majority in interest of the Registerable
Securities being offered may reasonably request; and (ii) see that the
registration statement remain effective with the Securities and Exchance
Commission until the earlier of ________________, 2002 [three years from the
grant date of the first of the Agreement Warrants issued] or the date upon which
all of the Registerable Securities have been sold by the Securities Holders.
As a condition to the inclusion of any shares of Common Stock in the
registration statement, the Company may require that all Securities Holders
desiring to include shares in the registration enter into an agreement with the
Company and the other such Securities Holders, whereby the Securities Holders
shall agree that as a group, notwithstanding the registration statement, they
will not sell during any period a number of shares of Common Stock which would
exceed the quantity limitations of Rule 144 promulgated by the Securities and
Exchange Commission, assuming for this purpose that they were acting in concert
and that they had acquired their shares of Common Stock as of the grant date of
the first of the Agreement Warrants issued. It shall be a further condition
precedent to the obligations of the Company to complete the registration
pursuant to this Warrant that each Securities Holder shall furnish to the
Company such information regarding itself and the Company's securities and the
intended method of disposition of the Registerable Securities held by it, as
shall be reasonably required to affect the registration of the Registerable
Securities, and each such Securities Holder shall execute such documents in
connection with such registration as the Company may reasonably request.
Upon receipt of any request for registration pursuant to this Section 1,
the Company shall promptly give written notice of such proposed registration to
all other Registered Holder. Each Registered Holders shall have the right, by
giving written notice to the Company within 10 days after the Company provides
its notice, to elect to have included in such registration such of their
Registrable Securities as such holders may request in such notice of election,.
Thereupon, the Company shall, as expeditiously as possible, use its best efforts
to effect the registration on an appropriate registration form of all
Registrable Securities which the Company has been requested to so register.
If and whenever the Company is required by the provisions of this Warrant
to effect the registration of any Registrable Securities under the Securities
Act, the Company shall:
(i) file with the Commission a Registration Statement with respect
to such Registrable Securities;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and
the prospectus included in the Registration Statement as may be necessary
to comply with the provisions of the Securities Act (including the anti-
fraud provisions
<PAGE>
thereof) and to keep the Registration Statement effective until the time
specified above or such lesser period until all such Registrable Securities
are sold;
(iii) as expeditiously as possible furnish to each person including
Registrable Securities in the Registration Statement ("Selling
Stockholders") such reasonable numbers of copies of the Prospectus,
including any preliminary Prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such Selling Stockholder
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such Selling
Stockholder;
(iv) as expeditiously as possible use its best efforts to register
or qualify the Registrable Securities covered by the Registration Statement
under the securities or Blue Sky laws of such states as the Selling
Stockholders shall reasonably request, and do any and all other acts and
things that may be necessary or desirable to enable the Selling
Stockholders to consummate the public sale or other disposition in such
states of the Registrable Securities owned by the Selling Stockholder;
(v) as expeditiously as possible, cause all such Registrable
Securities to be listed on each securities exchange or automated quotation
system on which similar securities issued by the Company are then listed;
(vi) promptly make available for inspection by the Selling
Stockholders and any attorney or accountant or other agent retained by any
such underwriter or selected by the Selling Stockholders, all financial and
other records, pertinent corporate documents and properties of the Company
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(vii) as expeditiously as possible, notify each Selling Stockholder,
promptly after it shall receive notice thereof, of the time when such
Registration Statement has become effective or a supplement to any
Prospectus forming a part of such Registration Statement has been filed;
and
(viii) as expeditiously as possible following the effectiveness of
such Registration Statement, notify each seller of such Registrable
Securities of any request by the Commission for the amending or
supplementing of such Registration Statement or Prospectus.
If the Company has delivered a Prospectus to the Selling Stockholders and
after having done so the Prospectus is amended to comply with the requirements
of the Securities Act, the Company shall promptly notify the Selling
Stockholders and, if requested, the Selling Stockholders shall immediately cease
making offers of Registrable Securities and return all Prospectuses to the
Company. The Company shall promptly provide the Selling Stockholders with
revised Prospectuses and, following receipt of the revised Prospectuses, the
Selling Stockholders shall be free to resume making offers of the Registrable
Securities.
The Company will pay all Registration Expenses for all registrations under
this Agreement. For purposes of this Section, the term "Registration Expenses"
shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of counsel for the
Company, state Blue Sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but excluding underwriting
discounts, selling commissions and the fees and expenses of Selling
Stockholders' own counsel.
Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Warrant, the Company
will indemnify and hold harmless each Selling Stockholder, each underwriter
of such Registrable Securities, and each other person, if any, who controls
such Selling Stockholder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act") against any losses, claims, damages or liabilities, joint
or several, to which such Selling Stockholder, underwriter or controlling
person may become subject under the Securities Act, the Exchange Act, state
securities or Blue Sky laws or otherwise, insofar as such losses,
<PAGE>
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement under which such
Registrable Securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement,
or arise out of or are based upon the omission or alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse such
Selling Stockholder, underwriter and each such controlling person for any
legal or any other expenses reasonably incurred by such Selling
Stockholder, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such
-----------------
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any untrue statement or omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
Selling Stockholder, underwriter or controlling person specifically for use
in the preparation thereof.
(b) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Warrant, each Selling
Stockholder, severally and not jointly, will indemnify and hold harmless
the Company, each of its directors and officers and each underwriter (if
any) and each person, if any, who controls the Company or any such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to
which the Company, such directors and officers, underwriter or controlling
person may become subject under the Securities Act, Exchange Act, state
securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement under which such Registrable
Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or
any amendment or supplement to the Registration Statement, or arise out of
or are based upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, if the statement or omission was made in reliance upon and
in conformity with information relating to such Selling Stockholder
furnished in writing to the Company by or on behalf of such Selling
Stockholder specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided,
--------
however, that the obligations of a Selling Stockholder hereunder shall be
-------
limited to an amount equal to the net proceeds to such Selling Stockholder
of Registrable Securities sold in connection with such registration.
(c) Each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom; provided, that
--------
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided, further, that
-------- -------
the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section except to the extent that the Indemnifying Party is adversely
affected by such failure. The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying
-------- -------
Party shall pay such expense if representation of such Indemnified Party by
the counsel retained by the Indemnifying Party would be inappropriate due
to actual or potential differing interests between the Indemnified Party
and any other party represented by such counsel in such proceeding;
provided further that in no event shall the Indemnifying Party be required
-------- -------
to pay the expenses of more than one law firm per jurisdiction as counsel
for the Indemnified Party. The Indemnifying Party also shall be
responsible for the expenses of such defense if the Indemnifying Party does
not elect to assume such defense. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each
Indemnified Party, 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, and no
Indemnified Party shall consent to entry of any judgment or settle such
claim or litigation without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld.
<PAGE>
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section is
due in accordance with its terms but for any reason is held to be
unavailable to an Indemnified Party in respect to any losses, claims,
damages and liabilities referred to herein, then the Indemnifying Party
shall, in lieu of indemnifying such Indemnified Party, contribute to the
amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities to which such party may be subject
in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Selling Stockholders on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Selling
Stockholders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact related to
information supplied by the Company or the Selling Stockholders and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Selling Stockholders agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph of this Section, (a) in no case shall any one
Selling Stockholder be liable or responsible for any amount in excess of
the net proceeds received by such Selling Stockholder from the offering of
Registrable Securities and (b) the Company shall be liable and responsible
for any amount in excess of such proceeds; provided, however, that no
-------- -------
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party
or parties under this Section, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties from whom contribution may be sought shall not relieve such party
from any other obligation it or they may have thereunder or otherwise under
this Section. No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its prior written
consent, which consent shall not be unreasonably withheld.
2. Transfer Restriction. The Registered Holder acknowledges that (i) neither
this Warrant nor the Shares have been registered under the Securities Act and
may not be transferred unless (a) subsequently registered thereunder or (b) the
Registered Holder shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form and substance to the Company, to the effect that
the Warrant or Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, (ii) any sale or transfer of
this Warrant or the Shares made in reliance upon Rule 144 under the Securities
Act may be made only in accordance with the terms of Rule 144 and, if Rule 144
is not applicable, any resale of this Warrant or the Shares under circumstances
in which the seller, or the person through whom the sale is made, may be deemed
to be an underwriter, as that term is used in the Securities Act, may require
compliance with another exemption under the Securities Act and the rules and
regulations promulgated thereunder, and (iii) neither the Company nor any other
person is under any obligation to comply with the terms and conditions of any
exemption under the Securities Act or the rules and regulations promulgated
thereunder. The Registered Holder acknowledges that this Warrant and the
certificate for the Shares may bear an appropriate legend describing the
transfer restrictions and may be subject to a stop-transfer order placed against
the transfer of this Warrant or the Shares.
Notwithstanding the foregoing, no registration or opinion of counsel shall
be required for (i) a transfer of all of this Warrant and any and all Shares to
any affiliate (as defined in Rule 12b-2 under the Exchange Act, an "Affiliate")
of the Registered Holder; (ii) a transfer made in accordance with Rule 144 under
the Securities Act; and (iii) a transfer which Company consents to in writing.
3. Exercise of Warrant.
3.1. Exercise in Full. The holder of this Warrant may exercise it in full
----------------
prior to the Expiration Time by surrendering to the Company this Warrant
together with the form of Election to Purchase attached hereto as Annex A duly
-------
executed by such holder. Such exercise may be accomplished by faxing an
executed and completed Election to Purchase to the Company and delivering,
within three business days thereafter, the original Election to Purchase and
Warrant via hand delivery or overnight courier. Such exercise shall be deemed
to have occurred on the date on
<PAGE>
which the facsimile copy of the Election to Purchase was received by the
Company. The surrendered Warrant shall be accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of Shares of Common Stock called for
on the face of this Warrant (after giving effect to any adjustment provided for
in this Warrant) by the Purchase Price, as adjusted.
3.2. Partial Exercise. This Warrant may be exercised in part by surrender
----------------
of this Warrant in the manner provided in Section 3.1, except that the exercise
price shall be calculated by multiplying (a) the number of shares of Common
Stock as shall be designated by the holder in the form of Election of Purchase
by (b) the Purchase Price, as adjusted. On any such partial exercise, subject
to the provisions of Section 2 hereof, the Company, at its expense, will issue
and deliver to or upon the order of the Registered Holder hereof a new Warrant
or Warrants of like tenor, in the name of the Registered Holder hereof or as
such Registered Holder may request, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock (after giving effect to
any adjustment provided for in this Warrant) equal to the number of such shares
called for on the face of this Warrant minus the number of such shares
designated by the Registered Holder in the applicable Election to Purchase.
4. Delivery of Share Certificates upon Exercise. Following the exercise of
this Warrant in full or in part, within the time periods and in the manner
provided in this Warrant, the Company, at its expense (including the payment by
it of any applicable issue taxes), will cause to be issued in the name of and
delivered to the Registered Holder hereof, or as such Registered Holder (upon
payment by such Registered Holder of any applicable transfer taxes) may direct,
a certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such Registered Holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share of Common Stock (as computed in
accordance with Subsection 5.1(c) of this Warrant).
5. Adjustment of Purchase Price and Number of Shares of Common Stock.
5.1. Adjustment of Purchase Price. The Purchase Price hereof shall be
----------------------------
subject to adjustment from time to time as follows:
(a) If the Company (i) pays a dividend on its shares of Common
Stock in Common Stock, (ii) subdivides its outstanding shares of Common
Stock or (iii) combines its then outstanding shares of Common Stock into a
smaller number of shares of Common Stock, then the Purchase Price in effect
immediately prior thereto shall be adjusted proportionately so that the
adjusted Purchase Price will bear the same relation to the Purchase Price
in effect immediately prior to any such event as the total number of shares
of Common Stock outstanding immediately prior any such event shall bear to
the total number of shares of Common Stock outstanding immediately after
such event. An adjustment made pursuant to this Section 5.1(a) shall, (i)
become effective retroactively immediately after the record date in the
case of a dividend and shall (ii) become effective immediately after the
effective date in the case of a subdivision or combination. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein.
(b) If the Company distributes to all holders of its shares of
Common Stock, (i) Other Securities, (ii) evidences of its indebtedness or
assets (excluding cash dividends or distributions) or (iii) purchase
rights, options or warrants to subscribe for or purchase Other Securities,
then the Purchase Price in effect thereafter shall be determined by
multiplying the Purchase Price in effect immediately prior to any such
event by a fraction, the numerator of which shall be the total number of
outstanding shares of Common Stock multiplied by the current market price
per share of Common Stock (determined in accordance with the provisions of
Section 5.1(c) of this Warrant) on the record date mentioned below, less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the Other Securities, evidences of
indebtedness or assets, or the rights, options or warrants so distributed,
and the denominator of which shall be the total number of outstanding
shares of Common Stock multiplied by such current market price per share of
Common Stock. Such adjustment shall be made whenever any such distribution
is made and shall become effective retroactively immediately after the
record date for the determination of shareholders entitled to receive such
distribution.
<PAGE>
(c) For the purpose of any computation under subdivision (b) above,
the current market price per share of Common Stock shall be deemed to be
the closing price of the Company's shares of Common Stock on the date that
the computation is made.
(d) No adjustment of the Purchase Price shall be made if the amount of
such adjustment shall be less than $.02 per share, but any adjustment that
would otherwise be then required to be made shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment so carried forward, shall
amount to not less than $.02 per share. If the Company at any time issues
shares of Common Stock by way of dividend on any class of stock of the
Company or subdivides or combines the outstanding shares of Common Stock,
said amount of $.02 per share (as increased or decreased, if the same
amount shall have been adjusted previously in accordance with the
provisions of this Section 5) shall be proportionately increased in the
case of a combination or decreased in the case of a subdivision or stock
dividend so as to appropriately reflect the same.
5.2. Adjustment of Shares. Upon each adjustment of the Purchase Price
--------------------
pursuant to subdivisions (a) and (b) of Section 5.1 of this Warrant, the number
of shares of Common Stock purchasable upon exercise of this Warrant shall be
adjusted to the number of shares of Common Stock, calculated to the nearest one
hundredth of a share, obtained by multiplying the number of shares of Common
Stock purchasable immediately prior to such adjustment upon the exercise of this
Warrant by a fraction, the numerator of which is the Purchase Price in effect
prior to such adjustment and the denominator of which is the adjusted Purchase
Price.
5.3. Certification by Company. Whenever the Purchase Price is adjusted as
------------------------
provided in this Section 5, the Company shall compute the adjusted Purchase
Price in accordance with this Section 5 and shall prepare a certificate signed
by its Chief Financial Officer or any other executive officer setting forth the
adjusted Purchase Price, and setting forth in reasonable detail the facts
requiring such adjustment, the information on which such calculation is based,
and the method of such adjustment. Such certificate shall be delivered to the
Registered Holder.
5.4. Form of Warrant. The form of this Warrant need not be changed because
---------------
of any change in the Purchase Price pursuant to this Section 5 and any Warrant
issued after such change may state the same Purchase Price and the same number
of shares of Common Stock as are stated in this Warrant as initially issued.
6. Adjustment for Reorganization, Consolidation, Merger, Etc.
6.1. Merger, Etc. If at any time or from time to time after the date of
-----------
issuance of this Warrant, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company within three (3)
years from the date of such transfer (any such transaction being hereinafter
referred to as a "Reorganization"), then the Registered Holder, upon the
exercise of this Warrant at any time after the consummation or effective date of
such Reorganization, shall receive, in lieu of the shares of Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which the Registered
Holder would have been entitled upon such consummation or effective date of such
Reorganization, if the Registered Holder had so exercised this Warrant
immediately prior thereto (all subject to further adjustment thereafter as
provided in Section 5).
6.2. Dissolution. Except as otherwise expressly provided in Section 6.1,
-----------
in the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the Registered Holder after the effective date of such dissolution to a bank or
trust company having its principal office in Denver, Colorado, as trustee for
the Registered Holder.
6.3. Continuation of Terms. Except as otherwise expressly provided in
---------------------
Section 6.1, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Section 6, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case
<PAGE>
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant.
7. No Dilution or Impairment. The Company will not, by amendment of its
Articles of Incorporation or Bylaws, or through any reorganization, 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 of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Registered
Holder against dilution (to the extent specifically provided in this Warrant) or
other impairment. Without limiting the generality of the foregoing, the Company
(a) will not increase the par value of any shares of stock receivable on the
exercise of the Warrants above the amount payable therefor on such exercise, and
(b) will not effect a subdivision or split up of shares or similar transaction
with respect to any class of the Common Stock without effecting an equivalent
transaction with respect to all other classes of Common Stock.
8. Representations and Warranties of Record Holder. By accepting delivery of
this Warrant, the Registered Holder hereby represents and warrants to, and
covenants with, the Company as follows:
(a) The Registered Holder has been given access to full and complete
information regarding the Company and has utilized such access to the
Registered Holder's satisfaction for the purpose of obtaining such
information regarding the Company as the Registered Holder has reasonably
requested; and, particularly, the Registered Holder has been given
reasonable opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Warrant and the Shares and to obtain any additional
information, to the extent reasonably available.
(b) The Registered Holder believes that an investment in the Warrant
and the Shares is suitable for the Registered Holder based upon the
Registered Holder's investment objectives and financial needs. The
Registered Holder (i) recognizes that the Securities as an investment
involve a high degree of risk; (ii) has adequate means for providing for
the Registered Holder's current financial needs and business contingencies;
(iii) has no need for liquidity in this investment; (iv) at the present
time, can afford a complete loss of such investment; and (v) does not have
an overall commitment to investments which are not readily marketable that
is disproportionate to the Registered Holder's net worth, and the
Registered Holder's investment in the Warrant and the Shares will not cause
such overall commitment to become excessive.
(c) The Registered Holder, in reaching a decision to subscribe, has
such knowledge and experience in financial and business matters that the
Registered Holder is capable of reading and interpreting financial
statements and evaluating the merits and risk of an investment in the
Warrant and the Shares and has the net worth to undertake such risks.
(d) The Registered Holder has obtained, to the extent the Registered
Holder deems necessary, the Registered Holder's own professional advice
with respect to the risks inherent in the investment in the Warrant and the
Shares, and the suitability of an investment in the Warrant and the Shares
in light of the Registered Holder's financial condition and investment
needs.
(e) The Registered Holder realizes that (i) the purchase of the
Warrant and the Shares is a long-term investment; (ii) the purchaser of the
Warrant and the Shares must bear the economic risk of investment for an
indefinite period of time because the Warrant and the Shares have not been
registered under the Act or under the securities laws of any state and,
therefore, the Warrant and the Shares cannot be resold unless they are
subsequently registered under said laws or exemptions from such
registrations are available; and (iii) the transferability of the Warrant
and the Shares is restricted and (A) requires conformity with the
restrictions contained in Section 2 of this Warrant and (B) stop transfer
instructions will be placed with the transfer agent for the Warrant and the
Shares and a legend will be placed on the certificate(s) representing the
Warrant and the Shares referring to the applicable restrictions on
transferability.
<PAGE>
(f) The Registered Holder has been advised and understands that the
Warrant and the Shares have not been registered under the Securities Act or
applicable state securities laws and that the Warrant and the Shares are
being offered and sold pursuant to exemptions from such laws. The Warrant
and the Shares are being acquired for the Registered Holder's own account
and for investment purposes only, and without the intention of reselling or
redistributing the same, and the Registered Holder has made no agreement
with others regarding any of the Warrant and the Shares. The Registered
Holder's financial condition is such that it is not likely that it will be
necessary to dispose of any of the Warrant or the Shares in the foreseeable
future. The Registered Holder is aware that, in the view of the Securities
and Exchange Commission, a purchase of such securities with an intent to
resell by reason of any foreseeable specific contingency or anticipated
change in market value, or any change in the condition of the Company, or
in connection with a contemplated liquidation settlement of any loan
obtained for the acquisition of such securities and for which such
securities were pledged, would represent an intent inconsistent with the
representations set forth above.
(g) The Registered Holder represents and warrants that the Warrant and
the Shares are being purchased by the Registered Holder in the Registered
Holder's name solely for the Registered Holder's own beneficial interest
and not as nominee for, or on behalf of or for the beneficial interest of,
or with the intention to transfer to, any other person, trust or
organization.
9. Right of Redemption. This Warrant shall be redeemable, in whole or in
part, at the option of the Company by resolution of its Board of Directors, at
any time and from time to time on or after the date, if any, upon which
Switchboard, Inc. shall have exercised the Perpetual License Option in
accordance with the terms of Section 8 of the Agreement, and prior to any
exercise thereof at a redemption price in cash equal to $.05per Warrant to be
redeemed (the "Redemption Price"). Not less than 30 nor more than 60 days prior
to the date fixed for redemption, a notice (the "Redemption Notice") specifying
the time and place thereof and the Redemption Price per Warrant to be redeemed
shall be given by mail to the Registered Holder at its address as the same shall
appear on the books of the Company. Holder shall have the right to exercise such
Warrant at any time prior to any such redemption. Upon tender of the Redemption
Price in accordance with the Redemption Notice, the Warrants to be redeemed as
indicated in the Redemption Notice shall no longer be deemed to be outstanding
and the Registered Holder shall have no claim against the Company, except the
right to receive the Redemption Price payable upon such redemption, without
interest, upon surrender (and endorsement, if required by the Company) of the
Warrant.
10. Notice of Record Date. In case of:
(a) any taking by the Company of a record of the holders of any class
of its securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or 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,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any transfer of all
or substantially all the assets of the Company, any consolidation or merger
of the Company, or any voluntary or involuntary dissolution, liquidation or
winding up of the Company, or
(c) the occurrence of any event resulting in the voluntary or
involuntary dissolution, liquidation or winding up of the Company,
then the Company will mail or cause to be mailed to each Registered Holder a
notice specifying (i) the date on which any record is to be taken for the
purpose of any such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their Common Stock (or
Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to
<PAGE>
whom such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least 30 days prior to the date specified in such notice on which any
such action is to be taken.
11. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company, at its expense, will issue and deliver to
or (subject to Section 2 of this Warrant) on the order of the holder thereof a
new Warrant or Warrants of like tenor, in the name of such holder or as such
holder (on payment by such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face or faces of the Warrant or Warrants so
surrendered.
12. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
13. Warrant Agent. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in Denver, Colorado, for the purpose
of issuing shares of Common Stock on the exercise of this Warrant pursuant to
Section 3, exchanging Warrants pursuant to Section 11, and replacing Warrants
pursuant to Section 11, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
14. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of the terms of this Warrant or by an
injunction against a violation of any of the terms of this Warrant.
15. Negotiability, Etc. This Warrant is issued upon the following terms, to
all of which each Registered Holder or owner hereof by the taking hereof
consents and agrees:
(a) subject to the terms of Section 2 of this Warrant, title to this
Warrant may be transferred by endorsement (by the Registered Holder hereof
executing the form of Assignment attached hereto as Annex B) and delivery
-------
in the same manner as in the case of a negotiable instrument transferable
by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered
to transfer absolute title hereto by endorsement and delivery hereof to a
bona fide purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of each
such bona fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the Registered Holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
16. Notices. All notices and other communications from the Company to the
Registered Holder of this Warrant shall be given in writing (unless otherwise
specified herein) and shall be effective upon personal delivery, via facsimile
(upon receipt of confirmation of error-free transmission) or two business days
following deposit of such notice with an internationally recognized courier
service, with postage prepaid and addressed, to such address as may have been
furnished to the Company in writing by such Registered Holder or, until any such
Registered Holder furnishes to the Company an address, then to, and at the
address of, the last Registered Holder of this Warrant who has so furnished an
address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Colorado, without regard to principles of
conflict of laws. The Company will, at all times, reserve
<PAGE>
and keep available, solely for issuance and delivery upon exercise of this
Warrant, such number of shares of Common Stock and other stock, securities and
property, as from time to time shall be issuable upon the exercise of this
Warrant. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. All nouns and
pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter, as the identity of the person or persons to whom reference is made
herein may require.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
__________, 1999.
ONLINE SYSTEM SERVICES, INC.
By:_______________________________
Name:__________________________
Title:_________________________
<PAGE>
Annex A
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FORM OF ELECTION TO PURCHASE
(To be executed by the Registered Holder if such Holder desires to exercise the
Warrant.)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase ____________ shares of Common Stock and
herewith tenders in payment for such securities a certified or official bank
check to the order of ONLINE SYSTEM SERVICES, INC., in the amount of
$__________, all in accordance with the terms hereof. The undersigned requests
that a certificate for such shares of Common Stock be registered in the name of
_____________, whose address is ___________________________________________ and
that such Certificate be delivered to _________________________________________
whose address is ____________________________________________.
Dated: ___________________________
Name:________________________________________
Signature:___________________________________
(Signature must conform in all respects to the name of the Registered
Holder, as specified on the face of the Warrant.)
_____________________________________________
(Insert Social Security or Other Identifying Number of Holder)
<PAGE>
Annex B
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FORM OF ASSIGNMENT
(To be executed by the Registered Holder if such Holder desires to transfer the
Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto _______________________________________________________ (Please
print name and address of transferee) this Warrant, together with all right,
title and interest therein, and does so hereby irrevocably constitute and
appoint ________________________________________ Attorney, to transfer this
Warrant on the books of the Company, with full power of substitution.
<PAGE>
Exhibit 10.2
AMENDMENT TO
DEVELOPMENT, ACCESS AND LICENSE AGREEMENT
This amendment to the Development, Access and License Agreement (the
"Agreement") entered into as of and effective June 30, 1999, between
Switchboard, Inc., a Delaware corporation ("SB"), and Online System Services,
Inc., a Colorado corporation which plans to change its name to WEBB Interactive
Services, Inc. ("WEBB") (collectively "the Parties") is entered into as of and
effective August ____, 1999. The Agreement, as amended hereby, determines the
rights and obligations of SB and WEBB with respect to the subject matter of the
Agreement.
Sections 2.1, 3.3, 7.2, 7.3 and 14.19 of the Agreement are hereby amended
in their entirety to read as follows:
2.1 "Exclusivity Period" means subject to compliance with the terms and
------------------
conditions of this Agreement, the period from June 30, 1999 through
September 30, 1999, subject to extensions as provided in Sections 7.3 and
8.
3.3 Phase 3. Providing that SB has elected to extend the Exclusivity
-------
Period in accordance with the terms of Section 7.3, commencing on SB's
acceptance of Phase 2 in accordance with Section 3.4, WEBB will develop a
further expanded version of the XML Site Generation Platform ("Phase 3"),
integrating the requirements and specifications to be jointly defined by
WEBB and SB ("Phase 3 Specifications") which shall incorporate the
following types of features:
(a) Vertical templates for thirty (30) additional categories of
businesses, including clip art and design formats and data intake
interfaces for each;
(b) Integration of interactive voice recognition (IVR) services for
capturing content and design preference information from merchants; and
(c) Expanded integration capability for third party content into
Vertical Template Sites.
(d) Extension and modification of XML site generation platform
required to deploy and administer multiple outlet dealer networks from
common templates
Subject, to the foregoing, WEBB shall complete the Phase 3 deliverables on
or before December 31, 1999 provided that the Phase 3 Specifications are
agreed to by the Parties by September 15, 1999. The parties shall use good
faith efforts to agree to the Phase 3 Specifications by September 15, 1999.
If they fail to do so, the delivery date for Phase 3 deliverables shall be
moved back by the number of days equivalent to the number of days between
September 15, 1999 and the completion of the Phase 3 Specifications. In the
event that SB requests any reasonable changes to the Phase 3
Specifications, the completion dates specified above shall be extended a
reasonable amount of time to allow for implementation of such changes.
7.2 Site Generation Platform Fee. During the Term of this Agreement, SB
-----------------------------
shall pay WEBB the following Site Generation Platform fees for web site
generation or modification/maintenance and HTML conversion:
<PAGE>
(i) $4 per month for each Standard Template Site hosted in such month
during the first two (2) years of the Term of this Agreement and $3 per
month thereafter during the Term of this Agreement for each such site; and
(ii) $5 per month for each Vertical Template Site hosted in such month
during the first two (2) years of the Term of this Agreement and $3 per
month thereafter during the Term of this Agreement for each such site.
In the event that SB does not elect to extend the Exclusivity Period for
the nine-month period ending June 30, 2000, the monthly payments in (i) and
(ii) above shall be increased for the balance of the year ending June 30,
2000, from the $4.00 per month amount for the Standard Template Site to
$5.00 per month, and for the Vertical Template Site from the $5.00 per
month amount, to $6.00 per month. The Parties will negotiate in good faith
to establish the amount of such monthly fees for the remaining Term of this
Agreement.
In lieu of the monthly payments set forth above for specific sites, during
the Term of this Agreement, SB shall pay WEBB the following Site Generation
Platform Fees for web sites generated by or for SB Customers through the
XML Site Generation Platform using tools and templates developed
specifically for national and/or multi-dealer systems pursuant to Phase 3
Specifications: (i) the greater of $1 per month for which each such
national or multi-dealer web site is hosted, or (ii) 20% of Net Revenues
recognized therefrom by SB during any such month.
SB shall commence payment of Site Generation Platform Fees upon the earlier
of 30 days after SB has sent its first invoice for the applicable Web site
to a customer or 90 days after continual service to a SB customer of a web
site.
7.3 Minimum Payments; Extension of Exclusivity Period. Provided that SB is
-------------------------------------------------
then in compliance with all material terms of this Agreement, SB may extend
the Exclusivity Period for up to one nine-month period and two successive
one-year periods by giving WEBB written notice during the week of August
30, 1999, in the case of the nine-month period and at least 90 days prior
to the end of the then current Exclusivity Period, in the case of the one-
year periods, that SB has elected to extend the Exclusivity Period for the
nine-month period or one-year period, as the case may be, commencing on
October 1, 1999, in the case of the nine-month period, or the following
July 1, in the case of the one-year periods, and by guaranteeing the
following minimum payments which shall be due (a) on the first day of the
quarter in the case of the nine-month period, and (b) on the last day of
the quarter in the case of the one-year periods, and payable within 10 days
after the respective due date, against which Site Generation Platform Fees
for such quarter are to be credited:
(i) During the 9-month period commencing on October 1, 1999 --
$250,000 per quarter;
(ii) During the 12-month period commencing on July 1, 2000 --$250,000
per quarter; and
(iii) During the 12-month period commencing on July 1, 2001 --$312,500
per quarter.
In the event that the Site Generation Platform Fees for the quarters for
which SB is obligated to make guaranteed payments exceed such guaranteed
amounts, SB will pay WEBB within thirty (30) days of the end of such
quarter the difference between the guaranteed amount for such quarter and
the Site Generation Platform Fees payable for such quarter.
During any Exclusivity Period, SB shall be given a credit of 100% of the
guaranteed payments during the 12-month period ending June 30, 2000, in the
case of the nine-month period, and during the applicable 12-month period,
in the case of the 12-month periods, to the extent of Site
<PAGE>
Generation Platform Fees payable during such period. In the event that SB
does not elect to extend the Exclusivity Period for either the nine-month
period or the year beginning July 1, 2000, it shall not, after any and
failure to extend, have any right to extend the Exclusivity Period, whether
pursuant to this Section 7.3 or Section 8.1(e).
14.19 Grant of Warrant to SB. WEBB shall grant to SB warrants
----------------------
representing the right to purchase up to 300,000 shares of WEBB's common
stock in accordance with the following, any such warrant to be in
substantially the form of Exhibit E to this Agreement:
(a) A Warrant for 150,000 shares of WEBB's common stock shall be
granted to SB on August 16, 1999, provided that at the time of such grant,
SB has not commenced the development of a product or service which would
compete with the XML Site Generation Platform. The exercise price for the
Warrant shall be equal to 105% of the closing sale price for WEBB's common
stock on August 16, 1999 as reported by The Nasdaq Stock Market, provided
that if there is no sale of WEBB's common stock on such date, the last
reported sale price prior to the date of grant; and
(b) A warrant for an additional 150,000 shares of WEBB's common
stock shall be granted to SB provided that SB and WEBB have entered into
the Engineering Services Agreement dated as of June 30, 1999, and an
agreement for the integration of WEBB's community building products and
services into SB's products and services. This warrant shall be granted on
the date that all of the foregoing conditions have been satisfied at an
exercise price equal to 105% of the closing sale price for WEBB's common
stock on the date of grant as reported by The Nasdaq Stock Market, provided
that if there is no sale of WEBB's common stock on such date, the last
reported sale price prior to the date of grant.
(c) An appropriate adjustment shall be made in the number of shares
of WEBB common stock to be subject to such warrants in the event that WEBB
pays a dividend on its shares of common stock in common stock, subdivides
or combines its shares of common stock or makes any other such change in
its capital structure prior to the grant of the warrants.
The Parties have executed this Agreement on August ___, 1999.
SWITCHBOARD, INC. ("SB") ONLINE SYSTEM SERVICES, INC. ("WEBB")
By____________________________ By_____________________________
Title_________________________ Title__________________________
<PAGE>
Exhibit 10.3
ENGINEERING SERVICES AGREEMENT
This Agreement is entered into and effective as of June 30, 1999 ("Effective
Date") between Switchboard Incorporated, a Delaware corporation ("SB") with
principal offices located at 115 Flanders Road, Westboro, MA 01581, and Online
System Services, Inc., a Colorado corporation which plans to change its name to
WEBB Interactive Services, Inc. ("WEBB"), with principal offices located at 1800
Glenarm Place, Denver, Colorado 80202.
In consideration of the premises and covenants herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. SB Engineering Services. WEBB hereby acknowledges that SB has
-----------------------
satisfactorily performed the following engineering services for WEBB prior to
the date of this Agreement:
(a) Development of (i) a co-branded version of the "Switchboard Directory
Services" (as defined in paragraph (b) below) for WEBB's web site
located on the Internet at www.webb.net ("WEBB Site"); and (ii) a
------------
generic co-branded version of the Switchboard Directory Services for
third party web sites. The co-branded version referenced in (i) above
has the primary branding and "look and feel" of WEBB; the co-branded
version referenced in (ii) above anticipates the primary branding and
"look and feel" the specific third party web site for which it will be
used. Each co-branded version has or will have a "Powered by
Switchboard" logo with form and placement as mutually agreed.
(b) "Switchboard Directory Services" shall mean the following interactive
directory services offered on SB's web site located on the Internet at
www.switchboard.com ("Switchboard Site"): (i) SB's directory of
-------------------
business listings and display advertisements (Yellow Pages); (ii) SB's
directory of residential listings (White Pages); (iii) SB's directory
of maps, routes and driving directions (Interactive Routes); (v) SB's
directory of World Wide Web sites organized by topic (Sideclick), and
(vi) SB's directory of email addresses..
2. Payment by WEBB. In consideration of the services performed by SB as
---------------
described in Section 1, WEBB hereby agrees to pay SB on or before July 31, 1999
the non-refundable amount of Two Hundred and Fifty Thousand Dollars ($250,000).
3. Further Agreement. In consideration of each party's performance as stated
-----------------
in Section 1 and 2, the parties hereby agree to enter into a written agreement
on mutually agreeable terms no later than July 31, 1999 pursuant to which the
parties will agree as follows:
(a) WEBB will have a right to display co-branded versions of the
Switchboard Directory Services described in Section 1(a)(i) above
through links on the WEBB Site.
(b) SB will, at no additional charge, work with Webb to modify the
co-branded Switchboard Directory Services to meet the needs, as
reasonably determined by SB and Webb, of Webb's current four co-
branded sites (two Bresnan markets, one Peak Communications
market, and one Rapid Communication market). This work will
include a link to SB's What's Nearby?(sm) functionality tailored
to each of the four co-branded market locations.
(c) WEBB will have the right to license to third parties to be mutually
agreed, the right to display through links on their web sites, co-
branded versions of the Switchboard Directory Services as described in
Section 1(a)(ii) above.
(d) SB will, at no additional charge, modify the generic co-branded
version of the Switchboard Directory Services for up to four
additional third party web sites requested by WEBB as necessary to
include the primary branding and "look and feel" of such third party.
The replication and setup fees for additional co-branded sites will be
a one-time payment of $1500.
<PAGE>
(e) SB shall have the right to sell banner advertisements on pages of the
co-branded versions of the Switchboard Directory Services and shall
pay Webb 55% of the net revenue (where net revenue is in no case less
than 85% of gross revenue) where Webb's third party is a cable
television service provider and 60% of such net revenue in all other
cases. SB agrees that on a co-branded site-by co-branded site basis,
up to 15% of the advertising inventory will be made available to
Webb's third party customer without any compensation to SB. Any
inventory made available under this provision that was not
subsequently used by Webb's third party will revert to SB for its use
under the terms of this Agreement. Should Webb's third party customer
require more advertising inventory, SB agrees to provide such
inventory in return for payment based on SB's then effective CPM rate.
Webb's third party customers must inform SB within 48 hours before
each month if they intend to sell their 15% portion of the next
month's inventory. In the event that Webb's third party customer fails
to claim such inventory for that month SB shall sell the inventory and
split revenues with Webb based on formulas outlined in this section.
(f) SB will host the Switchboard Directory Services.
(g) SB agrees to use commercially reasonable efforts to keep the co-
branded versions of the Switchboard Directory services continually
available to Webb and Webb's customers on a 24x7 basis, and maintain
agreed upon levels of infrastructure and operational standards.
(h) SB and Webb will agree upon penalty and termination provisions
associated with Chronic Interruptions of Service.
(i) This Agreement will be for a one-year term.
IN WITNESS WHEREOF, the parties, through their authorized representatives, set
their hands and seals as of the Effective Date.
ONLINE SYSTEM SERVICES, INC. SWITCHBOARD INCORPORATED
By:_________________________ By:_________________________
Title:______________________ Title:________________________
<PAGE>
Exhibit 10.4
DEVELOPMENT, ACCESS AND LICENSE AGREEMENT
This Development, Access and License Agreement ("Agreement") entered into as of
and effective _____ August l1,1999, 1999 ("Effective Date") between NetShepherd,
Inc. an _______Alberta ______ corporation ("NetShepherd") with principal offices
located at __________ 900-800 6th Avenue SW Calgary Alberta _________ and Online
System Services, Inc., a Colorado corporation which plans to change its name to
WEBB Interactive Services, Inc. ("WEBB") with principal offices located at 1800
Glenarm Place, Denver, Colorado 80202 (collectively "the Parties"), determines
the rights and obligations of NetShepherd and WEBB with respect to the subject
matter of this Agreement.
Section 1: Background
----------------------
NetShepherd has developed and offers a distributed task force of individuals
connected to one another and to NetShepherd through the world wide web. Webb has
developed a set of community building tools which facilitate communication and
interactivity among individuals on the world wide web. NetShepherd and Webb
desire to create a technology and distribution relationship by integrating
Webb's community building technology with NetShepherd's world wide web enabled
Task force.
Section 2: Definitions
-----------------------
2.1 "Distributed Task Force" means the distributed task force of individuals
----------------------
connected by and performing services to customers of NetShepherd over the world
wide web, utilizing NetShepherd's proprietary systems.
2.2 "Intellectual Property Rights" means all current or future patent
----------------------------
applications, patents, copyrights, trade secrets, trademarks, service marks,
domain names, mask works and other intellectual property rights enforceable at
any time under the laws and regulations of any jurisdiction anywhere in the
world.
2.3 "Modifications" means any error corrections, updates, revisions, new
-------------
versions, new releases, improvements, translations, derivative works, or other
changes or additions to the Webb Community Tools (as defined below).
2 "NetShepherd Confidential Information" includes NetShepherd's client list
------------------------------------
and confidential information provided by NetShepherd Customers or NetShepherd
Contractors and all existing and future information identified in writing by
NetShepherd as confidential. NetShepherd Confidential Information excludes any
portion of information which: (1) is or becomes publicly available through no
act or failure of WEBB; (2) was or is rightfully acquired by WEBB from a source
other than NetShepherd; (3) is or becomes independently known or available to
WEBB without breach of this Agreement; (4) is independently developed by WEBB
without reference to the NetShepherd Confidential Information or (5) is required
to be disclosed by court order, after giving NetShepherd the opportunity to
appear before the court and protect its interests. NetShepherd Confidential
Information does not include the identity of NetShepherd Customers introduced to
NetShepherd by WEBB.
2.6 "Object Code" means machine executable computer software code in binary
-----------
format, typically the result of processing the Source Code with an assembler or
compiler.
2.7 "Representatives" means an employee, officer, director, consultant,
---------------
attorney, accountant or agent employed or retained by another entity.
<PAGE>
2.8 "Source Code" means software in human-readable, high-level language form,
-----------
which when compiled or assembled, becomes the executable Object Code of a
computer software program. Source Code means both human readable (listings) and
machine readable (source files) forms and shall include all tools and
documentation needed to build such computer software, as well as all flow
charts, programmer comments and design specifications for the computer software.
2.9 Webb Community Tools" means Webb's Community Ware/XML platform including
--------------------
Webb's discussion, chat, personal calendar, template-based page publishing and
community building components.
2.10 "WEBB Confidential Information" includes all existing and future (i) Source
-----------------------------
Code to the Webb Community Tools and Modifications made by WEBB, and (ii)
information identified in writing by WEBB as confidential. WEBB Confidential
Information excludes any portion of information which: (1) is or becomes
publicly available through no act or failure of NetShepherd; (2) was or is
rightfully acquired by NetShepherd from a source other than WEBB; (3) is or
becomes independently known or available to NetShepherd without breach of this
Agreement; (4) is independently developed by NetShepherd without reference to
the WEBB Confidential Information; or (5) is required to be disclosed by court
order, after giving WEBB the opportunity to appear before the court and protect
its interests.
2.11 "WEBB Trademarks" means the trademarks designated by WEBB for use by
---------------
NetShepherd under this Agreement.
Section 3: WEBB Community Tools Integration and Delivery
---------------------------------------------------------
3.1 Integration Services. WEBB will perform the services set forth on Schedule
--------------------
A attached hereto, such services to be performed in accordance with the
suggested schedule therefor included on Schedule A, subject to such
modifications as mutually agreed by NetShepherd and WEBB.
3.2 Services of Andre Durand. During the performance of the integration
------------------------
services, WEBB shall make available to NetShepherd the services of Andre Durand,
a Senior Vice President of WEBB, for a period of three days, at a time or times
to be mutually agreed by NetShepherd and WEBB. In addition, during the Initial
Term (as hereinafter defined) of this Agreement, WEBB shall make available to
NetShepherd Mr. Durand's services and other subject matter experts of Webb for a
total of up to 12 additional days as requested by Net Shepherd, such additional
days generally to be provided one day per month during the Initial Term as
mutually agreed by NetShepherd and WEBB.
Section 4: Ownership, License and Maintenance and Support
----------------------------------------------------------
4.1 License Grant. WEBB grants to NetShepherd and NetShepherd accepts,
-------------
throughout the Term of this Agreement, a nonexclusive, nontransferable license
to use Webb Community Tools on the terms and conditions set forth herein (the
"License"), for use with Net Shepherd's Distributed Task Force.
4.2 Ownership Rights. Subject to the License, WEBB will retain all of its
----------------
ownership rights in all Intellectual Property Rights in the Webb Community Tools
4.3 Restrictions on Transfer. Except as expressly provided herein, NetShepherd
------------------------
will not sell, assign or otherwise transfer the Webb Community Tools or any
portion thereof, to any third party without the prior written consent of Webb
not to be unreasonably withheld.
<PAGE>
4.4 Restrictions on Disassembly and Reverse Engineering. To the extent that
---------------------------------------------------
restrictions on disassembly and reverse engineering are allowed by applicable
law, NetShepherd will not disassemble or reverse engineer the Webb Community
Tools.
4.5 NetShepherd Data. WEBB will not claim any ownership in or rights to data
----------------
or content originated by NetShepherd, including as same may be resident on
WEBB's servers, and WEBB shall assign to NetShepherd, any such rights it may
acquire.
4.6 Restrictions on Modification. NetShepherd will not make any Modifications
----------------------------
to the Webb Community Tools unless authorized by WEBB in writing.
4.7 Maintenance and Support. During the term of this Agreement, WEBB shall
-----------------------
provide the following Maintenance and Support Services for the Webb Community
Tools at no additional charge:
(a) Problem reporting, tracking and monitoring, and communication to
NetShepherd by electronic mail via the Internet;
(b) Reasonable telephone support on business days for problem
determination, verification and resolution on a call-back basis during
the hours of 8 a.m. to 5 p.m. Mountain Time; and after normal working
hours support in the form of pager based response.
(c) Periodic software Modifications made by WEBB. WEBB will inform
NetShepherd by e-mail at least 48 hours prior to any major software
upgrade to the Webb Community Tools.
Section 5: Restrictive Covenants of the Parties
------------------------------------------------
5.2 Nonsolicitation or Hiring of Employees of the Other Party. During the Term
---------------------------------------------------------
of this Agreement and for one year thereafter, and to the extent lawful under
applicable laws and regulations, each party covenants and agrees not to solicit
or hire any employees of the other party.
5.3 NetShepherd Confidential Information. Throughout the Term of this
------------------------------------
Agreement and thereafter, WEBB covenants and agrees not to directly or
indirectly: (i) use any NetShepherd Confidential Information except in
furtherance of this Agreement (and any other agreements between the Parties) and
the interests of NetShepherd and (ii) disclose the NetShepherd Confidential
Information except to Representatives of WEBB who have agreed to keep such
information confidential and use such information only as authorized by this
Agreement.
5.4 WEBB Confidential Information. Throughout the Term of this Agreement and
-----------------------------
thereafter, NetShepherd covenants and agrees not to directly or-indirectly: (i)
use any WEBB Confidential Information except in furtherance of this Agreement
(and any other agreements between the Parties) and the interests of WEBB and
(ii) disclose the WEBB Confidential Information except to Representatives of
NetShepherd who have agreed to keep such information confidential and use such
information only as authorized by this Agreement.
Section 6: Hosting of the Webb Community Tools
-----------------------------------------------
6.1 Hosting Commitment by WEBB. WEBB will host on WEBB servers, operate, and
--------------------------
allow continuing access to the Webb Community Tools by and for the benefit of
NetShepherd, until the earlier of (a) the expiration or termination of this
Agreement or (b) the changeover to the hosting of the Webb
<PAGE>
Community Tools on NetShepherd's servers under Section 6.3 below. If this
Agreement and the License continue in effect more than one (1) year after the
Effective Date, WEBB may at any time require NetShepherd to take over the
hosting and operation of the Webb Community Tools, provided that it gives
NetShepherd at least 90 days advance written notice and reasonable assistance
and training. Webb will not collect any data on NetShepherd's Distributed Task
Force's use of the Webb Community Tools other than data related to traffic and
performance management.
6.2 Third Party Costs. NetShepherd will also be responsible for the costs paid
-----------------
to third parties for third party content, technology and services that
NetShepherd specifically requests be integrated into the Webb Community Tools.
6.3 Optional Hosting by NetShepherd. At any time after four (4) months of the
-------------------------------
Effective Date, NetShepherd may elect to take over the hosting of the Webb
Community Tools from WEBB. Promptly after making that election. WEBB will
provide NetShepherd one copy of the Object Code to the Webb Community Tools to
enable NetShepherd to commence and continue, at its expense, the hosting and
operation of the Webb Community Tools for use in accordance with the License.
6.4 Reference to "Powered by" WEBB. So long as either WEBB or NetShepherd is
------------------------------
hosting and operating the Webb Community Tools for the benefit of NetShepherd,
(a) NetShepherd shall include a reference that the web site management tools are
"powered by" WEBB or other mutually agreed WEBB branding; and (b) NetShepherd
shall include a WEBB icon in the NetShepherd site. WEBB further reserves the
right to modify this branding from time to time, and shall reserve the right to
replace any associated branding and references, with reasonable notice to
NetShepherd.
Section 7: Webb Community Tool Integration Fee and License Fee
---------------------------------------------------------------
7.1 Fee for Services. For the performance of the services as set forth on
----------------
Schedule A, NetShepherd shall pay Webb a fee of $200,000 (U.S.) to be made
in two parts
7.2 Part I Fees for professional consultation services, functional
specifications and a demonstration prototype $66,000
These fees are payable on or before September 30,1999 assuming materially
all these services have been provided.
Part 2 Integration Services for transferring of the technology to the
NetShepherd platform
$134,000
The above fee is payable on or before December 31, 1999 assuming materially
all these services have been provided..
If Webb has not provided materially all the services in conformance with
the timelines set out in Schedule A, NetShepherd may terminate if Webb does not
materially complete these services within 30 days of receiving notice from
NetShepherd requesting such completion.
7.2 License Fee. For any license for the use of the Webb Community Tools other
-----------
than
the License, NetShepherd shall pay WEBB a license fee to be negotiated on a case
by case basis, such fee to be determined quarterly and paid to WEBB within 30
days of the end of each quarter for which a fee is due.
<PAGE>
7.3 Expenses. Net Shepherd shall reimburse WEBB for all reasonable out-of-
--------
pocket expenses incurred by Andre Durand in the performance of services in
accordance with the terms of this Agreement, any expenses in excess of $500.00
to be pre-approved by NetShepherd
7.4 Taxes. NetShepherd will pay or reimburse WEBB for any withholding taxes,
-----
sales, use or similar taxes, if any, based on the integration services or the
License, excluding taxes based on WEBB's taxable income or gain.
7.5 Late Fee. In addition to WEBB's other remedies, if NetShepherd fails to
--------
pay WEBB any amounts when due under this Agreement, NetShepherd will pay
interest on that amount at the rate of 1.5% per month or such lesser maximum
rate of interest permitted under applicable law.
Section 8: Representations and Agreements of NetShepherd
---------------------------------------------------------
8.1 Authority and Compliance. NetShepherd represents and warrants to WEBB
------------------------
that:
(a) NetShepherd is duly organized, validly existing and in good standing
under the laws of _________Alberta, Canada _____and has all requisite
rights, power and authority to enter into and perform its obligations
under this Agreement;
(b) The person signing this Agreement for NetShepherd is duly authorized
to execute this Agreement on NetShepherd's behalf,
(c) NetShepherd has secured and will keep in effect throughout the Term of
this Agreement all necessary licenses, permits and authorizations to
enable it, and all Representatives acting on NetShepherd's behalf, to
perform all of NetShepherd's obligations under this Agreement, and
will notify WEBB immediately should any such license, permit,
authorization or rights no longer be in effect or in good standing;
(d) NetShepherd will comply with all applicable laws and regulations in
the performance of its obligations under this Agreement
8.2 NetShepherd Expenses. Unless this Agreement expressly requires
--------------------
reimbursement by WEBB, NetShepherd will bear and pay all costs and expenses
incurred by NetShepherd pursuant to this Agreement.
8.3 Ownership of WEBB Trademarks; Notices. NetShepherd acknowledges and agrees
-------------------------------------
that, except for the limited nonexclusive license under this Agreement,
NetShepherd will not acquire any Intellectual Property Rights to the WEBB
Community Tools and WEBB Trademarks and that all such rights will remain the
sole property of WEBB. NetShepherd will not remove any patent, copyright,
trademark or other intellectual property notice appearing on the Webb Community
Tools.
8.4 NetShepherd's Books and Records; Inspection. During the Term of this
-------------------------------------------
Agreement and for one year thereafter: (a) NetShepherd will maintain true and
correct books and records pertaining to this Agreement and the payments
hereunder, and (b) WEBB shall have the right to engage an independent certified
public accountant, at its expense, to inspect, copy and audit the books and
records of NetShepherd pertaining to this Agreement for the sole purpose of
verifying the accuracy of payments made hereunder, subject to the
confidentiality obligations for NetShepherd Confidential Information.
<PAGE>
Section 9: Representations and Agreements of WEBB
--------------------------------------------------
9.1 Authority and Compliance. WEBB represents and warrants to NetShepherd
------------------------
that:
(a) WEBB is duly organized, validly existing and in good standing under
the laws of the State of Colorado and has all requisite rights, power
and authority to enter into and perform its obligations under this
Agreement;
(b) The person signing this Agreement for WEBB is duly authorized to
execute this Agreement on WEBB's behalf;
(c) WEBB has secured and will keep in effect throughout the Term of this
Agreement all necessary licenses, permits and authorizations to enable
it, and all Representatives acting on WEBB's behalf to perform all of
WEBB's obligations under this Agreement, and will notify NetShepherd
immediately should any such license, permit, authorization or rights
no longer be in effect or in good standing;
(d) Throughout the Term of this Agreement, WEBB will have obtained at its
expense all necessary permissions to use the WEBB Trademarks and Webb
Community Tools as described in this Agreement.
(e) WEBB will comply with all applicable laws and regulations in the
performance of its obligations under this Agreement
9.2 WEBB Expenses. Unless this Agreement expressly requires reimbursement by
-------------
NetShepherd, WEBB will bear and pay all costs and expenses incurred by WEBB
pursuant to this Agreement.
9.3 Ownership of NetShepherd Trademarks; Notices. WEBB acknowledges and agrees
--------------------------------------------
that WEBB will not acquire any Intellectual Property Rights to any NetShepherd
Materials or Trademarks under this Agreement and that all such rights will
remain the sole property of NetShepherd or its suppliers.
9.4 Performance Warranty and Disclaimer of Other Warranties. WEBB hereby
-------------------------------------------------------
warrants that the Webb Community Tools shall operate in substantial conformance
with the specifications therefor. THE FOREGOING WARRANTIES BY WEBB ARE IN LIEU
OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 10: Indemnification
----------------------------
10.1 Indemnification by NetShepherd. NetShepherd will hold WEBB and its
------------------------------
Representatives harmless from, and defend and indemnify WEBB and its
Representatives against, any and all claims, losses, damages and expenses,
including reasonable attorneys' fees, arising from a third party claim against
WEBB or its Representatives to the extent that such third party claim is based
on: (a) the negligence or willful misconduct of NetShepherd or its
Representatives, or (b) claims of infringement of Intellectual Property Rights
against WEBB or its Representatives for its authorized use of NetShepherd
Trademarks under this Agreement.
10.2 Indemnification by WEBB. WEBB will hold NetShepherd and its Representatives
-----------------------
harmless from, and defend and indemnify NetShepherd and its Representatives
against, any and all claims, losses, damages and expenses, including reasonable
attorneys' fees, arising from a third party claim against
<PAGE>
NetShepherd or its Representatives to the extent that such third party claim is
based on: (a) the negligence or willful misconduct of WEBB or its
Representatives or (b) claims of infringement of Intellectual Property Rights
against NetShepherd or its Representatives for its authorized use of the Webb
Community Tools or WEBB Trademarks under this Agreement.
10.3 Procedure for Indemnification. If a third party asserts a claim that is
-----------------------------
eligible for indemnification under Sections 10.1 or 10.2: (a) the indemnified
Party will promptly notify the indemnifying Party of the suit or claim; (b) the
indemnified Party will give the indemnifying Party sole authority to defend or
settle the suit or claim, provided that the indemnifying Party does not agree to
a settlement of the suit or claim unless the settlement is reasonably acceptable
to the indemnified Party; (c) the indemnified Party will provide to the
indemnifying Party all information in its control concerning the suit or claim;
and (d) the indemnified Party will reasonably cooperate with the defense of the
suit or claim. The indemnification obligations under Sections 10.1 and 10.2 are
subject to and conditioned upon compliance with this Section 10.3 by the
indemnified Party.
Section 11: Limitations of Liability
------------------------------------
11.1 Excusable Delay. Neither NetShepherd nor WEBB will be deemed to be in
---------------
default of any provision of this Agreement or for any failure in performance,
resulting from acts or events beyond the reasonable control of NetShepherd or
WEBB, as the case may be including, without limitation, acts of God, civil or
military authority, civil disturbance, war, strikes, fires, other catastrophes,
telecommunication outages, equipment malfunctions or other such major events
beyond NetShepherd's or WEBB's reasonable control.
11.2 Liability Exclusion. EXCEPT FOR EITHER PARTY'S OBLIGATIONS TO THIRD
-------------------
PARTIES PURSUANT TO SECTION 10, INDEMNIFICATION, IN NO EVENT SHALL NETSHEPHERD
OR WEBB BE LIABLE TO EACH OTHER FOR SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES,
INCLUDING LOST PROFITS. NEITHER PARTY SHALL SEEK, OR OTHERWISE APPLY FOR, ANY
PUNITIVE OR EXEMPLARY DAMAGES.
Section 12: Term and Termination
---------------------------------
12.1 Term. This Agreement will become effective as of the date first written
----
above and will continue in effect for a period of one (1) year (the "Initial
Term"), subject to renewal or earlier termination as provided in Sections 12.2
or 12.3 below ("Term").
12.2 Renewal. The Term of this Agreement will automatically renew for
-------
successive 12-month periods unless either Party provides the other Party written
notice of termination at least 90 days before the scheduled expiration of the
then current Term.
12.3 Termination. The Term and this Agreement may be terminated only as
-----------
follows:
(a) Either Party may elect not to renew the Term of this Agreement
pursuant to Section 12.2 above, in which case the Term and this
Agreement will terminate upon expiration of the then current Term.
(b) Either Party may, at its discretion, elect to terminate this
Agreement effective upon 30 days advance written notice to the
other Party stating that such Party is in material default under
any of the provisions of this Agreement, unless such default is
timely cured within
<PAGE>
such 30-day notice period. Any notice of termination under this
Section 12.3(b) will state the basis for the alleged default and
the measures reasonably necessary to cure such default
(c) WEBB may elect to terminate the Term and this Agreement upon at
least 90 days advance written notice to NetShepherd after the end
of any calendar quarter for which WEBB has not received the Minimum
Payments under Section 7.1, 7.2 or 7.3 above.
(d) The Parties may terminate this Agreement at any time by mutual
written agreement.
12.4 Rights and Obligations Upon Termination or Nonrenewal. Upon the nonrenewal
-----------------------------------------------------
or earlier termination of the Term of this Agreement by either Party:
(a) Both Parties will be relieved of all obligations under this
Agreement, except for those obligations which expressly survive
termination of this Agreement,
(b) Each Party will, at its expense and at the request of the other,
promptly return to the other any Confidential Information of the
other,
(c) The Parties will promptly pay to each other the payments due and
payable hereunder through the date of termination or expiration.
12.5 Survival. The terms and provisions of Sections 4.2, 4.5, 5.2, 5.3, 5.4, 8,
--------
9, 10, 11, 12.4 and 13 (inclusive) of this Agreement will survive and remain in
effect pursuant to their terms after the expiration or any earlier termination
of the then current Term of this Agreement by either Party.
Section 13: General
--------------------
13.1 Governing Law. This Agreement is governed by and construed in all respects
-------------
in accordance with the laws of the State of Colorado, without regard to
conflicts of laws principles.
13.2 Dispute Resolution. Parties agree that all disputes arising as a result of
------------------
or in connection with this Agreement will be mutually resolved, except that if
Parties are unable to mutually resolve such disputes within 60 days, one or both
of the Parties will submit the dispute for arbitration. At least 30 days before
either Party initiates arbitration proceeding, authorized Representatives of
NetShepherd and WEBB will review and become familiar with the subject matter of
the dispute, and meet in person or by telephone to review and attempt to resolve
the dispute in good faith. Except only for disputes for which injunctive relief
is sought by either Party, any disputes between the Parties (which arc not
otherwise resolved by the Parties) will be submitted to binding arbitration in
Denver, Colorado, before one arbitrator, with the venue and proceedings in
accordance with the then prevailing commercial rules of the American Arbitration
Association. NetShepherd and WEBB each waive their right to a trial by jury for
any disputes between the Parties.
13.3 Rights and Remedies. The Parties acknowledge that the unauthorized use or
-------------------
disclosure of Confidential Information, or the unauthorized use of the
NetShepherd Trademarks, the WEBB Trademarks or the Webb Community Tools may
result in immediate and irreparable injury and harm, and may cause damages in
amounts difficult to ascertain. Accordingly, upon such breach, which has not
been timely cured, the owning Party of such property will be entitled to seek an
injunction and other legal or equitable remedies, subject to the limitations in
Sections 10 and 11 above. All rights and remedies will be cumulative, and the
exercise of any one of them will not be deemed to be a waiver of any other.
<PAGE>
13.4 Protection of Trademarks. NetShepherd and WEBB will at all times use the
------------------------
trademarks of the other in a-manner which will not diminish the rights of the
trademark owner.
13.5 Assignment. Neither Party may assign this Agreement or any of its
----------
respective rights or obligations under this Agreement unless approved in
writing, prior to such assignment, by the other Party, such approval to not be
unreasonably withheld. Notwithstanding the foregoing, either Party may assign
its rights and obligations under this Agreement, upon notice to the other Party
and without the other Party's approval or consent, if such assignment is in
connection with the sale of substantially all of the business of the assigning
Party related to this Agreement
13.6 Headings. The section headings in this Agreement are for convenient
--------
reference and are not a part of this Agreement.
13.7 Waiver. No waiver of any breach of any provision of this Agreement will
------
constitute a waiver of any prior, concurrent, or subsequent breach of the same
or any other provisions hereof, and no waiver will be effective unless made in
writing.
13.8 Notices. Any notice required or permitted to be given under this
-------
Agreement will be sufficient if in writing and delivered personally or via fax
(all fax notices will also be mailed in accordance with this Section 13.8) or
sent by registered or certified mail, postage prepaid and return receipt
requested, or sent by overnight courier to the attention of the "President" at
the Parties' respective addresses set forth above (or to such other address as
the Parties will designate by notice to the other in accordance with this
Section 13.8) and will be deemed to have been given as of the date of receipt.
13.9 Amendments. This Agreement can be modified or amended only by written
----------
agreement signed by the Parties.
13.10 Severability. If any provision of this Agreement is held to be illegal,
------------
invalid or unenforceable under present or future laws effective during the Term
hereof, such provision will be fully severable; this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; and the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of each such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Agreement a provision which
reflects the intent of the Parties and is as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
13.11 Counterparts. This Agreement may be executed manually or via fax and in
------------
one or more counterparts.
13.12 Construction. If an ambiguity or question of intent arises, this
------------
Agreement will be construed as if drafted jointly by the Parities and no
presumption or burden of proof will arise favoring or disfavoring either Party
by virtue of authorship of any of the provisions of this Agreement.
13.13 Agreement Expenses. Each of the Parties will pay their own expenses and
------------------
legal fees incurred before the execution of this Agreement.
13.14 Time Limitation. Except for actions for breach of a Party's intellectual
---------------
property rights and any claims for which either party has an indemnification
obligation pursuant to Section 10, no action arising out of or relating to this
Agreement may be brought later than two (2) years after the cause of action
became known to the injured Party.
<PAGE>
13.15 Publicity. Neither Party will make any public release or announcement
---------
regarding the terms or existence of this Agreement except as may be required by
law, including the federal securities laws, without the prior consent of the
other Party, which consent will not be unreasonably withheld.
13.16 Relationship of the Parties. NetShepherd and WEBB are each independent
---------------------------
businesses. Neither Party nor its respective employees and representatives can
or shall make any agreements, warranties, representations, promises or covenants
on behalf of or for the other Party or any third party, unless approved in
advance in writing by the other Party. This Agreement shall not be construed as
a partnership or franchise for any purpose or reason, whether implied, expressed
or statutory.
13.17 Complete Agreement. This Agreement contains the complete agreement
------------------
between the Parties concerning the subject matter hereof and supersedes all
prior understandings, letters of intent, proposals or agreements, and all prior
communications between the Parties relating to the subject matter of this
Agreement. No representation, warranty, promise, inducement or statement of
intention has been made by either Party which is not embodied in this Agreement.
13.18 WEBB Community Members. During the Term of this Agreement, WEBB will use
- ----- ----------------------
its reasonable best efforts to give NetShepherd access to the members of
WEBB's various communities, to the extent that it may do so without
violating the rights or privacy of such parties, or WEBB's contracts or
agreements, for the sole purpose of permitting NetShepherd to recruit
such persons for NetShepherd's distributed task force. Net Shepherd Inc.
-----------------
shall pay Webb a fee of $1.00 for every member of Webb's company that
---------------------------------------------------------------------
becomes an active Net Shepherd's Task force participant as a result of
----------------------------------------------------------------------
Webb's invitation to participate..
----------------------------------
The Parties have executed this Agreement as of the Effective Date.
NETSHEPHERD, INC. ("NetShepherd") ONLINE SYSTEM SERVICES, INC. ("WEBB")
By____________________________ By ___________________________________
Title_________________________ Title ________________________________
<PAGE>
SCHEDULE 'A'
Scope Of Work
The following table outlines a draft scope of work to be undertaken by Net
Shepherd and Webb. Integration of Webb's community tools will be in two phases
as noted. All tools will be part of version 4.0 of the Webb suite of tools.
<TABLE>
<CAPTION>
Task Phase Scope
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Integrated 1 . Webb will provide a way for Net Shepherd to pass their
Registration/ members' login data to make signing in to any service hosted by
Sign-In Webb transparent to the user.
- -----------------------------------------------------------------------------------------------------------------------
Add Discussions 1 . Include Webb's discussions into Net Shepherd custom browser.
(The Member's Journal)
. Webb will pre-populate the discussion with Net Shepherd's
chosen discussion and topic names.
. Net Shepherd will modify their custom browser to accommodate
the new link.
- -----------------------------------------------------------------------------------------------------------------------
Add Chat 1 . Include Webb's chat into Net Shepherd browser.
. Net Shepherd will modify their custom browser to accommodate
the new link.
- -----------------------------------------------------------------------------------------------------------------------
Customized Webb Me 1 . Custom-branded, custom look & feel Webb Me page, including
ability to change all the graphics, delete any elements and
change the layout of the page. Net Shepherd to provide
direction. Net Shepherd or Webb to develop graphics, as
determined by Net Shepherd.
. No additional dynamic elements will be included.
. There is the possibility that this page can include updated
news/information from Net Shepherd. To be determined based on
other content on the page.
. If links are included that go to other Webb offerings, these
other offerings will not be customized in look & feel.
. Net Shepherd will modify its custom browser to accommodate
the new link.
- -----------------------------------------------------------------------------------------------------------------------
Personal Calendar 1 . Include Webb's personal calendar into Net Shepherd's browser.
. Net Shepherd will modify their custom browser to accommodate
the new link.
- -----------------------------------------------------------------------------------------------------------------------
Email Services 1 . Net Shepherd will evaluate Webb's e-mail services to
determine integration suitability.
- -----------------------------------------------------------------------------------------------------------------------
Personal Home Page 2 . Home page hosting will be implemented as part of a second
Hosting phase of integration of the Webb tools.
- -----------------------------------------------------------------------------------------------------------------------
Community Building 1 . Webb will provide version 4 of its community building tools
Tools so that Net Shepherd's community members and contracted
customers may create branded, sub-communities of the Internet
Explorers society. (Net Shepherd's virtual community)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated March
10, 1999, included in Online System Services, Inc.'s Form 10-KSB for the year
ended December 31, 1998 and to all references to our Firm included in this
Registration Statement on Form S-3.
/s/ Arthur Andersen LLP
Denver, Colorado
August 26, 1999
