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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1999
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ONE ECOMMERCE CORPORATION
(Name of small business issuer in its charter)
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NEVADA 7310 87-0531751
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification
No.)
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THE AUSTIN CENTRE
701 BRAZOS STREET, 10TH FLOOR
Austin, Texas 78701
(512) 615-5000
(Address and telephone number of principal executive offices)
DAVID B. CAROLAN
CHIEF EXECUTIVE OFFICER
THE AUSTIN CENTRE
701 BRAZOS STREET, 10TH FLOOR
AUSTIN, TEXAS 78701
(512) 615-5000
(Name, address and telephone number of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS TO:
GARY KISSIAH
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
816 Congress Avenue, Suite 1900
Austin, Texas 78701
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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, 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the 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 the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
Warrants and Common Stock,
$.001 par value per share... 4,728,420 $6.00 $28,370,520 $7,887
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) under the Securities Act.
------------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
The information in this prospectus is not complete and may change. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission becomes effective. This prospectus is not an offer to
sell these securities and is not soliciting offers to buy these securities in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY , 1999
PROSPECTUS
4,728,420 WARRANTS AND UNDERLYING
SHARES OF COMMON STOCK
ONE ECOMMERCE CORPORATION
---------------------
We are distributing 4,728,420 Warrants to our shareholders of record on
August 1, 1999 except certain of our principal shareholders who have waived
their rights to receive Warrants. Each Warrant entitles the holder to purchase
one share of Common Stock. Each Warrant is exercisable at 200% of the price of
our Common Stock on the effective date of this prospectus. Our Common Stock is
quoted on the NASD OTC Bulletin Board under the symbol "ONCE" and the current
(July 9, 1999) bid price quotation is $3.00. We may redeem the Warrants for $.01
per Warrant on 30 days notice at any time the closing bid price of the Common
Stock equals or exceeds 300% of the exercise price of the Warrant for ten
consecutive trading days. The Warrants will expire three years following the
date of this prospectus. We arbitrarily determined the exercise and redemption
prices of the Warrants and they bear no relationship to our assets,
shareholders' equity or any other objective criteria of value.
The Warrants are being distributed to our shareholders without the payment
of any consideration. The shares of Common Stock are being offered only to
holders of the Warrants and will be issued upon exercise of the Warrants. The
offering price of the shares of Common Stock is payable in cash upon exercise of
the Warrants. No minimum number of Warrants must be exercised, and we cannot
assure you that any Warrants will be exercised. We will not pay any underwriting
discounts or other commissions in connection with the exercise of the Warrants.
SHARES OF COMMON STOCK ISSUED UPON EXERCISE OF THE WARRANTS INVOLVE A HIGH
DEGREE OF RISK AND SUBSTANTIAL AND IMMEDIATE DILUTION AND SHOULD NOT BE
PURCHASED BY ANYONE WHO CANNOT AFFORD TO RISK THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" HEREIN.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
We expect to deliver the Warrants on or about , 1999.
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
You should only rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are distributing the Warrants only in
jurisdictions where such distributions are permitted. This prospectus does not
constitute an offer or a solicitation of an offer by anyone in any jurisdiction
in which such offer or solicitation is not authorized or is unlawful. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any
distribution of Warrants.
This preliminary prospectus is subject to completion prior to the
distribution. Among other things, this preliminary prospectus describes our
company as it existed at the time of the distribution of the Warrants and no
implication should be made that there has been no change in our affairs since
that date.
------------------------
TABLE OF CONTENTS
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PAGE
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SUMMARY.................................................................................................... 3
RISK FACTORS............................................................................................... 7
FORWARD-LOOKING STATEMENTS................................................................................. 17
USE OF PROCEEDS............................................................................................ 17
DIVIDEND POLICY............................................................................................ 18
CAPITALIZATION............................................................................................. 18
DILUTION................................................................................................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION................................................ 19
BUSINESS................................................................................................... 24
MANAGEMENT................................................................................................. 37
PRINCIPAL SHAREHOLDERS..................................................................................... 42
DESCRIPTION OF CAPITAL STOCK............................................................................... 43
SHARES ELIGIBLE FOR FUTURE SALE............................................................................ 46
EXPERTS.................................................................................................... 47
LEGAL MATTERS.............................................................................................. 47
ADDITIONAL INFORMATION..................................................................................... 47
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We maintain a Website at http://www.onecommerce.com. No information
contained in our Website shall be considered a part of this prospectus.
Merchant.Point, Merchant.PointPro, Transaction.Point, Accounting.Point,
Customer.Point and Profile.Point are trademarks of One eCommerce Corporation.
All other brand names or trademarks appearing in this prospectus are the
property of their respective holders.
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SUMMARY
The following summary is qualified by the more detailed information,
including the financial statements and related notes, appearing elsewhere in
this prospectus.
THE COMPANY
One eCommerce Corporation has developed an integrated suite of electronic
commerce products that enable small and midsize businesses to conduct
sophisticated electronic commerce transactions over the Internet. We have
developed a simple Web-based interface that enables our customers to build their
electronic commerce Websites by selecting their own look and feel, graphics and
functionality. The price level for our products ranges from $49.95 to $349.00 a
month, depending upon their features. We believe this price range is well below
all other electronic commerce products with equivalent functionality. We have
also developed a unique function that enables our products to be linked into a
broad range of accounting systems. Our products have been developed in a modular
design that allows easy installation and upgrading of our customers' Websites.
Our products consist of "Merchant.Point," which is our core product,
"Merchant.PointPro," which is our high-end product, and four "Modules" that can
be added to Merchant.Point or Merchant.PointPro to expand their functionality.
Merchant.Point provides our customers with a comprehensive electronic commerce
presence on the Internet at a price range of $49.95 to $349 a month.
Merchant.Point contains the following features:
- Internet pages and E-mail accounts;
- Domain name;
- Website search;
- Shopping cart;
- User authentication and credit card processing;
- Automatic tax and shipping calculation;
- Website status reporting;
- Customizable transaction reporting and maintenance;
- Dynamic database; and
- Marketing to search engines and directories.
Merchant.PointPro is our high-end electronic commerce application. It
contains the features found in Merchant.Point and the Modules, and may be fully
customized based upon our customers' needs. Merchant.PointPro contains (i)
advertising functions; (ii) dynamic catalog content and product pricing; (iii) a
browser-based customer interface; (iv) system management features; (v)
multilingual capability; and (vi) controlled access.
We have developed or have rights to the following Modules that can be added
to Merchant.Point and Merchant.PointPro to expand their functionality: (i)
Transaction.Point; (ii) Accounting.Point; (iii) Customer.Point; and (iv)
Profile.Point. Transaction.Point is a credit card payment processing module that
allows credit cards to be verified and processed on a real-time basis.
Accounting.Point integrates Merchant.Point and Merchant.PointPro into a complete
accounting system that also has the capability of entering inventory and
accounts receivable information. Customer.Point enables human interaction to
occur between the merchant and its customer. Profile.Point monitors customer
activities on the Website
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and enables our customers to configure their Websites based upon the information
that is gathered. The Modules have been designed to allow for easy upgrade and
configuration.
Marketing
We are launching a nationwide campaign to attract resellers of accounting
products that are compatible with Accounting.Point. The goal of the campaign is
to recruit 500 accounting resellers who will sell and support Merchant.Point and
the Modules. We will use seminars, advertising and our relationships with major
accounting vendors to attract the resellers. For example, Computer Associates;
AccPac; Great Plains; Intuit-Quick Books; Sage-DacEasy, MAS-90 and Peachtree;
Real World and Solomon have approximately 8,000 resellers of their products. We
anticipate that our relationships with these companies will be our primary
source of recruiting resellers for our marketing campaign.
Our reseller program has several levels of reseller involvement from simply
receiving commissions on sales to handling all aspects of selling, installing
and maintaining our products. We will offer a variety of programs to assist our
resellers in marketing and selling our products. These include lead generation
programs, turnkey marketing programs, trade shows, seminars, co-op marketing
programs, vertical marketing programs, reference programs, authorized training
centers and access to our affiliate Website. For a description of our marketing
programs, see "Business--Marketing."
Strategic Alliances
As part of our strategy to increase sales of our electronic commerce
products, we have actively pursued strategic alliances. We have entered into
strategic alliances with Directories International, L.L.C. to develop community
Internet portals in the United States; Matra Net to co-brand and distribute our
merchandising systems with its customer relationship products; Sage-DacEasy;
AccPac; Great Plains; Solomon; Peachtree and other developers of accounting
software to develop links from our customer's electronic storefronts to their
accounting systems; Inference Corporation for customer profiling systems and
data mining; and AT&T for Internet connectivity.
Acquisitions
On March 29, 1999, we entered into a letter of intent to acquire Sinergia
Servicios, S.C. ("Sinergia"). We anticipate closing the acquisition of Sinergia
on or about August 1, 1999. Sinergia is headquartered in Guadalajara, Mexico and
provides large multinational companies with software development and system
support services. Some of its major customers include Hewlett-Packard Co., Sage
U.S. and Kodak Corporation.
Principal Offices
Our principal executive offices are located at 701 Brazos Street, Suite
1010, Austin, Texas 78701, telephone: (512) 615-5000. Our research and
development offices are located at 555 IH 35 South, Suite 400, New Braunfels,
Texas 78130, telephone: (830) 606-8413.
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THE OFFERING
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Securities Offered........................... We are distributing 4,728,420 Warrants to our
shareholders of record as of August 1, 1999,
except certain principal shareholders who
have waived their rights to receive Warrants.
We will issue up to 4,148,420 shares of
Common Stock upon exercise of the Warrants.
See "Description of Capital Stock."
Offering Price............................... The Warrants will be distributed to our
shareholders, except certain principal
shareholders who have waived their rights to
receive Warrants, without the payment of any
cash consideration. Upon exercise of the
Warrants, the shares of Common Stock
underlying the Warrants will be sold at 200%
of the price quotation for our Common Stock
on the NASD OTC Bulletin Board on the
effective date of this prospectus.
Plan of Distribution......................... The Warrants will be distributed as soon as
practicable after the effective date of this
prospectus to our stockholders of record as
of August 1, 1999. We will offer and sell the
shares of Common Stock upon the exercise of
the Warrants without paying any underwriting
discounts or other commissions. See "Plan of
Distribution."
Securities Outstanding....................... We are authorized to issue up to 50,000,000
shares of Common Stock. As of June 30, 1999,
16,723,600 shares were issued and
outstanding. We have reserved from our
authorized but unissued capital 4,728,420
shares of Common Stock for issuance upon
exercise of the Warrants. See "Description of
Securities."
Warrants..................................... Each Warrant entitles the holder to purchase
one share of Common Stock. Warrants are
exercisable at 200% of the price of our
Common Stock on the effective date of this
prospectus. The Warrants will expire three
years after the effective date of this
prospectus. We may redeem the Warrants for
$.01 per Warrant on 30 days notice at any
time after the date of this Prospectus if the
closing bid price of the Common Stock equals
or exceeds 300% of the exercise price for ten
consecutive trading days. The exercise prices
for the Warrants are subject to adjustment in
certain events. See "Description of Capital
Stock."
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5
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Use of Proceeds.............................. There is no assurance as to the amount of
proceeds, if any, that we may receive from
the exercise of the Warrants. Any proceeds
that we may receive will be used to provide
additional working capital.
Transfer Agent............................... Our transfer agent and registrar is Interwest
Transfer Company, Inc., 1981 East 4800 South,
Suite 100, Salt Lake City, Utah 84117,. Its
telephone number is (801) 272-9294.
Risk Factors................................. An investment in our Common Stock by
exercising the Warrants is highly
speculative. Investors will suffer
substantial dilution in the book value per
share of the Common Stock compared to the
purchase price. If we do not receive
substantial funds from exercise of the
Warrants, we may require additional funding;
however, we have no commitments to obtain
additional funding. No person should invest
in the Company who cannot afford to risk loss
of their entire investment. See "Risk
Factors."
Proposed NASDAQ National Market symbol....... "ONCE"
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6
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RISK FACTORS
EXTREMELY LIMITED OPERATING HISTORY; NET LOSSES AND ANTICIPATION OF CONTINUED
LOSSES.
Our company was formed on December 31, 1998 through the acquisition of
Corridor Technology, Inc., a Texas corporation. Corridor had been engaged in
providing network and telephony services to midsize businesses in Central Texas
since 1995. From December 1998 through June 1999 (the "Inception Period"), we
eliminated the business activities of Corridor and focused our business plans on
developing our electronic commerce products, raising capital, recruiting
employees and marketing activities.
We commenced selling our electronic commerce products in May 1999.
Accordingly, we have an extremely limited operating history upon which an
evaluation of our business can be based. Our business must be considered in
light of the risks, expenses and problems frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as the Internet. Specifically, these risks include our
failure to anticipate and adapt to a developing market, the rejection of our
products by Internet consumers, the development of equal or superior services or
products by our competitors, the failure of the business world to adopt the
Internet as a commercial medium and our inability to identify, attract, retain
and motivate qualified personnel. There can be no assurance that we will be
successful in addressing such risks. In addition, in view of the rapidly
evolving nature of our business and our extremely limited operating history, we
believe that period-to-period comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
We have achieved only limited revenues to date, have incurred net losses
since our formation and expect to continue to operate at a loss for the
foreseeable future. As of December 31, 1998, we had a net loss of $103,469.
There can be no assurance that we can generate revenue growth, or that any
revenue growth that we may achieve can be sustained. Any revenue growth that we
achieve may not be indicative of future operating results. In addition, we have
increased, and plan to further increase our operating expenses to increase our
sales and marketing efforts, enter into strategic partnerships and alliances,
fund greater levels of product development, increase staff and increase our
general and administrative costs to support an enlarged organization. To the
extent that increases in such operating expenses precede or are not followed by
increased revenues, our business, results of operations and financial condition
will be materially adversely affected. Given the level of planned expenditures,
we anticipate that we will continue to incur losses for the foreseeable future
and there can be no assurance that we will ever achieve or sustain
profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. If our revenues do not increase, we may
not be able to compensate by reducing expenses in a timely manner. Our expenses
may also increase due to the potential impact of goodwill and other charges
resulting from completed and future acquisitions. Finally, Internet portals,
connectivity providers, and Internet distribution channels may increase their
fees to provide access to their products and services. If any of these expenses
are not accompanied by increased revenues, our business, financial condition and
operating results would be materially adversely affected.
MARKETING ALLIANCES MAY NOT GENERATE THE EXPECTED NUMBER OF NEW CUSTOMERS OR MAY
BE TERMINATED.
Our national marketing campaign is focused on recruiting resellers of
accounting products to sell and support Merchant.Point and our other electronic
commerce products. See "Business--Marketing." The success of this marketing
effort depends on the number of resellers we recruit and their ability to
produce new customers who will purchase our products. We may not develop a
sufficiently large number of resellers or our resellers may not generate the
expected number of new customers. We also cannot assure you that we will be able
to maintain our reseller relationships. If our marketing campaign is
unsuccessful or if any of
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our significant reseller relationships are terminated, our revenues derived from
the sales of our electronic commerce products may decrease, and our financial
condition may be adversely affected.
ESTABLISHING OUR BRAND QUICKLY AND COST-EFFECTIVELY IS ESSENTIAL FOR US TO BE
SUCCESSFUL.
We believe that we must establish, maintain and enhance the "One eCommerce"
brand to attract more customers to purchase our electronic commerce products and
to increase revenues from monthly hosting and transaction fees. Brand
recognition and customer loyalty will become increasingly important as more
companies with well-established brands in electronic commerce offer competing
services on the Internet. Development of the "One eCommerce" brand will depend
largely on our success in implementing an effective advertising campaign, and
providing high quality electronic commerce products and customer service, none
of which can be assured. We will need to increase substantially our spending on
programs designed to create and maintain strong brand loyalty among customers
and we cannot be certain that our efforts will be successful.
OUR PERFORMANCE DEPENDS ON OUR ABILITY TO OFFER NEW AND EXPANDED PRODUCTS AND
SERVICES.
We plan to introduce new and expanded products and services and to enter
into new relationships with third parties to generate additional revenues,
attract more consumers and respond to competition. We may be unable to offer
such products or services in a cost-effective or timely manner. Furthermore, any
new product or service we launch that is not favorably received by consumers
could damage our reputation and brand name. Expansion of our products or
services in this manner would also require significant additional expenses and
development and may strain our management, financial and operational resources.
Our business, operating results and financial condition could be seriously
harmed if we are unable to generate revenues from expanded services or products
sufficient to offset their cost. Our success also depends on our ability to
accurately determine the products and features required by customers and to
design and implement products that meet these requirements in a timely and
efficient manner. We may be unsuccessful in determining customer demands, and
our products may not adequately satisfy current or future customer demands.
WE MUST SUCCESSFULLY INTEGRATE SINERGIA INTO OUR COMPANY.
On March 29, 1999 we entered into a letter of intent to acquire Sinergia and
we anticipate closing the acquisition on August 1, 1999. After we close the
acquisition of Sinergia, we must relocate its corporate headquarters to obtain
additional office space due to the growth in Sinergia's business. We anticipate
this relocation will take approximately two months and will cost approximately
$250,000. During this period, we anticipate a loss in revenues from Sinergia.
Furthermore, we must integrate Sinergia into our business activities. We
anticipate this may be difficult because of the geographical distance between
Guadalajara, Mexico and our headquarters in Austin, Texas, differences between
the Mexican and American cultures, and Sinergia's lack of expertise in
electronic commerce applications. The failure to successfully integrate Sinergia
into our company may adversely affect our business, financial condition and
operating results.
FLUCTUATIONS IN OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT OUR STOCK PRICE.
We expect to experience significant fluctuations in our future quarterly
operating results due to a variety of factors, many of which are outside our
control. As a result, we believe that quarterly comparisons of our operating
results are not necessarily meaningful and that investors should not rely on the
results of one quarter as an indication of our future performance. We believe it
is likely that, in the future, fluctuations in our quarterly operating results
will cause our results to fall below the expectations of securities analysts and
investors, which could cause the price of our Common Stock to drop. Factors that
may negatively affect our quarterly operating results include:
- our ability to attract new prospects and convert them into customers;
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- the announcement or introduction of new or enhanced services by our
competitors;
- changes in our pricing policies or the pricing policies of our
competitors;
- the amount and timing of operating costs and capital expenditures relating
to expansion of our business, operations and infrastructure; and
- our ability to attract and retain new personnel in a timely and effective
manner.
WE RELY ON TECHNOLOGIES LICENSED FROM THIRD PARTIES.
We currently license from third parties certain technologies and information
incorporated into our products. As we continue to introduce new services that
incorporate new technologies, we may be required to license additional
technology from others. We cannot assure you that these third-party technology
licenses will continue to be available to us on commercially reasonable terms,
if at all. Additionally, we cannot assure you that the third parties from which
we currently license our technology will be able to defend their proprietary
rights successfully against claims of infringement. Any failure to obtain any of
these technology licenses could result in delays or reductions in the
introduction of new products, features, functions or services. It could also
negatively affect the performance of our existing products until equivalent
technology can be obtained.
OUR OPERATING RESULTS DEPEND ON OUR INTERNALLY DEVELOPED PRODUCTS, NETWORK
INFRASTRUCTURE AND TRANSACTION-PROCESSING SYSTEMS.
The satisfactory performance, reliability and availability of our products,
transaction-processing systems and network infrastructure are critical to our
operating results, as well as to our ability to attract and retain customers and
maintain adequate customer service levels. Any system interruptions that result
in the unavailability of our products or reduced performance of our transaction
systems would reduce the volume of sales and the attractiveness of our products
and services, which would seriously harm our business, operating results and
financial condition. If the volume of traffic on the Websites we host for our
customers or the number of purchases made by our customers substantially
increases, we will need to further expand and upgrade our technology,
transaction processing-systems and network infrastructure. Our transaction
processing systems and network infrastructure may not be able to accommodate
increases in traffic in the future. Any inability to do so could negatively
impact our business, operating results and financial condition.
OUR COMPUTERS AND COMMUNICATIONS SYSTEMS ARE VULNERABLE TO DAMAGE OR
INTERRUPTION WHICH MAY HINDER OUR ABILITY TO DELIVER TIMELY OUR PRODUCTS AND
SERVICES.
Our ability to successfully provide our products and services depends on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Substantially all of our computer and communications systems
are located in Austin, Texas. Our systems and operations are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications failure,
break-ins and similar events. Despite our implementation of network security
measures, our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability to accept and confirm customer orders. The
occurrence of any of the foregoing risks could negatively impact our business,
operating results and financial condition.
RAPID TECHNOLOGICAL CHANGE COULD RENDER OUR PRODUCTS AND SERVICES OBSOLETE.
If we are unable, for technical, legal, financial or other reasons, to adapt
in a timely manner in response to changing market conditions or customer
requirements, our business, operating results and financial condition could be
harmed. The Internet and the electronic commerce industry are characterized by
rapid technological change, sudden changes in customer requirements and
preferences, frequent new
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product and service introductions embodying new technologies and the emergence
of new industry standards and practices that could render our existing
technology obsolete. The emerging nature of these products and services and
their rapid evolution will require that we continually improve the performance,
features and reliability of our products. Our success will depend, in part, on
our ability:
- to enhance our existing products and services;
- to develop and license new services and technology that address the
increasingly sophisticated and varied needs of our current and prospective
customers; and
- to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of electronic commerce products and other proprietary technology
entails significant technical and business risks and requires substantial
expenditures and lead time. We may be unable to use new technologies effectively
or adapt our products to customer requirements or emerging industry standards.
FUTURE GOVERNMENT REGULATIONS OF THE INTERNET COULD INCREASE OUR COSTS OF
CONDUCTING BUSINESS.
New Internet legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to the Internet
and online commerce, or the application of existing laws and regulations to the
Internet and online commerce could harm our business, operating results and
financial condition. We are subject to regulations applicable to businesses
generally and laws or regulations directly applicable to communications over the
Internet and access to online commerce. Although there are currently few laws
and regulations directly applicable to the Internet and online retailing
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust, taxation and characteristics and
quality of products and services. For example, the United States Congress
recently enacted Internet laws regarding children's privacy, copyrights,
taxation and transmission of sexually-explicit material and the European Union
recently enacted its own privacy regulations. Furthermore, the growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online.
The adoption of any additional laws or regulations regarding Internet
commerce and communications may decrease the growth of the Internet or
commercial online services, which could, in turn, decrease the demand for our
products and services and increase our cost of doing business and have a
negative impact on our business, operating results and financial condition.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal privacy is uncertain and may take years to resolve.
For example, tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in online commerce, and new state
tax regulations may subject us to additional state sales and income taxes. If we
were alleged to have violated federal, state or foreign, civil or criminal law,
even if we could successfully defend such claims, it could have a negative
impact on our business, operating results and financial condition.
OUR OFFICERS AND DIRECTORS WILL EXERCISE SIGNIFICANT CONTROL OVER THE COMPANY.
On completion of distribution of the Warrants and assuming exercise of all
of the Warrants, executive officers and directors and their affiliates will
beneficially own, in the aggregate, approximately 60% of our outstanding Common
Stock. As a result, these stockholders will be able to exercise significant
control over all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions, which could
delay or prevent someone from acquiring or merging with us. See "Principal
Shareholders."
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THE BROAD DISCRETION WE HAVE IN THE USE OF PROCEEDS FROM EXERCISE OF THE
WARRANTS MAY INCREASE THE RISK THAT WE WILL NOT USE THEM EFFECTIVELY OR THAT
WE WILL USE THEM IN WAYS WITH WHICH YOU MAY NOT AGREE.
The net proceeds, if any, from the exercise of the Warrants will be added to
our working capital and will be available for general corporate purposes,
including operating expenses and capital expenditures. In addition, we may use a
portion of any such net proceeds to acquire or invest in complementary
businesses, technologies, services or products. We cannot state with certainty
particular uses for the net proceeds from the exercise of the Warrants, and will
have broad discretion in the use of the net proceeds. We can give no assurance
as to whether any net proceeds will be obtained from the exercise of the
Warrants. See "Use of Proceeds."
OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF THE ELECTRONIC COMMERCE
MARKET.
If the general acceptance of electronic commerce over the Internet does not
grow or grows slower than expected, the sales of our products to small and
midsize businesses may decrease and our business will suffer. Our long-term
success depends on the widespread acceptance of electronic commerce by small and
midsize businesses. A number of factors could prevent such acceptance, including
the following:
- electronic commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
- the necessary network infrastructure for substantial growth in usage of
the Internet may not be adequately developed;
- increased government regulation or taxation may adversely affect the
viability of electronic commerce;
- insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and
- adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
THERE IS INTENSE COMPETITION FOR SALES OF ELECTRONIC COMMERCE PRODUCTS AND
SERVICES ON THE INTERNET.
Competition for sales of electronic commerce products and services is
intense and we expect that competition will intensify. The barriers to entry are
minimal, and competitors can launch competitive products at a relatively low
cost. Although we believe there are no companies that offer our products'
functionality at a competitive price, there are many companies that offer
similar electronic commerce products. We expect that additional companies will
enter the market and offer competing products.
Many of our competitors have greater brand recognition and greater
financial, marketing and other resources than ours. These include Yahoo Store,
ICat Corporation, Forman Interactive, Mindspring, Oracle and IBM. This may place
us at a disadvantage in responding to their pricing strategies, technological
advances, advertising campaigns, strategic partnerships and other initiatives.
If we are unable to compete successfully against our competitors, our business,
financial condition and operating results will be adversely affected.
CONCERNS REGARDING SECURITY OF TRANSACTIONS AND TRANSMITTING CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY NEGATIVELY IMPACT OUR BUSINESS.
We believe that concern regarding the security of confidential information
transmitted over the Internet, such as credit card numbers, prevents many
potential customers from engaging in online transactions. If we do not add
compelling security features to future product releases, our products may not
gain market acceptance or there may be additional legal exposure to us. We have
included basic security features in some of our products to protect the privacy
and integrity of customer data, such as
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password requirements for access to portions of our trade communities. We do not
currently use authentication technology, which requires passwords and other
information to prevent unauthorized persons from accessing a customer's
information, or encryption, which transforms information into a "code" designed
to be unreadable by third parties, to protect confidential information such as
credit card numbers.
Despite the measures we have taken, our computer systems are potentially
vulnerable to physical or electronic break-ins, viruses or similar problems. If
a person circumvents our security measures, he or she could misappropriate
proprietary information or cause interruptions in our operations. Security
breaches that result in access to confidential information could damage our
reputation and expose us to a risk of loss or liability from our customers. We
may be required to make significant investments to protect against or remedy
security breaches. Additionally, as electronic commerce becomes more prevalent,
our customers will become more concerned about security. If we do not adequately
address these concerns, it could materially adversely affect our business,
financial condition and operating results.
EFFECTIVELY MANAGING OUR GROWTH MAY BE DIFFICULT.
We expect to grow rapidly by developing new products and hiring new
employees. This growth is likely to place a significant strain on our resources
and technology systems. To manage our growth, we must implement new systems and
train and manage our employees. Many of our senior management have only recently
joined us. Of the four key employees listed in the management section of this
prospectus, two have worked for us less than one year. We cannot assure you that
our management will be able to effectively or successfully manage our growth.
WE MAY NOT BE ABLE TO ACQUIRE OR MAINTAIN EFFECTIVE INTERNET ADDRESSES.
We currently hold various Internet addresses relating to our brand names
including "One eCommerce.com." The acquisition and maintenance of Internet
addresses generally is regulated by Internet regulatory bodies. The regulation
of domain names in the United States and in foreign countries is subject to
change. Governing bodies may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, we may be unable to acquire or maintain relevant domain
names in all countries where we may conduct business. Furthermore, the
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Therefore we may be unable
to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our trademarks and other
proprietary rights.
ACQUISITIONS MAY DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT ON OUR BUSINESS.
We have made, and plan to continue to make, investments in complementary
companies, technologies and assets. Future acquisitions are subject to the
following risks:
- acquisitions may cause a disruption in our ongoing business, distract our
management and other resources and make it difficult to maintain our
standards, controls and procedures;
- we may acquire companies in markets in which we have little experience;
- we may not be able to successfully integrate the services, products and
personnel of an acquisition into our operations;
- we may be required to incur debt or issue equity securities, which may be
dilutive to existing shareholders, to pay for acquisitions; and
- our acquisitions may not result in any return on our investment and we may
lose our entire investment.
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WE MAY NOT BE ABLE TO CONSUMMATE FUTURE ACQUISITIONS.
Our acquisition strategy is subject to the risk that we may not be able to
identify suitable acquisition candidates for purchase at reasonable prices or
terms. Additionally, regardless of whether suitable candidates are available, we
may not be able to consummate future acquisitions for other reasons such as the
availability of capital. If we are unable to consummate future acquisitions, our
business, financial condition and operating results may be adversely affected.
RISK OF FAILURE OF OUR COMPUTER AND COMMUNICATIONS HARDWARE SYSTEMS INCREASES
WITHOUT REDUNDANT FACILITIES.
Our business depends on the efficient and uninterrupted operation of our
computer and communications hardware systems. Any system interruptions may
reduce the attractiveness of our products to potential customers and could
materially adversely affect our business, financial condition and operating
results. We maintain most of our computer systems in Web-hosting facilities in
Austin, Texas. However, we do not have back-up or redundant facilities for our
computer systems. Interruptions may also result from natural disasters as well
as power loss, telecommunications failures and similar events.
CAPACITY CONSTRAINTS ON OUR TECHNOLOGY MAY BE DIFFICULT TO PROJECT.
As traffic in the electronic commerce Websites that we have sold to our
customers continues to increase, we must expand and upgrade our technology,
network hardware and software. We may not be able to accurately project the rate
of increase traffic in these Websites. In addition, we may not be able to expand
and upgrade our systems, network hardware and software capabilities to
accommodate increased use of these Websites. If we do not appropriately upgrade
these capabilities, our business, financial condition and operating results will
be materially adversely affected.
FUTURE CAPITAL NEEDS, UNCERTAINTY OF ADDITIONAL FINANCING.
We currently anticipate that the net proceeds from our current private
offering of Common Stock, together with available funds and cash flows generated
from revenues, will be sufficient to meet our anticipated needs for working
capital, capital expenditures and business expansion for at least the next three
months. See "Business--Raising Capital." Thereafter, we may need to raise
additional funds. We may need to raise additional funds sooner in order to fund
more rapid expansion, to develop new or enhanced services or products, to
respond to competitive pressures or to acquire complementary products,
businesses or technologies. If additional funds are raised through the issuance
of equity or convertible debt securities, the percentage ownership of our
shareholders will be reduced, shareholders may experience additional dilution
and such securities may have rights, preferences or privileges senior to those
of the holders of our Common Stock. There can be no assurance that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to fund expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance services or products or respond to results of
operations and financial condition.
OUR SUCCESS IS DEPENDENT ON OUR KEY PERSONNEL.
We believe that our success will depend on continued employment of our
senior management team and key technical personnel. If one or more members of
our senior management team were unable or unwilling to continue in their present
positions, our business, financial condition and operating results could be
materially adversely affected.
Our success also depends on maintaining a highly-trained sales force and a
telemarketing group to sell our electronic commerce products. These groups have
been formed recently and we will need to continue to hire additional personnel
as our business grows. A shortage in the number of trained salespeople could
limit our ability to increase sales of our products. We plan to expand our
employee base to manage our
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anticipated growth. Competition for personnel, particularly for employees with
technical and marketing expertise, is intense. Our business, financial condition
and operating results will be materially adversely affected if we cannot hire
and retain suitable personnel.
OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT.
We may realize exposure and risk if the systems on which we are dependent to
conduct our operations are not Year 2000 compliant. Our potential areas of
exposure include products purchased from third parties, computers, software,
telephone systems and other equipment used internally. If our present efforts to
address the Year 2000 compliance issues are not successful, or if distributors,
suppliers and other third parties with which we conduct business do not
successfully address such issues, our business, operating results and financial
position could be materially adversely affected. In the event that our system is
not Year 2000 compliant, we may have difficulty in maintaining the electronic
commerce Websites of our customers.
OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
The market price of our Common Stock may be highly volatile, just as the
stock market in general, and the market for Internet and technology companies in
particular, have been highly volatile. Investors may not be able to resell their
shares of Common Stock following periods of volatility because of the market's
adverse reaction to such volatility. The trading prices of many technology and
Internet companies' stocks have reached historical highs within the last year
and have reflected relative valuations substantially above historical levels.
During the same period, such companies' stocks have also been highly volatile
and have recorded lows well below such historical highs. We cannot assure you
that our stock will trade at the same levels as other Internet stocks or that
Internet stocks in general will sustain their current market prices. Factors
that could cause such volatility may include, among other things:
- changes in the prices of the stock market as a whole;
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- new sales formats or new products or services;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet industry;
- changes in the market valuations of other Internet companies;
- announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures;
- capital commitments;
- additions or departures of key personnel; and
- substantial sales of Common Stock by our shareholders.
Many of these factors are beyond our control and they may materially
adversely affect the market price of our Common Stock, regardless of our
operating performance.
QUALIFICATION FOR LISTING ON NASDAQ.
We intend to apply as soon as possible for listing of our Common Stock on
the NASDAQ Small-cap Market. There is no assurance when, if ever, we will meet
the requirements for such listing or, in any event, be accepted for such
listing. Furthermore, if our Common Stock were to qualify for listing there is
no
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assurance that we would be able to continue to satisfy the listing requirements.
In the event of delisting or failure to qualify initially, trading in our Common
Stock is expected to continue on the NASD OTC Bulletin Board. As a result,
investors may find it more difficult to dispose of, or to obtain quotations on
the price of the Common Stock.
DILUTION.
Warrant Holders who exercise their Warrants to purchase the underlying
shares of Common Stock will suffer substantial dilution in the purchase price of
the shares compared to the net tangible book value per share immediately after
the purchase. The exact amount of dilution will vary depending upon the total
number of Warrants exercised, and will be greater if less than all the Warrants
are exercised. The fewer Warrants exercised, the greater dilution will be with
respect to the Warrants that are exercised. See "Dilution."
APPLICABILITY OF LOW-PRICED STOCK RISK DISCLOSURE REQUIREMENTS.
The Common Stock of the Company may be considered a low-priced security
under rules promulgated under the Exchange Act. Under these rules,
broker-dealers participating in transactions in low-priced securities must first
deliver a risk-disclosure document which describes the risks associated with
such stocks, the broker-dealer's duties, the customer's rights and remedies, and
certain market and other information. Broker-dealers must also make a
suitability determination approving the customer for low-priced stock
transactions based on the customer's financial situation, investment experience
and objectives. Broker-dealers must also disclose these restrictions in writing
and provide monthly account statements to the customer, and obtain specific
written consent of the customer. With these restrictions, the likely effect of
designation as a low-priced stock is to decrease the willingness of
broker-dealers to make a market for the stock, to decrease the liquidity of the
stock and increase the transaction cost of sales and purchases of such stocks
compared to other securities.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS.
Our success and competitive position depend on our proprietary software and
other intellectual property, which we protect through a combination of
copyright, trademark and trade secrecy laws, confidentiality agreements and
protective contractual provisions. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to obtain and use our
proprietary information. In addition, they could independently develop
substantially equivalent intellectual property. If we do not effectively protect
our intellectual property, our business could suffer. Litigation may be
necessary to enforce our intellectual property rights, to protect our trade
secrets and to determine the validity and scope of the proprietary rights of
others. Any litigation could result in substantial costs and diversion of
resources and could seriously harm our business, operating results and financial
condition.
CURRENT PROSPECTUS REQUIRED FOR EXERCISE.
Holders of the Warrants may exercise the Warrants to acquire the underlying
Common Stock only if a current prospectus relating to the Company is then in
effect and such exercise is qualified or exempt from qualification under
applicable securities laws of the states in which the Holders of the Warrants
reside. Although we intend to use our best efforts to maintain a current
prospectus and federal and state registration/qualification for such exercise,
there is no assurance that we will be able to do so when a Holder may wish to
exercise a Warrant. The value of the Warrants will be greatly diminished if we
do not maintain your ability to exercise them.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that address, among
other things, our electronic commerce strategy, acquisition and expansion
strategy, the development of our products and services, use of proceeds,
projected capital expenditures, liquidity, development of additional revenue
sources, development of marketing and distribution alliances, market acceptance
of the Internet, technological advancement, and the ability to develop "brand"
identification. These statements may be found in the sections of this prospectus
entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and in this prospectus generally. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including all the risks discussed in "Risk Factors"
and elsewhere in this prospectus.
USE OF PROCEEDS
The net proceeds we may receive from the sale of shares of Common Stock
underlying the Warrants will vary depending upon the total number of Warrants
exercised, and the timing of and prices at which they are exercised. We can give
no assurances that any Warrants will be exercised or that we will obtain any net
proceeds from exercise of the Warrants. Regardless of the timing and number of
Warrants exercised, we expect to incur offering expenses estimated at $126,419
for legal, accounting, printing and other costs in connection with the offering
pursuant to this prospectus.
The uses of any proceeds that we may receive from exercise of the Warrants
will depend on the amounts received and the timing of their receipt. We will
have broad discretion in applying proceeds and we have presently identified the
following categories of expenditure, in the general order of their priority: (i)
advertising and marketing; (ii) personnel; (iii) relocation and expansion of
Sinergia Servicios, S.C. in Guadalajara, Mexico; and (iv) product research and
development.
DIVIDEND POLICY
We have never declared or paid any dividends on our Common Stock. We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of the board of directors and will be dependent upon our
financial condition, operating results, capital requirements and such other
factors as the board of directors deems relevant.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented (i) on an actual basis; and (ii) on a pro forma
basis to reflect our receipt of the estimated net proceeds from the sale of
4,728,420 shares of Common Stock upon exercise of all of the Warrants at an
assumed exercise price of $6.00 per share, after deducting estimated offering
expenses.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
------------------------------------------
<S> <C> <C> <C>
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED
------------ ------------- -------------
Short-term debt...................................................... $ 121,367 $ 121,367 $ 121,367
Long-term debt, less current portion................................. 35,954 35,954 35,954
Shareholders' equity:
Common stock, $.001 par value; 50,000,000 shares authorized;
16,723,600 shares issued and outstanding, actual; 21,452,020 shares
issued and outstanding, pro forma; and 21,452,020 issued and
outstanding, pro forma as adjusted.................................
Additional paid-in capital........................................... 1,641,656 30,007,448 32,906,868
Common Stock......................................................... 16,724 21,452 22,032
Accumulated deficit.................................................. (127,905) (127,905) (127,905)
------------ ------------- -------------
Total shareholders' equity......................................... $ 1,687,796 $ 30,058,316 $ 32,958,316
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
- ------------------------
(1) This assumes exercise of all the Warrants. We can give no assurance that any
of the Warrants will be exercised and that we will receive any net proceeds
therefrom.
Please read the capitalization table with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements included in this prospectus.
DILUTION
Dilution is the difference between the price per share being paid for the
Common Stock upon exercise of the Warrants, and the net tangible book value per
share of the Common Stock immediately after its purchase. Our net tangible book
value per share of Common Stock is calculated by subtracting total liabilities
from our total assets less any intangible assets and liquidation preferences,
then dividing by the number of shares of Common Stock then outstanding. Based on
our unaudited interim financial statements, we had 16,723,600 shares of Common
Stock outstanding at March 31, 1999, with a net tangible book value of
$1,392,791 or approximately $.08 per share. These amounts do not give effect to
operating results or any other changes in our net tangible book value or to any
obligations to issue shares of Common Stock after March 31, 1999.
Based upon an assumption that all Warrants were to be exercised at $6.00 per
share (of which there is no assurance), upon the exercise thereof, but before
giving effect to any other obligations to issue shares of Common Stock, the
estimated net tangible book value of the Company after the offering, on a pro
forma basis (which gives effect to receipt of the estimated net proceeds from
such exercise and issuance of the underlying shares of Common Stock, but does
not take into consideration any other changes in our net tangible book value
subsequent to March 31, 1999), would be approximately $29,763,311 or $1.39 per
share. This would result in dilution to persons exercising Warrants of $1.31 per
share, or 78% of the exercise price of $6.00 per share. Net tangible book value
per share would increase to the benefit of present stockholders from $1,392,791
prior to the offering to $29,763,311 after the offering, or an increase of $1.31
per share attributable to the exercise of the Warrants.
If less than all the Warrants are exercised, dilution to the Warrant holders
who do exercise will be greater than the amount shown. The fewer the Warrants
exercised, the greater the dilution will be to those
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who do exercise. The following table sets forth the estimated net tangible book
value ("NTBV") per share assuming exercise of all Warrants during the first
year, and the dilution to persons purchasing the underlying shares of Common
Stock:
NET TANGIBLE BOOK VALUE
<TABLE>
<S> <C>
Exercise of all Warrants:
Warrant exercise price per share................................................... $ 6.00
Net tangible book value per share prior to exercise................................ $ .08
Pro forma net tangible book value per share after exercise......................... $ 1.39
Dilution per share to new investors................................................ $ 1.31
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read together with the financial statements and the related
notes included in another part of this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties, such as our
plans, objectives, expectations and intentions. Our actual results may differ
materially from those anticipated in those forward-looking statements as a
result of certain factors, including but not limited to, those set forth under
"Risk Factors," "Business," and elsewhere in this prospectus.
OVERVIEW
One Commerce Corporation was formed in December 1998 through the acquisition
of Corridor Technologies, Inc., a Texas corporation ("Corridor"). Corridor had
been primarily engaged in providing network and telephony services to midsize
businesses in Central Texas since 1995. On March 30, 1999, One Commerce
Corporation was acquired by Arianne Co., a Nevada corporation ("Arianne") and
One Commerce Corporation became a wholly-owned subsidiary of Arianne. The
acquisition was an exchange of all outstanding shares of One Commerce
Corporation for shares of Arianne with the shareholders of One Commerce
Corporation owning approximately 86% of the shares of Arianne after the
exchange. Arianne was an inactive corporation with no material assets or
liabilities. Arianne had approximately ninety shareholders of record and its
shares were eligible for trading on the NASD OTC Bulletin Board. After the
acquisition of One Commerce Corporation by Arianne, Arianne's corporate name was
changed to "One eCommerce Corporation" and the officers and directors of One
Commerce Corporation became the officers and directors of the newly-named One
eCommerce Corporation.
From December 1998 through June 1999 (the "Inception Period"), we eliminated
the business activities of Corridor and focused our business plans on developing
Merchant.Point, Merchant.PointPro, the Modules, raising capital, recruiting
employees and engaging in marketing activities. During the Inception Period,
sales of system integration services and Website development fees contributed
most of the revenues. After the Inception Period, most of our revenues have been
generated from selling our electronic commerce products.
We have developed an integrated suite of electronic commerce products that
enable small and midsize businesses to conduct electronic commerce over the
Internet at an affordable price level. Our products integrate transaction
processing, accounting and financial systems, customer relationships,
management, advertising, cataloging, searching capabilities and security
features to provide comprehensive electronic commerce capabilities.
Merchant.Point is our entry level product that includes Internet pages,
e-mail accounts, domain names, electronic shopping, credit card processing and
authentication, dynamic databases and search engine capabilities. We have
developed or have rights to the following Modules that can be added to
Merchant.Point to expand its functionality: (i) Transaction.Point; (ii)
Accounting.Point; (iii) Customer.Point; and (iv) Profile.Point.
Transaction.Point is a credit card payment-processing module that allows credit
cards to be verified and processed on a real-time basis. Accounting.Point
integrates Merchant.Point into a complete accounting system that also has the
capability of entering inventory and accounts receivable information.
Customer.Point enables human interaction to occur between the merchant and its
customer. Profile.Point monitors customer activities on the Website and enables
our customers to configure their Websites based upon the information that is
gathered. The Modules have been designed to allow for an easy upgrade and
configuration. Merchant.PointPro is our high-end electronic commerce
application. It includes the features contained within Merchant.Point and the
Modules, and may be fully customized based upon our client needs.
Because our business plans were developed during the Inception Period and we
eliminated Corridor's business activities during that time, we have had an
extremely limited operating history upon which an evaluation of our business can
be based. Our business must be considered in light of the risks, expenses and
problems frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets, such as
the Internet. The market for our services and
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products has recently begun to develop, is rapidly evolving and is characterized
by an increasing number of market entrants who have introduced electronic
commerce products. As a result, our mix of services and products may undergo
substantial changes as we react to the competitive and other developments in the
overall Internet market. We have achieved only limited revenues to date, have
incurred net losses since inception and expect to continue to operate at a loss
for the foreseeable future. As of December 31, 1998, we had a net loss of
$103,469. See "Risk Factors--Extremely limited operating history; net losses and
anticipation of continued losses."
As a result of our limited operating history and the change in our business
activities since December 1998, we have no meaningful historical financial data
upon which to base planned operating expenses and we believe that any comparison
of current financial data to historical data would not be meaningful.
Accordingly, our expense levels are based in part on our expectations as to
future revenues, and to a large extent are fixed. Any significant shortfall in
revenues would have an immediate adverse impact on our business, results of
operations and financial condition. In addition, we plan to significantly
increase our operating expenses, increase our sales and marketing efforts, fund
greater levels of product development, increase our sales and management staff
and increase our general and administrative costs to support our enlarged
organization. We expect to experience significant fluctuations in our future
quarterly operating results and believe that period-to-period comparisons of our
results of operations are not meaningful and should not be relied upon as any
indication of future performance. See "Risk Factors--Extremely limited operating
history; net losses and anticipation of continued losses" and "--Fluctuations in
our quarterly results may adversely affect our stock price."
PLAN OF OPERATION
Our plan of operation for the next twelve months will focus on (i)
implementing our marketing strategies to increase sales of our products and to
promote our brand name; (ii) recruiting management, marketing and technical
personnel; (iii) raising capital; and (iv) integrating Sinergia into our company
and its business plans.
MARKETING STRATEGY
We are launching a nationwide campaign to attract resellers of accounting
products that are compatible with Accounting.Point. The goal of the campaign is
to recruit 500 accounting resellers who will sell and support Merchant.Point and
the Modules. We will use seminars, advertising and our relationships with major
accounting vendors to attract the resellers. For example, Computer Associates;
AccPac; Great Plains; Intuit-Quick Books; Sage-DacEasy, MAS-90 and Peachtree;
Real World and Solomon have approximately 8,000 resellers of their products. We
anticipate that our relationships with these companies will be our primary
source of recruiting resellers for our marketing campaign.
Our reseller program has several levels of reseller involvement from simply
receiving commissions on sales to handling all aspects of selling, installing
and maintaining our products. We will offer a variety of programs to assist our
resellers in marketing and selling our products. These include lead generation
programs, turnkey marketing programs, trade shows, seminars, co-op marketing
programs, vertical marketing programs, reference programs, authorized training
centers and access to our affiliate Website. For a description of our marketing
programs, see "Business--Marketing."
RECRUITING PERSONNEL
We plan to continue our efforts to recruit and retain marketing, management
and technical personnel. During the next twelve months, we intend to hire
approximately twenty-five additional employees. Because competition for
qualified personnel is intense, we can give no assurances as to whether we can
recruit and retain a sufficient number of new employees.
RAISING CAPITAL
We are currently conducting a private offering of 750,000 shares of our
Common Stock at $2.00 per share to raise up to $1,500,000 in additional capital.
We anticipate that this capital and projected revenues
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from the sales of our products will be sufficient to meet our anticipated needs
for working capital for the next three months. However, we may need to raise
additional funds sooner to fund more rapid expansion, to develop new or enhanced
products or services, to respond to competitive pressures or to acquire
complementary products, businesses or technology. To obtain such additional
capital, we may seek additional private equity capital, bank financing or an
underwritten public offering of our equity. However, we can offer no assurances
that additional capital will be available on terms favorable to us, or at all.
If additional capital is not available, we may not be able to fund expansion or
acquisitions, develop or enhance our products or services, or respond to
competitive pressures. This could have an adverse effect on our business,
results of operations and financial condition. See "Risk Factors--Future capital
needs, uncertainty of additional financing."
INTEGRATING SINERGIA
Sinergia is headquartered in Guadalajara, Mexico and provides large
multinational companies with software development and system support services.
Some of its major customers include Hewlett-Packard Co., Sage U.S. and Kodak
Corporation.
The acquisition of Sinergia is expected to close on August 1, 1999. After
the closing, we intend to continue Sinergia's current business of providing
contract programming services. We intend to use Sinergia's programming resources
to provide support for our programming needs to service our customers and to
develop new electronic commerce products. We also anticipate that Sinergia will
expand its business of providing contract programming services in the United
States through the use of our marketing and business resources. In order to
accommodate the growth of Sinergia's business, we intend to relocate Sinergia to
larger corporate headquarters in Guadalajara, Mexico. We anticipate this
relocation will take approximately two months. We will also temporarily move
employees from Sinergia to our offices located in Central Texas to enable them
to integrate into our company and to work on our software projects. We will pay
their transportation and temporary housing expenses. We anticipate these
additional personnel costs and the relocation of Sinergia's headquarters will
cost approximately $250,000.
LIQUIDITY AND CAPITAL RESOURCES
Since the Inception Period, we have primarily financed our operations
through private placements of our Common Stock, borrowings under a line of
credit with a commercial bank and revenues from sales of our products and
services. To date, we have raised approximately $450,000 from the sale of Common
Stock. We have a line of credit with a commercial bank for $100,000, which
expires on August 27, 1999. The line of credit is primarily used for working
capital purposes. As of March 31, 1999, there was $100,000 outstanding under the
line of credit. The line of credit bears interest at 9.5%.
At December 31, 1998 and on March 31, 1999, we had approximately $4,885 and
$785,860, respectively, in cash and cash equivalents. We have had negative cash
flow from operating activities in the amount of $108,207 for the year ended
December 31, 1998 and $24,436 for the period ended March 31, 1999. Net cash used
in operating activities was $39,408 for the fiscal year ended December 31, 1998,
and was $57,873 for the three months ended March 31, 1999.
We anticipate that we will expend approximately $750,000 in connection with
the implementation of our national marketing campaign and $250,000 to enhance
Merchant.Point and the Modules. See "Business--Marketing." We also anticipate
expending approximately $250,000 in connection with the acquisition and
relocation of Sinergia. See "Business-Sinergia." Finally, we anticipate
expending approximately $126,419 in connection with conducting audits of One
eCommerce Corporation and Sinergia and preparation of the Registration Statement
of which this prospectus is a part. We expect that these projected expenditures
will decrease our cash position and liquidity substantially during the next
three months.
We have experienced a substantial increase in our capital expenditures since
our inception, consistent with our growth in operations, marketing plans and
staffing, and we anticipate that this will continue for the foreseeable future.
Additionally, we continue to evaluate possible investments in businesses,
products and technologies and plan to expand our marketing programs. We may,
therefore, be required to raise additional financing during the next three
months. If additional funds are raised through the issuance of
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equity securities, our existing shareholders may experience significant
dilution. Furthermore, additional financing may not be available when needed or,
if available, such financing may not be on terms favorable to us or our
shareholders. If such financing is not available when required or is not
available on acceptable terms, we may be unable to implement our marketing plans
and further develop our products and services. In addition, we may be unable to
take advantage of business opportunities or to respond to competitive pressures.
Any of these events could have a material adverse effect on our business,
financial condition or results of operations.
ACQUISITION OF SINERGIA
On March 29, 1999, we entered into a letter of intent to acquire Sinergia.
We anticipate closing the acquisition of Sinergia on or about August 1, 1999.
We have reported pro forma results of operations as if we had consummated
the acquisition of Sinergia on January 1, 1998. The pro forma net loss for the
year ended December 31, 1998 was $563,530 compared to the actual net loss of
$211,676. The increase in the net loss results from the net losses of Sinergia
and the pro forma amortization of the goodwill associated with the acquisition.
YEAR 2000 COMPLIANCE
We may realize exposure and risk if the systems on which we are dependent to
conduct our operations are not Year 2000 compliant. Our potential areas of
exposure include products purchased from third parties, information technology
including computers and software, and non-information technology including
telephone systems and other equipment used internally. All of our new programs
are being tested and evaluated for Year 2000 compliance.
We have taken steps to ensure that phone systems and other non-information
technology are Year 2000 compliant. We believe that all non-information
technology upon which we are materially dependent is Year 2000 compliant.
Additionally, with respect to information technology, we expect to resolve any
Year 2000 compliance issues primarily through normal upgrades of our software
or, when necessary, through replacement of existing software with Year 2000
compliant applications. The cost of these upgrades or replacements is not
expected to be material to our financial position or results of operations.
We have completed our Year 2000 compliance assessment plan. Based on this
assessment, we believe that all of our technology is Year 2000 compliant. In the
event that our facilities that support our customer's Websites are not Year 2000
compliant, those Websites may become unavailable. Based upon our review of our
systems we believe there is no single application that would make the Websites
totally unavailable and we believe that we can quickly address any difficulties
that may arise. In the event that our Web-hosting facilities are not Year 2000
compliant, our customers would not be able to conduct electronic commerce.
If our present efforts to address the Year 2000 compliance issues are not
successful, or if distributors, suppliers and other third parties with which we
conduct business do not successfully address the Year 2000 problem, our
business, operating results and financial position could be materially and
adversely affected.
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BUSINESS
INDUSTRY OVERVIEW
The Internet has emerged as a mass communications and commerce medium
enabling millions of people worldwide to share information, create community
among individuals with similar interests and conduct business electronically.
International Data Corporation ("IDC") projects that the number of Internet
users will grow from 100 million in 1998 to 320 million in 2002. In addition to
its emergence as a mass communications medium, the Internet has features and
functions that are unavailable in traditional media, which enable online
merchants to communicate effectively with customers and advertisers to target
users with specific needs and interests. As a result, the Internet has emerged
as an attractive medium for advertising and electronic commerce. Along with the
impressive overall growth of the Internet, business-to-business usage is also
growing rapidly, as businesses are increasingly leveraging the Internet's
ability to reach customers globally, deliver personalized content and open new
distribution channels. Internet advertising and electronic commerce are
projected to experience significant growth in the future. IDC estimates that the
total value of products and services sold over the Internet by retailers,
catalogers and online merchants will increase from approximately $26 billion in
1998 to approximately $268 billion by 2002.
THE ELECTRONIC COMMERCE OPPORTUNITY
We believe there are over 25 million small businesses in the United States
and that less than five percent of those businesses have a presence on the
Internet. We believe that many of these businesses desire to conduct electronic
commerce over the Internet but they do not have the technical expertise or the
resources to develop, install and launch an effective electronic commerce
Website. Moreover, we believe that these businesses desire an integrated package
that is inexpensive, comprehensive and easily upgradeable. The current
electronic commerce applications in the market are more expensive than our
products, are not scalable at low-price points and do not include complete
functionality such as accounting, dynamic cataloging and customer management.
Accordingly, we believe there is a large demand for a complete electronic
commerce product for small and medium businesses and that demand is not being
currently met by any provider of electronic commerce products.
THE ONE eCOMMERCE SOLUTION
One eCommerce Corporation is a publicly-held company that has developed an
integrated suite of electronic commerce products which enables small and midsize
businesses to conduct sophisticated electronic commerce transactions over the
Internet. Our products integrate transaction processing, accounting systems,
customer relationship management, advertising, cataloging, searching
capabilities and security features to provide a comprehensive electronic
commerce solution.
We have developed an interface that enables our customers to configure their
electronic commerce Websites by selecting their own look and feel, graphics and
functionality. We have also developed a unique accounting function that links
the Website to an accounting system. Our products have been developed in a
modular design and allow easy installation and upgrading of the customer's
Website. The price level for Merchant.Point, our core product, ranges from
$49.95 to $995.00 per month, depending upon its features. We believe this price
range is well below all other electronic commerce products with equivalent
functionality. Our high-end product, Merchant.PointPro, features fully
customized capabilities and generally has a price range from $10,000 to $50,000.
One of the major shortcomings of most electronic commerce solutions
available today is that they do not provide a link to an accounting system. This
causes the electronic store owner to reenter sales information obtained from the
Website into an accounting application. Our products have resolved this
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problem by providing an electronic link between the Website and the accounting
system that automatically enters sales information into the accounting system.
We believe all of our products are highly competitive with similar products
in the market because: (i) the price of Merchant.Point includes hosting services
and accounting software which are attractive to small and midsize businesses;
(ii) Merchant.Point is easily scalable and upgradeable, (iii) all of the
functionality necessary for electronic commerce is integrated into one product;
and (iv) Merchant.Point has superior functionality and its price point is below
that of our competitors.
STRATEGY
Our mission is to become a leading provider of complete electronic commerce
solutions to the small and midsize business market. The key components of our
strategy are:
- Products. We intend to deliver quality electronic commerce products and
upgrades that are price competitive, easy to use, scalable, and that
integrate with existing information systems. We intend to introduce new
products that are competitive and appeal to the needs of businesses using
the Internet for electronic commerce. See "Business--Products."
- Marketing. We intend to sell and support our products to small and midsize
businesses by recruiting resellers of accounting products through our
national reseller marketing program. See "Business-- Marketing."
- Alliance building. We intend to establish marketing and support
relationships with national resellers in the accounting industry,
established software developers and marketing organizations. See
"Business--Marketing--General."
- Sinergia. We intend to use the software programming expertise of Sinergia
to continually expand and upgrade our products and to offer substantial
support services to our customers. See "Business--Sinergia."
- Brand awareness. We intend to create awareness of our brands through our
reseller program, industry trade shows, conferences, Internet and
traditional advertising campaigns and alliances with industry trade
associations. See "Business--Marketing."
PRODUCTS
Our products consist of Merchant.Point, which is our core product,
Merchant.PointPro, which is our high-end product, and four Modules
(Transaction.Point, Accounting.Point, Customer.Point and Profile.Point) that can
be added to Merchant.Point or Merchant.PointPro to expand their functionality.
MERCHANT.POINT
Merchant.Point is an inexpensive electronic commerce solution that has broad
functionality and that may easily be upgraded by installing one of the Modules.
Its price range is from $49.95 to $349 per month depending upon its features.
Merchant.Point includes the following applications and services:
- Internet pages;
- E-mail accounts;
- Domain name;
- Website search;
- Shopping cart;
- User authentication;
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- Credit card processing;
- Automatic tax and shipping calculation;
- Website status reporting;
- Customizable transaction reporting and maintenance;
- Dynamic database; and
- Marketing to search engines and directories.
THE MODULES
We have developed or have rights to the following Modules that can be added
to Merchant.Point to upgrade its functionality: (i) Transaction.Point; (ii)
Accounting.Point; (iii) Customer.Point; and (iv) Profile.Point. A description of
the Modules is as follows:
TRANSACTION.POINT (ON-LINE PAYMENT TRANSACTION PROCESSING)
A critical function of any successful electronic commerce product is an
on-line payment processing solution that allows customers to have a choice in
payment methods (i.e., credit card or open account). Transaction.Point contains
this feature and enables credit cards to be verified and processed online, in
real-time and in a secure environment.
Transaction.Point provides merchants with the ability to interface with
credit card verification services. This allows all credit card transactions to
be automatically verified and charged. Transaction.Point also allows resellers
and retailers to generate electronic receipts and send them via e-mail.
Transaction.Point includes a complete transaction reporting and maintenance
system that allows our customers to view and sort transactions, run reports and
handle maintenance of the orders including charge backs, partial credits and
batch settlement.
Transaction.Point enables our customers to create accounts with the online
merchant. They can charge online purchases to their account and configure
different methods of payment, such as monthly bills sent via mail or automatic
charges to their credit card. Transaction.Point has the capability of accepting
payment using bank drafts or electronic checks. In addition, customers can
perform other transactions such as converting earned points to cash.
All transactions tracked by Transaction.Point can be configured to support
updates in both the inventory database and the customer purchase database. In
addition, the order management system can be customized to automatically update
the additional inventory/shipping databases. Customization can be included to
provide real-time shipment tracking screens that will track order shipments via
Federal Express, UPS and others. Customers and administrators will have first
hand information about the product orders placed. Additional features can be
added to support e-mail notification or order confirmation and shipment
processing.
The key features and benefits of Transaction.Point are:
- Processes credit cards in real-time;
- Provides complete security;
- Detects fraud;
- Browser-based reporting and order maintenance system;
- Confirms payments before shipping product; and
- Accepts major credit cards worldwide.
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ACCOUNTING.POINT (ORDER ENTRY ACCOUNTING LINK)
Accounting.Point represents a significant advancement in the integration of
existing accounting systems into Internet systems. With Accounting.Point, our
customers can seamlessly connect their Merchant.Point storefront system to a
full-featured accounting system. Accounting.Point will provide a real-time or
batch link to most major order entry system applications or accounting software
applications such as DacEasy; Solomon; Great Plains; MAS-90 and Peachtree;
QuickBooks; and AccPac.
Accounting.Point automatically sends all the details of online orders from
Merchant.Point to the order entry module of the accounting system. Inventory
data, accounts receivable information, shipment dates and tracking numbers are
then sent back to the Merchant.Point reporting system via Accounting.Point. We
believe Accounting.Point is the first system to eliminate the need to manually
enter Internet orders into an accounting system and to keep a separate
accounting for Internet orders.
The key features and benefits of Accounting.Point are:
- Completely automates the electronic commerce system;
- Seamlessly integrates the electronic commerce storefront with an
accounting package;
- Transfers inventory data and accounts receivable information;
- Eliminates the need for a separate accounting system for online orders;
and
- Provides browser based reporting and order maintenance system.
CUSTOMER.POINT (CUSTOMER RELATIONSHIP MANAGEMENT)
Internet based customer service automation is a proven technology that
significantly reduces the cost of customer support services and improves the
quality and level of customer satisfaction. Customer.Point is a full-service
Website helper that allows for human interaction between the electronic
storefront and its customers. With Customer.Point, Websites can now become a
customer service and sales tool, enabling companies to turn hits into revenue,
decrease customer service costs, and increase customer loyalty.
Customer.Point improves the Web as a proactive sales and customer service
medium by allowing Website owners to enhance their sites with real-time,
intelligent responsiveness and interaction. In essence, companies conducting
business on the Web have the ability to initiate real-time, two-way
communication with any visitor who uses a Java-enabled browser without requiring
the visitor to install any special software, applets, or plug-ins or to click
any button requesting a callback. This power of outbound communication is backed
up by a complete set of tools for identifying "Hot Leads" to maximize the
efficient use of staff time and meet the needs of prospects and customers.
Customer.Point is just as compelling for companies that provide after-sales
support. By combining live interaction with the resources of the Web, it enables
support representatives to solve problems more rapidly and efficiently, and to
handle several customer calls at once. Our customers can use Customer.Point to
significantly reduce the cost of their customer support center and to make
better use of customer support staff and resources.
Customer.Point enables the owner of the electronic store front to monitor
how many potential customers have visited the Website. This capability greatly
facilitates the test marketing of products to quickly determine the market's
response to new products. This allows owners of electronic storefronts to gain a
competitive advantage. Customer.Point also provides statistical analysis and a
merchandising system integrated with statistical analysis tools capable of
identifying activity patterns and identifying the geographic origin of the
visitor, the type of domain and the organization or internet service provider
that facilitated the link. Furthermore, this analysis includes details of page
views, product views and activity by day of the week and hour of the day.
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PROFILE.POINT (CUSTOMER PROFILING)
Profile.Point constantly monitors customer activities on a Website by
focusing on their shopping and buying habits. Profile.Point enables owners of
electronic storefronts to custom configure profile requirements by telling the
system the information it would like to be presented. This allows for dynamic
showcasing of content and products including cross-selling and presentations of
specials based on the customers' needs and past buying and shopping data.
MERCHANT.POINTPRO
GENERAL
Merchant.PointPro is our high-end electronic commerce software that is sold
directly by our sales staff through value added resellers or accounting
resellers. Because Merchant.PointPro is a customized product, we charge our
customers based upon the functionality that they desire. The fees of
Merchant.PointPro generally range between $15,000 to $50,000. Set forth below is
a description of Merchant.PointPro.
ADVERTISING
This feature provides the tools to display content-sensitive advertising
banners. As users visit a Website, information is delivered to the Website
owner. The system tracks the number of times a file has been downloaded and who
downloaded it, records all data "hits" that each individual advertisement might
receive, and monitors users as they navigate the Website.
DYNAMIC CATALOG CONTENT
This feature enables dynamic online product catalogs with the ability to
update product information easily and remotely from anywhere in the world. This
approach to catalog marketing is similar to conventional methods of printing and
distributing catalogs. This allows for greater flexibility while dynamically
displaying thousands of products from an SQL-based database system.
DYNAMIC PRODUCT PRICING
This feature is a full-featured pricing system that includes group-based
member pricing, discount pricing structures, one-to-one pricing (price per
customer), cost-plus or discount from retail, and a point-based purchase credit
system. The customer can easily configure pricing policies and customer groups
for specific organizations that receive special pricing.
BROWSER CUSTOMER INTERFACE
Merchant.PointPro can include virtually every design requirement including:
- Custom logo presentation screens;
- Database product search screens availability, and search filter
specifications formatted according to product pricing;
- Discount and product package advertisements;
- Promotional packages;
- Frequent buyer plans;
- Identification of current customers for special pricing; and
- Retrieve product review information from outside sources.
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SYSTEM MANAGEMENT AND ADMINISTRATION
This application provides our customers with browser-based local and remote
administration access. The administration interface may be completely customized
to meet our customer's needs. Management access allows the customer to easily
make changes and update its database, merchandising specifications and many
other interfaces to adjust all aspects of the electronic commerce system.
Special consideration has been given to the design of graphics and bandwidth
availability to speed the loading and transfer of information over the Internet.
MULTILINGUAL
Merchant.PointPro may be customized to present data in multiple languages.
CONTROLLED ACCESS CONFIGURATION
Merchant.PointPro may be configured for specialized access from different
user types up to and including super-user access privileges. Users will have
special menu options for access to secure information calculated in real time
based on the data extracted from pre-defined databases. Account records and
configuration data will be located in a separate table or database that can be
manipulated without giving access to the generic consumer.
CUSTOMER ORDERS
e.Commerce Point supports full cash register-like functionality and is
compatible with most accounting systems. Complete virtual and physical receipt
of purchase may be easily designed and graphically matched according to the
customer's receipts/purchase orders.
SHOPPING CART
Merchant.PointPro is designed to permit this function to be customized
according to our customer's specifications. This may include check-out via
credit cards, open account or Internet check. The shopping cart is integrated
with Accounting.Point. It tracks items selected by customers including the
database identifier, product number and extra information produced via product
selection. One of the most advanced features of the shopping cart is the custom
pricing module which gives our customer the ability to put items on sale, accept
coupons, build and configure units, and develop kits.
SEARCH ENGINE
The search features that are incorporated into Merchant.PointPro include a
highly sophisticated search engine. This feature allows our customers to specify
the criteria for searching requirements including keyword search, text-based
search, drill-down continuous search, and search by form type. These search
features include powerful query filtering for user-friendly data search
functions.
SECURITY
Merchant.PointPro contains an authentication protection function for account
access and management services through industry-standard network security
protocols, including Netscape's secure socket layer.
Sinergia
Sinergia is headquartered in Guadalajara, Mexico and provides large
multinational companies with software development and system support services.
Some of its major customers include Hewlett-Packard Co., Sage U.S. and Kodak
Corporation.
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The acquisition of Sinergia is expected to close on August 1, 1999. After
the closing, we intend to continue Sinergia's current business of providing
programming services. We intend to use Sinergia's programming resources to
provide support for our programming needs to service our customers and to
develop new electronic commerce products. We also anticipate that Sinergia will
expand its business of providing contract programming services in the United
States through the use of our marketing resources. In order to accommodate the
growth of Sinergia's business, we intend to relocate Sinergia to larger
corporate headquarters in Guadalajara, Mexico. We anticipate this relocation
will take approximately two months. We will also temporarily move employees from
Sinergia to our offices located in Central Texas to enable them to integrate
into our company and to work on our software projects. We will pay their
transportation and temporary housing expenses. We anticipate these additional
personnel costs and the relocation of Sinergia's headquarters will cost
approximately $250,000.
Strategic Alliances
SAGE. Sage USA, one of the largest accounting software companies in the
world with more than 2 million users, has agreed to allow us to develop links
between our customers' electronic commerce catalog stores and some of their
accounting systems. The purpose is to co-market the combined products to each
company's customer base.
AT&T. We have entered into a software download and distribution agreement
that will allow our business customers to use AT&T WorldNet Internet
connectivity services through our system. Prospective customers may either
download the software directly from our Websites or set up their connections by
using a CD that we will produce. The purpose of this alliance is to provide
fast, reliable dial-up Internet connections with AT&T for businesses using our
products.
MATRANET. We have entered into an agreement to co-brand and distribute our
products with MatraNet's family of Customer Relationship Management products.
This semi-exclusive agreement covers North America. The product family allows
live interaction over the Web with a customer service representative while the
Internet user is at a Website. It enables our customers to provide their clients
with the opportunity of live person interaction while at their e-commerce site.
Other features include email management and an extensive report generator.
DIRECTORIES INTERNATIONAL, LLC. Directories International, LLC is a
publisher of yellow pages in ten markets. We are jointly developing community
Internet portals in several cities in the United States and Mexico. Directories
International's sales force will be used to sell Merchant.Point to its customer
base.
STRATEGIC ACQUISITIONS
We intend to pursue acquisitions of companies that have developed technology
that will allow us to expand our products and to create a competitive advantage.
Presently, we are not contemplating any specific acquisitions.
MARKETING
GENERAL
Our marketing strategy focuses on selling Merchant.Point to small and
midsize businesses primarily through our national marketing campaign described
below. We also intend to use various business relationships with sales
organizations and our local community electronic commerce portals to increase
sales of Merchant.Point. We believe that we must enhance our "One eCommerce"
brand name to attract more customers to our electronic commerce products. We
intend to use a variety of marketing programs to increase our brand awareness.
These programs will involve a mix of print advertising, Internet marketing,
telemarketing, affiliate programs, trade shows and direct mail. We will also
participate in trade shows for the accounting and electronic commerce
industries.
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NATIONAL MARKETING CAMPAIGN
OVERVIEW
We believe our Merchant.Point suite of products offers us a unique
opportunity to be first to market with a fully functional and affordable
electronic commerce application for small to midsized businesses. Because
Merchant.Point features an easy-to-use interface that allows almost anyone to
quickly build and maintain an electronic commerce storefront and has low
start-up and monthly fees, we believe demand for our products will build
quickly. To take advantage of these opportunities and begin positioning our
company as a dominant player in the electronic commerce marketplace, we are
launching a nationwide marketing campaign to attract value added resellers
("VARs") and to build a sales channel. This program will be targeted to
resellers and supporters of Microsoft compatible accounting products that are
supported by Accounting.Point. This community is a mix of VARs and accounting
professionals.
GOALS
Our marketing goals are as follows:
- Position Merchant.Point and Accounting.Point as the premier electronic
commerce solution for users of the compatible accounting products. This
will be based upon the value of having an electronic commerce site that
may be directly linked to an accounting system.
- Recruit VARs through a seminar and promotional campaign because the
Merchant.Point/Accounting.Point solution gives the VAR an incentive to do
installed base selling and provides them with a way to attract new
customers.
- Generate a revenue stream from VARs selling our products.
- Transfer sales and support costs to the VARs and other channel partners.
DESCRIPTION
Our marketing campaign is a seminar-based education and recruiting
initiative that will be supported by end-user advertising and collaborative
marketing efforts with the accounting software vendors. The targeted vendors are
Computer Associates; AccPac; Great Plains; Intuit-Quick Books, Sage-DacEasy, MAS
90 and Peachtree; and Soloman. There are approximately 8,000 VARs selling and
supporting these vendors/products. We intend to develop partnerships with at
least 500 of these VARs. The VARs will act as both a sales and support channel.
The seminar series will recruit and educate the VARs and will enable them to
conduct similar seminars which will be targeted at the ultimate customer. We
will assist the VARs in holding these seminars.
RESELLER PROGRAM
We have developed a comprehensive program to attract VARs and resellers to
sell and support our products. We have set forth below a description of our
program:
ONE EAFFILIATE
This is a referral program that allows our accounting reseller partners to
collect a commission for referring qualified customers who are interested in
Merchant.Point and our other products and services. We will manage all
activities associated with closing the sales and will provide billing,
implementation and support.
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ONE EAFFILIATE PLUS
Under this program, the reseller partner will close the sale and we will
implement, install and support the customer.
ONE EPREMIUM AFFILIATE
This is a value-added relationship between us and accounting system
resellers, VARs and integrators. The reseller will handle all aspects of
selling, implementing, maintaining and supporting the customer. We will provide
technical support to the reseller.
LEAD GENERATION PROGRAMS
We will actively pursue a host of lead generation programs to help produce a
steady stream of leads that we can pass on to our resellers. We intend to have a
strong presence at trade shows for the accounting and electronic commerce
software industry. We will produce advertising and issue-oriented public
relations campaigns to maintain a strong presence in the industry. Additionally,
we have developed our Website into a very consistent source of qualified leads
by providing our resellers, customers and prospects with the latest product,
promotional and industry-specific information.
TURNKEY MARKETING PROGRAMS
We have developed the following turnkey marketing programs to help make our
reseller marketing campaigns more effective:
- Direct mail;
- Directory advertising;
- Display advertising;
- Seminars; and
- Telemarketing.
TRADE SHOWS
These programs will allow our resellers to make use of our professional
marketing staff and expertise to enhance their marketing efforts.
SEMINARS
One of the most effective ways to sell our products is through seminars to
qualified prospects. We will provide our resellers with free tips, guidelines
and checklists detailing how to conduct successful seminars and how to fill
seats with qualified prospects. Our partners will have access to seminar
invitation templates.
CO-OP MARKETING PROGRAM
Our cooperative marketing program has been developed to enable our resellers
to maximize their marketing dollars. Under this program, we will provide full or
partial reimbursement for approved marketing activities undertaken by any
reseller. Our resellers can earn co-op marketing accrual credits for every
dollar they spend on our products. They can then choose to spend their marketing
accrual credits on approved marketing activities or any of our turnkey programs
to maximize their revenues.
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VERTICAL MARKETING PROGRAM
We believe that focusing on an industry-specific market is one of the best
methods for our resellers to increase their revenue and obtain new business
opportunities. Our experience has shown that many prospects are seeking a
complete, industry-specific solution. We have developed relationships with key
resellers in various vertical markets and we are deploying vertical portals.
The vertical marketing program also gives our resellers a significant
competitive edge over traditional resellers because they can rely on the
expertise of the vertical partners/portals to help close the sale. This allows
our resellers to easily expand into new markets without having to learn the
requirements of each specific industry.
REFERENCE PROGRAM
Credibility with our resellers' prospects can often be the deciding factor
in closing a sale. Our online reference database is intended to provide them
with that credibility. This resource contains the names of our satisfied
customers. Our partners who provide at least three submissions earn full access
to the database. Our resellers will also receive our reference library, which
contains the core application and associated marketing materials for each of our
products. This library is available to our resellers both as a demonstration
tool and for their own internal use.
AUTHORIZED TRAINING CENTERS
We believe that providing training to our customers and partners can produce
a steady stream of revenue. By operating an authorized training center, our
resellers can offer classroom training on any or all of our product lines,
including courses on installation, implementation and technical support and can
establish beneficial strategic relationships.
AFFILIATE WEBSITE
We believe the key to the success of our resellers is smooth information
exchange and an integrated team effort. Our affiliate program offers an online
system designed to deliver important information such as sales leads,
implementation assistance, education opportunities and news and events.
PROPRIETARY RIGHTS
Proprietary rights are important to our success and our competitive
position. To protect our proprietary rights, we rely generally on copyright,
trademark, and trade secret laws, confidentiality agreements with employees and
third parties, and license agreements with consultants, vendors and customers.
Despite such protections, a third party could, without authorization, copy or
otherwise appropriate information from our Websites. Our agreements with
employees, consultants and others who participate in development activities
could be breached, we may not have adequate remedies for any breach and our
trade secrets may otherwise become known or independently developed by
competitors.
We have applied for numerous trademarks, none of which have been issued to
date. Generally, we cannot protect our Web addresses for our trade communities
as trademarks due to the fact that they are too generic. The laws of some
foreign countries do not protect our proprietary rights to the same extent as do
the laws of the United States, and effective copyright, trademark and trade
secret protection may not be available in such jurisdictions.
There have been substantial amounts of litigation in the computer industry
regarding intellectual property assets. Third parties may claim infringement by
us with respect to current and future products, trademarks or other proprietary
rights, or we may counterclaim against such parties in such actions. Any such
claims or counterclaims could be time-consuming, result in costly litigation,
diversion of management's attention, cause product release delays, require us to
redesign our products or require us to enter
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into royalty or licensing agreements, any of which could have a material adverse
effect upon our business, financial condition and operating results. Such
royalty and licensing agreements, if required, may not be available in terms
acceptable to us, or at all.
GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES
New Internet legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to the Internet
and online commerce, or the application of existing laws and regulations to the
Internet and online commerce could harm our business, operating results and
financial condition. We are subject to regulations applicable to businesses
generally and laws or regulations directly applicable to communications over the
Internet and access to online commerce. Although there are currently few laws
and regulations directly applicable to the Internet and online retailing
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust, taxation and characteristics and
quality of products and services. For example, the United States Congress
recently enacted Internet laws regarding children's privacy, copyrights,
taxation and transmission of sexually explicit material and the European Union
recently enacted its own privacy regulations. Furthermore, the growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online. The adoption of any additional laws or
regulations regarding Internet commerce and communications may decrease the
growth of the Internet or commercial online services, which could, in turn,
decrease the demand for our products and services and increase our cost of doing
business and have a negative impact on our business, operating results and
financial condition. Moreover, the applicability to the Internet of existing
laws in various jurisdictions governing issues such as property ownership, sales
and other taxes, libel and personal privacy is uncertain and may take years to
resolve. For example, tax authorities in a number of states are currently
reviewing the appropriate tax treatment of companies engaged in online commerce,
and new state tax regulations may subject us to additional state sales and
income taxes. If we were alleged to have violated federal, state or foreign,
civil or criminal law, even if we could successfully defend such claims, it
could have a negative impact on our business, operating results and financial
condition.
COMPETITION
The market for electronic commerce is new and rapidly evolving. Competition
for electronic commerce and business users is intense and is expected to
increase significantly in the future. Several companies are primarily focused on
selling electronic commerce Websites, but most existing competition is at a
price point higher than our products with equivalent functionality and do not
provide end to end electronic commerce products that link to the accounting
system.
Our competitors fall into two distinct categories: electronic commerce
software developers and portal providers. We believe that the most compelling
electronic commerce products to offer small and midsize businesses should be
database driven to allow interaction with accounting and other information
systems at the client's site. Additionally, the database should be accessible
and manageable from the Website for ease of use. We believe that most small
businesses desire that Internet hosting services be included within their
electronic commerce software purchases. Finally, we believe that scalability of
the product, enhanced features, direct hosting, links to order entry and
inventory control systems and live person interaction is highly desirable. We do
not believe that any of our competitor's products include the functionality set
forth above at a price point that is competitive with ours and that includes the
links to the accounting system. Many of our competitors have greater brand
recognition and greater financial, marketing and other resources than ours.
These include Yahoo Store, ICat Corporation, Forman Interactive, Mindspring,
Oracle and IBM. This may place us at a disadvantage in responding to their
pricing strategies, technological advances, advertising campaigns, strategic
partnerships and other initiatives. If we are unable to
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compete successfully against our competitors, our business, financial condition
and operating results will be adversely affected.
Portals are Websites that conglomerate information for Internet users in
order to allow streamlining of information delivery. Their scope is global in
nature and impersonal. We do not believe that the portals focus on electronic
commerce that are designed for small and midsize businesses.
EMPLOYEES
As of June 1, 1999, we had 32 full-time employees. We consider our
relationships with our employees to be good. None of our employees are covered
by collective bargaining agreements.
PROPERTIES
Our corporate headquarters are located at Austin, Texas, where we lease
approximately 5,600 square feet for a monthly lease payment of approximately
$10,000 under a lease that expires June 5, 2001. Our research and development
facility located in New Braunfels, Texas is under a lease that expires on
December 1, 2000, for a monthly lease payment of approximately $11,000.
We maintain most of our computer systems in leased Web-hosting facilities
located in Austin, Texas. We entered into a one-year hosting agreement with IXC
on March 5, 1999. The agreement may be renewed for additional terms unless
terminated by prior written notice.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information regarding the executive
officers, directors and key employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Gil Lozano........................................... 49 President and Director
David Carolan........................................ 39 Chief Executive Officer and Director
John Baker Welch..................................... 44 Chief Financial Officer and Director
Jerry Baldwin........................................ 48 Executive Vice President and Chief Marketing Officer
KEY EMPLOYEES
Gil Lozano........................................... 49 President
David Carolan........................................ 39 Chief Executive Officer
Jerry Baldwin........................................ 48 Executive Vice President and Chief Marketing Officer
Fernando Contreras................................... 40 Senior Vice President of Research and Development,
Chief Technical Officer
</TABLE>
JOHN BAKER WELCH. John Welch is our Chairman of the Board and Chief
Financial Officer. Mr. Welch has 23 years of experience as principal of the
investment house Rothschild Investment Corporation of Chicago, Illinois. Mr.
Welch graduated from Carthage College and completed advanced studies at the New
York Institute of Finance. During his career, he has served on the boards of
directors of many public companies bringing to them his strong background in
investment banking and top management guidance.
GIL LOZANO. Gil Lozano is our President. He has over twenty years
experience in software design and development and marketing management in the
software industry in Europe and the United States.
During 1997, Mr. Lozano developed and launched www.virtual-world.com, which
we believe is one of the most successful sites for electronic commerce on the
Internet. During 1996, Mr. Lozano developed CuteFTP and increased Website
activity from 200 product downloads per day to more than five thousand per day.
In 1995, Mr. Lozano managed the Internationalization California Software's
"InterAP" developed in Europe (Internet Suite: e-mail, browser, telnet, ftp and
search agent) and a successful introduction of the product into the top five
European Markets.
In conjunction with DataEase International, Mr. Lozano developed an on-line
retail car financing system for DIAL and Division of Barclays Bank, U.K. This
system has been installed in all major European markets. Mr. Lozano developed
applications for Mercedes Benz truck manufacturing plant (Vittoria, Spain), the
Ford Motor Company plant in Valencia, Spain and Gaylord's National Corp. (a
retailer based in New Jersey). Mr. Lozano's other experience includes working
with IBM's Entry Systems Division, European Data Systems, the European Institute
of Technological Studies and post-graduate work in Systems Design at New York
University.
DAVID CAROLAN. David Carolan is our Chief Executive Officer and has
eighteen years experience in varied management situations involving public and
privately-held small and midsize businesses: technology, insurance and finance,
real estate and construction, manufacturing, retail, and employee assistance
companies. Mr. Carolan founded Corridor Technologies, Inc. in 1995. Corridor
provided LAN, WAN and telephony services to Central Texas midsize businesses
including regional banks and hospital. Mr. Carolan was a Senior Business
Consultant for Pegasus Information Systems which provided operational consulting
including the sale of financial products and services of several investment and
insurance firms. It also
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provided computer-related consulting including the sale and support of midrange
accounting software and hardware.
Mr. Carolan was CFO and Secretary/Treasurer for Enhanced Services Company,
Inc which managed all financial aspects of a holding company and its subsidiary
(Laptop Solutions, Inc.), including all accounting, operations and marketing.
Mr. Carolan holds a B.B.A. from the University of Texas at Austin, in General
Business.
JERRY BALDWIN. Jerry Baldwin is our Executive Vice President and Chief
Marketing Officer and he brings 25 years of marketing and sales management
experience to our company. From October 1998 through March 1999, Mr. Baldwin was
Managing Director of Sales and Channel Development at Acuity Corporation,
Austin, Texas. Mr. Baldwin helped guide Acuity's entrance into the electronic
commerce space with the WebCenter family of Customer Relationship Management
software products. From April 1994 through September 1998, Mr. Baldwin served as
President of Marketing Communications Group which provides consulting to such
companies as ATI, Digital Equipment Corporation, EDS, IBM and Hewlett Packard.
He has also held executive positions with BPI, CompuADD and Zenith Data Systems.
Mr. Baldwin has served on many Industry Advisory Boards and was a founding
member of both COMPTIA and MMPC Corporation. Mr. Baldwin was educated at St.
John's University.
FERNANDO CONTRERAS. Mr. Contreras serves as our Senior Vice President of
Research and Development and our Chief Technology Officer. Mr. Contreras is the
founder and former President and CEO of Sinergia. Mr. Contreras brings more than
16 years of experience with Hewlett Packard where he has held several management
positions in both the technical and administrative areas and holds a Bachelor of
Science and a Master of Science from the Georgia Institute of Technology.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors recently created a compensation committee. The
compensation committee of the board of directors evaluates our compensation
policies and administers our stock option plan. The members of the compensation
committee are John Welch and Jeanne Hake.
DIRECTOR COMPENSATION
We do not pay directors cash compensation, however they are reimbursed for
the expenses they incur in attending meetings of the board or board committees.
Non-employee directors are eligible to receive options to purchase Common Stock
awarded under our equity compensation plan. See "--Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal year ended
December 31, 1998 for our President and Chief Executive Officer. No other
executive officer who held office on December 31, 1998 met the definition of
"most highly compensated executive officer" within the meaning of the SEC's
executive compensation disclosure rules for this period.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------- LONG TERM
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- ------------------------------------------------------ ---------- ----------- -----------------
<S> <C> <C> <C>
David Carolan
Chief Executive Officer............................. $ 130,000 -0- -0-
Gil Lozano
President........................................... $ 130,000 -0- -0-
</TABLE>
STOCK OPTION INFORMATION
We have granted no stock options to any person who met the definition of
"most highly compensated executive officer" within the meaning of the SEC's
executive compensation disclosure rules for this period.
STOCK OPTION PLAN
EMPLOYEE STOCK OPTION PLAN. Under our First Amended and Restated Stock
Option Plan (the "Stock Option Plan"), as approved by the stockholders and
effective April 20, 1999, 1,440,000 shares of Common Stock are reserved and
authorized for issuance upon the exercise of options. All of our employees are
eligible to receive options under the Stock Option Plan. The Stock Option Plan
is administered by the Compensation Committee of the Board of Directors. The
purpose of the Stock Option Plan is to further our growth and success by
enabling selected employees to acquire shares of Common Stock, thereby
increasing their personal interest in such growth and success and to provide a
means of rewarding outstanding performance by such persons. Options granted
under the Stock Option Plan are intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended. It is the
policy of the compensation committee that Options will become exercisable as
follows: (i) 50% of the options will become exercisable on the second
anniversary of the date of grant, or in certain cases, the commencement date of
the holder's employment; (ii) an additional 25% of the options will become
exercisable on the third anniversary of the date of grant, or in certain cases,
the commencement date of the holder's employment; and (iii) the remaining 25% of
the options will become exercisable on the fourth anniversary of the date of
grant, or in certain cases, the commencement date of the holder's employment.
However, the committee may grant options with different vesting amounts and
periods. Options expire ten years after the date of grant, or in certain cases,
the commencement date of the option holder's employment. An increase in the
number of shares of Common Stock that may become available for sale in the
public market, or the perception that such sales may occur, could adversely
affect the market price prevailing from time to time of the Common Stock in the
public market and could impair the Company's ability to raise additional capital
through the sale of its equity securities. See "Shares Eligible for Future
Sale."
EMPLOYMENT AGREEMENTS
On October 27, 1998, we entered into substantially identical employment
agreements with Mr. Carolan and Mr. Lozano. Under these agreements, Mr. Carolan
and Mr. Lozano will each receive $130,000 annually and have the right to
participate in our bonus and stock option plans. Each of these agreements has a
term of one year and may be automatically renewed for an additional term of one
year. Mr. Carolan and Mr. Lozano have agreed not to compete with our company for
two years after the termination of this agreement.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.75 of the Nevada Business Corporation Act provides the power to
indemnify any officer or director acting in his capacity as our representative
who was, is or is threatened to be made a party to any
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action or proceeding, whether civil, criminal, administrative or investigative,
for expenses, judgments, penalties, fines and amounts paid in settlement in
connection with such action or proceeding. Generally, the only limitation on our
ability to indemnify our officers and directors is if they acted in good faith
and in a manner which they believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal proceeding, had
no reasonable cause to believe their conduct was unlawful.
Our bylaws provide a right to indemnification to the full extent permitted
by law for expenses, attorney's fees, damages, punitive damages, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by any director or officer whether or not the indemnified liability arises or
arose from any threatened, pending or completed proceeding by or in our right by
reason of the fact that such director or officer is or was serving as our
director, officer or employee or, at our request, as a director, officer,
partner, fiduciary or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, unless the act or
failure to act giving rise to the claim for indemnification is finally
determined by a court to have constituted willful misconduct or recklessness.
Our bylaws provide for the advancement of expenses to an indemnified party upon
receipt of an undertaking by the party to repay those amounts if it is finally
determined that the indemnified party is not entitled to indemnification. Our
bylaws authorize us to take steps to ensure that all persons entitled to the
indemnification are properly indemnified, including, if the board of directors
so determines, purchasing and maintaining insurance.
We have also entered into agreements to indemnify our executive officers and
directors for expenses and losses incurred in actions or proceedings arising out
of their services as directors or officers. We have also obtained insurance
policies that cover claims against our executive officers and directors, subject
to certain exclusions.
LIMITATION OF LIABILITY
Our Articles of Incorporation provide that none of our directors or officers
shall be personally liable to us or our shareholders for monetary damages for a
breach of fiduciary duty as a director or officer, except for liability:
- for acts or omissions involving intentional misconduct, fraud or a knowing
violation of law; or
- for the payment of unlawful dividends prohibited by Nevada corporate law.
At present, there is no pending litigation or proceeding, and we are not
aware of any threatened litigation or proceeding, involving any director,
officer, employee or agent where indemnification will be required or permitted
under the articles of incorporation or our bylaws.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Common Stock after the warrant distribution and as adjusted to
reflect the exercise of all Warrants by (i) each person who beneficially owns
more than 5% of the Common Stock; (ii) each of our executive officers; (iii)
each of our directors; and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES
NUMBER OF SHARES OF BENEFICIALLY
COMMON STOCK OWNED ASSUMING
BENEFICIALLY PERCENT OF EXERCISE OF
NAME OF BENEFICIAL OWNER OWNED(1) OWNERSHIP ALL WARRANTS(2)
- ------------------------------------------------------------ -------------------- ----------- -----------------
<S> <C> <C> <C>
David B. Carolan............................................ 5,917,644(3) 6,497,644
Gil Lozano.................................................. 4,573,697 4,573,697
John B. Welch............................................... 1,503,839 1,503,839
Fernando Contreras.......................................... -- -- --
Jerry Baldwin............................................... -- -- --
All executive officers and directors as a group (5
persons)(1)............................................... 11,995,180
</TABLE>
- ------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Unless otherwise indicated, the
persons named in the table have sole voting and investment power with
respect to all shares beneficially owned, subject to applicable community
property laws.
(2) Messrs. Carolan, Lozano and Welch have waived their right to receive a
distribution of Warrants.
(3) Mr. Carolan is the beneficial owner of 50,000 shares of Common Stock held in
an Annual Withdrawal Trust and 200,000 shares of Common Stock held in a
separate Annual Withdrawal Trust.
CERTAIN TRANSACTIONS
In connection with the acquisition of Sinergia, we agreed to pay the
following consideration to each of Messrs. Jose Antonio Grandizo and Fernando
Contreras who are the principal owners of Sinergia; (i) 290,000 shares of our
Common Stock; (ii) incentive stock options to purchase 25,000 shares of our
Common Stock at $.50 per share; and (iii) $100,000 in cash payable in the amount
of $50,000 on the closing of the acquisition and $50,000 on the year after the
closing. Mr. Carolan has agreed to transfer 580,000 shares of his Common Stock
to One eCommerce Corporation which will then deliver those shares to Messrs.
Grandizo and Contreras as payment for their interest in Sinergia. Messrs.
Grandizo and Contreras have agreed to transfer 2% of such consideration to the
three other shareholders of Sinergia.
In connection with the strategic partnership with Directories International,
L.L.C., we granted options to purchase 100,000 shares of our Common Stock to Mr.
Charles Smith at $1.50 per share and 100,000 shares of our Common Stock to Mr.
Kenneth Martin at $1.50 per share.
In connection with the acquisition of certain software owned by Mr. Bruce
Wilson, we purchased all the software for 50,000 shares of our Common Stock.
DESCRIPTION OF CAPITAL STOCK
At the closing of the distribution of the Warrants, our authorized capital
stock will consist of 50,000,000 shares of Common Stock, par value $.001 per
share. We are a Nevada corporation and are subject to the Nevada Business
Corporation Act. The following description is not complete and is subject to our
Articles of Incorporation and Bylaws, which are included as exhibits to the
Registration Statement of which this prospectus is a part.
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COMMON STOCK
Holders of the Common Stock are entitled to receive as, when and if declared
by the Board of Directors from time to time, such dividends and other
distributions in cash, stock or property from our assets or funds legally
available for such purposes, subject to any dividend preferences attributable to
any preferred stock that may be authorized. Holders of Common Stock are entitled
to one vote for each share held of record on all matters on which shareholders
may vote. There are no preemptive, conversion, redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable. In the event of our liquidation,
dissolution or winding up, holders of Common Stock are entitled to share ratably
in the assets available for distribution.
PREFERRED STOCK
Our Articles of Incorporation permit the company to issue up to 500,000
shares of preferred stock with such rights, preferences and designations as
determined by the Board of Directors. No shares of preferred stock have been
issued by the company.
THE WARRANTS
We declared a distribution of Warrants to holders of our Common Stock of
record as of August 1, 1999, with the exception of certain of our principal
shareholders who have waived their rights to receive Warrants, on a one for one
basis. The Warrants will be distributed on the effective date of the prospectus.
The Warrants will be exercisable at a price equal to 200% of the price of the
Common Stock on the effective date of this prospectus. Our Common Stock is
quoted on the NASD OTC Bulletin Board under the symbol "ONCE." Warrants are
exercisable only if a current prospectus is then in effect, and the exercise is
registered or otherwise qualified in any state or other jurisdiction where
required.
We may redeem all or a portion of the Warrants, at $.01 per warrant, upon 30
days' prior written notice to the Warrant holders in the event the closing bid
price of our Common Stock exceeds or equals 300% of the exercise price per share
for ten consecutive trading days. Any Warrant holder who does not exercise its
Warrants prior to the redemption date, as set forth on our notice of redemption,
will forfeit its right to purchase the shares of Common Stock underlying the
Warrants. After the redemption date any outstanding Warrants referred to in the
notice of redemption will become void and be canceled. If we do not redeem the
Warrants, they will expire at the conclusion of the exercise period unless we
extend the period.
We may extend the exercise period of the Warrants at any time provided we
give written notice of the extension to the Warrant holders prior to their
expiration date. Also, we may, at any time, reduce the exercise price of the
Warrants by written notice to the Warrant holders. We do not presently
contemplate any extensions of the exercise period or reduction in the exercise
price of the Warrants.
The Warrants contain anti-dilution provisions with respect to the occurrence
of certain events, such as stock splits or stock dividends. The anti-dilution
provisions do not apply in the event of a merger or acquisition. In the event of
a liquidation, dissolution or winding-up of our company, Warrant holders will
not be entitled to participate in our assets. Warrant holders have no voting,
preemptive, liquidation or other rights of a stockholder, and no dividends may
be declared on the Warrants.
The Warrants may be exercised by surrendering the Warrant certificate
evidencing the Warrants to be exercised, with the exercise form included therein
duly completed and executed, and paying to us the exercise price per share in
cash or check. Stock certificates will be issued as soon thereafter as
practicable.
The Warrants are not exercisable until the Warrants and the shares of Common
Stock underlying the Warrants are registered. We filed with the Securities and
Exchange Commission a registration statement with respect to the issuance of the
Common Stock underlying the Warrants. This prospectus is part of such
registration statement and the date of this prospectus is the effective date of
the registration statement.
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The effective date of the registration statement is the "Commencement Date" for
determining the exercise period of the Warrants. We will also seek to register
or qualify the Common Stock issuable upon the exercise of the Warrants under the
Blue Sky laws of all states in which holders of the Warrants may reside.
REGISTRATION RIGHTS
Pursuant to an agreement with Baytree Capital Associates, L.L.C.
("Baytree"), Baytree is entitled, subject to certain limitations, to "piggyback"
registration rights that require us to include its registrable securities in
registration statements that we may file under the Securities Act in the future.
Registration of shares of Common Stock pursuant to the exercise of piggyback
registration rights under the Securities Act would result in such shares
becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of such registration. See "Shares Eligible
for Future Sale."
TRANSFER AGENT
The transfer agent for our Common Stock is Interwest Transfer Co., Inc.,
Salt Lake City, Utah.
LISTING
The Common Stock is currently quoted on the NASD OTC Bulletin Board under
the symbol "ONCE." The Company has applied for a quotation on the NASDAQ Small
Cap Market under the symbol "ONCE."
PLAN OF DISTRIBUTION
This prospectus relates to the distribution of 4,728,420 redeemable Warrants
and 4,728,420 shares of our Common Stock underlying these Warrants. As soon as
practicable after the date of this prospectus, the Warrants will be distributed
to the record holders of our Common Stock as of August 1, 1999. The Warrants
were not distributed and did not constitute an offer by us to sell the shares of
Common Stock prior to the date of this prospectus.
The distribution of the Warrants will be managed without an underwriter, and
the shares of Common Stock to be issued upon exercise of the Warrants will be
issued by an officer of the Company without any discount, sales commissions or
other compensation being paid to anyone in connection with the distribution. In
connection therewith, we will pay the costs of preparing, mailing and
distributing this prospectus to the holders of our Common Stock. Brokers,
nominees, fiduciaries and other custodians will be requested to forward copies
of this prospectus to the beneficial owners of securities held of record by
them, and such custodians will be reimbursed for their expenses.
There is no assurance that any of the Warrants will be exercised and that
any of the shares of Common Stock will be sold. All funds received upon the
exercise of any Warrants will be immediately available to the company for its
use. See "Use of Proceeds."
EXERCISE PROCEDURES
Warrants may be exercised in whole or in part by presentation of the Warrant
Certificate, with the Purchase Form on the reverse side thereof filled out and
signed at the bottom thereof, together with payment of the Exercise Price and
any applicable taxes at the principal office of Interwest Transfer Co., Inc.,
1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117. Payment of the
Exercise Price shall be made in lawful money of the United States of America by
wire transfer or check payable to the order of "Interwest Transfer Co.--One
eCommerce Escrow Account." All holders of Warrants will be given an independent
right to exercise their purchase rights. If, as and when properly completed and
duly executed notices of exercise are received by the Transfer Agent and/or
Warrant Agent, together with the Certificates being surrendered and full payment
of the Exercise Price in cleared funds, the checks or other funds will be
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delivered to the Company and the Transfer Agent and/or Warrant Agent will
promptly issue certificates for the underlying Common Stock. It is presently
estimated that certificates for the shares of Common Stock will be available for
delivery in Salt Lake City, Utah at the close of business on the tenth business
day after the receipt of all required documents and funds.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 16,273,600 shares of Common Stock outstanding after the distribution,
the 4,728,420 shares of Common Stock that may be issued upon exercise of the
Warrants will be freely tradeable without restriction in the public market
unless such shares are held by our "affiliates," as that term is defined in Rule
144(a) under the Securities Act. For purposes of Rule 144, an "affiliate" is a
person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, such issuer. The
11,995,180 shares of Common Stock that are currently held by affiliates of the
Company are "restricted securities" under the Securities Act and may be sold in
the public market upon the expiration of certain holding periods under Rule 144,
subject to the volume, manner of sale and other limitations of Rule 144. In
general, under Rule 144 as currently in effect, a person who has beneficially
owned restricted shares for at least one year, including an "affiliate," is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:
- one percent of the then outstanding shares of our Common Stock
(approximately 162,736 shares immediately following the offering), or
- the average weekly trading volume during the four calendar weeks preceding
the sale.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A shareholder who is deemed not to have been an "affiliate" of ours at any time
during the 90 days preceding a sale, and who has beneficially owned restricted
shares for at least two years, would be entitled to sell such shares without
regard to the volume limitations, manner of sale provisions or public
information requirements.
In addition, as of June 1, 1999, there were outstanding options to purchase
200,000 shares of Common Stock, of which 100,000 options were fully vested and
exercisable. There are an aggregate of 1,440,000 shares of Common Stock reserved
for issuance under our Stock Option Plan. See "Description of Capital
Stock--Registration Rights."
42
<PAGE>
EXPERTS
The consolidated financial statements of One eCommerce Corporation as of
December 31, 1997 and 1998 and for the period from inception (November 1, 1998)
to December 31, 1998 and for the period ended March 31, 1999 have been included
herein and in the registration statement in reliance upon the reports of David
Patrick and Company, P.C., independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing. The consolidated financial statements of Sinergia Servicios, S.C.
as of December 31, 1997 and 1998 and for the period ended March 31, 1999 have
been included herein and in the registration statement in reliance upon the
report of Tanner & Co., independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
LEGAL MATTERS
The validity of the Warrants and the Common Stock offered by this prospectus
will be passed upon for us by Akin, Gump, Strauss, Hauer & Feld, L.L.P., 816
Congress Avenue, Suite 1900, Austin, Texas 78701.
ADDITIONAL INFORMATION
This prospectus constitutes a part of a registration statement on Form SB-2
(the "Registration Statement") filed by us with the Commission under the
Securities Act with respect to the securities offered in this prospectus. This
prospectus does not contain all the information which is in the Registration
Statement. Certain parts of the Registration Statement are omitted as allowed by
the rules and regulations of the Commission. We refer to the Registration
Statement and to the exhibits to such Registration Statement for further
information with respect to the Company and the securities offered in this
prospectus. Copies of the Registration Statement and the exhibits to such
Registration Statement are on file at the offices of the Commission and may be
obtained upon payment of the prescribed fee or may be examined without charge at
the public reference facilities of the Commission described below. Statements
contained in this prospectus concerning the provisions of documents are
necessarily summaries of the material provisions of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
Upon completion of the distribution of the Warrants, we will file annual,
quarterly and special reports and other information with the Commission. Such
reports and information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street N.W., Washington, D.C. 20549 and at its regional offices located at 7
World Trade Center, New York, New York 10048 and Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at
prescribed rates. Our Common Stock is quoted on the NASD Electronic Bulletin
Board under the symbol "ONCE." The Commission maintains a Website that will
contain all information filed electronically by us. The address of the
Commission's Website is (http://www.sec.gov.).
This prospectus includes statistical data regarding Internet usage and the
advertising industry which were obtained from industry publications, including
reports generated by International Data Corporation and Forrester Research.
These industry publications generally indicate that they have obtained
information from sources believed to be reliable, but do not guarantee the
accuracy and completeness of such information. While we believe those industry
publications to be reliable, we have not independently verified such data. We
also have not sought the consent of any of these organizations to refer to their
reports in this prospectus.
43
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ONE eCOMMERCE CORPORATION
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ONE eCOMMERCE CORPORATION
Report of David Patrick & Company, P.C....................................................................... F-2
Consolidated Statement of Financial Position................................................................. F-3
Statements of Results of Operations.......................................................................... F-4
Statements of Changes in Shareholders' Equity................................................................ F-5
Statements of Cash Flows..................................................................................... F-6
Notes to Financial Statements................................................................................ F-7
Pro Forma Combined Condensed Financial Statements............................................................ F-14
Unaudited Interim Consolidated Financial Statements.......................................................... F-18
SINERGIA SERVICIOS, S.C.
Report of Tanner & Co........................................................................................ F-22
Balance Sheet................................................................................................ F-23
Statement of Operations...................................................................................... F-24
Statement of Partners Capital................................................................................ F-25
Statement of Cash Flows...................................................................................... F-26
Notes to Financial Statements................................................................................ F-27
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
One Commerce Corporation
New Braunfels, Texas
We have audited the accompanying consolidated statement of financial
position of One Commerce Corporation and its subsidiary as of December 31, 1998,
and the related statements of results of operations, changes in shareholders'
equity and cash flows of One Commerce Corporation for the period of inception
(November 1, 1998) through December 31, 1998, and the consolidated statements of
results of operations, changes in shareholders' equity and cash flows of
Corridor Technologies, Inc. and subsidiary for the two years ended December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
Except as explained in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
We did not observe the taking of physical inventory of Corridor
Technologies, Inc. as of December 31, 1996 and December 31, 1997, since these
dates were prior to our appointment as auditors for the Company; and we were
unable to satisfy ourselves regarding inventory quantities by means of other
auditing procedures. Inventory amounts as of December 31, 1996 and December 31,
1997 enter into the determination of net income, changes in shareholders' equity
and cash flows of Corridor Technologies, Inc. for the years ended December 31,
1998 and December 31, 1997.
Because of the matter discussed in the preceding paragraph, the scope of our
work was not sufficient to enable us to express, and we do not express, an
opinion on the consolidated statements of results of operations, changes in
shareholders' equity and cash flows of Corridor Technologies, Inc. and
subsidiary for the two years ended December 31, 1998.
In our opinion, the consolidated statement of financial position of One
Commerce Corporation and its subsidiary as of December 31, 1998 and the related
statements of results of operations, changes in shareholders' equity and cash
flows of One Commerce Corporation for the period of inception (November 1, 1998)
through December 31, 1998, present fairly, in all material respects, the
financial position of One Commerce Corporation as of December 31, 1998 and the
results of its operations and its cash flows for the period of inception through
December 31, 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note H to the
financial statements, the Company has incurred operating deficits which raises
substantial doubt about its ability to continue as a going concern. Management's
plans to raise additional capital to fund operating deficits are also described
in Note H. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
DAVID PATRICK & CO., P.C.
Houston, Texas
July 9, 1999
F-2
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash............................................................................ $ 4,885
Inventories..................................................................... 77,785
Trade accounts receivable, net of an allowance for doubtful
accounts of $8,815............................................................ 140,257
Accounts receivable--employees.................................................. 53,331
Deferred income tax assets...................................................... 7,592
---------
Total current assets.......................................................... 283,850
---------
PROPERTY AND EQUIPMENT, at cost
Office furniture and fixtures................................................... 3,429
Office equipment................................................................ 93,388
Computer software............................................................... 603,459
Leasehold improvements.......................................................... 3,646
---------
Total property & equipment.................................................... 703,922
Less accumulated depreciation and amortization................................ 37,370
---------
Total property and equipment.................................................. 666,552
---------
OTHER ASSETS
Goodwill........................................................................ 137,684
Other assets.................................................................... 1,408
---------
Total other assets............................................................ 139,092
---------
Total assets.................................................................. $1,089,494
---------
---------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities........................................ $ 380,145
Customer deposits / deferred revenues........................................... 11,610
Short-term notes payable--Bank.................................................. 75,000
Short-term convertible notes payable--Shareholders.............................. 27,392
Current portion of long-term capital leases..................................... 18,661
---------
Total current liabilities..................................................... 512,808
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES...................................... 40,035
DEFERRED INCOME TAXES........................................................... 7,592
---------
Total liabilities............................................................. 560,435
---------
SHAREHOLDERS' EQUITY
COMMON STOCK, par value $.01, 1,000,000 shares authorized in 1997,
794,000 shares issued and outstanding as of December 31, 1998................. 7,940
ADDITIONAL PAID-IN CAPITAL...................................................... 624,588
RETAINED EARNINGS............................................................... (103,469)
---------
Total shareholders' equity.................................................... 529,059
---------
Total liabilities and shareholders' equity.................................... $1,089,494
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
STATEMENTS OF RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
ONE COMMERCE
CORPORATION
FOR THE PERIOD
OF INCEPTION CORRIDOR TECHNOLOGIES, INC.
(NOVEMBER 1, 1998) AND SUBSIDIARY (CONSOLIDATED)
THROUGH (PREDECESSOR TO ONE COMMERCE
DECEMBER 31, 1998 CORPORATION)
(SUCCESSOR TO ------------------------------------
CORRIDOR TECHNOLOGIES, YEAR ENDED YEAR ENDED
INC.) DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------- ----------------- -----------------
<S> <C> <C> <C>
REVENUES........................................ $ 0 $ 1,192,236 $ 988,229
COSTS OF SALES.................................. 0 880,370 660,121
----------- ----------------- --------
Gross profit.................................. 0 311,866 328,108
----------- ----------------- --------
SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Sales and marketing expenses.................... 7,152 51,343 9,875
Personnel expenses:
Salaries and wages............................ 10,504 163,031 146,774
Other personnel expenses...................... 537 69,413 44,644
Programming, design and data services........... 73,644 22,336 0
Facilities expenses............................. 439 43,653 12,407
Other operating expenses........................ 16,828 68,522 26,628
----------- ----------------- --------
Total sales, general and administrative
expenses.................................... 109,104 418,298 240,328
----------- ----------------- --------
Income from operations........................ (109,104) (106,432) 87,780
OTHER INCOME AND EXPENSES....................... 0 (17,953) (551)
----------- ----------------- --------
Net income (loss) before income taxes......... (109,104) (124,385) 87,229
INCOME TAX EXPENSE (BENEFIT).................... (5,635) (16,178) 21,813
----------- ----------------- --------
Net income (loss)............................. $ (103,469) $ (108,207) $ 65,416
----------- ----------------- --------
----------- ----------------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CORRIDOR
TECHNOLOGIES,
INC.
AND
SUBSIDIARY
(CONSOLIDATED)
(PREDECESSOR
TO ONE
ONE COMMERCE CORPORATION COMMERCE
(SUCCESSOR TO CORRIDOR TECHNOLOGIES, INC.) CORPORATION)
--------------------------------------------------- -----------
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDER'S COMMON
STOCK CAPITAL EARNINGS EQUITY STOCK
----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balances as of December 31, 1996............................... $ 0 $ 0 $ 0 $ 0 $ 1,000
Sales of common stock in 1997.................................. -- --
Net income for the year ended December 31, 1997................ -- --
----------- ----------- ---------- ------------- -----------
Balances as of December 31, 1997............................... 0 0 0 0 1,000
Sales of common stock in 1998.................................. 7,940 624,588 632,528 --
Net loss for the year ended December 31, 1998.................. (103,469) (103,469) --
----------- ----------- ---------- ------------- -----------
Balances as of December 31, 1998............................... $ 7,940 $ 624,588 $ (103,469) $ 529,059 $ 1,000
----------- ----------- ---------- ------------- -----------
----------- ----------- ---------- ------------- -----------
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED SHAREHOLDER'S
CAPITAL EARNINGS EQUITY
--------------- ---------- --------------
<S> <C> <C> <C>
Balances as of December 31, 1996............................... $ 0 $ 19,627 $ 20,627
Sales of common stock in 1997.................................. -- --
Net income for the year ended December 31, 1997................ 65,416 65,416
--
---------- --------------
Balances as of December 31, 1997............................... 0 85,043 86,043
Sales of common stock in 1998.................................. -- --
Net loss for the year ended December 31, 1998.................. -- (108,207) (108,207)
--
---------- --------------
Balances as of December 31, 1998............................... $ 0 $ (23,164) $ (22,164)
--
--
---------- --------------
---------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ONE COMMERCE
CORPORATION
FOR THE PERIOD
OF INCEPTION CORRIDOR TECHNOLOGIES, INC.
(NOVEMBER 1, 1998) AND SUBSIDIARY (CONSOLIDATED)
THROUGH (PREDECESSOR TO ONE COMMERCE
DECEMBER 31, 1998 CORPORATION)
(SUCCESSOR TO ------------------------------------
CORRIDOR YEAR ENDED YEAR ENDED
TECHNOLOGIES, INC.) DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................ $ (103,469) $(108,207) $ 65,416
---------- ----------------- -----------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 25,175 9,348 1,195
Change in assets and liabilities:
(Increase) decrease in inventory..................... (66,931) 75,589
(Increase) decrease in trade accounts receivable..... 15,265 (145,042)
(Increase) decrease in inter-company accounts........ 9,999 (9,999) 0
(Increase) decrease in employee accounts
receivable......................................... (53,331) 0
(Increase) decrease in deferred income tax assets.... 5,027 (12,619)
(Increase) decrease in other assets.................. 199 (998)
Increase (decrease) in deferred revenues............. 11,610 (48,913)
Increase (decrease) in deferred tax liabilities...... (26,840) 34,432
Increase (decrease) in accounts payable and accrued
liabilities........................................ 111,270 184,451 51,093
---------- ----------------- -----------------
Total adjustments.................................... 146,444 68,799 (45,263)
---------- ----------------- -----------------
Net cash used in operating activities................ 42,975 (39,408) 20,153
---------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of furniture and fixtures.................... (750) (2,077)
Acquisition of office equipment.......................... (1,216) (67,706) (16,541)
Acquisition of computer software......................... (71,759) (17,301) 0
Leasehold improvements................................... (3,646) 0
Acquisition of subsidiaries.............................. (115,520) 0 (5,000)
---------- ----------------- -----------------
Net cash used in investing activities................ (188,495) (89,403) (23,618)
---------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock..................................... 118,128 0 6,000
Proceeds of short-term notes payable to bank............. 75,000 0
Proceeds of capital leases payable.......................
Proceeds of capital leases payable....................... 58,696 0
Proceeds of short-term convertible notes payable to
shareholders........................................... 27,392 0 (2,535)
---------- ----------------- -----------------
Net cash provided by financing activities............ 145,520 133,696 3,465
---------- ----------------- -----------------
Net increase (decrease) in cash and temporary cash
investments........................................ 0 4,885 0
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF
PERIOD................................................. 0 0 0
---------- ----------------- -----------------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD..... $ 0 $ 4,885 $ 0
---------- ----------------- -----------------
---------- ----------------- -----------------
SUPPLEMENTAL CASH FLOWS DISCLOSURES
In 1998, One Commerce Corporation issued 200,000 shares of common stock, valued at $514,400, in connection with the
acquisition of computer software.
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of One Commerce Corporation
and subsidiary (the "Company") is presented to assist in understanding the
Company's financial statements. The financial statements and notes are
representations of the Company's management, who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
ORGANIZATION
One Commerce Corporation (a Texas Corporation) was organized in November
1997 and began operations November 1, 1998.
BASIS OF CONSOLIDATION
The consolidated statement of financial position of One Commerce Corporation
includes the accounts of Corridor Technologies, Inc. ("Corridor"), a wholly
owned subsidiary. Corridor also includes the accounts of Corridor Telecom, LLC,
a wholly owned subsidiary of Corridor. The Company paid $115,520 for Corridor,
acquiring 51% of the outstanding common stock of Corridor for $52,020 from the
Company's president and major shareholder. The acquisition of Corridor was
completed as of December 31, 1998 and was accounted for as a business
combination under the "purchase method" of accounting. The consolidated
statement of financial position reflects the combined assets, liabilities and
shareholders' equity of the consolidated companies. In accordance with generally
accepted accounting principles, the operating statements for purchase method
business combinations report combined results only for the period subsequent to
the combination. Accordingly, the statements of results of operations, changes
in shareholders' equity and cash flows of One Commerce Corporation exclude the
1998 operating results of Corridor.
The consolidated statement of results of operations, changes in
shareholders' equity and cash flows of Corridor reflect the operating results of
Corridor and Corridor Telecom, LLC.
BUSINESS ACTIVITY
As of December 31, 1998, the Company was preparing to develop and support
web sites and electronic commerce for small and midsize businesses and provide
electronic marketing services. Through Corridor, the Company provides sales,
service, installation and support of computer hardware and computer software,
provides local and wide area network installation and support, and provides
print advertising services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
F-7
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method for financial reporting
purposes at rates based on the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Computer software...................................................................... 2-5
Office furniture and fixtures.......................................................... 5-7
Office machines and equipment.......................................................... 5-7
Leasehold improvements................................................................. 5-7
</TABLE>
Software amortization expense for the Company was $25,175 in 1998 and is
included in programming, design and data services in the statement of results of
operations. Depreciation expense for Corridor was $9,348 and $1,195 for the
years ended December 31, 1998 and 1997, respectively.
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
INTANGIBLE ASSETS
The Company capitalizes the costs of developing certain software, which will
be used by the Company and marketed by the Company in the future. The
technological feasibility of this software has previously been established. The
Company capitalized $71,569 of software development costs during the current
year. Corridor capitalized $17,301 of software development costs during the year
ended December 31, 1998. The software is under development and no amortization
was recorded during the year. The Company incurred estimated research and
development costs for computer software to be sold of $5,336 in 1998. Corridor
incurred estimated research and development costs for computer software to be
sold of approximately $3,500 in 1998.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of property and equipment for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future federal income taxes.
For the year ended December 31, 1998, the Company's first taxable year, the
Company has a loss. The Company realized a tax benefit as a result of
consolidating its tax loss with Corridor. Accordingly, a tax benefit of $5,635
is reflected in the financial statements of One Commerce Corporation.
F-8
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred tax assets and liabilities of Corridor as of December 31, 1998
consisted of the following:
<TABLE>
<S> <C>
Deferred tax asset................................................ $ 16,919
Deferred tax liability............................................ (10,635)
Valuation allowance............................................... (6,284)
---------
$ 0
---------
---------
</TABLE>
Prior to 1997, Corridor was an "S Corporation" under Subchapter S of the
Internal Revenue Code. Accordingly, the taxable income or loss of Corridor was
includable in the taxable income of the shareholders. No provision for income
taxes was recorded by Corridor. Effective January 1, 1997, Corridor revoked the
"S corporation" status. Corridor had a net operating loss carryforward as of
December 31, 1997 of $32,962. It is expected that the loss carryforward will be
utilized in 1998.
Corridor files U.S. Federal income tax returns on the "cash basis".
Accordingly, the tax bases of trade accounts receivable are lower than their
bases for financial reporting purposes, and the tax bases of accounts payable
exceed their bases for financial reporting purposes, resulting in deferred tax
assets or liabilities. Property and equipment exceed their tax bases by the
cumulative amount that accelerated tax basis depreciation exceeds straight-line
depreciation. This excess will be taxable in future periods through reduced
depreciation deductions for tax purposes.
The provision for income taxes for Corridor consists of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Current taxes.......................................................... $ 5,635 $ --
Deferred taxes......................................................... (34,748) 21,813
Valuation allowance.................................................... 12,935 --
---------- ---------
$ (16,178) $ 21,813
---------- ---------
---------- ---------
</TABLE>
Deferred tax assets and liabilities as of December 31, 1998 and 1997
consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Deferred tax assets................................................... $ 20,527 $ 12,619
Deferred tax liability................................................ (7,592) (34,432)
Valuation allowance................................................... (12,935) --
---------- ----------
Net deferred tax asset (liability).................................. $ 0 $ (21,813)
---------- ----------
---------- ----------
</TABLE>
The 1998 tax provision for Corridor differed from the expense that would
result from applying statutory rates to income before income taxes because of
certain expenses are non-deductible for income taxes and the valuation allowance
for deferred tax assets. The 1997 provision differs due to certain
non-deductible expenses, and certain tax benefits and liabilities resulting from
the revocation of "S Corporation" status, which were not previously recorded by
Corridor.
F-9
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION OF GOODWILL
Cost of investments in purchased companies in excess of the underlying fair
value of net assets at dates of acquisition are recorded as goodwill and
amortized over 10 years on a straight-line basis.
ADVERTISING COSTS
The Company recognizes advertising costs in the period incurred. Advertising
costs of the Company were $1,600 for 1998, and were $31,646 and $2,479 for
Corridor for the years ended December 31, 1998 and 1997, respectively.
NOTE B--SHORT-TERM NOTES PAYABLE
Short-term notes payable to a bank as of December 31, 1998 consisted of the
following:
<TABLE>
<S> <C>
Note payable--bank, dated September 30, 1998, accruing interest at
10%, payable monthly, due March 30, 1999, secured by accounts
receivable. ..................................................... $ 50,000
Note payable--bank, dated December 15, 1998, accruing interest at
9.75%, payable monthly, due February 15, 1999, secured by
accounts
receivable. ..................................................... 25,000
---------
Total.............................................................. $ 75,000
---------
---------
</TABLE>
Short-term convertible notes payable to Shareholders as of December 31, 1998
consisted of the following:
<TABLE>
<S> <C>
5% note payable dated November 4, 1998, interest payable
semi-annually, due November 1, 1999. The note holder has the
right to convert the unpaid amounts due under this note into
common stock at the rate of $4 per share (to be adjusted for
stock splits) at any time after May 1,
1999. ........................................................... $ 4,565
5% note payable dated December 7, 1998, interest payable
semi-annually, due December 1, 1999. The note holder has the
right to convert the unpaid amounts due under this note into
common stock at the rate of $4 per share (to be adjusted for
stock splits) at any time after June 1,
1999. ........................................................... 4,565
5% note payable dated November 4, 1998, interest payable
semi-annually, due November 1, 1999. The note holder has the
right to convert the unpaid amounts due under this note into
common stock at the rate of $4 per share (to be adjusted for
stock splits) at any time after May 1,
1999. ........................................................... 18,262
---------
$ 27,392
---------
---------
</TABLE>
Interest expense for Corridor was $5,793 and $0 for the years ended December
31, 1998 and 1997, respectively.
F-10
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE C--INVENTORIES
Inventories consist primarily of computer hardware and telephone equipment
and are priced at the lower of cost (average cost) or market.
NOTE D--PENSION PLAN
Corridor has a SEP IRA defined contribution profit sharing plan, which
allows the Company to make contributions to the plan if it should chose to do
so. No contribution amounts have been accrued for 1998. Contributions for 1997
were $17,500.
NOTE E--LEASE OBLIGATIONS
Corridor leases computer equipment with an original cost of $48,516 under a
capital leases requiring the Company to pay related property taxes and maintain
adequate insurance coverage. Related accumulated depreciation as of December 31,
1998 was $3,381.
The following is a schedule, by year, of future minimum lease payments under
the capital lease together with the present value of the net minimum lease
payments as of December 31, 1998:
<TABLE>
<S> <C>
Year ending December 31:
1999............................................................ $ 21,688
2000............................................................ 20,428
2001............................................................ 7,560
2002............................................................ 7,560
2003............................................................ 9,800
---------
Total minimum lease payments...................................... 67,036
Less: Amounts representing interest............................... (8,340)
---------
Present value of net minimum lease-payment........................ 58,696
Less current portion............................................ (18,661)
---------
Non-current portion............................................... $ 40,035
---------
---------
</TABLE>
The Company leases office space under operating leases. The future minimum
lease payments for these facilities are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
1999.............................................................................. $ 40,704
2000.............................................................................. 40,704
2001.............................................................................. 37,312
----------
$ 118,720
----------
----------
</TABLE>
Subsequent to December 31, 1998, the Company entered into an additional
lease that will also mature in 2001. The future minimum lease payments under
this lease are $170,985.
Lease rental expense of Corridor was $15,486 and $10,382 for the years ended
December 31,1998 and 1997.
F-11
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F-- SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES
200,000 shares of common stock, valued at $514,400 were issued to acquire
computer software and web sites from a shareholder and officer of the Company.
Interest expense paid by Corridor during 1998 was $3,784.
NOTE G--SUBSEQUENT EVENTS
On March 8, 1999, the Company authorized 29,000,000 additional shares of
common stock and 15,000,000 shares of preferred stock. The Company also approved
a stock split of 18 new shares for each old share owned.
Also on March 8, 1999, the Company approved a merger of Corridor with and
into the Company.
Also on March 8, 1999, the Company approved an employee stock option plan
for issuance of up to 1,440,000 shares of the Company's common stock.
On March 30, 1999, The Company approved an agreement and plan of
reorganization providing for all shares of common stock of the Company to be
exchanged for common stock of One e-Commerce Corporation (formerly Arianne Co.),
resulting in the Company becoming a wholly-owned subsidiary of One e-Commerce
Corporation.
In June 1999 the Company decided to discontinue certain operations of
Corridor, including sales of computer hardware and software and installation and
support of computer networks.
NOTE H--OPERATING DEFICITS AND REALIZATION OF ASSETS
As of December 31, 1998 the Company had recently begun offering services to
design, develop, maintain and host web-sites and related services to implement
e-commerce for small to medium sized businesses. As reflected in the statement
of results of operations, the Company incurred a loss of $103,469. Operating
losses have continued in 1999 as the Company has incurred increased operating
expenses in preparation for the increased revenues expected by the Company. The
Company has entered into marketing agreements to market products and services,
which are expected to begin in the summer of 1999. One e-Commerce Corporation
plans to become a SEC reporting company in 1999 in connection with an offering
of securities.
While the Company and One e-Commerce Corporation have a business plan to
raise additional capital to fund operating deficits, there can be no assurance
that the Company or One e-Commerce will be successful in accomplishing its
objectives. Accordingly, there is substantial doubt about the Company's ability
to continue as a going concern. These financial statements do not include
adjustments that might be necessary should the Company be unable to continue as
a going concern.
NOTE I--RELATED PARTY TRANSACTIONS
As of December 31, 1998, advances to employees includes $50,800 due from the
Company's president, who is also a major shareholder. Of the amount, $50,000 was
repaid in January 1999.
The statement of results of operations of One Commerce Corporation includes
advertising and promotional expenses for products and services purchased from
Corridor of $2,875.
F-12
<PAGE>
ONE COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE J--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities included bank overdrafts in the
amount of $15,047 as of December 31, 1998.
NOTE K--CONCENTRATION OF CREDIT RISKS
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of trade accounts receivable.
As of December 31, 1998, substantially all of trade accounts receivable was due
from customers located in Central Texas. Accordingly, the Company has credit
risk associated with the economic environment in Central Texas.
F-13
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
BALANCE SHEET DATA
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
ONE --------------------------
SINERGIA ARRIANE COMMERCE DR CR TOTAL
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash.................................... $ 13,247 $ 368 $ 4,885 $ $ $ 18,500
Inventories............................. -- -- 77,785 77,785
Trade receivables....................... 87,551 -- 140,257 227,808
Employee receivables.................... -- -- 53,331 53,331
Deferred income taxes................... -- -- 7,592 7,592
Prepaid expenses........................ 28,948 -- -- 28,948
---------- ---------- ------------ ------------
129,746 368 283,850 413,964
---------- ---------- ------------ ------------
Net property & equip. ................ 62,380 -- 666,552 728,932
---------- ---------- ------------ ------------
Investments............................. -- -- -- 139,882 139,882 --
Goodwill................................ -- -- 137,684 2,960,118 296,012 2,801,790
Other assets............................ -- -- 1,408 -- -- 1,408
---------- ---------- ------------ ------------ ------------ ------------
Total assets.......................... $ 192,126 $ 368 $ 1,089,494 $ 3,100,000 $ 435,894 $ 3,946,094
---------- ---------- ------------ ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------ ------------
Accounts payable and accrued
liabilities........................... $ 75,333 $ -- $ 380,145 $ $ $ 455,478
Accounts payable--related parties....... 62,950 9,137 -- 72,087
Customer deposits....................... -- -- 11,610 11,610
Note payable--Bank...................... -- -- 75,000 75,000
Convertible notes payable--
shareholders.......................... -- -- 27,392 27,392
Current portion--capital leases......... -- -- 18,661 18,661
---------- ---------- ------------ ------------
Total current liabilities............... 138,283 9,137 512,808 660,228
---------- ---------- ------------ ------------
Long-term capital lease obligation...... -- -- 40,035 40,035
Deferred income taxes................... -- -- 7,592 7,592
Common stock............................ 107,838 5,375 7,940 113,213 580 8,520
Paid-in capital......................... -- 7,125 624,588 26,669 3,099,420 3,704,464
Retained earnings....................... (46,394) (21,269) (103,469) 296,012 -- (467,144)
Cumulative foreign currency translation
adjustment............................ (7,601) -- -- -- -- (7,601)
---------- ---------- ------------ ------------ ------------ ------------
Total shareholders' equity............ 53,843 (8,769) 529,059 435,894 3,100,000 3,238,239
---------- ---------- ------------ ------------ ------------ ------------
Total................................. $ 192,126 $ 368 $ 1,089,494 $ 3,535,894 $ 3,535,894 $ 3,946,094
---------- ---------- ------------ ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------ ------------
</TABLE>
Pro Forma adjustments to record the acquisition of Sinergia as if it occurred on
January 1, 1998.
F-14
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
INCOME STATEMENT DATA
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
ONE ------------------------
SINERGIA ARRIANE COMMERCE DR CR TOTAL
---------- --------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 865,449 $ -- $ 1,192,236 $ $ $ 2,057,685
Cost of sales......................... 670,502 -- 880,370 1,550,872
Gross profit........................ 194,947 -- 311,866 506,813
---------- --------- ------------ ------------
Selling general and
administrative...................... 245,399 8,866 527,402 296,012 -- 1,077,679
---------- --------- ------------ ------------
Operating income (loss)............... (50,452) (8,866) (215,536) 296,012 -- (570,866)
Other income (expense)................ 4,058 (582) (17,953) -- -- (14,477)
---------- --------- ------------ ----------- ----------- ------------
Net loss before income tax benefit.... (46,394) (9,448) (233,489) 296,012 -- (585,343)
Income tax benefit.................... -- -- 21,813 -- -- 21,813
---------- --------- ------------ ----------- ----------- ------------
Net income (loss)..................... $ (46,394) $ (9,448) $ (211,676) $ 296,012 $ -- $ (563,530)
---------- --------- ------------ ----------- ----------- ------------
---------- --------- ------------ ----------- ----------- ------------
Earnings (loss) per share
applicable to common stock:
Basic and diluted loss per share,
assuming 16,723,600 shares
outstanding on January 1, 1998...... $ (0.03)
------------
------------
</TABLE>
Pro Forma adjustments to record the acquisition of Sinergia as if it occurred on
January 1, 1998.
F-15
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
BALANCE SHEET DATA
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SINERGIA ARRIANE ONE COMMERCE PRO FORMA ADJUSTMENTS TOTAL
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash............................. $ 44,454 $ -- $ 785,860 $ $ $ 830,314
Inventories...................... -- -- 62,150 62,150
Trade receivables................ 150,725 -- 305,255 455,980
Employee receivables............. -- -- 5,616 5,616
Prepaid expenses................. 12,848 -- 6,402 19,250
---------- ---------- ------------ ------------
208,027 -- 1,165,283 1,373,310
---------- ---------- ------------ ------------
Net property & equip............. 61,539 -- 825,537 887,076
---------- ---------- ------------ ------------
Goodwill......................... -- -- 137,684 2,960,118 370,015 2,727,787
Other assets..................... -- -- 5,610 -- -- 5,610
---------- ---------- ------------ ------------ ------------ ------------
Total assets................... $ 269,566 $ -- $ 2,134,114 $ 2,960,118 $ 370,015 $ 4,993,783
---------- ---------- ------------ ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------ ------------
Accounts payable and accrued
liabilities.................... $ 91,561 $ -- $ 431,459 $ $ $ 523,020
Accounts payable--related
parties........................ 38,123 -- 3,465 41,588
Customer deposits................ -- -- 11,394 11,394
Notes payable--Bank.............. -- -- 75,000 75,000
Convertible notes payable--
shareholders................... -- -- 27,392 27,392
Current portion--capital
leases......................... -- -- 18,975 18,975
---------- ---------- ------------ ------------
Total current liabilities...... 129,684 -- 567,685 697,369
---------- ---------- ------------ ------------
Long-term capital lease
obligation..................... -- -- 35,954 35,954
Common stock..................... 146,289 5,375 16,724 151,664 580 17,304
Paid-in capital.................. -- 16,262 1,641,656 3,132,839 4,790,757
Retained earnings................ -- (21,637) (127,905) 391,652 (541,194)
Cumulative foreign currency
translation adjustment......... (6,407) -- -- (6,407)
---------- ---------- ------------ ------------
Total shareholders' equity..... 139,882 -- 1,530,475 543,316 3,133,419 4,260,460
---------- ---------- ------------ ------------ ------------ ------------
Total.......................... $ 269,566 $ -- $ 2,134,114 $ 543,316 $ 3,133,419 $ 4,993,783
---------- ---------- ------------ ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------ ------------
</TABLE>
Pro Forma adjustments to record the acquisition of Sinergia as if it occurred on
January 1, 1998.
F-16
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
INCOME STATEMENT DATA
THREE MONTHS ENDING MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ONE
SINERGIA ARRIANE COMMERCE PRO FORMA ADJUSTMENTS TOTAL
---------- ----------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................................... $ 307,757 $ -- $ 423,054 $ $ $ 730,811
Cost of sales..................................... 204,432 -- 223,439 427,871
---------- ----- ---------- ----------
Gross profit.................................... 103,325 -- 199,615 302,940
---------- ----- ---------- ----------
Selling general and administrative................ 61,939 368 220,951 74,003 357,261
---------- ----- ---------- ----------
Operating income (loss)......................... 41,386 (368) (21,336) (54,321)
Other income (expense).......................... 1,455 -- (3,100) -- -- (1,645)
---------- ----- ---------- ----------- ------ ----------
Net income (loss)............................... $ 42,841 $ (368) $ (24,436) $ 74,003 $ -- $ (55,966)
---------- ----- ---------- ----------- ------ ----------
---------- ----- ---------- ----------- ------ ----------
Earnings (loss) per share applicable to common
stock:
Basic and diluted loss per share.............. $ 0.00
----------
----------
</TABLE>
Pro Forma adjustments to record the acquisition of Sinergia as if it occurred on
January 1, 1998.
F-17
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1999
-------------
<S> <C>
Cash............................................................................................... $ 785,860
Inventories........................................................................................ 62,150
Trade receivables.................................................................................. 305,255
Employee receivables............................................................................... 5,616
Prepaid expenses................................................................................... 6,402
-------------
1,165,283
-------------
Net property & equipment, at cost.................................................................. 825,537
-------------
Goodwill........................................................................................... 137,684
Other assets....................................................................................... 5,610
-------------
Total assets..................................................................................... $ 2,134,114
-------------
-------------
Accounts payable and accrued liabilities........................................................... 431,459
Accounts payable--related parties.................................................................. 3,465
Customer deposits.................................................................................. 11,394
Notes payable--Bank................................................................................ 75,000
Convertible notes payable shareholders............................................................. 27,392
Current portion--capital leases.................................................................... 18,975
-------------
Total current liabilities........................................................................ 567,685
-------------
Long-term capital lease obligation................................................................. 35,954
Shareholders' equity:
Common stock, par value $.001, 50,000,000 shares authorized, 16,723,600 issued and outstanding at
March 31, 1999................................................................................. 16,724
Additional paid-in capital....................................................................... 1,641,656
Accumulated deficit.............................................................................. (127,905)
-------------
Total shareholders' equity......................................................................... 1,530,475
-------------
Total.............................................................................................. $ 2,134,114
-------------
-------------
</TABLE>
F-18
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
<S> <C> <C>
1999 1998
---------- ----------
Revenues.................................................................................. $ 423,054 $ 217,079
Cost of sales............................................................................. 223,439 126,139
---------- ----------
Gross profit............................................................................ 199,615 90,940
---------- ----------
Selling general and administrative:
Salaries and wages...................................................................... 76,505 54,625
Other................................................................................... 144,446 32,422
---------- ----------
Total................................................................................... 220,951 87,047
---------- ----------
Operating income (loss)................................................................... (21,336) 3,893
Other income (expense).................................................................... (3,100) (368)
---------- ----------
Net income (loss)......................................................................... $ (24,436) $ 3,525
---------- ----------
---------- ----------
Basic earnings (loss) per share........................................................... $ (0.01) $ --
---------- ----------
---------- ----------
</TABLE>
F-19
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
(FORMERLY ONE COMMERCE CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss)..................................................................... $ (24,436) $ 3,525
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization....................................................... 12,144 300
Changes in current assets........................................................... (100,458) 16,326
Changes in current liabilities...................................................... 54,877 (16,584)
------------ ----------
Net cash provided (used) by operating activities...................................... (57,873) 3,567
------------ ----------
Cash flows from investing activities:
Acquisition of property and equipment................................................. (171,129) (3,567)
Other................................................................................. (4,202) --
------------ ----------
Net cash provided (used) by investing activities...................................... (175,331) (3,567)
------------ ----------
Cash flows from investing activities:
Sale of common stock.................................................................. 1,025,820 --
Other................................................................................. (11,641) --
------------ ----------
Net cash provided (used) by financing activities...................................... 1,014,179 --
------------ ----------
Net increase (decrease) in cash and cash equivalents.................................... 780,975 --
Beginning cash and cash equivalents..................................................... 4,885 --
------------ ----------
Ending cash and cash equivalents........................................................ $ 785,860 $ --
------------ ----------
------------ ----------
</TABLE>
F-20
<PAGE>
ONE ECOMMERCE CORPORATION AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements include the accounts of One
eCommerce Corporation and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
2. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form SB-2.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included.
3. The Company used the asset and liability method of Statement 109 for
accounting for income taxes. Pursuant to this method, deferred tax, assets
and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
4. On March 17, 1999, One Commerce Corporation was acquired by Arainne Co., a
Nevada corporation ("Arainne") and One Commerce Corporation became a
wholly-owned subsidiary of Arainne. The acquisition was an exchange of all
outstanding shares of One Commerce Corporation for shares of Arainne with
the shareholders of One Commerce Corporation owning 95% of the shares of
Arainne after the exchange. Arainne was an inactive corporation with no
material assets or liabilities. Arainne shares were eligible for trading on
the NASD OTC Bulletin Board. After the acquisition of One Commerce
Corporation by Arainne, Arainne's corporate name was changed to "One
eCommerce Corporation" and the officers and directors of One Commerce
Corporation became the officers and directors of the newly-named One
eCommerce Corporation.
5. On March 29, 1999, the Company entered into a letter of intent to acquire
Sinergia Servicios, S.C. ("Sinergia"). Which is expected to close on or
about August 1, 1999. Sinergia is headquartered in Guadalajara, Mexico and
provides large multinational companies with software development and system
support services.
6. The following table presents a reconciliation of the numerators and
denominators of the basic EPS and diluted EPS computations as required by
FAS 128:
<TABLE>
<CAPTION>
THREE MOUTHS ENDED MARCH 31, 1999
------------------------------------------------
WEIGHTED
AVERAGE
LOSS SHARES
(NUMERATOR) (DENOMINATOR) PER-SHARE AMOUNT
------------ ------------- -------------------
<S> <C> <C> <C>
Net loss-basic and diluted....................................... $ (24.436) 3,163,378 $ (.01)
------------ ------------- -----
------------ ------------- -----
</TABLE>
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
of Sinergia Servicios, S.C.
We have audited the accompanying balance sheet of Sinergia Servicios, S.C.
as of December 31, 1998 and 1997, and the related statements of operations,
partners' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sinergia Servicios, S.C. as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
TANNER + Co.
Salt Lake City, Utah
June 11, 1999
F-22
<PAGE>
SINERGIA SERVICIOS, S.C.
BALANCE SHEET
DECEMBER 31,
ASSETS
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash.................................................................................... $ 13,247 $ 794
Trade accounts receivable............................................................... 87,551 137,212
Prepaid expenses........................................................................ 28,948 3,479
---------- ----------
Total current assets.................................................................. 129,746 141,485
Property and equipment, net............................................................... 62,380 68,717
---------- ----------
$ 192,126 $ 210,202
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable........................................................................ $ 4,915 $ 7,287
Accrued expenses........................................................................ 70,418 92,386
Related party payables.................................................................. 62,950 6,913
---------- ----------
Total current liabilities............................................................. 138,283 106,586
---------- ----------
Commitments and contingencies............................................................. -- --
Partners' capital......................................................................... 61,444 107,838
Cumulative foreign currency translation adjustment........................................ (7,601) (4,222)
---------- ----------
53,843 103,616
---------- ----------
$ 192,126 $ 210,202
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
SINERGIA SERVICIOS, S.C.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Net sales............................................................................... $ 865,449 $ 854,184
Other................................................................................... 4,058 9,738
---------- ----------
869,507 863,922
---------- ----------
Costs and expenses:
Cost of Sales........................................................................... 670,502 582,620
Selling, general and administrative..................................................... 245,399 261,949
---------- ----------
915,901 844,569
---------- ----------
Net (loss) income....................................................................... $ (46,394) $ 19,353
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
SINERGIA SERVICIOS, S.C,
STATEMENT OF PARTNERS CAPITAL
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY
PARTNERS' TRANSLATION
CAPITAL ADJUSTMENT TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
Balance, January 1, 1997..................................................... $ 88,485 $ (2,277) $ 85,708
Comprehensive net income:
Net income................................................................. 19,353 -- 19,353
Foreign currency translation adjustment, net............................... -- (1,445) (1,445)
---------- ----------- ----------
Total comprehensive income................................................. -- -- 17,908
---------- ----------- ----------
Balance, December 31, 1997................................................... 107,838 -- 103,616
Comprehensive net income calculation:
Net loss................................................................... (46,394) -- (46,394)
Foreign currency translation adjustment, net............................... -- (3,379) (3,379)
---------- ----------- ----------
Total comprehensive loss................................................... -- -- (49,773)
---------- ----------- ----------
Balance, December 31, 1998................................................... $ 61,444 $ (7,601) $ 53,843
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
SINERGIA SERVICIOS, S.C,
STATEMENT OF PARTNERS CAPITAL (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
SINERGIA SERVICIOS. S.C.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities......................................................
Net (loss) income....................................................................... $ (46,394) $ 19,353
---------- ----------
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating
activities:
Depreciation.......................................................................... 21,077 20,394
(Increase) decrease in:
Accounts receivable............................................................... 49,661 (49,637)
Prepaid expenses.................................................................. (25,469) (2,776)
Increase (decrease) in:
Accounts payable.................................................................. (2,372) (14,903)
Accrued liabilities............................................................... (21,968) 70,802
Net cash (used in) provided by operating activities............................. (25,465) 43,233
Cash flows from investing activities--purchase of property and equipment.................. (14,740) (35,597)
Cash flows from financing activities--related party payable............................... 56,037 (15,050)
Effect of exchange rate changes........................................................... (3,379) (1,445)
Net increase (decrease) in cash................................................. 12,453 (8,859)
Cash, beginning of year................................................................... 794 9,653
---------- ----------
Cash, end of year......................................................................... $ 13,247 $ 794
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE>
SINERGIA SERVICIOS, S.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. ORGANIZATION
Sinergia Servicios, S.C. (the Company) was organized under the laws of
Mexico in February 1996. In Mexico, an S.C. represents a SOCIEDAD CIVIL, which
is the equivalent of a partnership in the United States. The Company provides
computer technical support and software design, primarily to international
companies operating in Mexico.
PRINCIPLES OF ACCOUNTING
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's operations are translated into
U.S. dollars at current exchange rates, except fixed assets, which are
translated at historical rates. Revenues and expenses are translated at an
average exchange' rate for the year. Resulting translation adjustments are
reflected as a separate component of partners' capital.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency,
except those transactions which operate as a hedge of an identifiable foreign
currency commitment or as a hedge of a foreign currency investment position, are
included in the results of operations as incurred.
CASH EQUIVALENTS
For purposes of the statement of cash flows, cash includes all cash and
investments with original maturities to the Company of three months or less.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, less accumulated depreciation.
Depreciation on property and equipment is determined using the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance and repairs are expensed when incurred and betterments are
capitalized. Gains and losses on sale of property and equipment are reflected in
operations.
REVENUE RECOGNITION
Revenue is recognized upon performance of services.
INCOME TAXES
The Company is not a taxable entity and as a result has no income tax
liability.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist primarily of cash and trade receivables. The Company's
cash is deposited in banks located in Mexico. Accordingly, the Company has a
credit risk associated with the economic and political environment in Mexico.
F-27
<PAGE>
SINERGIA SERVICIOS, S.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Office Furniture and equipment........................................ $ 6,327 $ 3,726
Computer equipment.................................................... 75,198 63,059
Transportation equipment.............................................. 22,917 22,917
---------- ----------
104,442 89,702
---------- ----------
Less accumulated depreciation....................................... (42,062) (20,985)
---------- ----------
$ 62,380 $ 68,717
---------- ----------
---------- ----------
</TABLE>
3. RELATED PARTY PAYABLES
Related party payables consist of unsecured, non-interest bearing payables
due on demand to partners of the Company.
4. SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended March 31, 1999 (unaudited), the shareholders
of the Company converted $42,004 of related party payables to common stock.
The Company paid no cash for interest or taxes for the years ended December
31, 1998 or 1997.
5. MAJOR CUSTOMERS
The Company had net sales to a major customer of approximately $667,000 and
$731,000 for the years ended December 31, 1998 and 1997, respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
None of the Company's financial instruments are held for trading purposes.
The Company estimates that the fair value of all financial instruments at
December 31, 1998 and 1997, does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgement is necessarily required in interpreting
market data to develop the estimates of fair value, and, accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
F-28
<PAGE>
7. SUBSEQUENT EVENT
During March 1999, the partners of the Company entered into a letter of
intent to sell all of their partnership interest to another company.
F-29
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, bylaws, contracts or other arrangements
under which controlling persons, directors or officers of the registrant are
insured or indemnified in any manner against any liability which they may incur
in such capacity are as follows:
A. Section 78.751 of the Nevada Business Corporation Act provides that each
corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction, determines upon application that in
view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections 1 and 2, or in defense of any
claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court or
advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
<PAGE>
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal
counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by
the corporation as they are incurred and in advance of the final disposition
of the action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to
be indemnified by the corporation. The provisions of this subsection do not
affect any rights to advancement of expenses to which corporate personnel
other than director of officers may be entitled under any contract or
otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, for either an action in his
official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant
to subsection 2 or for the advancement of expenses made pursuant to
subsection 5, may not be made to or on behalf of any director or officer
if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
B. The Registrant's Articles of Incorporation limit liability of its
officers and directors to the corporation for monetary damages for any breach of
fiduciary duty subject to certain exceptions.
C. The Registrant has executed an indemnity agreement with certain of its
directors and key employees under which the Registrant will indemnify them for
certain losses and expenses.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all estimated costs and expenses, other than
underwriting discounts, commissions and expense allowances, payable by the
registrant in connection with the maximum offering for the securities included
in this Registration Statement:
<TABLE>
<CAPTION>
AMOUNT(1)
-----------
<S> <C>
SEC registration fee.............................................................. 6,919
Blue sky fees and expenses........................................................ 2,500
Printing and shipping expenses.................................................... 1,000
Legal fees and expenses........................................................... 50,000
Accounting fees and expenses...................................................... 65,000
Miscellaneous expenses and Transfer Agent fees.................................... 1,000
-----------
Total........................................................................... $ 126,419
-----------
</TABLE>
- ------------------------
(1) All expenses are estimated except the Commission filing fee.
2
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
As of June 30, 1999, the Registrant issued and sold 125,000 shares of its
Common Stock to certain accredited investors and raised $250,000 of capital.
This transaction was not registered under the Securities Act of 1933, as amended
(the "Act"), in reliance on the exemption provided by Section 4(2) of the Act,
as a transaction not involving any public offering. The shares of Common Stock
were issued as restricted securities and the certificates were stamped with a
restrictive legend to prevent any resale without registration under the Act or
in compliance with an exemption therefrom.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended Articles of Incorporation of the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
4.0 Form of Warrant.
5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. regarding the legality of the Warrants and shares
of Common Stock being registered.
10.1 Letter of Intent, dated March 29, 1999, between the Registrant and Sinergia Servicios, S.C.
10.2* Acquisition Agreement for Corridor Technologies, L.L.C.
10.3 Employment Agreement, dated November 1, 1998, between Mr. David Carolan and the Registrant.
10.4 Employment Agreement, dated October 27, 1999, between Mr. Gil Lozano and the Registrant.
10.5 Office Lease, dated March 3, 1999, between the Registrant and Executive Plaza Joint Venture.
10.6 Office Lease, dated October 22, 1998, between the Registrant and Executive Plaza Joint Venture.
10.7 Agreement and Plan of Reorganization, dated March 17, 1999, between the Registrant and Arianne Co.
24.1 Consent of David Patrick and Company, P.C.
24.2 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in its opinion filed as Exhibit 5
hereto).
24.3 Consent of Tanner & Co.
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement, as amended, to be signed
on its behalf by the undersigned, thereunto duly authorized, in Austin, Texas on
July 12, 1999.
<TABLE>
<S> <C> <C>
ONE ECOMMERCE CORPORATION
By: /s/ DAVID B. CAROLAN
-----------------------------------------
Name: David B. Carolan
Title: CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement, as amended, has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ GIL LOZANO
- ------------------------------ President and Director July 12, 1999
Gil Lozano
/s/ DAVID B. CAROLAN
- ------------------------------ Chief Executive Officer July 12, 1999
David B. Carolan and Director
/s/ JOHN B. WELCH
- ------------------------------ Chief Financial Officer July 12, 1999
John B. Welch and Director
/s/ JERRY BALDWIN Executive Vice President
- ------------------------------ and Chief Marketing July 12, 1999
Jerry Baldwin Officer
</TABLE>
4
<PAGE>
EXHIBIT 3.1
AMENDED ARTICLES OF INCORPORATION
OF THE REGISTRANT
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 30 1999
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
ARIANNE CO.
Pursuant to the applicable provisions of the Nevada Business
Corporations Act, Arianne Co. (the "Corporation") adopts the following
Articles of Amendment to its Articles of Incorporation:
FIRST: The present name of the Corporation is Arianne Co.
SECOND: The following amendments to its Articles of Incorporation were
adopted by the board of directors and by majority consent of shareholders of
the Corporation in the manner prescribed by applicable law.
(1) The Article entitled ARTICLE I - NAME, is amended to read as
follows:
ARTICLE I - NAME
The name of the corporation shall be: One E-Commerce Corporation
(2) The Article entitled ARTICLE IV - STOCK, is amended to read as
follows:
ARTICLE IV - STOCK
COMMON. The aggregate number of common shares which this Corporation
shall have authority to issue is 50,000,000 shares of Common Stock having a par
value of $.001 per share. All common stock of the Corporation shall be of the
same class, common, and shall have the same rights and preferences. Fully-paid
common stock of this Corporation shall not be liable to any further call or
assessment.
PREFERRED. The Corporation shall be authorized to issue 500,000
shares of Preferred Stock having a par value of $.001 per share and with such
rights, preferences and designations determined by the board of directors.
THIRD: The Corporation has effectuated, effective with the
commencement of business on Wednesday, March 31, 1999, a 1.8 to 1 forward
stock split as to its shares of common stock outstanding as of the opening of
business on Tuesday, March 30, 1999, which increases the outstanding shares as
of that date from 416,666 shares to 750,000 shares. The forward split shall
not change the number of shares of Common Stock authorized for issuance by
the Corporation.
<PAGE>
FOURTH: The number of shares of the Corporation outstanding and
entitled to vote at the time of the adoption of said amendment was 5,375,000.
FIFTH: The number of shares voted for such amendments was 5,294,400
(98.5%) and no shares were voted against such amendment.
DATED this 20 day of March, 1999.
ARIANNE CO.
By: /s/
----------------------------------
Lisa D. Ryan, President/Secretary
VERIFICATION
STATE OF UTAH )
:ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states: that the
undersigned is the President of Arianne Co., that the undersigned has read the
Certificate of Amendment and knows the contents thereof and that the same
contains a truthful statement of the Amendment duly adopted by the board of
directors and stockholders of the Corporation.
/s/
----------------------------------
Lisa D. Ryan, President
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of Arianne Co., a Nevada
corporation, and signed the foregoing Articles of Amendment as her own free and
voluntary acts and deeds pursuant to a corporate resolution for the uses and
purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this 20 day of March,
1999.
[Seal]
/s/
----------------------------------
NOTARY PUBLIC
Notary Seal:
<PAGE>
ARTICLES OF INCORPORATION
OF
ARIANNE CO.
WE THE UNDERSIGNED natural persons of the age of eighteen (18) years
or more, acting as incorporators of a corporation under the Nevada Business
Corporation Act adopt the following Articles of Incorporation.
ARTICLE I
NAME
The Name of the corporation is ARIANNE CO.
ARTICLE II
DURATION
The duration of the corporation is perpetual.
ARTICLE III
PURPOSES
The purpose or purposes for which this corporation is engaged are:
(a) To produce childrens books and works of art. Also, to
acquire, develop, explore, and otherwise deal in and with all kinds of
real and personal property and all related activities, and for any and
all other lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest,
subscription, or otherwise; and to hold, own, mortgage, pledge,
hypothecate, sell, assign, transfer, exchange, or otherwise dispose of
or deal in or with its own corporate securities or stock or other
securities including, without limitations, any shares of stock, bonds,
debentures, notes mortgages, or other obligations, and any
certificates, receipts or other instruments representing rights or
interests therein on any property or assets created or issued by any
person, firm, associate, or corporation, or instrumentalities thereof;
to make payment therefor in any lawful
-1-
<PAGE>
manner or to issue in exchange therefor in any lawful manner or to
issue in exchange therefor its unreserved earned surplus for the
purchase of its own shares, and to exercise as owner or holder of
any securities, any and all rights, powers, and privileges in
respect thereof.
(c) To do each and everything necessary, suitable, or proper
for the accomplishment of any of the purposes or the attainment of
any one or more of the subjects herein enumerated, or which may, at
any time, appear conducive to or expedient for the protection or
benefit of this corporation, and to do said acts as fully and to
the same extent as natural persons might, or could do in any part
of the world as principals, agents, partners, trustees, or
otherwise, either alone or in conjunction with any other person,
association, or corporation.
(d) The foregoing clauses shall be construed both as purposes
and powers and shall not be held to limit or restrict in any manner the
general powers of the corporation, and the enjoyment and exercise
thereof, as conferred by the laws of the State of Nevada; and it is the
intention that the purposes and powers specified in each of the
paragraphs of this Article III shall be regarded as independent
purposes and powers.
ARTICLES IV
STOCK
The aggregate number of shares which this corporation shall have
authority to issue is 50,000,000 shares of Common Stock having a par value of
$.001 per share. All Stock of the corporation shall be of the same class,
common, and shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment.
ARTICLE V
AMENDMENT
These Articles of Incorporation may be amended by the affirmative Vote
of "a majority" of the shares entitled to vote on each such amendment.
ARTICLE VI
SHAREHOLDERS RIGHTS
The authorized and treasury stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall
-2-
<PAGE>
determine. Shareholders shall not have pre-emptive rights to acquire unissued
shares of the stock of this corporation.
ARTICLE VII
INITIAL OFFICE AND AGENT
The registered office of the Corporation in the State of Nevada is 3230
E. Flamingo Road, Suite 156, Las Vegas, NV 89121. The registered agent in charge
thereof at such address is Gateway Enterprises, Inc.
ARTICLE VIII
DIRECTORS
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business corporation act
provides that the directors may act in certain instances where the Articles of
Incorporation authorize such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or
pledge any or all assets of the business with stockholders' approval.
The number of directors constituting the initial Board of Directors of
this corporation is one (1). The names and addresses of persons who are to serve
as Directors until the first annual meeting of stockholders or until their
successors are elected and qualify are:
NAME ADDRESS
---- -------
ARIANNE NEMELKA 897 SOUTH ARTISTIC CIRCLE
SPRINGVILLE, UTAH 84663
ARTICLES IX
INCORPORATORS
The name and address of each incorporator is:
NAME ADDRESS
---- -------
ARIANNE NEMELKA 897 SOUTH ARTISTIC CIRCLE
SPRINGVILLE, UTAH 84663
-3-
<PAGE>
ARTICLE X
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATIONS
No contract or other transaction between this corporation and any on
or more of its directors or any other corporation, firm, association, or
entity in which one or more of its directors or officers are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves,
or ratifies such contract or transaction, or because his or their votes are
counted for such purpose if: (a) the fact of such relationship or interest is
disclosed or known to the Board of Directors or committee which authorizes,
approves, or ratifies the contract or transaction by vote or consent
sufficient for the purpose without counting the votes or consents of such
interested director; or (b) the fact of such relationship or interest is
disclosed or known to the stockholders entitled to vote and they authorize,
approve, or ratify such contract or transaction by vote or written consent,
or (c) the contract or transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or committee there
of which authorizes, approves or ratifies such contract or transaction.
ARTICLE XI
LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall be personally liable to the Corporation
or its stockholders for monetary damages for any breach of fiduciary duty by
such person as a director or officer. Notwithstanding the foregoing sentence,
a director or officer shall be liable to the extent provided by applicable
law, (i) for acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law, or (ii) for the payment of dividends in
violation of NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the Corporation for
or with respect to any acts or omissions of such person occurring prior to such
amendment.
Under penalties of perjury, I declare that these Articles of
Incorporation have been examined by me an are, to the best of my knowledge and
belief, true, correct and complete.
Dated this 25 day of August, 1994
/s/
----------------------------------
ARIANNE NEMELKA
-4-
<PAGE>
STATE OF UTAH )
) ss.
COUNTY OF )
On the 25 day of August, 1994, personally appeared before me, Arianne
Nemelka, who being by me first duly sworn, declared that they are the persons
who signed the foregoing document as incorporators and that the statements
therein contained are true.
IN WITNESS THEREOF, I have hereunto set my hand and seal this 25 day of
August, 1994.
/s/ Kimberly A. Patterson
----------------------------------
NOTARY PUBLIC
Residing at 225 W. Main St.
----------------------
Mason, OH 45040
----------------------
My commission expires:
KIMBERLY A. PATTERSON
- ------------------------------
Notary Public, State of Ohio
My Commission Expires July 23, 1998
-5-
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ONE ECOMMERCE CORPORATION
a Nevada corporation
(THE "COMPANY")
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ONE ECOMMERCE CORPORATION, INC.
ARTICLE I
OFFICES
Section 1.1 REGISTERED OFFICE. The registered office of the
Company within the State of Nevada shall be located at either (i) the
principal place of business of the Company in the State of Nevada or (ii) the
office of the corporation or individual acting as the Company's registered
agent in Nevada.
Section 1.2 ADDITIONAL OFFICES. The Company may, in addition to
its registered office in the State of Nevada, have such other offices and
places of business, both within and without the State of Nevada, as the Board
of Directors of the Company (the "Board") may from time to time determine or
as the business and affairs of the Company may require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 2.1 ANNUAL MEETINGS. Annual meetings of stockholders
shall be held at a place and time on any weekday that is not a holiday and
that is not more than 120 days after the end of the fiscal year of the
Company as shall be designated by the Board and stated in the notice of the
meeting, at which the stockholders shall elect the directors of the Company
and transact such other business as may properly be brought before the
meeting.
Section 2.2 SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by law
or by the certificate of incorporation, (i) may be called by the chairman of
the board or the president and (ii) shall be called by the president or
secretary at the request in writing of a majority of the Board or
stockholders owning capital stock of the Company representing a majority of
the votes of all capital stock of the Company entitled to vote thereat. Such
request of the Board or the stockholders shall state the purpose or purposes
of the proposed meeting.
Section 2.3 NOTICES. Written notice of each stockholders meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote thereat by or at the direction of the officer
calling such meeting not less than ten nor more than sixty days before the
date of the meeting. If said notice is for a stockholders meeting other than
an annual meeting, it shall in addition state the purpose or purposes for
which said meeting is called, and the business transacted at such meeting
shall be limited to the matters so stated in said notice and any matters
reasonably related thereto.
<PAGE>
Section 2.4 QUORUM. The presence at a stockholders meeting of the
holders, present in person or represented by proxy, of capital stock of the
Company representing a majority of the votes of all capital stock of the
Company entitled to vote thereat shall constitute a quorum at such meeting
for the transaction of business except as otherwise provided by law, the
certificate of incorporation or these Bylaws. If a quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present or represented. At such reconvened meeting at which a quorum shall
be present or represented, any business may be transacted that might have
been transacted at the meeting as originally notified. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the reconvened meeting, a notice of said meeting shall be given to
each stockholder entitled to vote at said meeting. The stockholders present
at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 2.5 VOTING OF SHARES.
Section 2.5.1 VOTING LISTS. The officer or agent who has charge
of the stock ledger of the Company shall prepare, at least ten days and no
more than sixty days before every meeting of stockholders, a complete list of
the stockholders entitled to vote thereat arranged in alphabetical order and
showing the address and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The original stock transfer
books shall be prima facie evidence as to who are the stockholders entitled
to examine such list or transfer books or to vote at any meeting of
stockholders. Failure to comply with the requirements of this section shall
not affect the validity of any action taken at said meeting.
Section 2.5.2 VOTES PER SHARE. Unless otherwise provided in the
certificate of incorporation, each stockholder shall be entitled to one vote
in person or by proxy at every stockholders meeting for each share of capital
stock held by such stockholder.
Section 2.5.3 PROXIES. Every stockholder entitled to vote at a
meeting or to express consent or dissent without a meeting or a stockholder's
duly authorized attorney-in-fact may authorize another person or persons to
act for him by proxy. Each proxy shall be in writing, executed by the
stockholder giving the proxy or by his duly authorized attorney. No proxy
shall be voted on or after three years from its date, unless the proxy
provides for a longer period. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns, except in those cases where an irrevocable proxy
permitted by statute has been given.
2
<PAGE>
Section 2.5.4 REQUIRED VOTE. When a quorum is present at any
meeting, the vote of the holders, present in person or represented by proxy,
of capital stock of the Company representing a majority of the votes of all
capital stock of the Company entitled to vote thereat shall decide any
question brought before such meeting, unless the question is one upon which,
by express provision of law or the certificate of incorporation or these
Bylaws, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
Section 2.5.5 CONSENTS IN LIEU OF MEETING. Any action required to
be or that may be taken at any meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt, written
notice of the action taken by means of any such consent which is other than
unanimous shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 3.1 POWERS. The business of the Company shall be managed
by or under the direction of the Board, which may exercise all such powers of
the Company and do all such lawful acts and things as are not by law, the
certificate of incorporation or these Bylaws directed or required to be
exercised or done by the stockholders. Directors need not be stockholders or
residents of the State of Nevada.
Section 3.2 NUMBER. The number of directors constituting the
Board shall never be less than one and shall be determined by resolution of
the Board.
Section 3.3 ELECTION. Directors shall be elected by the
stockholders by plurality vote at an annual stockholders meeting as provided
in the certificate of incorporation, except as hereinafter provided, and each
director shall hold office until such director's successor has been duly
elected and qualified or until such director's earlier resignation or removal.
Section 3.4 VACANCIES. Vacancies and newly-created directorships
resulting from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall
hold office until their successors are duly elected and qualified. If there
are no directors in office, then an election of directors may be held in the
manner provided by law. If, at the time of filling any vacancy or any
newly-created directorship, the directors then in office shall constitute
less than a majority of the whole Board (as constituted immediately prior to
any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the total number
of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies
or newly-created directorships, or to replace the directors chosen by the
directors then in office. No decrease in the size of the Board shall serve
to shorten the term of an incumbent director.
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Section 3.5 REMOVAL. Unless otherwise restricted by law, the
certificate of incorporation or these Bylaws, any director or the entire
Board may be removed, with or without cause, by a majority vote of the shares
entitled to vote at an election of directors, if notice of the intention to
act upon such matter shall have been given in the notice calling such meeting.
Section 3.6 COMPENSATION. Unless otherwise restricted by the
certificate of incorporation or these Bylaws, the Board shall have the
authority to fix the compensation of directors. The directors may be
reimbursed their expenses, if any, of attendance at each meeting of the Board
and may be paid either a fixed sum for attendance at each meeting of the
Board or a stated salary as director. No such payment shall preclude any
director from serving the Company in any other capacity and receiving
compensation therefor. Members of committees of the Board may be allowed
like compensation for attending committee meetings.
ARTICLE IV
BOARD MEETINGS
Section 4.1 ANNUAL MEETINGS. The Board shall meet as soon as
practicable after the adjournment of each annual stockholders meeting at the
place of the stockholders meeting. No notice to the directors shall be
necessary to legally convene this meeting, provided a quorum is present.
Section 4.2 REGULAR MEETINGS. Regularly scheduled, periodic
meetings of the Board may be held without notice at such times and places as
shall from time to time be determined by resolution of the Board and
communicated to all directors.
Section 4.3 SPECIAL MEETINGS. Special meetings of the Board (i)
may be called by the chairman of the board or president and (ii) shall be
called by the president or secretary on the written request of two directors
or the sole director, as the case may be. Notice of each special meeting of
the Board shall be given, either personally or as hereinafter provided, to
each director at least 24 hours before the meeting if such notice is
delivered personally or by means of telephone, telegram, telex or facsimile
transmission and delivery; two days before the meeting if such notice is
delivered by a recognized express delivery service; and three days before the
meeting if such notice is delivered through the United States mail. Any and
all business that may be transacted at a regular meeting of the Board may be
transacted at a special meeting. Except as may be otherwise expressly
provided by law, the certificate of incorporation or these Bylaws, neither
the business to be transacted at, nor the purpose of, any special meeting
need be specified in the notice or waiver of notice of such meeting.
Section 4.4 QUORUM; REQUIRED VOTE. A majority of the directors
shall constitute a quorum for the transaction of business at any meeting of
the Board, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board, except as may be
otherwise specifically provided by law, the certificate of incorporation or
these Bylaws. If a quorum shall not be present at any meeting, a majority of
the directors present may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
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Section 4.5 CONSENT IN LIEU OF MEETING. Unless otherwise
restricted by the certificate of incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board or any
committee thereof may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or
committee.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1 ESTABLISHMENT; STANDING COMMITTEES. The Board may by
resolution establish, name or dissolve one or more committees, each committee
to consist of one or more of the directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board when
required. There shall exist the following standing committees, which
committees shall have and may exercise the following powers and authority:
Section 5.1.1 FINANCE COMMITTEE. The Finance Committee shall from
time to time meet to review the Company's consolidated operating and
financial affairs, both with respect to the Company, and to report its
findings and recommendations to the Board for final action. The Finance
Committee shall not be empowered to approve any corporate action of whatever
kind or nature, and the recommendations of the Finance Committee shall not be
binding on the Board, except when, pursuant to the provisions of Section 5.2
hereof, such power and authority have been specifically delegated to such
committee by the Board by resolution. In addition to the foregoing, the
specific duties of the Finance Committee shall be determined by the Board by
resolution.
Section 5.1.2 AUDIT COMMITTEE. The Audit Committee shall from
time to time, but no less than two times per year, meet to review and monitor
the financial and cost accounting practices and procedures of the Company and
to report its findings and recommendations to the Board for final action.
The Audit Committee shall not be empowered to approve any corporate action of
whatever kind or nature, and the recommendations of the Audit Committee shall
not be binding on the Board, except when, pursuant to the provisions of
Section 5.2 hereof, such power and authority have been specifically delegated
to such committee by the Board by resolution. In addition to the foregoing,
the specific duties of the Audit Committee shall be determined by the Board
by resolution.
Section 5.1.3 COMPENSATION COMMITTEE. The Compensation Committee
shall from time to time meet to review the various compensation plans,
policies and practices of the Company and to report its findings and
recommendations to the Board for final action. The Compensation Committee
shall not be empowered to approve any corporate action of whatever kind or
nature, and the recommendations of the Compensation Committee shall not be
binding on the Board, except when, pursuant to the provisions of Section 5.2
hereof, such power and authority have been specifically delegated to such
committee by the Board by resolution. In addition to the foregoing, the
specific duties of the Compensation Committee shall be determined by the
Board by resolution.
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Section 5.2 AVAILABLE POWERS. Any committee established pursuant
to Section 5.1 hereof, including the Finance Committee, the Audit Committee
and the Compensation Committee, but only to the extent provided in the
resolution of the Board establishing such committee or otherwise delegating
specific power and authority to such committee and as limited by law, the
certificate of incorporation and these Bylaws, shall have and may exercise
all of the powers and authority of the Board in the management of the
business and affairs of the Company, and may authorize the seal of the
Company to be affixed to all papers that may require it. Without limiting
the foregoing, such committee may, but only to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock
adopted by the Board as provided in Section 151(a) of the General Corporation
Law of Nevada, fix any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
Company or the conversion into, or the exchange of such shares for, shares of
any other class or classes or any other series of the same or any other class
or classes of stock of the Company.
Section 5.3 UNAVAILABLE POWERS. No committee of the Board shall
have the power or authority to (1) approve or adopt, or recommend to the
stockholders, any action or matter expressly required by the General
Corporation Law of Nevada to be submitted to stockholders for approval or (2)
adopt, amend or repeal any provision in these Bylaws.
Section 5.4 ALTERNATE MEMBERS. The Board may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of such committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not the member or members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
Section 5.5 PROCEDURES. Time, place and notice, if any, of
meetings of a committee shall be determined by such committee. At meetings
of a committee, a majority of the number of members designated by the Board
shall constitute a quorum for the transaction of business. The act of a
majority of the members present at any meeting at which a quorum is present
shall be the act of the committee, except as otherwise specifically provided
by law, the certificate of incorporation or these Bylaws. If a quorum is not
present at a meeting of a committee, the members present may adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum is present.
ARTICLE VI
OFFICERS
Section 6.1 ELECTED OFFICERS. The Board shall elect a president,
a treasurer and a secretary (collectively, the "Required Officers") having
the respective duties enumerated below and may elect such other officers
having the titles and duties set forth below that are not reserved for the
Required Officers or such other titles and duties as the Board may by
resolution from time to time establish:
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Section 6.1.1 CHAIRMAN OF THE BOARD. The chairman of the board,
or in his or her absence, the president, shall preside when present at all
meetings of the stockholders and the Board. The chairman of the board shall
advise and counsel the president and other officers and shall exercise such
powers and perform such duties as shall be assigned to or required of the
chairman from time to time by the Board or these Bylaws. The chairman of the
board may execute bonds, mortgages and other contracts requiring a seal under
the seal of the Company, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board to some other officer or
agent of the Company. The chairman of the board may delegate all or any of
his or her powers or duties to the president, if and to the extent deemed by
the chairman of the board to be desirable or appropriate.
Section 6.1.2 PRESIDENT. The president shall be the chief
executive officer of the Company, shall have general and active management of
the business of the Company and shall see that all orders and resolutions of
the Board are carried into effect. In the absence of the chairman of the
board or in the event of his or her inability or refusal to act, the
president shall perform the duties and exercise the powers of the chairman of
the board.
Section 6.1.3 VICE PRESIDENTS. In the absence of the president or
in the event of the president's inability or refusal to act, the vice
president (or in the event there be more than one vice president, the vice
presidents in the order designated by the Board, or in the absence of any
designation, then in the order of their election or appointment) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice presidents shall perform such other duties and have such other powers as
the Board may from time to time prescribe.
Section 6.1.4 SECRETARY. The secretary shall attend all meetings
of the stockholders, the Board and (as required) committees of the Board and
shall record all the proceedings of such meetings in books to be kept for
that purpose. The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board and shall
perform such other duties as may be prescribed by the Board or the president.
The secretary shall have custody of the corporate seal of the Company and
the secretary, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it, and when so affixed, it may be attested
by his or her signature or by the signature of such assistant secretary. The
Board may give general authority to any other officer to affix the seal of
the Company and to attest the affixing thereof by his or her signature.
Section 6.1.5 ASSISTANT SECRETARIES. The assistant secretary, or
if there be more than one, the assistant secretaries in the order determined
by the Board (or if there be no such determination, then in the order of
their election or appointment) shall, in the absence of the secretary or in
the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the Board may from time to time prescribe.
Section 6.1.6 TREASURER. Unless the Board by resolution otherwise
provides, the treasurer shall be the chief accounting and financial officer
of the Company. The treasurer shall have the custody of the corporate funds
and securities, shall keep full and accurate accounts of
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receipts and disbursements in books belonging to the Company and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Company in such depositories as may be designated by the Board. The
treasurer shall disburse the funds of the Company as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
president and the Board, at its regular meetings, or when the Board so
requires, an account of all his or her transactions as treasurer and of the
financial condition of the Company.
Section 6.1.7 ASSISTANT TREASURERS. The assistant treasurer, or
if there shall be more than one, the assistant treasurers in the order
determined by the Board (or if there be no such determination, then in the
order of their election or appointment) shall, in the absence of the
treasurer or in the event of his or her inability or refusal to act, perform
the duties and exercise the powers of the treasurer and shall perform such
other duties and have such other powers as the Board may from time to time
prescribe.
Section 6.1.8 DIVISIONAL OFFICERS. Each division of the Company,
if any, may have a president, secretary, treasurer or controller and one or
more vice presidents, assistant secretaries, assistant treasurers and other
assistant officers. Any number of such offices may be held by the same
person. Such divisional officers will be appointed by, report to and serve
at the pleasure of the Board and such other officers that the Board may place
in authority over them. The officers of each division shall have such
authority with respect to the business and affairs of that division as may be
granted from time to time by the Board, and in the regular course of business
of such division may sign contracts and other documents in the name of the
division where so authorized; provided that in no case and under no
circumstances shall an officer of one division have authority to bind any
other division of the Company except as necessary in the pursuit of the
normal and usual business of the division of which he or she is an officer.
Section 6.2 ELECTION. All elected officers shall serve until
their successors are duly elected and qualified or until their earlier death,
resignation or removal from office.
Section 6.3 APPOINTED OFFICERS. The Board may also appoint or
delegate the power to appoint such other officers, assistant officers and
agents, and may also remove such officers and agents or delegate the power to
remove same, as it shall from time to time deem necessary, and the titles and
duties of such appointed officers may be as described in Section 6.1 hereof
for elected officers; provided that the officers and any officer possessing
authority over or responsibility for any functions of the Board shall be
elected officers.
Section 6.4 MULTIPLE OFFICEHOLDERS; STOCKHOLDER AND DIRECTOR
OFFICERS. Any number of offices may be held by the same person, unless the
certificate of incorporation or these Bylaws otherwise provide. Officers
need not be stockholders or residents of the State of Nevada. Officers, such
as the chairman of the board, possessing authority over or responsibility for
any function of the Board must be directors.
Section 6.5 COMPENSATION; VACANCIES. The compensation of elected
officers shall be set by the Board. The Board shall also fill any vacancy in
an elected office. The compensation of appointed officers and the filling of
vacancies in appointed offices may be delegated by the Board to the same
extent as permitted by these Bylaws for the initial filling of such offices.
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Section 6.6 ADDITIONAL POWERS AND DUTIES. In addition to the
foregoing especially enumerated powers and duties, the several elected and
appointed officers of the Company shall perform such other duties and
exercise such further powers as may be provided by law, the certificate of
incorporation or these Bylaws or as the Board may from time to time determine
or as may be assigned to them by any competent committee or superior officer.
Section 6.7 REMOVAL. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board.
ARTICLE VII
SHARE CERTIFICATES
Section 7.1 ENTITLEMENT TO CERTIFICATES. Every holder of the
capital stock of the Company, unless and to the extent the Board by
resolution provides that any or all classes or series of stock shall be
uncertificated, shall be entitled to have a certificate, in such form as is
approved by the Board and conforms with applicable law, certifying the number
of shares owned by such holder.
Section 7.2 MULTIPLE CLASSES OF STOCK. If the Company shall be
authorized to issue more than one class of capital stock or more than one
series of any class, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualification, limitations or restrictions of
such preferences and/or rights shall, unless the Board shall by resolution
provide that such class or series of stock shall be uncertificated, be set
forth in full or summarized on the face or back of the certificate that the
Company shall issue to represent such class or series of stock; provided
that, to the extent allowed by law, in lieu of such statement, the face or
back of such certificate may state that the Company will furnish a copy of
such statement without charge to each requesting stockholder.
Section 7.3 SIGNATURES. Each certificate representing capital
stock of the Company shall be signed by or in the name of the Company by (1)
the chairman of the board, the president or a vice president; and (2) the
treasurer, an assistant treasurer, the secretary or an assistant secretary of
the Company. The signatures of the officers of the Company may be facsimiles.
In case any officer who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to hold such office before such
certificate is issued, it may be issued by the Company with the same effect
as if he or she held such office on the date of issue.
Section 7.4 ISSUANCE AND PAYMENT. Subject to the provisions of
law, the certificate of incorporation or these Bylaws, shares may be issued
for such consideration and to such persons as the Board may determine from
time to time. Shares may not be issued until the full amount of the
consideration has been paid, unless upon the face or back of each certificate
issued to represent any partly paid shares of capital stock there shall have
been set forth the total amount of the consideration to be paid therefor and
the amount paid thereon up to and including the time said certificate is
issued.
Section 7.5 LOST CERTIFICATES. The Board may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Company alleged to
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have been lost, stolen or destroyed upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the Company a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Company with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 7.6 TRANSFER OF STOCK. Upon surrender to the Company or
its transfer agent, if any, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer and of the payment of all taxes applicable to the transfer of said
shares, the Company shall be obligated to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the
transaction upon its books; provided, however, that the Company shall not be
so obligated unless such transfer was made in compliance with applicable
state and federal securities laws.
Section 7.7 REGISTERED STOCKHOLDERS. The Company shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, vote and be held liable for
calls and assessments and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any person
other than such registered owner, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 GENERAL. The Company shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Company), by reason of the fact that the person is or was a director,
officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, have reasonable cause to believe that
his or her conduct was unlawful.
Section 8.2 ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The
Company shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened,
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pending or completed action or suit by or in the right of the Company to
procure a judgment in its favor by reason of the fact that the person is or
was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture or trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the Company and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 8.3 INDEMNIFICATION AGAINST EXPENSES. To the extent that
a present or former director or officer of the Company has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 8.1 and 8.2 hereof, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
Section 8.4 BOARD DETERMINATIONS. Any indemnification under
Sections 8.1 and 8.2 hereof (unless ordered by a court) shall be made by the
Company only as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or agent
is proper in the circumstances because the person has met the applicable
standard of conduct set forth in Sections 8.1 and 8.2 hereof. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who were not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated
by majority vote of such directors, even though less than a quorum, or (3) if
there are no such disinterested directors or if such directors so direct, by
independent legal counsel in a written opinion, or (4) by the stockholders.
Section 8.5 ADVANCEMENT OF EXPENSES. Expenses including
attorneys' fees incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the Company as authorized by law or in this section. Such
expenses incurred by former directors and officers or other employees and
agents may be so paid upon such terms and conditions, if any, as the Company
deems appropriate.
Section 8.6 NONEXCLUSIVE. The indemnification and advancement of
expenses provided by, or granted pursuant to, this section shall not be
deemed exclusive of any other rights to which any director, officer, employee
or agent of the Company seeking indemnification or advancement of expenses
may be entitled under any other bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall, unless
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otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent of the Company and
shall inure to the benefit of the heirs, executors and administrators of such
a person.
Section 8.7 INSURANCE. The Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity
or arising out of such person's status as such, whether or not the Company
would have the power to indemnify such person against such liability under
the provisions of applicable statutes, the certificate of incorporation or
this section.
Section 8.8 CERTAIN DEFINITIONS. For purposes of this Section
8.8, (a) references to "the Company" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger that, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued; (b) references to "other
enterprises" shall include employee benefit plans; (c) references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and (d) references to "serving at the request of the
Company" shall include any service as a director, officer, employee or agent
of the Company that imposes duties on, or involves services by, such
director, officer, employee or agent with respect to any employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this section.
Section 8.9 CHANGE IN GOVERNING LAW. In the event of any
amendment or addition to Section 145 of the General Corporation Law of Nevada
or the addition of any other section to such law that limits indemnification
rights thereunder, the Company shall, to the extent permitted by the General
Corporation Law of Nevada, indemnify to the fullest extent authorized or
permitted hereunder, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the Company), by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding.
12
<PAGE>
ARTICLE IX
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
Section 9.1 VALIDITY. Any contract or other transaction between
the Company and any of its directors, officers or stockholders (or any
corporation or firm in which any of them are directly or indirectly
interested) shall be valid for all purposes notwithstanding the presence of
such director, officer or stockholder at the meeting authorizing such
contract or transaction, or his or her participation or vote in such meeting
or authorization.
Section 9.2 DISCLOSURE; APPROVAL. The foregoing shall, however,
apply only if the material facts of the relationship or the interests of each
such director, officer or stockholder are known or disclosed:
(A) to the Board and it nevertheless in good faith
authorizes or ratifies the contract or transaction by a majority of
the directors present, each such interested director to be counted
in determining whether a quorum is present but not in calculating
the majority necessary to carry the vote; or
(B) to the stockholders and they nevertheless in good
faith authorize or ratify the contract or transaction by a majority
of the shares present, each such interested person to be counted
for quorum and voting purposes.
Section 9.3 NONEXCLUSIVE. This provision shall not be construed
to invalidate any contract or transaction that would be valid in the absence
of this provision.
ARTICLE X
MISCELLANEOUS
Section 10.1 PLACE OF MEETINGS. All stockholders, directors and
committee meetings shall be held at such place or places, within or without
the State of Nevada, as shall be designated from time to time by the Board or
such committee and stated in the notices thereof. If no such place is so
designated, said meetings shall be held at the principal business office of
the Company.
Section 10.2 FIXING RECORD DATES.
(a) In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board may
fix, in advance, a record date, which shall not precede the
date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more
than sixty nor less than ten days prior to any such action.
If no record date is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business
on the day next preceding the day notice is given or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to
13
<PAGE>
any adjournment of the meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
(b) In order that the Company may determine the
stockholders entitled to consent to corporate action in
writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board,
and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted
by the Board. If no record date has been fixed by the Board,
the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting,
when no prior action by the Board is otherwise required,
shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is
delivered to the Company by delivery to its registered office
in the State of Nevada, its principal place of business, or
an officer or agent of the Company having custody of the book
in which proceedings of meetings of stockholders are
recorded. Delivery made to the Company's registered office
shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the
Board and prior action by the Board is required, the record
date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the
close of business on the day on which the Board adopts the
resolution taking such prior action.
(c) In order that the Company may determine the
stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix a
record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior
to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at
the close of business on the day on which the Board adopts
the resolution relating thereto.
Section 10.3 MEANS OF GIVING NOTICE. Whenever under applicable
law, the certificate of incorporation or these Bylaws, notice is required to
be given to any director or stockholder, such notice may be given in writing
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or stockholder at
his or her address or telex or facsimile transmission number, as the case may
be, appearing on the records of the Company, with postage and fees thereon
prepaid. Such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail or with an express delivery
service or when transmitted, as the case may be. Notice of any meeting of
the Board may be given to a director by telephone and shall be deemed to be
given when actually received by the director.
Section 10.4 WAIVER OF NOTICE. Whenever any notice is required to
be given under applicable law, the certificate of incorporation or these
Bylaws, a written waiver of such notice, signed before or after the date of
such meeting by the person or persons entitled to said notice, shall be
deemed equivalent to such required notice. All such waivers shall be filed
with the
14
<PAGE>
corporate records. Attendance at a meeting shall constitute a waiver of
notice of such meeting, except where a person attends for the express purpose
of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 10.5 ATTENDANCE VIA COMMUNICATIONS EQUIPMENT. Unless
otherwise restricted by applicable law, the certificate of incorporation or
these Bylaws, members of the Board, any committee thereof or the stockholders
may hold a meeting by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting can
effectively communicate with each other. Such participation in a meeting
shall constitute presence in person at the meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section 10.6 DIVIDENDS. Dividends on the capital stock of the
Company, paid in cash, property or securities of the Company and as may be
limited by applicable law and applicable provisions of the certificate of
incorporation (if any), may be declared by the Board at any regular or
special meeting.
Section 10.7 RESERVES. Before payment of any dividend, there may
be set aside out of any funds of the Company available for dividends such sum
or sums as the Board from time to time, in its absolute discretion,
determines proper as a reserve or reserves to meet contingencies, for
equalizing dividends, for repairing or maintaining any property of the
Company or for such other purpose as the Board shall determine to be in the
best interest of the Company; and the Board may modify or abolish any such
reserve in the manner in which it was created.
Section 10.8 REPORTS TO STOCKHOLDERS. The Board shall present at
each annual meeting of stockholders, and at any special meeting of
stockholders when called for by vote of the stockholders, a statement of the
business and condition of the Company.
Section 10.9 CONTRACTS AND NEGOTIABLE INSTRUMENTS. Except as
otherwise provided by applicable law or these Bylaws, any contract or other
instrument relative to the business of the Company may be executed and
delivered in the name of the Company and on its behalf by the chairman of the
board or the president; and the Board may authorize any other officer or
agent of the Company to enter into any contract or execute and deliver any
contract in the name and on behalf of the Company, and such authority may be
general or confined to specific instances as the Board may by resolution
determine. All bills, notes, checks or other instruments for the payment of
money shall be signed or countersigned by such officer, officers, agent or
agents and in such manner as are permitted by these Bylaws and/or as, from
time to time, may be prescribed by resolution (whether general or special) of
the Board. Unless authorized so to do by these Bylaws or by the Board, no
officer, agent or employee shall have any power or authority to bind the
Company by any contract or engagement, or to pledge its credit, or to render
it liable pecuniarily for any purpose or to any amount.
Section 10.10 FISCAL YEAR. The fiscal year of the Company shall
be fixed by resolution of the Board.
15
<PAGE>
Section 10.11 SEAL. The seal of the Company shall be in such form
as shall from time to time be adopted by the Board. The seal may be used by
causing it or a facsimile thereof to be impressed, affixed or otherwise
reproduced.
Section 10.12 BOOKS AND RECORDS. The Company shall keep correct
and complete books and records of account and shall keep minutes of the
proceedings of its stockholders, Board and committees and shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names
and addresses of all stockholders and the number and class of the shares held
by each.
Section 10.13 RESIGNATION. Any director, committee member,
officer or agent may resign by giving written notice to the chairman of the
board, the president or the secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 10.14 SURETY BONDS. Such officers and agents of the
Company (if any) as the president or the Board may direct, from time to time,
shall be bonded for the faithful performance of their duties and for the
restoration to the Company, in case of their death, resignation, retirement,
disqualification or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in their possession or under their
control belonging to the Company, in such amounts and by such surety
companies as the president or the Board may determine. The premiums on such
bonds shall be paid by the Company and the bonds so furnished shall be in the
custody of the Secretary.
Section 10.15 PROXIES IN RESPECT OF SECURITIES OF OTHER
CORPORATIONS. The chairman of the board, the president, any vice president
or the secretary may from time to time appoint an attorney or attorneys or an
agent or agents for the Company to exercise, in the name and on behalf of the
Company, the powers and rights that the Company may have as the holder of
stock or other securities in any other corporation to vote or consent in
respect of such stock or other securities, and the chairman of the board, the
president, any vice president or the secretary may instruct the person or
persons so appointed as to the manner of exercising such powers and rights;
and the chairman of the board, the president, any vice president or the
secretary may execute or cause to be executed, in the name and on behalf of
the Company and under its corporate seal or otherwise, all such written
proxies or other instruments as he or she may deem necessary or proper in
order that the Company may exercise such powers and rights.
Section 10.16 AMENDMENTS. These Bylaws may be altered, amended,
repealed or replaced by the stockholders, or by the Board when such power is
conferred upon the Board by the certificate of incorporation, at any annual
stockholders meeting or annual or regular meeting of the Board, or at any
special meeting of the stockholders or of the Board if notice of such
alteration, amendment, repeal or replacement is contained in the notice of
such special meeting. If the power to adopt, amend, repeal or replace these
Bylaws is conferred upon the Board by the certificate of incorporation, the
power of the stockholders to so adopt, amend, repeal or replace these Bylaws
shall not be divested or limited thereby.
16
<PAGE>
EXHIBIT 4.0
FORM OF WARRANT
<PAGE>
COMMON STOCK PURCHASE WARRANT
ONE ECOMMERCE CORPORATION
(A NEVADA CORPORATION)
Dated: ____________, 1999
THIS CERTIFIES THAT ______________ (hereinafter called the "Holder") will
in the future during the period hereinafter specified, upon fulfillment of the
conditions and subject to the terms hereinafter set forth, be entitled to
purchase from One eCommerce Corporation, a Nevada corporation (the "Company"),
shares (the "Shares") of the Company's common stock, par value $.001 per share
("Common Stock"), at an exercise price equal to 200% of the price of the Common
Stock on the effective date of the Company's Registration Statement relating to
the issuance of the Common Stock and the Warrants (the "Exercise Price"), on the
basis of one share for each warrant (the "Warrant") indicated on the face
hereof.
1. Commencing with the issuance of this certificate and ending on the
date three years later, unless extended by the Company in its sole discretion
("Expiration Date"), the Holder shall have the right to purchase the Shares
hereunder at the Exercise Price. After the Expiration Date, the Holder shall
have no right to purchase any Shares hereunder and this Warrant shall expire
thereon effective at 5:00 p.m., Austin, Texas time.
2. The rights represented by this Warrant may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Warrant (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the Exercise Price then in effect for the number of Shares specified in the
above-mentioned purchase form together with applicable stock transfer taxes, if
any; and (iii) delivery to the Company, if the Company so requires, of a duly
executed agreement signed by the Holder to the effect that such person agrees to
be bound by all provisions hereof. This Warrant shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior to the
close of business on the date this Warrant is surrendered and payment is made in
accordance with the foregoing provisions of this Paragraph 2, and the person or
persons in whose name or names the certificates for Shares shall be issuable
upon such exercise shall become the holder or holders of record of such Shares
at that time and date. The certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time after the rights represented by
this Warrant shall have been exercised.
3. This Warrant may not be exercised or sold, transferred, assigned, or
otherwise disposed of at any time by the Holder unless the transaction is
registered under the Securities Act of 1933, as amended (the "Act") or, in the
opinion of the Company (which may in its discretion require the Holder to
furnish it with an opinion of counsel in form and substance satisfactory to it),
such exercise, sale, transfer, assignment or other disposition does not require
registration under the Act and a valid exemption is available under applicable
federal and state securities
<PAGE>
laws. Any permitted transfer or assignment shall be effected by the Holder
(i) completing and executing the form of assignment at the end hereof and
(ii) surrendering this Warrant with such duly completed and executed
assignment form for cancellation, accompanied by funds sufficient to pay any
transfer tax, at the principal executive office of the Company, accompanied
by a written representation from each such assignee addressed to the Company
stating that such assignee agrees to be bound by the terms of this Warrant;
whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder) a new Warrant or Warrants of like tenor with
appropriate legends restricting transfer under the Act and representing in
the aggregate rights to purchase the same number of Shares as are purchasable
hereunder.
4. The Company covenants and agrees that all Shares purchased hereunder
will, upon issuance, be duly and validly issued, fully paid and non-assessable
and no personal liability will attach to the Holder thereof. The Company
further covenants and agrees that during the period within which this Warrant
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Common Stock to provide for the exercise of this
Warrant.
5. This Warrant shall not entitle the Holder to any voting rights or
other rights as a stockholder of the Company, either at law or in equity, and
the rights of the Holder are limited to those expressed in this Warrant and are
not enforceable against the Company except to the extent set forth herein.
6. In the event that the Company shall at any time subdivide or combine
into a greater or lesser number the number of outstanding shares of Common
Stock, the number of Shares purchasable upon exercise of the Warrant shall be
proportionately increased and the Exercise Price proportionally decreased in the
case of subdivision or, in the case of combination, the number of Shares
purchasable upon the exercise of the Warrant shall be proportionately decreased
and the Exercise Price proportionately increased. Irrespective of any
adjustments in the Exercise Price or the number of Shares purchasable upon
exercise of the Warrant, the Warrant theretofore or thereafter issued may
continue to express the same price and number and kind of Shares as are stated
in the Warrant initially issued.
7. The Warrants represented by this certificate are subject to redemption
by the Company at $.01 per Warrant, at any time after the date hereof, upon
thirty days notice if the closing bid price of the Company's Common Stock equals
or exceeds 300% of the exercise price hereof for ten consecutive trading days at
any time prior to notice of redemption. The terms of the redemption and other
terms of these Warrants are set forth in a Warrant Agreement between the Company
and its Warrant Agent, which agreement shall control the terms and conditions of
this Warrant.
8. This Warrant Certificate does not constitute an offer to sell, nor
does it confer any right to purchase securities of the Company until such time
as the conditions precedent to its exercisability have been fulfilled.
9. This Warrant shall be governed by and be in accordance with the laws
of the State of Nevada and may not be amended other than by written instrument
executed by the parties
2
<PAGE>
hereto except as provided in the Warrant Agreement between the Company and
the Warrant Agent.
IN WITNESS WHEREOF, One eCommerce Corporation has caused this Warrant to be
signed by its duly authorized officers.
ONE ECOMMERCE CORPORATION
By:
-------------------------------
David B. Carolan
Chief Executive Officer
3
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the Holder of the foregoing Warrant, hereby irrevocably
elects to exercise the purchase rights represented by such Warrant for, and to
purchase thereunder, Shares of the Common Stock of One eCommerce Corporation,
and herewith makes payment of $__________ therefore, and requests that the share
certificates be issued in the name(s) of, and delivered to_____________________
_________________________________________________________ whose address(es)
is (are) ______________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________________.
Dated:
------------------
-----------------------------
(Signature)
------------------------------
Name (Print or Type)
Address:
------------------------------
------------------------------
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby assigns and transfers unto
_____________________________________________ the right to purchase shares of
the Common Stock of One eCommerce Corporation represented by the foregoing
Warrant to the extent of________ Shares, and appoints
___________________________, attorney to transfer such rights on the books of
_____________________________________________, with full power of substitution
in the premises.
Dated:
-----------------
-------------------------------
(Signature)
-------------------------------
Name (Print or Type)
Address:
-------------------------------
-------------------------------
<PAGE>
EXHIBIT 5
OPINION OF AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE>
[LETTERHEAD]
July 12, 1999
One eCommerce Corporation
555 IH-35 South, Suite 400
New Braunfels, TX 78130
Re: One eCommerce Corporation -- Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel for One eCommerce Corporation, a Nevada
corporation (the "Company"), in connection with the preparation of the
registration statement (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended (the "Act"), relating to the public offering (the "Offering") of
4,148,820 Warrants (the "Warrants") to purchase up to 4,148,820 shares of the
Company's common stock, $.001 par value (the "Common Stock"). This opinion is
being furnished pursuant to Item 601(b)(5) of Regulation S-B under the Act.
In rendering the opinion set forth below, we have reviewed (a) the
Registration Statement and the exhibits thereto; (b) the Company's Articles of
Incorporation, including the Articles of Amendment filed with Nevada Secretary
of State on March 30, 1999; (c) the Company's Amended and Restated Bylaws; (d)
certain records of the Company's corporate proceedings as reflected in its
minute books; and (e) such statutes, records and other documents as we have
deemed relevant. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
conformity with the originals of all documents submitted to us as copies
thereof. In addition, we have made such other examinations of law and fact as we
have deemed relevant in order to form a basis for the opinion hereinafter
expressed.
Based upon the foregoing, we are of the opinion that the Common Stock,
upon issuance by the Company in the manner and for the consideration
contemplated in the Registration Statement, will be validly issued, fully paid
and nonassessable.
<PAGE>
One eCommerce Corporation
July 12, 1999
Page 2
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the references to this Firm under the caption
"Legal Matters" in the Registration Statement. In giving such consent, we do not
thereby admit that we are acting within the category of persons whose consent is
required under Section 7 of the Act and the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Akin, Gump, Strauss, Hauer & Feld, L.L.P.
---------------------------------------------
<PAGE>
EXHIBIT 10.1
LETTER OF INTENT FOR ACQUISITION OF
SINERGIA SERVICIOS, S.C.
<PAGE>
March 29, 1999
Sinergia Servicios, S.C.
Av. Union No. 480-S
C.P.: 4420
Guadalajara, Jalisco
MEXICO
Re: Agreement of One Commerce Corporation to Acquire Certain Assets of
Sinergia Servicios, S.C.
Ladies and Gentlemen:
The purpose of this letter ("Letter") is to set forth certain nonbinding
understandings and certain binding agreements between One Commerce Corporation,
a Texas corporation (the "Buyer"), and Sinergia Servicios, S.C., a company
established under the laws of Mexico (the "Seller"), with respect to the
acquisition of certain assets of the Seller on the terms set forth below:
PART I: - NONBINDING PROVISIONS
The following paragraphs of this Letter (collectively, the "Nonbinding
Provisions") reflect our mutual understanding of the matters described in them,
but each party acknowledges that the Nonbinding Provisions are not legally
binding until a definitive agreement (the "Definitive Agreement"), and other
related documents, are executed and delivered by the parties.
1. BASIC TRANSACTION. The Buyer and the Seller propose to enter into a
Definitive Agreement under which Buyer will acquire certain assets of the Seller
as described on Exhibit "A" hereto (the "Assets"). The transaction will be
structured as a tax-free exchange of shares of Buyer's Common Stock and cash for
the Seller's Assets. The Definitive Agreement will be structured such that the
exchange is tax-free to both the Seller, the Buyer and the shareholders of the
Seller. Jose Grandizo and Fernando Contreras will each be employed by the Buyer
and one of them will agree to move to New Braunfels, Texas and conduct the
business activities of the Assets after the Closing Date.
<PAGE>
Sinergia Services, S.C.
March 29, 1999
Page 2
2. DUE DILIGENCE. The Buyer has commenced, and intends to continue, its
due diligence investigation of the Seller.
3. CONDITIONS TO PROPOSED TRANSACTION. The Definitive Agreement will
provide that the proposed transaction will be subject to such representations,
warranties, terms and conditions as are customary in transactions involving the
acquisition of assets similar to the Assets in a manner contemplated by the
Definitive Agreement.
4. PURCHASE PRICE. Subject to any adjustments contained in the
Definitive Agreement, Buyer agrees to purchase the Assets for consideration
equal to (i) 580,000 shares of the Buyer's Common Stock, and (ii) $200,000 in
cash payable in the amount of $100,000 on the Closing Date and $100,000 one year
after the Closing Date, and (iii) options granted to each of Jose Antonio
Grandizo and Fernando Contreras to purchase 25,000 shares of Company Common
Stock.
5. CLOSING DATE. The Buyer and the Seller intend to consummate the
Definitive Agreement on April 30, 1999 or as soon thereafter as practicable.
PART II. - BINDING PROVISIONS
Upon execution by the Seller of this Letter, the following paragraphs of
this Letter (collectively, the "Binding Provisions") will constitute the legally
binding and enforceable agreement of Buyer and the Seller.
A. NONBINDING PROVISIONS NOT ENFORCEABLE. The Nonbinding Provisions do
not create or constitute any legally binding obligations between Buyer and the
Seller, and if the Definitive Agreement is not executed and delivered for any
reason, no party to this Letter shall have any liability to any other party
arising from the Nonbinding Provisions.
B. DEFINITIVE AGREEMENT. Buyer and its counsel shall be responsible for
preparing the initial draft of the Definitive Agreement. Buyer and the Seller
shall negotiate in good faith to arrive at a mutually acceptable Definitive
Agreement for approval, execution and delivery on the earliest reasonably
practicable date. The Definitive Agreement and this Letter of Intent shall be
governed by the provisions of Texas law.
C. ACCESS. The Seller shall provide Buyer complete access to the
Seller's books, records and business facilities and shall cause the directors,
employees, accountants, and other agents of the Seller (collectively,
"Representatives") to cooperate fully with Buyer and Buyer's due diligence
investigation of the Seller's business activities.
<PAGE>
Sinergia Services, S.C.
March 29, 1999
Page 3
D. EXCLUSIVE DEALING. For a period of thirty (30) days after execution
of this Letter by the Seller (the "Exclusivity Period"), the Seller shall not
directly or indirectly, through any Representative or otherwise, solicit or
entertain offers from, or negotiate with any party involving the acquisition of
the Seller or the Assets.
E. CONDUCT OF BUSINESS. Until the Definitive Agreement has been duly
executed and delivered by all of the parties or the Binding Provisions have been
terminated pursuant to this Letter, the Seller shall conduct its business only
in the ordinary course, and shall not engage in any extraordinary transactions
without Buyer's prior consent.
F. COSTS. Buyer and the Seller shall be responsible for and shall bear
all of their own costs and expenses incurred in connection with the proposed
transaction, including expenses of its Representatives, incurred at any time in
connection with pursuing or consummating the proposed transaction.
G. TERMINATION. The Binding Provisions may be terminated:
(i) by mutual written consent of Buyer and Seller, or
(ii) upon written notice by any party to the other party if the
Definitive Agreement has not been executed by April 15, 1999;
(iii) upon ten (10) days written notice by any party to the other
party if the Closing does not occur within sixty (60) days of
the date hereof, unless such failure to close is the result of
the actions or inactions of such terminating party; or
(iv) by the failure of the acquisition of Arianne, Co. by the Buyer
to be consummated;
provided, however, that the termination of the Binding Provisions shall not
affect the liability of a party for breach of any of the Binding Provisions
prior to the termination. Upon termination of the Binding Provisions, the
parties shall have no further obligations hereunder.
H. CONFIDENTIALITY. In consideration of the mutual promises herein made,
Buyer and the Seller hereby agree to keep all information concerning this Letter
and the transaction contemplated thereby strictly confidential.
<PAGE>
Sinergia Services, S.C.
March 29, 1999
Page 4
Please sign and date this Letter in the space provided below to confirm the
mutual agreements set forth in the Binding Provisions and return a signed copy
to the undersigned.
Very truly yours,
ONE COMMERCE CORPORATION
By: /s/ David B. Carolan
------------------------------------
Its: President
-----------------------------------
ACKNOWLEDGED AND AGREED,
intending to be legally bound hereby,
as to the Binding Provisions:
SINERGIA SERVICIOS, S.C.
By: /s/ Fernando Conteras
--------------------------------
Name: Fernando Conteras
------------------------------
Title: President
-----------------------------
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT BETWEEN
DAVID CAROLAN AND THE REGISTRANT
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is by and between One
Commerce Corporation, a Texas Corporation, ("Employer") and David B. Carolan, an
individual residing in Comal County, Texas ("Employee"), and shall be effective
as of November 1, 1998
RECITALS:
WHEREAS, Employee desires to enter into the employment of Employer, and
Employer desires to employ Employee provided that, in so doing, it can protect
its confidential information, business, accounts, patronage and goodwill.
NOW, THEREFORE, in consideration of the foregoing recital and of the
mutual covenants set forth below, the parties hereto agree as follows:
1. EMPLOYMENT; TERMINATION.
1.1. Employer hereby hires Employee and Employee accepts
employment as President and Chief Executive Officer (CEO) for, a one (1) year
term, commencing November 1, 1998.
1.2. This Agreement shall be automatically renewed for
successive additional one (l) year terms unless either party gives the other at
least thirty (30) days written notice to any scheduled termination date of its
determination not to so renew this Agreement.
1.3. This Agreement shall be automatically terminated on the
death of Employee or on the permanent disability of Employee if he is no longer
able to perform in all material respects the usual and customary duties of his
employment hereunder. For the purposes hereof, any condition which in reasonable
likelihood is expected to impair Employee's ability to materially perform his
duties hereunder for a period of 30 days or more shall be considered to be
permanent.
1.4. Either Employer or Employee may terminate this Agreement
at any time, without cause, by giving the other thirty (30) days notice of his
or its intent to do so. Employer may elect, during such thirty (30) day period,
to relieve Employee of his regular duties.
1.5. In addition to Employer's right to terminate this
Agreement without cause pursuant to Section 1.4 hereof, Employer may terminate
this Agreement for cause if:
(a) in the opinion of the Board of Directors of
Employer, Employee has engaged in personal conduct or a breach of this
Agreement of such a serious nature as to render Employee's continued
employment detrimental to Employer;
<PAGE>
(b) Employee is convicted of an offense constituting a
felony or involving moral turpitude; or
(c) in any material or substantial way, Employee (i)
violates any rule, regulation, practice or policy of the Employer; (ii)
violates any provision of this Agreement; (iii) is dishonest in the
performance of his duties hereunder or engages in a conflict of interest with
the Employer that is not fully disclosed to and approved by a majority of the
disinterested members of the Employer's Board of Directors; (iv) fails to
follow reasonable instructions or directions from the Board of Directors or
any person authorized by the Board of Directors to give such instructions; or
(v) fails to perform the services required of him pursuant to this Agreement.
A notice of termination pursuant to this Section 1.5
shall be in writing and shall state the alleged reason for termination.
Employee, within not less than fifteen (15) nor more than thirty (30) days after
such notice, shall be given the opportunity to appear before the Board of
Directors of the Employer, or a committee thereof, to rebut or dispute the
alleged reason for termination. If the Board of Directors or committee
determines, by a majority of the disinterested directors, after having given
Employee the opportunity to rebut or dispute the allegations, that such reason
is indeed valid, Employer may immediately terminate Employee's employment under
this Agreement for cause. Immediately upon giving the notice contemplated by
this paragraph, Employer may elect, during the pendency of such inquiry, to
relieve Employee of his regular duties. In the same written notice provided
pursuant to Section 1.5, Employer shall be authorized, in its discretion, to
provide that such notice is also given pursuant to Section 1.4 and commences the
thirty (30) day period contemplated thereby.
1.6. Upon termination, Employee shall be entitled to the
following:
(a) If this Agreement is terminated pursuant to
Section 1.3 as a result of Employee's death or disability, then Employer
shall pay Employee or his representative, as the case may be, Employee's
then-current base salary (excluding any bonuses and non-cash benefits) for a
period of sixty (60) days following the effective date of the termination,
(b) If this Agreement is terminated by Employer and
such termination is not for cause, Employee shall be entitled to the thirty
(30) day notice provided by Section 1.4, and to a two month salary
continuation (including any bonus and non-cash benefits) beyond the effective
date of the termination, for such period of months as, when added to the
ninety (90) day notice, will equal $50,000.00, whether or not Employer has
elected to relieve Employee of his regular duties pursuant to Section 1.4
above.
(c) If Employer terminates this Agreement for cause
pursuant to Section 1.5, Employee shall not be entitled to receive one half
of the compensation ($25,000.00) defined under 1.6 (b) beyond those bonus or
benefits earned or accrued as of the effective date of the termination.
1.7. Any termination of Employee's employment shall not
release either Employer or Employee from its or his respective obligations to
the date of termination nor from the provisions of Section 4 hereof.
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1.8. Upon Employee's termination of employment hereunder for
any reason, Employer agrees to use its best efforts to eliminate, or if full
elimination cannot be accomplished, to reduce to the greatest extent possible,
Employee's obligations under Employee's guaranty of any of Employer's
indebtedness.
2. DUTIES OF EMPLOYEE.
2.1. During the period of his employment, Employee shall
devote substantially his entire time and his best efforts to the business of
Employer for the profit, benefit and advantage of Employer, and shall perform
such other services as shall be designated, from time to time, by the Board
of Directors of Employer; provided, however, that this Section shall not be
construed as preventing Employee from investing his personal assets in
business ventures that do not compete with Employer, and spending reasonable
amounts of personal time in the management thereof. Employee shall use his
best efforts to promote the interests of Employer and to preserve Employer's
goodwill with respect to its employees, customers, suppliers and other
persons having business relations with Employer, accept and hold all such
offices and/or directorships to which he may, from time to time, be elected;
provided, however, that Employee shall be under no obligation to accept a
directorship with another entity at Employer's direction unless a valid and
effective Directors' and Officers' Liability Policy insuring Employee to the
full extent permitted by the Texas Business Corporation Act (the "Act") is
maintained in full force and effect at all times in accordance with Section 6
below.
2.2. Subject to the approvals by and the ultimate
supervision of the Employer's Board of Directors, Employee during the term
hereof shall serve as the President and CEO of the Employer and shall be a
member of the Board of Directors of the Employer. Subject to the control of
the Board of Directors and in compliance with its instructions and
directives, Employee, as the President of the Employer, shall have
responsibility for general supervision, direction, and control of the
business of the Employer. As CEO, he shall have the general powers and duties
of management usually vested in the office of CEO of a corporation and shall
have such other powers and duties as may be prescribed by the Board of
Directors.
3. SALARY; EXPENSE REIMBURSEMENTS.
3.1. As compensation for his service under and during the term
of this Agreement (or until terminated pursuant to the provisions hereof)
Employer shall pay Employee a salary of $130,000.00 per year, payable in
accordance with the regular payroll practices of the Employer, as in effect from
time to time. Such salary shall be subject to withholding for the prescribed
federal income tax, social security and other items as required by law and for
other items consistent with the Employer's policy with respect to health
insurance and other benefit plans for similarly situated employees in which
Employee may elect to participate.
3.2. During the term of this Agreement, Employee also shall be
entitled to receive such benefits as are made available to other personnel of
the Employer in comparable positions, with comparable service credit and with
comparable duties and responsibilities. Any benefits substantially in excess of
those granted other salaried employees of Employer shall be subject to the prior
approval of the Board of Directors.
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3.3. In the discretion of the Board of Directors of the
Employer, and without implying any obligation on Employer ever to award a bonus
to Employee, Employee may from time to time be awarded a cash bonus or bonuses
for services rendered to the Employer during the term of his employment under
this Agreement. Such bonuses shall be in accordance with a bonus plan, if any,
adopted from year to year by Employer but all such bonuses are entirely
discretionary with the Board of Directors. If and to the extent a bonus is ever
considered for Employee, it is expected that any such bonus will be based not
only on Employee's individual performance and his relative position, service
tenure and responsibilities with Employer, but also on the performance and
profitability of the entire business of Employer.
3.4. Employer shall reimburse all reasonable travel and
entertainment expenses incurred by Employee in connection with the performance
of his duties pursuant to this Agreement. Employee shall provide Employer with a
written monthly accounting of his expenses, on a form acceptable to Employer and
satisfying any applicable federal income tax reporting or record keeping
requirements within a reasonable time following the end of each month.
3.5. At 180 day intervals, the employer may review and
evaluate the employee's performance based on the company goals being reached,
and grant a 5% pay increase upon the approval and recommendation of the
compensation committee.
4. EMPLOYEE'S RESTRICTIVE COVENANTS. In consideration of the extended
employment of Employee hereunder, the increase in salary hereunder, the
agreement of Employer to seek Employee's release from certain of Employer's
indebtedness, the grant of options hereunder, and other good and valuable
consideration the receipt and sufficiency of which Employee hereby acknowledges,
Employee acknowledges and agrees that:
4.1. (a) In his position of employment, Employee will be
exposed to confidential information and trade secrets ("Proprietary
Information") pertaining to, or arising from, the business of Employer; that
such Proprietary Information is unique and valuable to Employer's business and
that Employer would suffer irreparable injury if this information were divulged
to those in competition with Employer. Therefore, Employee agrees to keep in
strict secrecy and confidence, both during, except as otherwise herein provided,
and after the period of his employment, any and all information which he
acquires, or to which he has access, during his employment by Employer, that has
not been publicly disclosed by Employer or that is not a matter of common
knowledge by Employer's competitors. The Proprietary Information covered by this
Agreement shall include, but shall not be limited to, information relating to
any inventions, processes, formulae, plans, devices, compilations of
information, technical data, mailing lists, distribution methods, names of
suppliers (of both goods and services) and customers, names of employees and
terms of employment, arrangements entered into with suppliers and customers,
including, but not limited to, proposed expansion plans of Employer, marketing
and other business and pricing strategies, trade secrets of Employer.
(b) Except with prior written approval of Employer,
either during or after Employee's employment hereunder, Employee will
neither: (i) directly or indirectly, disclose any Proprietary Information to
any person except authorized personnel of Employer; nor, (ii) use
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<PAGE>
Proprietary Information in any way. Upon termination of employment, whether
voluntary or involuntary, within forty-eight (48) hours of termination,
Employee will return to Employer all documents, records or other
memorializations including copies of documents and any notes which he has
prepared, that contain Proprietary Information or relate to Employer's
business, and all of Employer's credit cards, keys, equipment, vehicles,
supplies and other materials that are in his possession or under his control.
4.2. (a) During the Employee's, employment hereunder and for
a period of one (1) year after he ceases to be employed by the Employer, the
Employee shall not, directly or indirectly, for his own account or otherwise (i)
solicit business from, divert business from, or attempt to convert to other
methods of using the same or similar products or services as provided by the
Employer, any client, account or location of the Employer with which the
Employee has had any contact as a result of his employment by the Employer
hereunder; or (ii) solicit for employment or employ any employee or former
employee of the Employer.
(b) For a period of one (1) years after the termination of the
Employees' employment hereunder, the Employee shall not, directly or indirectly,
as an officer, director, employee, consultant or otherwise in the geographic
market areas in which Employer's products or Services are sold, engage in the
business of developing, manufacturing, selling or leasing products actually
sold, or perform services actually provided, by Employer at the time of
termination.
4.3. Employee understands and acknowledges damages at law
alone will be an insufficient remedy for Employer and Employer will suffer
irreparable injury if Employee violates the terms of this Agreement.
Accordingly, Employer, upon application to a court of competent jurisdiction,
shall be entitled to injunctive relief to enforce the provisions of this
Agreement in the event of any breach, or threatened breach, of its terms
Employee hereby waives any requirement that Employer post bond or other security
prior to obtaining such injunctive relief. Injunctive relief may be sought in
addition to any other available rights or remedies at law. Employer shall
additionally be entitled to reasonable attorneys' fees incurred in enforcing the
provisions of this Agreement.
5. OWNERSHIP OF INVENTIONS AND COPYRIGHTS.
5.1. During the term of employment, every invention,
discovery, improvement, device, design, apparatus, practice, process, method
of production, whether patentable or not, made, developed, perfected,
devised, conceived or first reduced to practice by the Employee, either
solely or in collaboration with others, relating in any way to the business,
developments, products, or activities of the Employer ("Inventions") shall be
promptly disclosed to Employer and shall be Employer's sole and exclusive
property, except as may otherwise be required as provided in Section 5.4
below. The Employed shall hold all such Inventions in a fiduciary capacity
for the benefit of the Employer and shall promptly disclose in writing full
information concerning each Invention to the Employer. All Inventions claimed
to have been made or conceived by the Employee during the first sixty (60)
days following the termination of the Employee's employment and related to
the Employer's business shall be presumed to have been made or conceived
during the period of employment and shall be subject to the provisions of this
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<PAGE>
Agreement unless the Employee can establish the contrary to the reasonable
satisfaction of the Employer or of a court of competent jurisdiction. All
writing or other works subject to copyright written by the Employee either
solely or in collaboration with others during the period of employment by the
Employer or at the Employer's facility and relating in any way to the
business developments, products or activities of the Employer (the
"Copyrights"), shall be the sole and exclusive property of the Employer,
except as provided in Section 5.4 below.
5.2. At the request of the Employer, during his employment and
for a one (1) year period thereafter and with reasonable compensation determined
by the Employer along with necessary expenses not covered by his salary that are
incurred by him in connection therewith, the Employee shall (a) assist the
Employer, its attorneys and nominees in preparing and prosecuting in the United
States and all foreign countries applications for patents covering all
Inventions, (b) execute, acknowledge and deliver any and all instruments
necessary to make, file, or prosecute all such patent applications, necessary in
connection with continuations, renewals or reissues of patents or patent
applications or necessary in the conduct of proceedings or litigations in regard
to patents or patent applications, (c) execute any and all instruments deemed by
the Employer, its attorneys or nominees to be necessary to transfer title in and
to applications or title in and to all patents covering Inventions to the
Employer or its nominees, (d) take the necessary steps to perfect copyright
rights in the Copyrights of registrations, and (e) assist the Employer, if
requested, to obtain reprints of the Copyrights for distribution.
5.3. The Employee shall keep complete, accurate and authentic
accounts, notes, data and records of Invention and Copyrights in the manner and
form requested by the Employer Such accounts, notes, data and records shall be
the property of the Employer and the Employee shall surrender the same to the
Employer upon request or termination of his employment.
5.4. The Employee acknowledges that (a) there are no
inventions of the Employee heretofore made or conceived by the Employee which
Employee deems to be excluded from the scope of this Agreement, except as set
forth and attached in Exhibit B, and (b) there are no writings or other works
written or produced by Employee which Employee deems to be excluded from the
scope of this Agreement except as set forth and attached in Exhibit B.
Employer hereby acknowledges and agrees that it shall have no claim for any
of the intellectual property rights, profits and other rights in the patents,
properties, business plans or other items listed in Exhibit B.
6. INDEMNITY; EMPLOYER'S MAINTENANCE OF DIRECTORS' AND OFFICERS'
LIABILITY INSURANCE. Employer shall indemnify Employee against all judgments,
penalties, fines, amounts paid in settlement and reasonable expenses actually
incurred by Employee in connection with any proceedings to which Employee
was, is or is threatened to be named a defendant, respondent or witness;
provided, however, that as a condition precedent to any such indemnification,
the disinterested members of Employer's Board of Directors shall reasonably
determine that Employee's conduct in question was acted upon in good faith
and that Employee was acting within the scope of Employee's authority of
Employer. Employer agrees that during the term hereof, it shall endeavor in
good faith and with reasonable diligence to obtain and maintain Directors'
and Officers' Liability Insurance providing for coverage of Employee to the
fullest
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<PAGE>
extent provided under the Act in such amounts as Employer's Board of Directors
from time to time shall determine to be adequate to reasonably protect Employee
and Employer's other officers and directors in light of the nature of Employer's
business.
7. MISCELLANEOUS.
7.1. This Agreement is performable in COMAL County, Texas and
is governed by the laws of Texas; supersedes all prior understandings and
agreements between the parties and contains the entire understanding of the
parties hereto with respect to the subject matter hereof; and is binding upon
the parties hereto, their successors and permitted assigns. Employer may assign
its interest in this Agreement and all covenants, conditions and provisions
hereunder shall inure to the benefit of and be enforceable by its assignee or
successor in interest. The rights and obligations of Employee under this
Agreement are personal to him, and no such rights, benefits or obligations shall
be subject to voluntary or involuntary alienation, assignment or transfer,
except that his personal representatives, heirs and legatees may enforce the
obligation of the Company hereunder.
7.2. Any notices required or permitted hereunder shall be given in
writing either (a) through personal delivery by courier or otherwise, (b) by
telecopy or other electronic medium to be promptly followed by mailed notice
pursuant to Subsection (c) or (c) by deposit in United States mail, postage
paid, certified or registered mail, return receipt requested to the address
stated below or to such other address notice of which is given in accordance
with this Section 7.2:
If to Employer: One Commerce Corporation
555 IH 35 South, Suite 400
New Braunfels, TX 78130
If to Employee: David B. Carolan
555 IH 35 South, Suite 400
New Braunfels, TX 78130
Any such notice shall be deemed given five (5) business days following
its deposit in the United States mails.
7.3. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal or unenforceable, that
shall, in no way, affect the validity or enforceability of any other
provision of this Agreement and that provision shall be deemed modified to
the minimum extent necessary to render it valid, legal and enforceable.
7.4. No waiver by either the Employer or the Employee of a
breach of any provision of this Agreement shall operate as or be construed as a
waiver of any subsequent breach.
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT BETWEEN
GIL LOZANO AND THE REGISTRANT
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT"), is made and entered into
this 27th day of October, 1998, by and between GIL LOZANO, whose mailing address
is 2907 Greenrun San Antonio, Texas 78231 (hereinafter "EMPLOYEE"), and ONE
COMMERCE CORPORATION, a Texas corporation having its principal office at 555 IH
35 SOUTH, SUITE 306, NEW BRAUNFELS, TEXAS 78130 (hereinafter "Employer").
W I T N E S S E T H:
This Agreement is made and entered into under the following
circumstances:
(1) Whereas the Employer is engaged in the business of DESIGNING,
DEVELOPING, MAINTAINING, AND MARKETING ELECTRONIC COMMERCE
INTERNET SITES CONTENT; and
(2) Whereas the Employer desires, on the terms and conditions
stated herein, to employ the Employee as VICE PRESIDENT OF
CORPORATE DEVELOPMENT, a position with the rights, duties and
responsibilities as described in this Agreement; and
(3) Whereas the Employee desires, on the terms and
conditions stated herein, to be employed by the
Employer.
NOW, THEREFORE, in consideration of the foregoing recitals, and of the
promises, covenants, terms and conditions contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. Subject to earlier termination as
provided for in Section 8 hereof, the Employer hereby
employs Employee, and Employee hereby accepts
employment with the Employer commencing NOVEMBER 1,
1998 (hereinafter the "EFFECTIVE DATE") and continuing
for a period of ONE YEAR (hereinafter the "TERM OF
EMPLOYMENT"). Upon the expiration of the initial term,
the Term of Employment shall automatically be renewed
for successive one (1) year periods commencing upon the
first anniversary of the Effective Date, unless either
party gives written notice of intent not to renew not
less than sixty (60), nor more than ninety (90), days
prior to the end of any term.
2. DUTIES AND QUALIFICATIONS. Employee shall serve as VICE
PRESIDENT OF CORPORATE DEVELOPMENT of the Employer's, at the
Employer's office located at 555 IH 35 South Suite 306 New
Braunfels, Texas 78130 or such other locations as requested by
Employer, in accordance with any applicable state and federal
laws and regulations.
During the Term of Employment, Employee will be employed as an employee
of Employer on a full-time basis and will perform all services, acts or things
necessary or advisable to DESIGN AND DEVELOP ELECTRONIC COMMERCE INTERNET SITES
AND EXPAND THE BUSINESS OF EMPLOYER. Furthermore, the Employee will have such
other duties as are reasonably assigned to Employee from time to time by the
Board of Directors of Employer ("Board of Directors") and/or the CEO or
President. Such duties shall include, without limitation:
a. Developing Clients, Vendors, and Contractors
<PAGE>
b. Opening new offices
c. Expanding the client base
d. Directing programming efforts
e. Providing strategic advise and implementation for
corporate expansion
f. Assist with the management of sales and
administration
g. Organize and provide forecasts and budgets
relating to the above tasks
3. STATUS OF EMPLOYEE. The parties expressly acknowledge that
Employee, in the performance of services hereunder, is an
employee of Employer. Accordingly, Employer shall deduct from
all compensation paid to Employee pursuant to this Agreement
any sums required by law or any other requirement of any
governmental body.
4. SALARY. Employee shall be entitled to a monthly minimum base
salary $8,000.00, payable semi-monthly at $4,000.00 per pay
period. Any deferred pay will be considered earned and payable
to the employee upon demand.
a. Bonus - Employee will be entitled to participate in
any bonus plans offered by employer without
restriction.
b. Stock Options - Employee will be entitled to
participate in any stock option plans offered by
employer without restriction.
5. VACATION/PERSONAL TIME. Employee shall be entitled to paid
leave FOR VACATION, ILLNESS AND DISABILITY PURPOSES AS
PROVIDED FOR IN THE CURRENT EMPLOYEE POLICY MANUAL. The Board
of Directors may authorize, any additional paid absences for
any reason. Employer and Employee shall mutually agree on
the scheduling of Employee's vacation, holiday and leave time.
6. TERMINATION. Notwithstanding any other provisions of
this Agreement, the Term of Employment shall terminate
upon:
a. the cessation of all of Employer's DESIGNING,
DEVELOPING, MAINTAINING, AND MARKETING ELECTRONIC
COMMERCE INTERNET SITES CONTENT; provided that the
Agreement shall not terminate prior to ninety (90)
days' written notice to Employee of the
discontinuance of business operations; or
b. the death of Employee; or,
c. upon Employee's "disability" (For purposes of this
Agreement, the term "disability" shall mean the
inability of Employee, arising out of any
medically determinable physical or mental
impairment, to perform the services required of
him hereunder for a period of sixty (60)
consecutive days during which sixty (60) day
period Employee's compensation hereunder shall
continue); or,
d. at Employer's option, with 60 days severance pay upon
the existence of "cause." For purposes of this
Agreement, the term "cause" shall be defined as:
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(1) failure of Employee to perform the duties
required of him in this Agreement in a manner
satisfactory to Employer, in Employer's sole
discretion; provided, however, that the Term of
Employment shall not be terminated pursuant to this
subparagraph unless Employer first gives Employee a
written notice ("Notice of Deficiency"). The Notice
of Deficiency shall specify the deficiencies in
Employee's Performance of his duties. Employee shall
have a period of sixty (60) days, commencing on
receipt of the Notice of Deficiency, in which to cure
the deficiencies contained in the Notice of
Deficiency. In the event Employee does not cure the
deficiencies to the satisfaction of Employer, in its
sole discretion, within such sixty (60) day period,
the Employer shall have the right to immediately
terminate the Term of Employment and this Agreement.
The provisions of this subparagraph (1) may be
invoked by Employer any number of times and cure of
deficiencies contained in any Notice of Deficiency
shall not be construed as a waiver of this
subparagraph (1) nor prevent the Employer from
issuing any subsequent Notices of Deficiency;
(2) any dishonesty by Employee in his dealings with
the Employer, the commission of fraud by Employee, or
negligence in the performance of the duties of
Employee;
(3) the arrest or conviction (or plea of guilty or
nolo contendere) of Employee of any felony or other
crime involving dishonesty or moral turpitude;
(4) any violation of any covenant or restriction
contained in Section 11 or Section 12 hereof;
(5) unlawful use of narcotics or other controlled
substances, or use of alcohol or other drugs in a
manner the Employer reasonably determines to be
adverse to the best interests of the Employer;
For all purposes of this Agreement, termination for "cause" shall be
deemed to have occurred in the event of Employee's resignation when, because of
existing facts and circumstances, subsequent termination for "cause" can
reasonably be foreseen.
Except as otherwise provided in Section 6(c), in the event of
termination of this Agreement pursuant to this Section 6, Employee or Employee's
estate, as appropriate, shall be entitled to receive (in addition to any fringe
benefits payable upon death in the case of Employee's death) the salary provided
for in Section 4 hereof (prorated on a daily basis) and any Bonus provided for
in Section 5 hereof (determined as provided in Section 5), up to and including
the effective date of termination.
7. EFFECTS OF TERMINATION. In the event of termination of
this Agreement, except for insolvency of the employer,
neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to
the date of termination and (ii) obligations, promises
or covenants contained herein which are expressly made
to extend beyond the term of this Agreement, including,
without limitation, confidentiality of information,
indemnities and Employee's covenants not to compete and
to pay damages (which covenants and agreements shall
survive the termination or expiration of this
Agreement). If the Employee's employment terminates
prior to the end of the initial term or any renewal
term of this Agreement, any compensation owed to
Employee shall continue to be calculated based on the
formula for compensation under this Agreement for 60
days. The termination of this Agreement, for whatever
reason, shall not extinguish those
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obligations of Employee specified in the Restrictive
Covenants (hereinafter defined), nor shall the same
extinguish the right of either party to bring an action,
either in law or in equity, for breach of this
Agreement by the other party.
8. TRANSITION FOLLOWING NOTICE OF TERMINATION. Following
any notice of termination of employment hereunder,
whether given by Employer or Employee, Employee will
fully cooperate with Employer in all matters relating
to the winding up of Employee's pending work on behalf
of Employer and the orderly transfer of such work to
the other employees of Employer. On or after the giving
of notice of termination hereunder and during any
notice period, Employer will be entitled to such full-
time or part-time services of Employee as Employer may
reasonably require.
9. NON-COMPETITION. Except for insolvency of the employer
or failure to pay as stated in paragraph #4. During the
Term of Employment and for a continuous period of 2
years thereafter commencing upon expiration or
termination of the Term of Employment, except for
termination resulting from the Employer's cessation of
business operations, Employee shall not without the
written consent of Employer, individually or jointly
with others, directly or indirectly, whether for his
own account or for that of any other person or entity,
own or hold any ownership or voting interest in any
person or entity engaged in DESIGNING, DEVELOPING,
MAINTAINING, AND MARKETING ELECTRONIC COMMERCE INTERNET
SITES CONTENT, or in a business which competes in such
a manner with the business of Employer or Employer's
Facility, and Employee shall not act in any role, nor
provide any assistance, performance or cooperation to
any competitor.
10. NON-DISCLOSURE: NON-SOLICITATION. Except in the
performance of his duties hereunder, at no time during
the Term of Employment or at any time thereafter shall
Employee, individually or jointly with others, for the
benefit of Employee or any third party, publish,
disclose, use or authorize anyone else to publish,
disclose or use, any secret or confidential material or
information relating to any aspect of the business or
operations of the Employer or any information regarding
the business methods, business policies, procedures,
techniques, or trade secrets, or other knowledge or
processes of or developed by Employer (and/or any other
Employee or agent of Employer), any affiliate of the Employer,
any entity in which the Employer has an interest, including,
without limitation,
- business records and plans
- financial statements
- customer lists and records
- trade secrets
- technical information
- products
- inventions
- product design information
- pricing structure
- discounts
- costs
- computer programs and listings
- source code and/or object code
- copyrights and other intellectual property
- and other proprietary information.
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11. Except for disclose affiliation with tasteofspain.com.
Moreover, during the Term of Employment, Employee shall
not act as employee, Employer, Independent Contractor,
Partnership, Limited Partnership, General Partnership,
Shareholder, Director or Sole Proprietor, any
competitive or similar business as that of Employer or
otherwise contract with individuals formerly associated
with Employer or any of its affiliates nor employ,
induce or attempt to influence any current employees of
Employer.
12. REASONABLENESS OF RESTRICTIONS REFORMATION;
ENFORCEMENT. The parties hereto recognize and
acknowledge that the geographical and time limitations
contained in Sections 11 and 12 hereof (hereinafter the
"RESTRICTIVE COVENANTS") are reasonable and properly
required for the adequate protection of the Employer's
interest. Employee acknowledges that the Employer will
provide to Employee confidential information concerning
the Employer's business methods and operating practices
in reliance on the covenants contained in the
Restrictive Covenants. It is agreed by the parties
hereto that if any portion of the restrictions
contained in the Restrictive Covenants are held to be
unreasonable, arbitrary or against public policy, then
the restrictions shall be considered divisible, both as
to the time and to the geographical area, with each
month of the specified period being deemed a separate
period of time and each radius mile of the restricted
territory being deemed a separate geographical area, so
that the lesser period of time or geographical area
shall remain effective so long as the same is not
unreasonable, arbitrary or against public policy. The
parties hereto agree that in the event any court of
competent jurisdiction determines the specified period
or the specified geographical area of the restricted
territory to be unreasonable, arbitrary or against
public policy, a lesser time period or geographical
area which is determined to be reasonable, nonarbitrary and
not against public policy may be enforced against Employee. If
Employee shall violate any of the covenants contained herein
and if any court action is instituted by the Employer to
prevent or enjoin such violation, then the period of time
during which the Employee's business activities shall be
restricted, as provided in this Agreement, shall be lengthened
by a period of time equal to the period between the date of
the Employee's breach of the terms or covenants contained in
this Agreement and the date on which the decree of the court
disposing of the issues upon the merits shall become final and
not subject to further appeal.
13. NO REMEDY AT LAW. Employee agrees that the remedy at
law for any breach by him of the Restrictive Covenants
will be inadequate and would be difficult to ascertain
and therefore, in the event of the branch or threatened
breach of any such covenants, the Employer, in addition
to any and all other remedies, shall have the right to
enjoin Employee from any threatened or actual
activities in violation thereof; and Employee hereby
consents and agrees that temporary and permanent
injunctive relief may be granted in any proceedings
which might be brought to enforce any such covenants
without the necessity of proof of actual damages.
14. SPECIFIC PERFORMANCE. With respect to the covenants and
agreements of Employee set forth in the Restrictive
Covenants, the parties agree that a violation of such
covenants and agreements will cause irreparable injury
to Employer for which Employer will not have an
adequate remedy at law, and, that Employer shall be
entitled, in addition to any other rights and remedies
it may have, at law or in equity, to obtain an
injunction to restrain Employee from violating, or
continuing to violate, such covenants and agreements.
In the event Employer does apply for such an
injunction, Employee shall not raise as a defense
thereto that the Employer has an adequate remedy at
law.
Page 5
<PAGE>
15. REPRESENTATIONS OF EMPLOYEE. Employee hereby makes the
following representations to Employer, each of which is
material and is being relied on by Employer and shall be true
as of the date hereof and throughout the Term of Employment:
a. FACTUAL INFORMATION. Any and all factual information
furnished by Employee to Employer is true and
accurate in every material respect as of the date on
which such information was furnished.
b. AUTHORITY. Employee has full power and authority to
enter into this Agreement and perform all obligation
hereunder. The execution and performance of this
Agreement by Employee will not constitute a breach or
violation of any covenant, agreement or contract to
which Employee is a party or by which Employee is
bound.
16. ASSIGNABILITY. This Agreement and the rights and duties
created hereunder shall not be assignable or delegable by
Employee. Employer may, at Employer's option and without
consent of Employee, assign its rights and duties hereunder to
any successor entity or transferee of Employer's assets.
17. NOTICES. All notices or other communications provided
for herein to be given or sent to a party by the other
party shall be deemed validly given or sent if in
writing and mailed, postage prepaid, by registered or
certified United States mail or hand delivered or sent
by facsimile, addressed to the parties at their
addresses hereinabove set forth. Any party may give
notice to the other parties at any time, by the method
specified above, of a change in the address at which,
or the person to whom, notice is to be addressed.
18. SEVERABILITY. Each section, subsection and lesser
section of this Agreement constitutes a separate and
distinct undertaking, covenant or provision hereof. In
the event that any provision of this Agreement shall be
determined to be invalid or unenforceable, such
provision shall be deemed limited by construction in
scope and effect to the minimum extent necessary to
render the same valid and enforceable, and, in the
event such a limiting construction is impossible such
invalid or unenforceable provision shall be deemed
severed from this Agreement, but every other provision
of this Agreement shall remain in full force and
effect.
19. WAIVER. The failure of a party to enforce any term, provision
or condition of this Agreement at any time or times shall not
be deemed a waiver of that term, provision or condition for
the future, nor shall any specific waiver of a term, provision
or condition at one time be deemed a waiver of such term,
provision or condition for any future time or times.
20. PARTIES. This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their heirs,
personal representatives, legal representatives, and proper
successors and assigns, as the case may be.
21. GOVERNING LAW. The validity, interpretation and performance
of this Agreement shall be governed by the laws of the
State of Texas, without giving effect to the principles of
comity or conflicts of laws thereof. Each party hereto
agrees to submit to the personal jurisdiction and venue
of the state and federal courts having jurisdiction for
a resolution of all disputes arising in connection with
the interpretation, construction, and
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<PAGE>
enforcement of this Agreement, and hereby waives the claim
or defense therein that such courts constitute an
inconvenient forum.
22. CAPTIONS. The captions of this Agreement have been assigned
thereto for convenience only, and shall not be construed to
limit, define or modify the substantive terms hereof.
23. ENTIRE AGREEMENT; COUNTERPARTS. This Agreement
constitutes the entire agreement between the parties
hereto concerning the subject matter hereof, and
supersedes all prior agreements, memoranda,
correspondence, conversations and negotiations. This
Agreement may be executed in several counterparts that
together shall constitute but one and the same
Agreement.
24. COSTS OF ENFORCEMENT. In the event it is necessary for
any party to retain the services of an attorney or to
initiate legal proceedings to enforce the terms of this
Agreement, the prevailing party shall be entitled to
recover from the non-prevailing party, in addition to
all other remedies, all costs of such enforcement,
including reasonable attorneys' fees and costs and
including trial and appellate proceedings.
25. GENDER, ETC. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other
gender, masculine, feminine or; neuter, as the context
indicates is appropriate.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on
the date first written above.
EMPLOYEE:
Gil Lozano
/s/ Gil Lozano
-------------------------------------
EMPLOYER:
One Commerce Corporation, a Texas
corporation
By: /s/ David B. Carolan
---------------------------------
David B. Carolan, CEO & President
Page 7
<PAGE>
EXHIBIT 10.5
OFFICE LEASE BETWEEN REGISTRANT
AND EXECUTIVE PLAZA JOINT VENTURE
<PAGE>
OFFICE LEASE
EXECUTIVE PLAZA OFFICE BUILDING
This is a Lease Agreement made and entered into between EXECUTIVE PLAZA JOINT
VENTURE, as "Lessor", and CORRIDOR TECHNOLOGY INC., as "Lessee", whether one
or more.
1.1 THE LEASED PREMISES: Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor the "Leased Premises" which consists of "Lessee's Office
Space" and "Common Areas" as defined below.
(a) Lessee's office space. "Lessee's Office Space", to which Lessee shall
have exclusive use rights, consists of suite(s) 304-306, representing the
office space outlined and shaded on the floor plan contained in Exhibit A.
Such space is located in the building on a tract of land, legally described
as BLK 1, Lot 1, EXECUTIVE PARK 1, New Braunfels, Comal County, Texas. The
street address of the building is 555 IH 35 South, New Braunfels, Texas,
78130.
(b) Common areas. The "common area", to which Lessee shall have
non-exclusive use rights, consists of (1) the interior common area located in
the above described building, i.e., areas normally accessible to tenants such
as the hallways, stairwells, elevators, lobby, restrooms, and snack bar
areas, and (2) the exterior common area located outside the building on the
above described land, i.e., loading areas, sidewalks, driveways, parking
garage, parking areas, and other open areas (if any), subject to paragraph
10.1 on parking.
1.2. USE: Lessee's office space may be used only for general office
purposes. The name of Lessee's business will be CORRIDOR TECHNOLOGY, INC.
1.3 USABLE AREA: Lessee's "usable area" is approximately 2,950 square
feet. It is the office space outlined and shaded in Exhibit A. Such area is
measured from the interior of the exterior walls and the exterior glass lines
of the building to the middle of the remaining perimeter walls of the office
space. This is in accordance with the BOMA International Standard of Floor
Measurement.
1.4. RENTABLE AREA: Lessee's "rentable area" is approximately 3,392
square feet. It consists of Lessee's "usable area" as defined above, plus
Lessee's prorata share of the building common areas as set forth below. The
common area "add on" factor is 15% of Lessee's usable area. Building common
areas are defined as all corridors, restrooms, snack bars, building equipment
rooms, telephone closets, janitor closets, enclosed lobby, entrance areas,
and other public areas in the building, excluding elevator shafts,
stairwells, vertical chases, and enclosed parking areas. This is in
accordance with the BOMA International Standard of Floor Measurement.
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2.1. BASE RENT AND ADDITIONAL RENTS WITH EXPENSE STOP: Lessee shall pay to
Lessor a "base rent" of $ $40,704.00 per calendar year, which amounts to
$3,392.00 per calendar month. The base rent is subject to adjustment as
provided in paragraph 32.1. Additional rent (representing Lessee's prorata
share of building operating expenses over the $ 1998 ACTUAL expense stop)
shall be paid in accordance with paragraph 32.1. Building operating expenses
up to such expense stop amount shall be paid by Lessor. Base rent is subject
to the annual base rent increase referred to in paragraph 32.2.
3.1. DATE AND PLACE OF PAYMENT: The monthly rent and one-twelfth of
Lessee's share of estimated building operating expenses under paragraph 32.1
(i.e., expenses in excess of the expense stop) shall be due on the first day
of each calendar month without demand. Partial months shall be prorated. All
rent and other sums are due in the county where the building is located at
the address designated by Lessor from time to time. All sums due by Lessee
are without right of setoff or deduction. Monies mailed are considered timely
paid only if received by Lessor by the due date; however rents postmarked one
or more days before due date and received after the due date shall be
considered as timely received by Lessor, Rent and late payment charges shall
be paid without notice or demand. All other sums shall be due upon delivery
of written notice in accordance with paragraph 29.1.
3.2. LATE PAYMENTS: If any rent payment or other sum due by Lessee to
Lessor is received and accepted by Lessor later than 5 days after its due
date, Lessee shall pay a late charge of 5% of such rent payment or other sum
plus 1% thereof for each day thereafter (for up to 15 days) until such rent
or other sum is paid. Lessor's acceptance of late rent or other sum shall not
constitute permission for Lessee to pay the rent or other sum late thereafter
and shall not constitute a waiver of Lessor's remedies for subsequent late
payments. Late payment charges are due immediately upon notice or demand.
All payments shall be by check or money order on a local bank, not cash. For
each returned check, Lessee shall pay all applicable bank charges incurred by
Lessor plus $25.00. Payments of any kind received by Lessor on behalf of
Lessee may be applied at Lessor's option to nonrent items first, then to
rent. Payment of rent by Lessee shall be an independent covenant. If Lessee
has not timely paid rentals and other sums due on two or more occasions, or
if a check from Lessee is returned for insufficient funds or no account,
Lessor may for the next 12 months require that all rent and other sums due be
paid by cashier's check, certified check, or money order, without prior
notice.
3.3. SECURITY DEPOSIT: At the time of execution of this lease, Lessee shall
deposit with Lessor $ *1,468 cash to secure performance of Lessee's
obligations under this lease. If Lessee fails to pay rent or other sums when
due under this lease, Lessor may apply any cash security deposit toward
amounts due and unpaid by Lessee. Lessee shall immediately restore the
security deposit to its original amount after any portion of it is applied to
amounts due and unpaid by Lessee.
*carried over from suite 210 & suite 312
2
<PAGE>
4.1. TERM, COMMENCEMENT, AND ANNIVERSARY: The initial lease term shall be
for 36 full calendar months from commencement date, plus the remainder of the
last month. The lease commencement date shall be the 1st day of November 1998
or the date Lessee occupies all or any part of Lessee's office space,
whichever occurs first. The annual anniversary date of this lease shall be
the first day of the first full month following commencement of the lease,
unless the lease commencement date is the first day of the month.
4.3. DELIVERY OF POSSESSION: Lessor shall deliver keys and possession of
Lessee's office space to Lessee on the lease commencement date stated in
paragraph 4.1 unless otherwise agreed in writing by the parties. Lessee shall
not be liable for rent until Lessor delivers possession of the leased
premises to Lessee. If there is a delay in delivery of possession, rent shall
be abated until Lessee's office space is ready for occupancy; and neither
Lessor nor Lessor's agents shall otherwise be liable for any damages; and the
lease shall not terminate.
5.1 TENANT FINISH-OUT (CHECK ONE):
Lessor shall provide standard building finish-out, as described
--- in Exhibit D. Lessor shall perform any special construction
described in Exhibit D. Costs of tenant finish-out or special
construction shall be paid for pursuant to such exhibit.
X Lessor shall provide no tenant finish-out or improvements since
--- Lessee has taken Lessee's office space "as is".
6.1. QUIET POSSESSION: If Lessee is current and in compliance with all of
Lessee's obligations under this lease, Lessee shall be entitled to peaceful
and quiet possession and enjoyment of Lessee's office space, subject to the
terms and conditions of this lease. Lessee shall have access to the building
and common parking areas at all times, subject to the rules referred to in
paragraphs 9.2 and 23.1. Lessor shall make diligent efforts to have all other
tenants in the building comply with building rules. Otherwise, failure of
other tenants to comply with such rules shall not be considered a default by
Lessor. Construction noise or vibrations shall not be considered a default by
Lessor.
7.1. UTILITIES AND SERVICES BY LESSOR: Except where otherwise stated in
this lease, Lessor shall pay for and furnish in a timely and diligent manner
to Lessee the following utilities and services and no others, subject to
paragraph 32.1 regarding Lessee's payment of Lessee's prorata share of
building operating expenses.
(a) air conditioning and heating as reasonably required for comfortable use and
occupancy under normal office conditions from 7:30 a.m. to 6:30 p.m. Monday
through Friday, and from 7:30 a.m. to 2:30 p.m. Saturday.
(b) water and wastewater services for common areas;
(c) janitorial trash removal, sweeping, mopping, vacuuming and dusting three
days per week excluding holidays;
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<PAGE>
(d) electricity for standard office equipment and lighting;
(e) trash collection services (dumpster);
(f) pest control services as needed in the reasonable judgement of Lessor;
(g) landscaping and parking lot maintenance services;
(h) repair and maintenance services pursuant to paragraph 8.1; and
(i) replacement of fluorescent light bulbs and ballasts in building standard
lighting fixtures (but not incandescent light bulbs for nonstandard
fixtures or for Lessee's lamps); and
(j) elevator service.
7.2. UTILITIES AND SERVICES BY LESSEE: Lessee shall pay for all utilities
and services not expressly furnished by Lessor under paragraph 7.1.
7.3. INTERRUPTION OF UTILITIES OR SERVICES: Temporary interruption or
malfunction of utilities, services, and/or telephones shall not render
Lessor liable for damages, rent abatements, or release of any Lessee
obligation. Lessor shall use diligent efforts to have such utilities and
services restored as soon as reasonably possible.
8.1. MAINTENANCE AND REPAIRS BY LESSOR: Lessor shall maintain the interior
of Lessee's office space in good repair, at Lessee's expense. Lessor shall
use diligence to provide for the reasonable cleaning, maintenance, repair,
reconnection of interrupted utilities or services, and landscaping of common
areas, subject to any reimbursement obligations of Lessee under paragraph
8.2. Lessor may rekey at any time. Lessor may temporarily close any part of
the common facilities if reasonably necessary for repairs or construction.
Repairs and maintenance shall be in accordance with applicable governmental
requirements.
8.2. MAINTENANCE AND REPAIRS BY LESSEE: Lessee shall promptly reimburse
Lessor for the cost of repairing or replacing damage which is caused inside
Lessee's office space by Lessee, Lessee's agents, employees, family, or
licensees, invitees, visitors, or customers or outside Lessee's office space
by Lessee or Lessee's employees, agents, or contractors. Cost of repair shall
include 15% for overhead. Lessor may require advance payment therefor prior
to repair or replacement. Lessor shall have right of approval of all
repairmen or maintenance personnel. Lessee shall not damage or allow other
persons listed above to damage any portion of the leased premises. Lessee
shall pay for replacement of all incandescent light bulbs and for unstopping
any drains or water closets in Lessee's office space. If Lessor or Lessee's
workmen or contractors are permitted to repair, alter, or modify Lessee's
office space, Lessee shall warrant that no mechanic or materialman's lien
shall be filed against the leased premises. All such work shall be in
accordance with applicable governmental requirements.
8.3. TELECOMMUNICATIONS EQUIPMENT: All telecommunications equipment
necessary to serve Lessee shall be located in Lessee's office space and paid
for by Lessee, or, at Lessor's option and at Lessee's expense, in a lockable
enclosure in a common area location designated by Lessor.
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<PAGE>
9.1. ACCESS, KEYS, LOCKS, AND SECURITY: (a) Access. Lessee shall have access
to Lessee's office space at all times. Lessor shall have access to Lessee's
office space at reasonable times for reasonable business purposes upon prior
notice to Lessee except notice shall not be necessary in the event of an
emergency threatening life or property or the lawful exercise of Lessor's
remedies in case of default by Lessee.
(b) Keys. Lessor shall furnish Lessee two (2) keys for Lessee's office
space and two (2) keys for the main exterior entry doors of the building if
such door is locked after hours. Lessor shall not be liable for risk of loss
resulting from Lessee's keys being lost or used by unauthorized persons.
Lessor reserves the right to rekey or change locks for security reasons if
new keys are timely furnished to Lessee.
(c) Locks. Lessee may not add locks, change locks, or rekey locks without
written permission of Lessor. Locks may be changed at Lessee's request and
expense. If locks to the office space are changed, Lessor may specify kind
and brand of locks, placement, installation, master key compatibility, etc
(d) Security. Lessor shall have no duty to provide any security services
of any kind unless expressly provided in this lease. Lessor shall not be
liable to Lessee or Lessee's employees, family, customers, invitees,
contractors, or agents for injury, damage, or loss to person or property
caused by criminal conduct of other persons, including theft, burglary,
assault, vandalism or other crimes. Lessee shall lock its office space doors
when the last person leaves such office space for the day.
9.2. PARKING: Lessor shall have sole control over parking. If vehicles are
parked in violation of Lessor parking rules or in violation of state
statutes, Lessor may exercise vehicle removal remedies under Articles 6701g-1
and 6701g-2 of the Texas Civil Statutes upon compliance with statutory
notice. There shall be no reserved parking spaces unless agreed in writing by
Lessor.
10.1. OCCUPANCY, NUISANCE, AND HAZARDS: Lessee's office space shall be
occupied only by Lessee or Lessee's employees and shall not be left entirely
vacant or used exclusively for storage. Lessee and Lessee's agents,
employees, family, licensees, invitees, visitors, and contractors shall
comply with all federal, state, and local laws relating to occupancy or to
criminal conduct while such persons are on the leased premises. Lessee and
the persons listed above shall not (1) use, occupy, or permit the use or
occupancy of the leased premises for any purpose which is directly or
indirectly forbidden by such laws or which may be dangerous to life or
property, (2) permit any public or private nuisance, (3) disturb the quiet
enjoyment of other tenants, (4) do anything which might emit offensive odors
or fumes, (5) make undue noise or vibrations, (6) permit anything which would
cancel insurance coverage or increase the insurance rate on the building or
contents, or (7) otherwise damage the leased premises.
11.1. TAXES: Lessor shall be responsible for payment of all taxes and
assessments against the building subject to Lessee's obligation to pay Lessor
for Lessee's share thereof, on a prorata square foot basis, as additional
rent pursuant to paragraph 32.1. Lessee shall timely pay all taxes
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<PAGE>
assessed against Lessee's furniture, equipment, fixtures, or other personal
property in Lessee's office space.
12.1. INSURANCE: Lessor and Lessee shall comply with the respective
insurance obligations as set forth below:
(a) Lessor. Lessor shall maintain (1) fire and extended coverage
insurance, including vandalism and malicious mischief, on the office
building, and (2) comprehensive general liability insurance. The amounts
shall be as required by Lessor's mortgagee or as Lessor may deem reasonably
appropriate, whichever is greater. Lessor shall have no responsibility to
maintain fire and extended coverage insurance on Lessee's contents. The
portion of Lessor's insurance premiums reasonably due to Lessee's acts or
omissions or Lessee's special use, improvements, or tenant finish-out (over
and above Lessee's normal use as contemplated in paragraph 1.1(a)) shall be
paid for by Lessee.
(b) Lessee. Lessee shall provide Lessee's own public liability insurance
for its operations on the leased premises in the minimum "primary coverage"
amount presently required under Texas law for the purchase of umbrella
liability insurance. Upon written notice by Lessor to Lessee, such dollar
amount of Lessee's liability policy shall be increased by the amount of any
increase required under Texas law for "primary coverage" under an umbrella
liability policy. Lessee is encouraged to maintain fire and extended coverage
insurance (including vandalism and malicious mischief) on the contents in
Lessee's office space, including fixtures, furniture, equipment, supplies,
inventory, and other personal property. Such property is not covered by
Lessor's insurance.
(c) Insurance certificates. Lessee shall provide Lessor with a certificate
of Lessee's insurance or a copy thereof as required above within 7 days after
Lessee initially occupies Lessee's office space or any portion thereof. Lessor
and Lessor's managing agent (if any) shall be named as additional insureds on
Lessee's liability insurance policy. Upon written request by Lessor, changes
in the name of Lessor or Lessor's managing agent shall be reflected on such
certificate.
(d) Notice from Lessee's Insurance Carrier. All policies of insurance to
be provided by Lessee shall contain a provision (to the extent legally
permitted) that the insurance company shall give Lessor 10 days' written
notice to Lessor, in advance of (1) any cancellation or non-renewal of the
policy, (2) any reduction in the policy amount, and (3) any deletion of
additional insureds.
12.2. MUTUAL RELEASES AND WAIVER OF SUBROGATION: (a) To the extent that the
coverage of their respective insurance policies are not adversely affected,
Lessor and Lessee release each other and their respective officers,
directors, employees, and agent from any claims for loss or damage to any
person or property on the leased premises which is caused by or which results
from risks insured against under insurance policies carried by Lessor or
Lessee and in force at the time of any such loss or damage. The foregoing
release shall not apply to property losses or damages in excess of policy
limits or to losses or damages not covered by insurance due to a deductible
clause in the policy.
(b) Upon written request after signing this lease, but before any loss or
damage occurs, Lessor
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<PAGE>
or Lessee may require that the other party's respective fire/casualty and
liability insurance policy provide a waiver for all right of recovery by way
of subrogation in connection with any loss or damage covered by such
insurance policies.
(c) Notwithstanding the foregoing, if such waiver of subrogation is not
incorporated into the policy and cannot be procured or if it can be procured
only with an additional premium charge, such party shall furnish to the other
party written evidence from the insurance company or insurance agent,
verifying that such waiver is (1) not obtainable or (2) not obtainable
without extra charge. Thereafter, within a reasonable time after receiving
such notice, the party for whose benefit the waiver is sought may (1) agree
to pay any additional charge necessary to obtain the waiver of subrogation or
(2) place the insurance with a company which is reasonably satisfactory to
the other party and to such party's mortgagees with a policy of the same
terms and coverage, the extra cost of which will be entirely borne by the
party for whose benefit the waiver of subrogation is sought.
(d) Upon written request, Lessor and Lessee shall furnish to each other
copies of the policies of insurance referred to in this lease, including any
waivers of subrogation, or satisfactory evidence of same.
12.3. HOLD HARMLESS: Lessee shall indemnify Lessor for and shall hold Lessor
harmless from all fines, claims, liabilities, and suits (including costs and
expenses of defending against same) resulting from any breach or
nonperformance of the lease by Lessee or Lessee's agents, employees, family,
licensees, or invitees. Lessor shall indemnify Lessee for and shall hold
Lessee harmless from all fines, claims, liabilities, and suits (including
costs and expenses of defending against same) resulting from any breach or
nonperformance of the lease by Lessor or Lessor's agents, employees, family,
licensees, or invitees. Lessor and Lessee shall not be liable to the other or
the other's agent, employees, or family for any damage to personal property
resulting from any act, omission, or negligence of any other tenant or
occupant of the office building.
13.1. ALTERATIONS BY LESSEE: Lessee may not make any alterations,
improvements, doorlock changes, or other modifications of any kind to the
leased premises without Lessor's written consent which may not be
unreasonably withheld. "Alterations" include but are not limited to
improvements glued, screwed, nailed, or otherwise permanently attached to the
building, structural changes, roof and wall penetrations, and all plumbing,
electrical, and HVAC changes. Requests for Lessor's approval shall be in
writing and shall be detailed to Lessor's reasonable satisfaction. The
foregoing shall be done only by Lessor's contractors or employees or by third
parties approved by Lessor in writing. Lessee shall pay in advance for any
requested alterations, improvements, lock changes, or other modifications
which are approved and performed by Lessor. If same are performed by Lessee
with Lessor's permission, Lessee shall not allow any liens to be placed
against the buildings as a result of such additions or alterations.
Alterations, improvements, and modifications done at Lessee's request shall
comply with all applicable laws. Changes in Lessee's alterations or
improvements which may be later required by governmental action shall also be
paid for by Lessee.
14.1. REMOVAL OF PROPERTY BY LESSEE: Lessee may remove its trade fixtures,
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<PAGE>
furniture, and equipment only if (1) such removal is made prior to the end of
the lease term, (2) Lessee is not in default under this lease at time of
removal, and (3) such removal is not in anticipation of an early moveout
prior to the end of the lease term. Lessee shall pay all costs of removal.
Lessee shall have no rights to property remaining on the leased premises
after moveout. Lessee may not remove any alterations as defined in paragraph
13.1 or improvements such as wall-to-wall carpeting, book shelves, window
coverings, drapes, cabinets, paneling, counters, kitchen or breakroom
built-ins, shelving, wall covering, and anything else attached to the floor,
walls, or ceilings. If Lessor requests in writing, Lessee shall, immediately
prior to moving out, remove any alterations, fixtures, equipment, and other
property installed by Lessee. Lessee shall pay for cleaning or repairing
damage caused by Lessee's removal of any property.
15.1 SUBLETTING AND ASSIGNMENT: Lessee may not sublet, assign, pledge, or
mortgage this lease and may not grant licenses, commissions, or other rights
of occupancy to all or any part of the leased premises without Lessor's prior
written approval which shall not be unreasonably withheld. Sublessee's
financial strength, reputation, personnel, and length of sublease or
assignment shall be important factors in Lessor's approval. Sale, transfer,
or merger of the majority of the voting shares or voting partnership
interests in Lessee (if a corporation or partnership) shall be considered an
assignment; likewise for issuance of treasury stock or admission of a new
general partner. Lessor shall not be obligated to approve any sublease or
assignment. However, if Lessor gives such approval, Lessor shall be entitled
to (1) 50% of any excess between Lessee's rental per square foot under the
lease and the rental per square foot under the sublease or assignment, and
(2) 50% of any other consideration flowing directly or indirectly from the
sublessee or assignee to Lessee or Lessee's agents. The foregoing is in
consideration of additional management performed or to be performed by Lessor
under such sublease or assignment. In addition to the foregoing, Lessor may
charge Lessee a one-time fee equal to one month's lease rental for such
additional administrative, investigative, and management services. Violation
of this lease by sublessees or assignees shall be deemed a violation by
Lessee. Approval by Lessor of any sublease or assignment shall not release
Lessee from any obligation under this lease and shall not constitute approval
for subsequent subletting or assignment. Sublessees or assignees shall be
liable for all of Lessee's obligations under this lease unless otherwise
specified in writing. Upon default by Lessee any sublease shall pay all
sublease rentals and other sums due Lessor, direct to Lessor, to be credited
against sums owed to Lessor by Lessee under this lease. Unless otherwise
agreed in writing, no sublease or assignment shall be valid unless (1) a copy
of this lease is attached thereto, (2) the sublessee or assignee agrees in
writing to be liable for all of Lessee's obligations under this lease, and
(3) Lessor's written approval is attached to the sublease or assignment.
16.1. DESTRUCTION BY FIRE OR OTHER CASUALTY: (a) Total destruction, rent
abatement, and restoration. If Lessee's office space is totally damaged by
fire or other casualty so that it cannot reasonably be used by Lessee and if
this lease is not terminated as provided in subparagraph (d) below, there
shall be a total abatement of Lessee's rent and Lessee's obligation to pay
office building operating expenses until Lessee's office space is restored by
Lessor and Lessee.
(b) Partial destruction, rent abatement, and restoration. If Lessee's office
space is partially
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destroyed or damaged by fire or other hazard so that it can be only partially
used by Lessee for the purposes allowed in this lease and if this lease is
not terminated as provided in subparagraph (d) below, there shall be a
partial abatement of Lessee's rent and Lessee's obligation to pay office
building operating expenses which fairly and reasonably corresponds to the
time and extent to which Lessee's office space cannot reasonably be used by
Lessee.
(c) Restoration. Lessor's obligation to restore shall be limited to the
condition of the leased premises existing prior to the casualty. Lessor shall
proceed with diligence to restore. During restoration, Lessee shall continue
business to the extent practical in Lessee's reasonable judgment.
(d) Lease termination. If Lessee's office space or the office center is so
badly damaged that restoration and repairs cannot be completed within 6
months after the fire or casualty, then this lease may be terminated as of
the date of the destruction by either Lessor or Lessee by serving written
notice upon the other. Termination notice must be delivered within 30 days
after the casualty.
17.1. CONDEMNATION: If any part of Lessee's office space is taken by
condemnation or by deed in lieu of condemnation by any governmental
authority, this lease shall terminate one day prior to such taking. If any
part of the office building's parking lot is so taken, Lessee's right to use
such portion shall terminate one day prior to such taking; and Lessee's rent
shall be reduced only to the extent that such partial taking reduces the fair
market value of Lessee's office space; Lessor shall pay all costs associated
with construction reasonably necessary to render the leased premises usable
for Lessee's permitted purposes after such partial taking. All compensation
awarded for any partial or total taking of the office building shall be the
property of Lessor. If Lessor has received written notice of intent to
condemn, Lessee shall upon 10 days written request by Lessor execute an
acknowledgement that the lease terminates one day prior to the condemnation
of deed in lieu of condemnation and that Lessee claims no interest in the
condemnation award. Lessor shall have no interest in any monies paid by the
condemning authorities to Lessee for moving costs or for the other personal
property within the leased premises (excluding leasehold improvements) if a
separate award for such items is made to Lessee.
18.1. DEFAULT BY LESSOR: Lessee shall be entitled to recover actual damages
and terminate this lease if (1) Lessor fails to pay any sum due and owing to
Lessee within 7 days after written demand from Lessee, or (2) Lessor remains
in default on any other obligation for 7 days after Lessee's written demand
for performance. However, Lessor shall not be in default if Lessor promptly
commences to cure such noncompliance and diligently proceeds in good faith to
cure same after receiving written notice of such default of taxes and
utilities are not timely paid, Lessee may pay some to the extent that it is
necessary to avert foreclosure or cutoff.
19.1. DEFAULT BY LESSEE: If Lessee defaults, Lessor shall have any or all
remedies set forth below.
(a) Definition of default. The occurrence of any of the following shall
constitute a default by Lessee: (1) failure to pay rent or any other sum due
by Lessee under this lease within 7 days after written demand therefor by
Lessor; (2) failure to vacate on or before the last day of the lease term,
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renewal term, or extension period; (3) failure to pay rent in advance on a
daily basis in the event of unlawful holdover by Lessee; (4) unauthorized
early move-out or notice of same as set forth below; (5) acquisition of
Lessee's interest in the lease by a third party by judicial or non-judicial
process; or (6) failure to comply with any other provision of the lease
(including rules) if such failure to comply is not cured as soon as possible
after delivery of written notice by Lessor to Lessee. However, Lessee shall
not be in default under subclause (6) above if Lessee promptly commences to
cure such noncompliance and diligently proceeds in good faith to cure same
after receiving written notice of such default.
(b) Door Locks. If Lessee is in default for nonpayment of rent or other
sums due and if Lessee fails to pay same in full within 7 days after Lessor
hand delivers to Lessee or to Lessee's office space written demand or notice
of nonpayment, then Lessor shall be entitled to change or modify door locks
on all entry doors of Lessee's office space until all such sums are paid in
full; provided, however, Lessor shall immediately thereafter post a notice on
the primary entry door to Lessee's office space, stating that Lessor has
expressed such lockout rights. No other notice requirements or lockout laws
shall apply. Lessor's right to modify or change locks shall occur
automatically and without notice if Lessee's rent is accelerated under
subparagraph (e) below, relating to unlawful early move-out. If Lessee moves
out or abandons Lessee's office space, Lessor may permanently change the
locks without notice to Lessee, and Lessee shall not be entitled to a key or
to reentry.
(c) Utilities and services. If Lessee is in default for nonpayment of rent
or other sums due and if Lessee fails to pay same in full within 3 days after
Lessor hand delivers to Lessee or to Lessee's representative written notice
of Lessor's intent to terminate utilities or services which are furnished by
Lessor, then Lessor may terminate such utilities or services after such 3-day
notice period, without further notice. Lessor's right to terminate such
utilities or services shall occur automatically and without notice if
Lessee's rent is accelerated under subparagraph (e) below, relating to
unlawful early move-out.
(d) Acceleration after notice of rental delinquency. If Lessee is in
default for nonpayment of rent or other sums due and if Lessee fails to pay
same in full within 3 days after Lessor delivers to Lessee or to Lessee's
office space a written notice of Lessor's intent to accelerate, then all rent
for the remainder of the lease term shall be accelerated, due, and delinquent
at the end of such 3-day notice period without further demand or notice. Such
acceleration rights are in consideration of the rentals for the entire term
being payable in monthly installments rather than in one lump sum at the
beginning of the lease term. If Lessee has already vacated the leased
premises, notice of acceleration may be delivered to Lessee pursuant to
paragraph 29.1. Liability for additional rents accruing in the future (over
and above any base rents) shall not be waived by such acceleration.
(e) Acceleration upon early move-out. If Lessee is lawfully evicted, or if
Lessee moves out or gives verbal or written notice (in person or by an
authorized employee or agent) of intent to move-out prior to the end of the
lease term without the rent being paid in full for the entire remainder of
the lease term or renewal or extension period or without prior written
consent of Lessor, all remaining rents for the remainder of the lease term
shall be accelerated immediately and
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automatically, without demand or notice. Such accelerated rents shall be due
and delinquent without notice before or after such acceleration. Such
acceleration shall occur even if the rent for the current month has been paid
in full.
(f) Termination of possession. If Lessee is in default as defined in
subparagraph (a) above and if Lessee remains in default for 3 days after
Lessor gives notice of such default to Lessee, or if Lessee abandons the
leased premises, Lessor may (with or without demand for performance)
terminate Lessee's right of possession by giving one day's written notice to
vacate; and Lessor shall be entitled to immediate possession without
termination of Lessee's obligations under the lease. Lessor's repossession
shall not be considered an election to terminate this lease unless written
notice of such intention to terminate is given to Lessee by Lessor.
Repossession may be by voluntary agreement or by eviction lawsuit.
Commencement of an eviction lawsuit shall not preclude other Lessor remedies
under this lease or other laws.
(g) Reletting costs. If Lessee is in default as defined in subparagraph
(a) above and if Lessor terminates Lessee's right of possession without
terminating this lease, Lessee shall pay upon Lessor's demand the following:
(1) all costs of reletting (which in no event shall be less than one month's
rent), including leasing commissions, rent concessions (whether in the form
of assuming or buying out lease remainders elsewhere, free rent for a period
of time, or reduced rental rates), utilities during the vacancy, advertising
costs, administrative overhead, and all costs of repair, remodeling, or
redecorating for replacement tenants in Lessee's office space, (2) all rent
and other indebtedness due from Lessee to Lessor through the date of
termination of Lessee's right of possession, and (3) all rent and other sums
required to be paid by Lessee during the remainder of the entire lease term,
subject to the acceleration paragraphs above.
(h) Mitigation by Lessor. Upon eviction or voluntary vacation of the
leased premises by Lessee without the lease being terminated by Lessor,
Lessor shall make reasonable efforts to relet the leased premises. After
deduction of reasonable expenses incurred by Lessor, Lessee shall receive
credit for any rentals received by Lessor through reletting the leased
premises during the remainder of the lease term or renewal or extension
period. Such deductible expenses may include real estate commissions,
attorney's fees, and all other expenses in connection with reletting. Lawsuit
to collect amounts due by Lessee under this lease may be brought from time to
time on one or more occasions without the necessity of Lessor's waiting until
the expiration of the lease term. If judgment for accelerated rents is
recovered, Lessor shall give credit against such judgment for subsequent
payments made by Lessee and subsequent rentals received by Lessor from other
tenants of Lessee's office space, less lawful deductions and expenses of
reletting.
(i) Termination of lease. Lessor may terminate this lease (as contrasted
to termination of possession rights only) upon default by Lessee or at any
time after Lessor's lawful re-entry or repossession following default by
Lessee. Lessor's agents have authority to terminate the lease only by written
notice given pursuant to paragraph 29.1.
(j) Damages. In addition to other remedies, Lessor may recover actual
damages incurred.
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20.1. LIEN FOR RENT: (a) Notwithstanding anything to the contrary in this
lease, Lessor's landlord lien shall be subordinate to any existing security
interest and any future purchase money security interests on Lessee's
personal property if such security interest is properly perfected and
timely recorded as required by the Texas Business Code. Lessor shall
cooperate in signing lien subordinations in accordance with the foregoing.
Any lien subordination shall be on forms reasonably acceptable to Lessor.
(b) Subject to the limitations of subparagraph (a) above, Lessee gives to
Lessor a contractual lien on all of Lessee's property which may be found on
the leased premises to secure payment of all monies and damages owed by
Lessee under the lease. Such lien also covers all insurance proceeds on such
property. Lessee shall not remove such property while rent or other sums
remain due and unpaid to Lessor and such property shall not be removed until
all Lessee's obligations under the lease have been complied with. This lien
is in addition to Lessor's statutory lien under Section 54.021 of the Texas
Property Code. If Lessee is in default for nonpayment of rent or any other
sums due by Lessee, Lessor's representatives may peacefully enter the leased
premises and remove and store all property. If Lessor removes any property
under this lien, Lessor shall leave the following information in a
conspicuous place inside Lessee's office space: (1) written notice of
exercise of lien, (2) a list of items removed, (3) the name of Lessor's
representative who removed such items, and (4) the date of such removal.
Lessor shall be entitled to reasonable charges for packing, removing, or
storing abandoned or seized property, and may sell same at public or private
sale (subject to any properly recorded chattel mortgage or recorded financing
statement) after 30 days' written notice of time and place of sale is given
to Lessee by certified mail, return receipt requested. Upon request by
Lessor, Lessee shall acknowledge the above lien rights by executing a UCC-1
form or similar form reflecting same.
21.1. ATTORNEY'S FEES, INTEREST AND OTHER EXPENSES: If Lessee or Lessor is
in default and if the nondefaulting party places the lease in the hands of an
attorney in order to enforce lease rights or remedies, the nondefaulting
party may recover reasonable attorney's fees from the defaulting party even
if suit has not been filed. In any lawsuit enforcing lease rights, the
prevailing party shall be entitled to recover reasonable attorney's fees from
the nonprevailing party, plus all out-of-pocket expenses. Trial shall be to
court only; and all parties waive jury trial. All delinquent sums due by
Lessor or Lessee shall bear interest at the maximum lawful rate of interest,
compounded annually, from date of default until paid, plus any late payment
fees. Late payment fees as set forth in paragraph 3.2 shall be considered
reasonable liquidated damages for the time, trouble, inconvenience, and
administrative overhead expense incurred by Lessor in collecting late
rentals, such element of damages being uncertain and difficult to ascertain.
Late payment fees shall not be liquidated damages for attorney's fees or for
Lessor's loss of use of such funds during the time of delinquency.
22.1. NONWAIVER: The acceptance of monies past due or the failure to
complain of any action, nonaction, delayed payment, or default, whether
singular or repetitive, shall not constitute a waiver of rights or
obligations under the lease. Lessor's or Lessee's waiver of any right or any
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default shall not constitute waiver of other rights, violations, defaults, or
subsequent rights, violations, or defaults under this lease. No act or
omission by Lessor or Lessor's agents shall be deemed an acceptance or
surrender of the leased premises, and no agreement by Lessor to accept a
surrender of the leased premises shall be valid unless it is in writing and
signed by a duly authorized agent of Lessor.
23.1. BUILDING RULES AND REGULATIONS: Lessor's rules and regulations for the
office building are attached as Exhibit C and are subject to reasonable
change if the changes are applicable to all tenants of the office building.
24.1. TRANSFER OF OWNERSHIP BY LESSOR: If Lessor transfers ownership of the
office building (other than as security for a mortgage) and if Lessor has
delivered to the transferee all of Lessee's security deposits and any prepaid
rents, Lessor shall be released from all liability under the lease; and such
transferee shall become liable as Lessor. Such right to be released of
liability shall accrue to subsequent owners only if such transfer is in good
faith and for consideration.
25.1. MORTGAGES: Unless otherwise provided in this lease, Lessee shall
subordinate and attorn to mortgage liens now or hereafter on the office
building. Lessee agrees to execute, from time to time, documentation therefor
which is necessary in the reasonable judgment of Lessor. Other than the
provisions already set forth in this lease, there are no special lease
provisions which are required by lienholders of the office building. This
lease shall be subordinate to all existing and future mortgages. However,
such mortgagees may at any time subordinate their lien to this lease by
filing a subordination notice in the county real property records without
necessity of notice to Lessee. Since a Mortgagee Nondisturbance Agreement is
contemplated, any foreclosure of such mortgagee's lien shall not terminate
this lease even if such lien is superior to the lease.
26.1. SURRENDER OF PREMISES: When Lessee moves out, Lessee shall surrender
Lessee's office space in the same condition as on the date of lease
commencement by Lessee (as changed or improved from time to time in
accordance with this lease), less ordinary wear.
27.1. HOLDING OVER: If Lessee remains in possession of the leased premises
after the expiration or mutually-agreed termination date of the lease,
without the execution by Lessor and Lessee of a new lease or a renewal or
extension of the lease, then (1) Lessee shall be deemed to be occupying the
leased premises as a tenant-at-sufferance on a daily basis, subject to all
obligations of the lease, (2) Lessee shall pay rent for the entire holdover
period, (3) Lessee shall be subject to all other remedies of Lessor as
provided in paragraph 19.1, (4) Lessee shall indemnify Lessor and/or
prospective tenants for damages, including lost rentals, storage expenses,
and attorney's fees, and (5) at Lessor's sole option, Lessee may extend the
lease term for a period of one month at the then current rental rates for the
office building, as reasonably determined by Lessor, by hand delivering
written notice to Lessee or to Lessee's office space while Lessee is holding
over. Holdover rents shall be immediately due on a daily basis and delinquent
without notice or demand; and the prior written notice and waiting period
requirements of this lease shall not be necessary in order for Lessor to
exercise remedies thereunder.
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28.1. SIGNS AND BUILDING NAME: Except for standard suite signage and
building directory listings, there shall be no signs, symbols, or identifying
marks on or in the building, halls, elevators, staircases, entrances, parking
areas, landscape areas, doors, walls, or windows without prior written
approval of Lessor. All signs or lettering shall conform to the sign and
lettering criteria established by Lessor. Unless otherwise stated in the
rules, suite signage and building directory changes shall be done exclusively
by Lessor and at Lessee's expense. Lessor may remove all unapproved signs
without prior notice to Lessee and at Lessee's expense. Lessor may change the
name of the building upon six months' written notice to Lessee.
28.2. RELOCATION OF LESSEE: Upon at least 60 days' notice to Lessee, Lessor
shall have the right to relocate Lessee within the building in lease space
which is the same size or larger and suited to Lessee's use. Such relocation
shall be made at Lessor's sole expense, including necessary reprinting of
Lessee's stationary, envelopes, business cards, door signs, etc. Rent shall
not be increased if the relocation office space is larger or better quality.
Relocation date shall be contained in the relocation notice referred to
above. Lessor shall not be liable to Lessee in connection with such
relocation except for undue delay or property damages caused by Lessor or
Lessor's employees, agents, or contractors.
29.1. NOTICES: Whenever written notice is required or permitted under this
lease, such notice shall be in writing and shall be either (a) hand delivered
personally to the party being notified, (b) hand delivered to or inside such
party's mailing address, or (c) delivered at such party's mailing address by
certified mail, return receipt requested, postage prepaid. The mailing
address of Lessor shall be the address to which Lessee normally mails or
delivers the monthly rent unless Lessor notifies Lessee of a different
address in writing. The mailing address of Lessee shall be Lessee's office
space under this lease. However, if Lessee moves out, it shall be Lessee's
last address known by Lessor. Hand delivered notice is required only when
expressly required in the lease. Notice by noncertified mail is sufficient if
actually received by the addressee or an employee or agent of addressee. The
term "notice" shall be inclusive of notices, billings, requests, and demands.
30.1. ESTOPPEL CERTIFICATES: From time to time, upon 7 days' prior written
request from Lessor, Lessee shall execute and deliver to Lessor the estoppel
certificate as reasonably required by a prospective purchaser or lender. If any
statement in the estoppel certificate form is contrary to the facts existing at
the time of execution of such form, Lessee may correct same before signing. The
estoppel certificate may be conclusively relied upon by Lessor and by any
prospective lienholder or purchaser of the leased premises. If Lessee fails to
comply with the foregoing by the end of such 7-day period, it shall be
conclusively presumed that (1) this lease is in full force and effect without
any subleases or assignments and is unamended or modified except for amendments
verified by affidavit of Lessor to the prospective lienholder or purchaser, (2)
no rents, security deposits, or other charges have been prepaid, (3) the
statements contained in the estoppel certificate form are correct, (4) there are
no uncured defaults by Lessor, (5) Lessee has no right of offset or rescission,
and (6) any prospective purchaser or lienholder may conclusively rely on such
silence or noncompliance by Lessee and may conclusively assume no Lessor
defaults within the 120 days
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following Lessee's receipt of Lessor's request for an estoppel certificate.
31.1. SUCCESSORS: This lease shall bind and inure to the benefit of the
parties, any guarantors of this lease, and their respective successors and
assigns.
31.2. LEASING AGENT COMMISSIONS: No leasing commission shall be due by
Lessor to any leasing agent unless in writing. Commission agreements executed
by Lessor shall be binding on subsequent building owners if the tenant of the
lease in question is in possession at the time of transfer of building
ownership.
32.1. BUILDING OPERATING EXPENSE: In addition to the monthly base rent in
paragraph 2.1, Lessee shall pay additional rent on a monthly basis,
equivalent to Lessee's prorata share of actual building operating expenses as
per Exhibit B. Lessee's responsibility for payment of building operating
costs shall be subject to the expense stop referred to in paragraph 2.1.
32.2. BASE RENT ADJUSTMENT: At each annual anniversary date of this lease,
the monthly base rent shall increase by 0 % of the previous lease year's base
rents.
33.1. REPRESENTATIONS AND WARRANTIES BY LESSOR: Lessor warrants that Lessor
is the sole owner of the land and improvements comprising the office building
and that Lessor has full right to enter into this lease. Lessor's duties and
warranties are limited to those expressly stated in this lease and shall not
include any implied duties or implied warranties, now or in the future. No
representations or warranties have been made by Lessor other than those
expressly contained in this lease.
34.1. REPRESENTATIONS AND WARRANTIES BY LESSEE: Lessee warrants to Lessor
that (1) the financial statements of Lessee heretofore furnished to Lessor
are true and correct to the best of Lessee's knowledge, (2) there has been no
significant adverse change in Lessee's financial condition since the date of
the financial statements, (3) the financial statements fairly represent the
financial condition of Lessee upon those dates and at the time of execution
hereof, (4) there are no delinquent taxes due and unpaid by Lessee, and (5)
Lessee and none of the officers or partners of Lessee (if Lessee is a
corporation or partnership) have ever declared bankruptcy. Lessee warrants
that Lessee has disclosed in writing to Lessor all lawsuits pending or
threatened against Lessee, and Lessee has made no material misrepresentation
or material omission of facts regarding Lessee's financial condition or
business operations. All financial statements must be dated and signed by
Lessee. Lessee acknowledges that Lessor has relied on the above information
furnished by Lessee to Lessor and that Lessor would not have entered into
this lease otherwise.
35.1. PLACE OF PERFORMANCE: Unless otherwise expressly stated in this lease,
all obligations under this lease, including payment of rent and other sums
due, shall be performed in the county where the office building is located,
at the address designated from time to time by Lessor.
36.1. MISCELLANEOUS: This lease contains the entire agreement of the
parties. No
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other written or oral promises or representations have been made, and none
shall be binding. This lease supersedes and replaces any previous lease
between the parties on Lessee's office space, including any renewals or
extensions thereunder. Except for reasonable changes in written rules, this
lease shall not be amended or changed except by written instrument, signed by
both Lessor and Lessee. Lessor's agents do not and will not have authority to
(1) make exceptions, changes or amendments to this lease, or factual
representations not expressly contained in this lease, (2) waive any right,
requirement, or provision of this lease, or (3) release Lessee from all or
part of this lease, unless such action is in writing. Multiple lessees shall
be jointly and severally liable under this lease. Notices, requests, or
agreements to, from, or with one of multiple lessees shall be deemed to be
to, from, or with all such Lessees. Under no circumstances shall Lessor or
Lessee be considered an agent of the other. Nonsubstantial errors in space
footage calculations shall entitle the parties to correct the rental figures
in the lease and adjust previously paid rentals accordingly, but not to
terminate the lease. The lease shall not be construed against either party
more or less favorably by reason of authorship or origin of language. Texas
law applies. If any date of performance or exercise of a right ends on a
Saturday, Sunday, or state holiday, such date shall be automatically extended
through the next business day. Time is of the essence; and all performance
dates, time schedules, and conditions precedent to exercising a right shall
be strictly adhered to without delay except where otherwise expressly
provided. If any provision of this lease is invalid under present or future
laws, the remainder of this lease shall not be affected.
37.1. GUARANTY: This lease ( ) is or ( X ) is not guaranteed by others.
The names and titles of any guarantors are shown on the signature page(s) at
the end of this lease. The specific obligations of such guarantors, if any,
shall be pursuant to attached Exhibit H entitled "Lease Guaranty". Such
guaranty shall continue and shall be unaffected by any modification or
amendment to this lease or any renewal or extension thereof. The signature
requirements and corporate resolution requirements for any guarantors shall
conform to the requirements for Lessees in paragraph 39.1 below.
37.2. SPECIAL CONDITIONS: Additional provisions of this lease are set forth
in Addendum A.
38.1. EXHIBIT LIST: The exhibits attached to this lease are listed below.
All exhibits are a part of this lease except for those which have been lined
out or which have been shown below as omitted.
Exhibit B Building Operating Expense Passthrough Calculations (paragraphs
2.1 and 32.1)
Exhibit C Building Rules and Regulations (paragraph 23.1)
39.1. LESSEE SIGNATURE REQUIREMENTS: Lessee is ( ) an individual, ( ),
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several individuals, ( ) a general partnership, ( ) a limited partnership,
( ) a joint venture, ( ) an unincorporated association, ( ) a
professional corporation, ( ) a professional association, or ( X ) a
corporation (check one). Such partnership, joint venture, unincorporated
association, or corporation is organized or chartered under the laws of the
State of Texas. Lessee's name stated at the beginning of this lease ( ) is
or ( X ) is not an assumed name. If so, an assumed name certificate has been
or will be filed by Lessee in the county where the office building is located
or with the Texas Secretary of State's Office in Austin, Texas, whichever is
appropriate. Lessee shall disclose to Lessor the names and addresses of all
partners or venturers of Lessee if Lessee is a partnership or joint venture.
If Lessee or Guarantor is a corporation, corporate resolutions shall be
executed on the form in Exhibit I. Corporate seals are unnecessary under
Texas law.
39.2. LEASE DATES AND AUTHORITY TO SIGN: The "identification" date of this
lease is the 3rd day of March, 1999. The "effective date" on which this
lease becomes binding is the date on which the lease has been signed by
Lessor, Lessee, and any guarantors. The names and signatures of all parties
are shown below; and all persons signing have been duly authorized to sign.
If Lessee is a corporation, a corporate resolution authorizing Lessee to
execute this lease is attached as Exhibit I: Corporate seals are unnecessary
under Texas law.
IN WITNESS WHEREOF
Landlord and Tenant have executed this Lease in multiple original
counterparts as of the day and year first written above.
LESSOR: LESSEE:
EXECUTIVE PLAZA JOINT VENTURE CORRIDOR TECHNOLOGIES, INC.
By: /s/ [Illegible] By: /s/ [Illegible]
----------------------------- -------------------------
Title: [Illegible] Title: President
------------------------- -----------------------
Date: 3-3-99 Date: 3-3-99
------------------------- -----------------------
LEASING AGENT:
LePAGE PROPERTIES
By: /s/ [Illegible]
----------------------------
Date:
--------------------------
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ADDENDUM "A"
EXECUTIVE PLAZA JOINT VENTURE, Landlord, and CORRIDOR TECHNOLOGIES, INC.,
Tenant, do hereby agree that the following provisions shall become
incorporated into the attached Lease Agreement dated March 3, 1999. Such
following provisions to control whenever inconsistent with the provisions
contained in the Lease Agreement.
1. BASE RENT:
03-15-99 Thru 05-31-99 $3,978.00/mo
06-01-99 Thru 11-30-01 $5,368.00/mo
2. REMODELING:
A. Landlord will construct one building standard partition in suite
#304. Exact location and dimensions to be determined.
B. Landlord will move (or install new) Tenant's glass door from
Suite #170 to Suite #304.
3. WET BAR MAINTENANCE
Tenant shall be responsible for all maintenance pertaining to wet bar.
Such maintenance shall include but not be limited to fixtures, plumbing,
water heater, counter top, cabinets, etc.
4. SIGNAGE:
Tenant may install at his expense a sign on the monument sign in front
of Executive Plaza. Tenant shall be responsible for all costs, including
installation, maintenance, liability, etc. concerning this signage.
Landlord must approve Tenant's final sign configuration and design.
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EXHIBIT "B"
EXECUTIVE PLAZA
BUILDING OPERATING EXPENSE PASSTHROUGH CALCULATIONS
(see paragraphs 2.1 and 32.1 of lease)
(a) "ESTIMATED" PRORATA BUILDING OPERATING EXPENSES. On or before the
beginning of each calendar year, Lessor shall calculate the estimated
building operating expenses for that calendar year, according to the criteria
in subparagraph (c) below. One-twelfth of Lessee's prorata share of estimated
building operating expense's which are in excess of any expense stop shall be
due on the first of each month as additional rent.
(b) YEAR-END ADJUSTMENT FOR OVERPAYMENT OR UNDERPAYMENT BY LESSEE BECAUSE
OF DIFFERENCES BETWEEN "ESTIMATED" AND "ACTUAL" BUILDING OPERATING EXPENSES.
After each calendar year of the lease term and renewal or extension periods,
Lessor shall determine the actual building operating expenses for that
calendar year. If it is then determined that actual building operating
expenses were less than estimated expenses and that Lessee's monthly payments
of estimated expenses over Lessee's expense stop figure were too much, Lessor
shall promptly refund to Lessee the excess amount paid by Lessee. If it is
determined that actual building operating expenses were more than estimated
expenses and that Lessee's monthly payments of estimated expenses over
Lessee's expense stop figure were insufficient, Lessor shall invoice Lessee
for the amount of Lessee's underpayment. Payment thereof shall be due upon
delivery of invoice to Lessee. The foregoing calculations and adjustments may
also be made one or more times during the calendar year, at Lessor's option.
(c) DEFINITION OF BUILDING OPERATING EXPENSES. Building operating expenses
for each calendar year shall include: all ad valorem taxes, assessments and
related government charges becoming due on the office complex; and on-site
personal property used in operation of the office complex in such period;
utilities, insurance premiums for fire, extended coverage, vandalism, and
liability on the building and personal property used in building management;
landscape expenses; janitorial expenses; window cleaning; supplies; painting and
other maintenance expenses; licenses; permits; advertising; maintenance salaries
and bonuses; payroll taxes; management office overhead and management fees; and
all other managerial and operating expenses which are reasonably related to the
operation of the building and utilities serving same. No such category shall
include more than 12 months' worth of expenses. Building operating expenses
shall also include the following improvements if amortized over the useful life
of such improvements for IRS purposes together with interest at 12% per annum on
the unamortized, cost: (i) improvements to reduce operating expenses, (ii)
improvements required by governmental agencies following completion of the
building, and (iii) carpeting, floor covering, draperies, and wall coverings for
the common areas of the building. Building operating expenses shall be
calculated on an accrual basis in accordance with generally accepted accounting
principles, consistently applied. The word "building" as referred to above shall
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include the building, parking areas, parking garage (if any), and common
areas.
Building operating expenses shall not include: principal and interest
payments on mortgages; depreciation or improvements which IRS requires to be
depreciated (except as provided above); expenses of repairing damage of the
type normally covered by fire, vandalism, flood, and EC insurance; any
expense paid or reimbursed from insurance proceeds; costs of repairing damage
for which Lessor is entitled to reimbursement from others; remodeling costs
for new or existing tenants; common area improvements or personal property
required by other tenants to be made, purchased, or furnished to such
tenants; common area improvements or personal property required by other
tenants to be made, purchased, or furnished to such tenants; utility and air
conditioning or heating costs or other expenses which are separately billed
to specific tenants; franchise and income taxes of Lessor; leasing
commissions; expenses of marketing vacant space in the building; legal fees;
structural repairs to roof, foundation, and walls; asbestos removal; and
installation of sprinklers, fire alarms, and smoke detector systems.
If utilities and taxes included in "Building Operating Expense" are not
payable, billed or otherwise due so as to allow an accurate calculation of
said factors annually, then Lessor, in its reasonable discretion, may
estimate and prorata said expenses on an annual basis, and said factors shall
be properly adjusted by Lessor when they actually become due and payable.
Otherwise, expenses must be supported by invoice and actually paid.
(d) DEFINITION OF PRORATA SHARE. Lessee's prorata share of estimated and
actual building operating expenses is the percentage result of dividing
"Lessee's rentable area" (which is set forth in paragraph 1.4) by the total
rentable area in the entire building.
(e) DELAY IN IMPLEMENTATION. At Lessor's option, adjustments may be
delayed. Lessor's delay in implementing such adjustments shall not waive
Lessor's right thereto, and the most recent monthly rental figures shall
continue to be paid during such delay. If Lessor delays in timely
calculating adjustments, such adjustments shall be retroactive to the
respective date on which Lessor had a right to make such adjustment; and such
delayed rent adjustments shall become due upon written notice to Lessee.
(f) EXAMINATION OF RECORDS. Upon reasonable notice to Lessor in writing,
Lessee may examine Lessor's accounting records for building operating
expenses and other data used in calculating additional rents or rent
adjustments. Such examination shall be during normal business hours.
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EXHIBIT "C"
EXECUTIVE PLAZA
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by Tenant or used by Tenant for any
purpose other than ingress and egress to and from the leased premises
and for going from one part of the Building to another.
2. No signs, advertisements or notices, including political signs, shall be
painted or affixed on or to any windows, doors, corridors, or other
parts of the Building except of such color, size, and style and in such
places as shall be first approved in writing by Building Management.
3. All locks for doors in each Tenant's leased areas shall be building
standard and no tenant shall place any additional lock or locks on any
door in its leased area without Building Management's consent.
4. Movement of furniture or office equipment, or dispatch or receipt by
Tenants of any bulky material, merchandise or materials which requires
use of elevators or stairways, or movement through the Building
entrances or lobby, shall be restricted to such hours as Building
Management shall designate, and such movement shall be subject to
control of Building Management.
5. Building Management shall have authority to prescribe the weight and
position of safes and other heavy equipment, said items shall in all
cases (to distribute weight) stand on supporting devices approved by
Building Management.
6. Corridor doors, when not in use, shall be kept closed.
7. Should a tenant require a telegraphic, telephonic, annunciator or other
communication service, Building Management will direct the electricians
where and how wires are to be introduced and placed and none shall be
introduced or placed except as Building Management shall direct.
8. No animals or birds shall be brought into or kept in, on or about
Tenant's area.
9. No vending machines of any type shall be allowed in Tenant's space
without the prior written consent of Building Management.
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10. Tenants are requested to lock all office, doors leading to corridors and
to turn out all lights at the close of their working day.
11. Lessor reserves the right to close Tenant's blinds, if in Lessor's
judgement, Tenant's interior is offensive to other Lessees.
12. Lessee agrees that no flammable liquids of any type at any time shall be
stored in Lessee's lease space.
13. Lessor reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its
judgement shall, from time to time, be required for the safety,
protection, care and cleanliness of the Building, the operation thereof,
the preservation of good order therein and the protection and comfort of
the tenants and their agents, employees and invitees, which rules and
regulations shall be binding upon it in like manner as if originally
herein prescribed.
AGREED AND ACCEPTED
this ________ day of_________,19___
- -----------------------------------
"Tenant"
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EXHIBIT 10.6
OFFICE LEASE BETWEEN THE REGISTRANT
AND EXECUTIVE PLAZA JOINT VENTURE
<PAGE>
OFFICE LEASE
EXECUTIVE PLAZA OFFICE BUILDING
This is a Lease Agreement made and entered into between EXECUTIVE PLAZA JOINT
VENTURE, as "Lessor", and CORRIDOR TECHNOLOGIES INC., as "Lessee", whether one
or more.
1.1. THE LEASED PREMISES: Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor the "Leased Premises" which consists of "Lessee's Office
Space" and "Common Areas" as defined below.
(a) Lessee's office space. "Lessee's Office Space", to which Lessee shall
have exclusive use rights, consists of suite(s) 400 & 402, Such space is
located in the building on a tract of land, legally described as BLK 1, Lot
1, EXECUTIVE PARK 1, New Braunfels, Comal County, Texas. The street address of
the building is 555 IH 35 South, New Braunfels, Texas, 78130.
(b) Common areas. The "common area", to which Lessee shall have
non-exclusive use rights, consists of (1) the interior common area located in
the above described building, i.e., areas normally accessible to tenants such
as the hallways, stairwells, elevators, lobby, restrooms, and snack bar
areas, and (2) the exterior common area located outside the building on the
above described land, i.e., loading areas, sidewalks, driveways, parking
garage, parking areas, and other open areas (if any), subject to paragraph
10.1 on parking.
1.2. USE: Lessee's office space may be used only for general office
purposes. The name of Lessee's business will be .
1.3. USABLE AREA: Lessee's "usable area" is approximately 4,244 square
feet. It is the office space outlined and shaded in Exhibit A. Such area is
measured from the interior of the exterior walls and the exterior glass lines
of the building to the middle of the remaining perimeter walls of the office
space. This is in accordance with the BOMA International Standard of Floor
Measurement.
1.4. RENTABLE AREA: Lessee's "rentable area" is approximately 4,880
square feet. It consists of Lessee's "usable area" as defined above, plus
Lessee's prorata share of the building common areas as set forth below. The
common area "add on" factor is 15% of Lessee's usable area. Building common
areas are defined as all corridors, restrooms, snack bars, building equipment
rooms, telephone closets, janitor closets, enclosed lobby, entrance areas,
and other public areas in the building, excluding elevator shafts,
stairwells, vertical chases, and enclosed parking areas. This is in
accordance with the BOMA International Standard of Floor Measurement.
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2.1. BASE RENT AND ADDITIONAL RENTS WITH EXPENSE STOP: Lessee shall pay to
Lessor a "base rent" of $ SEE ADDENDUM "A" per calendar year, which amounts
to $ SEE ADDENDUM "A" per calendar month. The base rent is subject to
adjustment as provided in paragraph 32.1. Additional rent (representing
Lessee's prorata share of building operating expenses over the $ 4.50
expense stop) shall be paid in accordance with paragraph 32.1. Building
operating expenses up to such expense stop amount shall be paid by Lessor.
Base rent is subject to the annual base rent increase referred to in
paragraph 32.2.
3.1. DATE AND PLACE OF PAYMENT: The monthly rent and one-twelfth of
Lessee's share of estimated building operating expenses under paragraph 32.1
(i.e., expenses in excess of the expense stop) shall be due on the first day
of each calendar month without demand. Partial months shall be prorated. All
rent and other sums are due in the county where the building is located at
the address designated by Lessor from time to time. All sums due by Lessee
are without right of setoff or deduction. Monies mailed are considered timely
paid only if received by Lessor by the due date; however rents postmarked one
or more days before due date and received after the due date shall be
considered as timely received by Lessor. Rent and late payment charges shall
be paid without notice or demand. All other sums shall be due upon delivery
of written notice in accordance with paragraph 29.1.
3.2. LATE PAYMENTS: If any rent payment or other sum due by Lessee to
Lessor is received and accepted by Lessor later than 5 days after its due
date, Lessee shall pay a late charge of 5% of such rent payment or other sum
plus 1% thereof for each day thereafter (for up to 15 days) until such rent
or other sum is paid. Lessor's acceptance of late rent or other sum shall not
constitute permission for Lessee to pay the rent or other sum late thereafter
and shall not constitute a waiver of Lessor's remedies for subsequent late
payments. Late payment charges are due immediately upon notice or demand.
All payments shall be by check or money order on a local bank, not cash. For
each returned check, Lessee shall pay all applicable bank charges incurred by
Lessor plus $25.00. Payments of any kind received by Lessor on behalf of
Lessee may be applied at Lessor's option to nonrent items first, then to
rent. Payment of rent by Lessee shall be an independent covenant. If Lessee
has not timely paid rentals and other sums due on two or more occasions, or
if a check from Lessee is returned for insufficient funds or no account,
Lessor may for the next 12 months require that all rent and other sums due be
paid by cashier's check, certified check, or money order, without prior
notice.
3.3. SECURITY DEPOSIT: At the time of execution of this lease, Lessee shall
deposit with Lessor $5,360.00 cash to secure performance of Lessee's
obligations under this lease. If Lessee fails to pay rent or other sums when
due under this lease, Lessor may apply any cash security deposit toward
amounts due and unpaid by Lessee. Lessee shall immediately restore the
security deposit to its original amount after any portion of it is applied to
amounts due and unpaid by Lessee.
4.1. TERM, COMMENCEMENT, AND ANNIVERSARY: The initial lease term shall
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be for 32.5 full calendar months from commencement date, plus the remainder
of the last month. The lease commencement date shall be the 15th day of
March, 1999 or the date Lessee occupies all or any part of Lessee's office
space, whichever occurs first. The annual anniversary date of this lease
shall be the first day of the first full month following commencement of the
lease, unless the lease commencement date is the first day of the month.
4.3. DELIVERY OF POSSESSION: Lessor shall deliver keys and possession of
Lessee's office space to Lessee on the lease commencement date stated in
paragraph 4.1 unless otherwise agreed in writing by the parties. Lessee shall
not be liable for rent until Lessor delivers possession of the leased
premises to Lessee. If there is a delay in delivery of possession, rent shall
be abated until Lessee's office space is ready for occupancy; and neither
Lessor nor Lessor's agents shall otherwise be liable for any damages; and the
lease shall not terminate.
5.1 TENANT FINISH-OUT (CHECK ONE):
Lessor shall provide standard building finish-out, as described
--- in Exhibit D. Lessor shall perform any special construction
described in Exhibit D. Costs of tenant finish-out or special
construction shall be paid for pursuant to such exhibit.
X Lessor shall provide no tenant finish-out or improvements since
--- Lessee has taken Lessee's office space "as is".
6.1. QUIET POSSESSION: If Lessee is current and in compliance with all of
Lessee's obligations under this lease, Lessee shall be entitled to peaceful
and quiet possession and enjoyment of Lessee's office space, subject to the
terms and conditions of this lease. Lessee shall have access to the building
and common parking areas at all times, subject to the rules referred to in
paragraphs 9.2 and 23.1. Lessor shall make diligent efforts to have all other
tenants in the building comply with building rules. Otherwise, failure of
other tenants to comply with such rules shall not be considered a default by
Lessor. Construction noise or vibrations shall not be considered a default by
Lessor.
7.1. UTILITIES AND SERVICES BY LESSOR: Except where otherwise stated in
this lease, Lessor shall pay for and furnish in a timely and diligent manner
to Lessee the following utilities and services and no others, subject to
paragraph 32.1 regarding Lessee's payment of Lessee's prorata share of
building operating expenses.
(a) air conditioning and heating as reasonably required for comfortable use and
occupancy under normal office conditions from 7:30 a.m. to 6:30 p.m. Monday
through Friday, and from 7:30 a.m. to 2:30 p.m Saturday.
(b) water and wastewater services for common areas;
(c) janitorial trash removal, sweeping, mopping, vacuuming and dusting three
days per week excluding holidays;
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(d) electricity for standard office equipment and lighting;
(e) trash collection services (dumpster);
(f) pest control services as needed in the reasonable judgement of Lessor;
(g) landscaping and parking lot maintenance services;
(h) repair and maintenance services pursuant to paragraph 8.1; and
(i) replacement of fluorescent light bulbs and ballasts in building standard
lighting fixtures (but not incandescent light bulbs for nonstandard
fixtures or for Lessee's lamps); and
(j) elevator service.
7.2. UTILITIES AND SERVICES BY LESSEE: Lessee shall pay for all utilities
and services not expressly furnished by Lessor under paragraph 7.1.
7.3. INTERRUPTION OF UTILITIES OR SERVICES: Temporary interruption or
malfunction of utilities, services, and/or telephones shall not render
Lessor liable for damages, rent abatements, or release of any Lessee
obligation. Lessor shall use diligent efforts to have such utilities and
services restored as soon as reasonably possible.
8.1. MAINTENANCE AND REPAIRS BY LESSOR: Lessor shall maintain the interior
of Lessee's office space in good repairs at Lessee's expense. Lessor shall
use diligence to provide for the reasonable cleaning, maintenance, repair,
reconnection of interrupted utilities or services, and landscaping of common
areas, subject to any reimbursement obligations of Lessee under paragraph
8.2. Lessor may rekey at any time. Lessor may temporarily close any part of
the common facilities if reasonably necessary for repairs or construction.
Repairs and maintenance shall be in accordance with applicable governmental
requirements.
8.2. MAINTENANCE AND REPAIRS BY LESSEE: Lessee shall promptly reimburse
Lessor for the cost of repairing or replacing damage which is caused inside
Lessee's office space by Lessee, Lessee's agents, employees, family, or
licensees, invitees, visitors, or customers or outside Lessee's office space
by Lessee or Lessee's employees, agents, or contractors. Cost of repair shall
include 15% for overhead. Lessor may require advance payment therefor prior
to repair or replacement. Lessor shall have right of approval of all
repairmen or maintenance personnel. Lessee shall not damage or allow other
persons listed above to damage any portion of the leased premises. Lessee
shall pay for replacement of all incandescent light bulbs and for unstopping
any drains or water closets in Lessee's office space. If Lessor or Lessee's
workmen or contractors are permitted to repair, alter, or modify Lessee's
office space, Lessee shall warrant that no mechanic or materialman's lien
shall be filed against the leased premises. All such work shall be in
accordance with applicable governmental requirements.
8.3. TELECOMMUNICATIONS EQUIPMENT: All telecommunications equipment
necessary to serve Lessee shall be located in Lessee's office space and paid
for by Lessee, or, at Lessor's option and at Lessee's expense, in a lockable
enclosure in a common area location designated by Lessor.
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9.1. ACCESS, KEYS, LOCKS, AND SECURITY: (a) Access. Lessee shall have access
to Lessee's office space at all times. Lessor shall have access to Lessee's
office space at reasonable times for reasonable business purposes upon prior
notice to Lessee except notice shall not be necessary in the event of an
emergency threatening life or property or the lawful exercise of Lessor's
remedies in case of default by Lessee.
(b) Keys. Lessor shall furnish Lessee two (2) keys for Lessee's office
space and two (2) keys for the main exterior entry doors of the building if
such door is locked after hours. Lessor shall not be liable for risk of loss
resulting from Lessee's keys being lost or used by unauthorized persons.
Lessor reserves the right to rekey or change locks for security reasons if
new keys are timely furnished to Lessee.
(c) Locks. Lessee may not add locks, change locks, or rekey locks without
written permission of Lessor. Locks may be changed at Lessee's request and
expense. If locks to the office space are changed, Lessor may specify kind
and brand of locks, placement, installation, master key compatibility, etc.
(d) Security. Lessor shall have no duty to provide any security services
of any kind unless expressly provided in this lease. Lessor shall not be
liable to Lessee or Lessee's employees, family, customers, invitees,
contractors, or agents for injury, damage, or loss to person or property
caused by criminal conduct of other persons, including theft, burglary,
assault, vandalism or other crimes. Lessee shall lock its office space doors
when the last person leaves such office space for the day.
9.2. PARKING: Lessor shall have sole control over parking. If vehicles are
parked in violation of Lessor parking rules or in violation of state
statutes, Lessor may exercise vehicle removal remedies under Articles 6701g-1
and 6701g-2 of the Texas Civil Statutes upon compliance with statutory
notice. There shall be no reserved parking spaces unless agreed in writing by
Lessor.
10.1. OCCUPANCY, NUISANCE, AND HAZARDS: Lessee's office space shall be
occupied only by Lessee or Lessee's employees and shall not be left entirely
vacant or used exclusively for storage. Lessee and Lessee's agents,
employees, family, licensees, invitees, visitors, and contractors shall
comply with all federal, state, and local laws relating to occupancy or to
criminal conduct while such persons are on the leased premises. Lessee and
the persons listed above shall not (1) use, occupy, or permit the use or
occupancy of the leased premises for any purpose which is directly or
indirectly forbidden by such laws or which may be dangerous to life or
property, (2) permit any public or private nuisance, (3) disturb the quiet
enjoyment of other tenants, (4) do anything which might emit offensive odors
or fumes, (5) make undue noise or vibrations, (6) permit anything which would
cancel insurance coverage or increase the insurance rate on the building or
contents, or (7) otherwise damage the leased premises.
11.1. TAXES: Lessor shall be responsible for payment of all taxes and
assessments against the building subject to Lessee's obligation to pay Lessor
for Lessee's share thereof, on a prorata
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square foot basis, as additional rent pursuant to paragraph 32.1. Lessee
shall timely pay all taxes assessed against Lessee's furniture, equipment,
fixtures, or other personal property in Lessee's office space.
12.1. INSURANCE: Lessor and Lessee shall comply with the respective
insurance obligations as set forth below:
(a) Lessor. Lessor shall maintain (1) fire and extended coverage
insurance, including vandalism and malicious mischief, on the office
building, and (2) comprehensive general liability insurance. The amounts
shall be as required by Lessor's mortgagee or as Lessor may deem reasonably
appropriate, whichever is greater. Lessor shall have no responsibility to
maintain fire and extended coverage insurance on Lessee's contents. The
portion of Lessor's insurance premiums reasonably due to Lessee's acts or
omissions or Lessee's special use, improvements, or tenant finish-out (over
and above Lessee's normal use as contemplated in paragraph 1.1(a)) shall be
paid for by Lessee.
(b) Lessee. Lessee shall provide Lessee's own public liability insurance
for its operations on the leased premises in the minimum "primary coverage"
amount presently required under Texas law for the purchase of umbrella
liability insurance. Upon written notice by Lessor to Lessee, such dollar
amount of Lessee's liability policy shall be increased by the amount of any
increase required under Texas law for "primary coverage" under an umbrella
liability policy. Lessee is encouraged to maintain fire and extended coverage
insurance (including vandalism and malicious mischief) on the contents in
Lessee's office space, including fixtures, furniture, equipment, supplies,
inventory, and other personal property. Such property is not covered by
Lessor's insurance.
(c) Insurance certificates. Lessee shall provide Lessor with a certificate
of Lessee's insurance or a copy thereof as required above within 7 days after
Lessee initially occupies Lessee's office space or any portion thereof. Lessor
and Lessor's managing agent (if any) shall be named as additional insureds on
Lessee's liability insurance policy. Upon written request by Lessor, changes
in the name of Lessor or Lessor's managing agent shall be reflected on such
certificate.
(d) Notice from Lessee's Insurance Carrier. All policies of insurance to
be provided by Lessee shall contain a provision (to the extent legally
permitted) that the insurance company shall give Lessor 10 days' written
notice to Lessor, in advance of (1) any cancellation or non-renewal of the
policy, (2) any reduction in the policy amount, and (3) any deletion of
additional insureds.
12.2. MUTUAL RELEASES AND WAIVER OF SUBROGATION: (a) To the extent that the
coverage of their respective insurance policies are not adversely affected,
Lessor and Lessee release each other and their respective officers,
directors, employees, and agents from any claims for loss or damage to any
person or property on the leased premises which is caused by or which results
from risks insured against under insurance policies carried by Lessor or
Lessee and in force at the time of any such loss or damage. The foregoing
release shall not apply to property losses or damages in excess of policy
limits or to losses or damages not covered by insurance due to a deductible
clause in the policy.
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(b) Upon written request after signing this lease, but before any loss or
damage occurs, Lessor or Lessee may require that the other party's respective
fire/casualty and liability insurance policy provide a waiver for all right
of recovery by way of subrogation in connection with any loss or damage
covered by such insurance policies.
(c) Notwithstanding the foregoing, if such waiver of subrogation is not
incorporated into the policy and cannot be procured or if it can be procured
only with an additional premium charge, such party shall furnish to the other
party written evidence from the insurance company or insurance agent,
verifying that such waiver is (1) not obtainable or (2) not obtainable
without extra charge. Thereafter, within a reasonable time after receiving
such notice, the party for whose benefit the waiver is sought may (1) agree
to pay any additional charge necessary to obtain the waiver of subrogation or
(2) place the insurance with a company which is reasonably satisfactory to
the other party and to such party's mortgagees with a policy of the same
terms and coverage, the extra cost of which will be entirely borne by the
party for whose benefit the waiver of subrogation is sought.
(d) Upon written request, Lessor and Lessee shall furnish to each other
copies of the policies of insurance referred to in this lease, including any
waivers of subrogation, or satisfactory evidence of same.
12.3. HOLD HARMLESS: Lessee shall indemnify Lessor for and shall hold Lessor
harmless from all fines, claims, liabilities, and suits (including costs and
expenses of defending against same) resulting from any breach or
nonperformance of the lease by Lessee or Lessee's agents, employees, family,
licensees, or invitees. Lessor shall indemnify Lessee for and shall hold
Lessee harmless from all fines, claims, liabilities, and suits (including
costs and expenses of defending against same) resulting from any breach or
nonperformance of the lease by Lessor or Lessor's agents, employees, family,
licensees, or invitees. Lessor and Lessee shall not be liable to the other or
the other's agents, employees, or family for any damage to personal property
resulting from any act, omission, or negligence of any other tenant or
occupant of the office building.
13.1. ALTERATIONS BY LESSEE: Lessee may not make any alterations,
improvements, doorlock changes, or other modifications of any kind to the
leased premises without Lessor's written consent which may not be
unreasonably withheld. "Alterations" include but are not limited to
improvements glued, screwed, nailed, or otherwise permanently attached to the
building, structural changes, roof and wall penetrations, and all plumbing,
electrical, and HVAC changes. Requests for Lessor's approval shall be in
writing and shall be detailed to Lessor's reasonable satisfaction. The
foregoing shall be done only by Lessor's contractors or employees or by third
parties approved by Lessor in writing. Lessee shall pay in advance for any
requested alterations, improvements, lock changes, or other modifications
which are approved and performed by Lessor. If same are performed by Lessee
with Lessor's permission, Lessee shall not allow any liens to be placed
against the buildings as a result of such additions or alterations.
Alterations, improvements, and modifications done at Lessee's request shall
comply with all applicable laws. Changes in Lessee's alterations or
improvements which may be later required by governmental action shall also be
paid for by Lessee.
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14.1. REMOVAL OF PROPERTY BY LESSEE: Lessee may remove its trade fixtures,
furniture, and equipment only if (1) such removal is made prior to the end of
the lease term, (2) Lessee is not in default under this lease at time of
removal, and (3) such removal is not in anticipation of an early moveout
prior to the end of the lease term. Lessee shall pay all costs of removal.
Lessee shall have no rights to property remaining on the leased premises
after moveout. Lessee may not remove any alterations as defined in paragraph
13.1 or improvements such as wall-to-wall carpeting, book shelves, window
coverings, drapes, cabinets, paneling, counters, kitchen or breakroom
built-ins, shelving, wall covering, and anything else attached to the floor,
walls, or ceilings. If Lessor requests in writing, Lessee shall, immediately
prior to moving out, remove any alterations, fixtures, equipment, and other
property installed by Lessee. Lessee shall pay for cleaning or repairing
damage caused by Lessee's removal of any property.
15.1 SUBLETTING AND ASSIGNMENT: Lessee may not sublet, assign, pledge, or
mortgage this lease and may not grant licenses, commissions, or other rights
of occupancy to all or any part of the leased premises without Lessor's prior
written approval which shall not be unreasonably withheld. Sublessee's
financial strength, reputation, personnel, and length of sublease or
assignment shall be important factors in Lessor's approval. Sale, transfer,
or merger of the majority of the voting shares or voting partnership
interests in Lessee (if a corporation or partnership) shall be considered an
assignment; likewise for issuance of treasury stock or admission of a new
general partner. Lessor shall not be obligated to approve any sublease or
assignment. However, if Lessor gives such approval, Lessor shall be entitled
to (1) 50% of any excess between Lessee's rental per square foot under the
lease and the rental per square foot under the sublease or assignment, and
(2) 50% of any other consideration flowing directly or indirectly from the
sublessee or assignee to Lessee or Lessee's agents. The foregoing is in
consideration of additional management performed or to be performed by Lessor
under such sublease or assignment. In addition to the foregoing, Lessor may
charge Lessee a one-time fee equal to one month's lease rental for such
additional administrative, investigative, and management services. Violation
of this lease by sublessees or assignees shall be deemed a violation by
Lessee. Approval by Lessor of any sublease or assignment shall not release
Lessee from any obligation under this lease and shall not constitute approval
for subsequent subletting or assignment. Sublessees or assignees shall be
liable for all of Lessee's obligations under this lease unless otherwise
specified in writing. Upon default by Lessee any sublease shall pay all
sublease rentals and other sums due Lessor, direct to Lessor, to be credited
against sums owed to Lessor by Lessee under this lease. Unless otherwise
agreed in writing, no sublease or assignment shall be valid unless (1) a copy
of this lease is attached thereto, (2) the sublessee or assignee agrees in
writing to be liable for all of Lessee's obligations under this lease, and
(3) Lessor's written approval is attached to the sublease or assignment.
16.1. DESTRUCTION BY FIRE OR OTHER CASUALTY: (a) Total destruction, rent
abatement, and restoration. If Lessee's office space is totally damaged by
fire or other casualty so that it cannot reasonably be used by Lessee and if
this lease is not terminated as provided in subparagraph (d) below, there
shall be a total abatement of Lessee's rent and Lessee's obligation to pay
office building operating expenses until Lessee's office space is restored by
Lessor and Lessee.
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(b) Partial destruction, rent abatement, and restoration. If Lessee's
office space is partially destroyed or damaged by fire or other hazard so
that it can be only partially used by Lessee for the purposes allowed in this
lease and if this lease is not terminated as provided in subparagraph (d)
below, there shall be a partial abatement of Lessee's rent and Lessee's
obligation to pay office building operating expenses which fairly and
reasonably corresponds to the time and extent to which Lessee's office space
cannot reasonably be used by Lessee.
(c) Restoration. Lessor's obligation to restore shall be limited to the
condition of the leased premises existing prior to the casualty. Lessor shall
proceed with diligence to restore. During restoration, Lessee shall continue
business to the extent practical in Lessee's reasonable judgment.
(d) Lease termination. If Lessee's office space or the office center is so
badly damaged that restoration and repairs cannot be completed within 6
months after the fire or casualty, then this lease may be terminated as of
the date of the destruction by either Lessor or Lessee by serving written
notice upon the other. Termination notice must be delivered within 30 days
after the casualty.
17.1. CONDEMNATION: If any part of Lessee's office space is taken by
condemnation or by deed in lieu of condemnation by any governmental
authority, this lease shall terminate one day prior to such taking. If any
part of the office building's parking lot is so taken, Lessee's right to use
such portion shall terminate one day prior to such taking; and Lessee's rent
shall be reduced only to the extent that such partial taking reduces the fair
market value of Lessee's office space. Lessor shall pay all costs associated
with construction reasonably necessary to render the leased premises usable
for Lessee's permitted purposes after such partial taking. All compensation
awarded for any partial or total taking of the office building shall be the
property of Lessor. If Lessor has received written notice of intent to
condemn, Lessee shall upon 10 days written request by Lessor execute an
acknowledgement that the lease terminates one day prior to the condemnation
of deed in lieu of condemnation and that Lessee claims no interest in the
condemnation award. Lessor shall have no interest in any monies paid by the
condemning authorities to Lessee for moving costs or for the other personal
property within the leased premises (excluding leasehold improvements) if a
separate award for such items is made to Lessee.
18.1. DEFAULT BY LESSOR: Lessee shall be entitled to recover actual damages
and terminate this lease if (1) Lessor fails to pay any sum due and owing to
Lessee within 7 days after written demand from Lessee, or (2) Lessor remains
in default on any other obligation for 7 days after Lessee's written demand
for performance. However, Lessor shall not be in default if Lessor promptly
commences to cure such noncompliance and diligently proceeds in good faith to
cure same after receiving written notice of such default of taxes and
utilities are not timely paid, Lessee may pay some to the extent that it is
necessary to avert foreclosure or cutoff.
19.1. DEFAULT BY LESSEE; If Lessee defaults, Lessor shall have any or all
remedies set forth below.
(a) Definition of default. The occurrence of any of the following shall
constitute a default by Lessee: (1) failure to pay rent or any other sum due by
Lessee under this lease within 7 days after
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written demand therefor by Lessor; (2) failure to vacate on or before the
last day of the lease term, renewal term, or extension period; (3) failure to
pay rent in advance on a daily basis in the event of unlawful holdover by
Lessee; (4) unauthorized early move- out or notice of same as set forth
below; (5) acquisition of Lessee's interest in the lease by a third party by
judicial or non-judicial process; or (6) failure to comply with any other
provision of the lease (including rules) if such failure to comply is not
cured as soon as possible after delivery of written notice by Lessor to
Lessee. However, Lessee shall not be in default under subclause (6) above if
Lessee promptly commences to cure such noncompliance and diligently proceeds
in good faith to cure same after receiving written notice of such default.
(b) Door Locks. If Lessee is in default for nonpayment of rent or other
sums due and if Lessee fails to pay same in full within 7 days after Lessor
hand delivers to Lessee or to Lessee's office space written demand or notice
of nonpayment, then Lessor shall be entitled to change or modify door locks
on all entry doors of Lessee's office space, until all such sums are paid in
full; provided, however, Lessor shall immediately thereafter post a notice on
the primary entry door to Lessee's office space, stating that Lessor has
expressed such lockout rights. No other notice requirements or lockout laws
shall apply. Lessor's right to modify or change locks shall occur
automatically and without notice if Lessee's rent is accelerated under
subparagraph (e) below, relating to unlawful early move-out. If Lessee moves
out or abandons Lessee's office space, Lessor may permanently change the
locks without notice to Lessee, and Lessee shall not be entitled to a key or
to reentry.
(c) Utilities and services. If Lessee is in default for nonpayment of rent
or other sums due and if Lessee fails to pay same in full within 3 days after
Lessor hand delivers to Lessee or to Lessee's representative written notice
of Lessor's intent to terminate utilities or services which are furnished by
Lessor, then Lessor may terminate such utilities or services after such 3-day
notice period, without further notice. Lessor's right to terminate such
utilities or services shall occur automatically and without notice if
Lessee's rent is accelerated under subparagraph (e) below, relating to
unlawful early move-out.
(d) Acceleration after notice of rental delinquency. If Lessee is in
default for nonpayment of rent or other sums due and if Lessee fails to pay
same in full within 3 days after Lessor delivers to Lessee or to Lessee's
office space a written notice of Lessor's intent to accelerate, then all rent
for the remainder of the lease term shall be accelerated, due, and delinquent
at the end of such 3-day notice period without further demand or notice. Such
acceleration rights are in consideration of the rentals for the entire term
being payable in monthly installments rather than in one lump sum at the
beginning of the lease term. If Lessee has already vacated the leased
premises, notice of acceleration may be delivered to Lessee pursuant to
paragraph 29.1. Liability for additional rents accruing in the future (over
and above any base rents) shall not be waived by such acceleration.
(e) Acceleration upon early move-out. If Lessee is lawfully evicted, or if
Lessee moves out or gives verbal or written notice (in person or by an
authorized employee or agent) of intent to move-out prior to the end of the
lease term without the rent being paid in full for the entire remainder of
the lease term or renewal or extension period or without prior written
consent of Lessor, all remaining
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rents for the remainder of the lease term shall be accelerated immediately
and automatically, without demand or notice. Such accelerated rents shall be
due and delinquent without notice before or after such acceleration. Such
acceleration shall occur even if the rent for the current month has been paid
in full.
(f) Termination of possession. If Lessee is in default as defined in
subparagraph (a) above and if Lessee remains in default for 3 days after
Lessor gives notice of such default to Lessee, or if Lessee abandons the
leased premises, Lessor may (with or without demand for performance)
terminate Lessee's right of possession by giving one day's written notice to
vacate; and Lessor shall be entitled to immediate possession without
termination of Lessee's obligations under the lease. Lessor's repossession
shall not be considered an election to terminate this lease unless written
notice of such intention to terminate is given to Lessee by Lessor.
Repossession may be by voluntary agreement or by eviction lawsuit.
Commencement of an eviction lawsuit shall not preclude other Lessor remedies
under this lease or other laws.
(g) Reletting costs. If Lessee is in default as defined in subparagraph
(a) above and if Lessor terminates Lessee's right of possession without
terminating this lease, Lessee shall pay upon Lessor's demand the following:
(1) all costs of reletting (which in no event shall be less than one month's
rent), including leasing commissions, rent concessions (whether in the form
of assuming or buying out lease remainders elsewhere, free rent for a period
of time, or reduced rental rates), utilities during the vacancy, advertising
costs, administrative overhead, and all costs of repair, remodeling, or
redecorating for replacement tenants in Lessee's office space, (2) all rent
and other indebtedness due from Lessee to Lessor through the date of
termination of Lessee's right of possession, and (3) all rent and other sums
required to be paid by Lessee during the remainder of the entire lease term,
subject to the acceleration paragraphs above.
(h) Mitigation by Lessor. Upon eviction or voluntary vacation of the
leased premises by Lessee without the lease being terminated by Lessor,
Lessor shall make reasonable efforts to relet the leased premises. After
deduction of reasonable expenses incurred by Lessor, Lessee shall receive
credit for any rentals received by Lessor through reletting the leased
premises during the remainder of the lease term or renewal or extension
period. Such deductible expenses may include real estate commissions,
attorney's fees, and all other expenses in connection with reletting. Lawsuit
to collect amounts due by Lessee under this lease may be brought from time to
time on one or more occasions without the necessity of Lessor's waiting until
the expiration of the lease term. If judgment for accelerated rents is
recovered, Lessor shall give credit against such judgment for subsequent
payments made by Lessee and subsequent rentals received by Lessor from other
tenants of Lessee's office space, less lawful deductions and expenses of
reletting.
(i) Termination of lease. Lessor may terminate this lease (as contrasted
to termination of possession rights only) upon default by Lessee or at any
time after Lessor's lawful re-entry or repossession following default by
Lessee. Lessor's agents have authority to terminate the lease only by written
notice given pursuant to paragraph 29.1.
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(j) Damages. In addition to other remedies, Lessor may recover actual
damages incurred.
20.1. LIEN FOR RENT: (a) Notwithstanding anything to the contrary in this
lease, Lessor's landlord lien shall be subordinate to any existing security
interest and any future purchase money security interests on Lessee's
personal property if such security interest is properly perfected and
timely recorded as required by the Texas Business Code. Lessor shall
cooperate in signing lien subordinations in accordance with the foregoing.
Any lien subordination shall be on forms reasonably acceptable to Lessor.
(b) Subject to the limitations of subparagraph (a) above, Lessee gives to
Lessor a contractual lien on all of Lessee's property which may be found on
the leased premises to secure payment of all monies and damages owed by
Lessee under the lease. Such lien also covers all insurance proceeds on such
property. Lessee shall not remove such property while rent or other sums
remain due and unpaid to Lessor and such property shall not be removed until
all Lessee's obligations under the lease have been complied with. This lien
is in addition to Lessor's statutory lien under Section 54.021 of the Texas
Property Code. If Lessee is in default for nonpayment of rent or any other
sums due by Lessee, Lessor's representatives may peacefully enter the leased
premises and remove and store all property. If Lessor removes any property
under this lien, Lessor shall leave the following information in a
conspicuous place inside Lessee's office space: (1) written notice of
exercise of lien, (2) a list of items removed, (3) the name of Lessor's
representative who removed such items, and (4) the date of such removal.
Lessor shall be entitled to reasonable charges for packing, removing, or
storing abandoned or seized property, and may sell same at public or private
sale (subject to any properly recorded chattel mortgage or recorded financing
statement) after 30 days' written notice of time and place of sale is given
to Lessee by certified mail, return receipt requested. Upon request by
Lessor, Lessee shall acknowledge the above lien rights by executing a UCC-1
form or similar form reflecting same.
21.1. ATTORNEY'S FEES, INTEREST, AND OTHER EXPENSES: If Lessee or Lessor is
in default and if the nondefaulting party places the lease in the hands of an
attorney in order to enforce lease rights or remedies, the nondefaulting
party may recover reasonable attorney's fees from the defaulting party even
if suit has not been filed. In any lawsuit enforcing lease rights, the
prevailing party shall be entitled to recover reasonable attorney's fees from
the nonprevailing party, plus all out-of-pocket expenses. Trial shall be to
court only; and all parties waive jury trial. All delinquent sums due by
Lessor or Lessee shall bear interest at the maximum lawful rate of interest,
compounded annually, from date of default until paid, plus any late payment
fees. Late payment fees as set forth in paragraph 3.2 shall be considered
reasonable liquidated damages for the time, trouble, inconvenience, and
administrative overhead expense incurred by Lessor in collecting late
rentals, such elements of damages being uncertain and difficult to ascertain.
Late payment fees shall not be liquidated damages for attorney's fees or for
Lessor's loss of use of such funds during the time of delinquency.
22.1. NONWAIVER: The acceptance of monies past due or the failure to
complain of any action, nonaction, delayed payment, or default, whether
singular or repetitive, shall not constitute a
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waiver of rights or obligations under the lease. Lessor's or Lessee's waiver
of any right or any default shall not constitute waiver of other rights,
violations, defaults, or subsequent rights, violations, or defaults under
this lease. No act or omission by Lessor or Lessor's agents shall be deemed
an acceptance or surrender of the leased premises, and no agreement by Lessor
to accept a surrender of the leased premises shall be valid unless it is in
writing and signed by a duly authorized agent of Lessor.
23.1. BUILDING RULES AND REGULATIONS: Lessor's rules and regulations for the
office building are attached as Exhibit C and are subject to reasonable
change if the changes are applicable to all tenants of the office building.
24.1. TRANSFER OF OWNERSHIP BY LESSOR: If Lessor transfers ownership of the
office building (other than as security for a mortgage) and if Lessor has
delivered to the transferee all of Lessee's security deposits and any prepaid
rents, Lessor shall be released from all liability under the lease; and such
transferee shall become liable as Lessor. Such right to be released of
liability shall accrue to subsequent owners only if such transfer is in good
faith and for consideration.
25.1. MORTGAGES: Unless otherwise provided in this lease, Lessee shall
subordinate and attorn to mortgage liens now or hereafter on the office
building. Lessee agrees to execute, from time to time, documentation therefor
which is necessary in the reasonable judgment of Lessor. Other than the
provisions already set forth in this lease, there are no special lease
provisions which are required by lienholders of the office building. This
lease shall be subordinate to all existing and future mortgages. However,
such mortgagees may at any time subordinate their lien to this lease by
filing a subordination notice in the county real property records without
necessity of notice to Lessee. Since a Mortgagee Nondisturbance Agreement is
contemplated, any foreclosure of such mortgagee's lien shall not terminate
this lease even if such lien is superior to the lease.
26.1. SURRENDER OF PREMISES: When Lessee moves out, Lessee shall surrender
Lessee's office space in the same condition as on the date of lease
commencement by Lessee (as changed or improved from time to time in
accordance with this lease), less ordinary wear.
27.1. HOLDING OVER: If Lessee remains in possession of the leased premises
after the expiration or mutually-agreed termination date of the lease,
without the execution by Lessor and Lessee of a new lease or a renewal or
extension of the lease, then (1) Lessee shall be deemed to be occupying the
leased premises as a tenant-at-sufferance on a daily basis, subject to all
obligations of the lease, (2) Lessee shall pay rent for the entire holdover
period, (3) Lessee shall be subject to all other remedies of Lessor as
provided in paragraph 19.1, (4) Lessee shall indemnify Lessor and/or
prospective tenants for damages, including lost rentals, storage expenses,
and attorney's fees, and (5) at Lessor's sole option, Lessee may extend the
lease term for a period of one month at the then current rental rates for the
office building, as reasonably determined by Lessor, by hand delivering
written notice to Lessee or to Lessee's office space while Lessee is holding
over. Holdover rents shall be immediately due on a daily basis and delinquent
without notice or demand; and the prior written notice and waiting period
requirements of this lease shall not be necessary in order for Lessor to
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exercise remedies thereunder.
28.1. SIGNS AND BUILDING NAME: Except for standard suite signage and
building directory listings, there shall be no signs, symbols, or identifying
marks on or in the building, halls, elevators, staircases, entrances, parking
areas, landscape areas, doors, walls, or windows without prior written
approval of Lessor. All signs or lettering shall conform to the sign and
lettering criteria established by Lessor. Unless otherwise stated in the
rules, suite signage and building directory changes shall be done exclusively
by Lessor and at Lessee's expense. Lessor may remove all unapproved signs
without prior notice to Lessee and at Lessee's expense. Lessor may change the
name of the building upon six months written notice to Lessee.
28.2. RELOCATION OF LESSEE: Upon at least 60 days' notice to Lessee, Lessor
shall have the right to relocate Lessee within the building in lease space
which is the same size or larger and suited to Lessee's use. Such relocation
shall be made at Lessor's sole expense, including necessary reprinting of
Lessee's stationary, envelopes, business cards, door signs, etc. Rent shall
not be increased if the relocation office space is larger or better quality.
Relocation date shall be contained in the relocation notice referred to
above. Lessor shall not be liable to Lessee in connection with such
relocation except for undue delay or property damages caused by Lessor or
Lessor's employees, agents, or contractors.
29.1. NOTICES: Whenever written notice is required or permitted under this
lease, such notice shall be in writing and shall be either (a) hand delivered
personally to the party being notified, (b) hand delivered to or inside such
party's mailing address, or (c) delivered at such party's mailing address by
certified mail, return receipt requested, postage prepaid. The mailing
address of Lessor shall be the address to which Lessee normally mails or
delivers the monthly rent unless Lessor notifies Lessee of a different
address in writing. The mailing address of Lessee shall be Lessee's office
space under this lease. However, if Lessee moves out, it shall be Lessee's
last address known by Lessor. Hand delivered notice is required only when
expressly required in the lease. Notice by noncertified mail is sufficient if
actually received by the addressee or an employee or agent of addressee. The
term "notice" shall be inclusive of notices, billings, requests, and demands.
30.1. ESTOPPEL CERTIFICATES: From time to time, upon 7 days' prior written
request from Lessor, Lessee shall execute and deliver to Lessor the estoppel
certificate as reasonably required by a prospective purchaser or lender. If any
statement in the estoppel certificate form is contrary to the facts existing at
the time of execution of such form, Lessee may correct same before signing. The
estoppel certificate may be conclusively relied upon by Lessor and by any
prospective lienholder or purchaser of the leased premises. If Lessee fails to
comply with the foregoing by the end of such 7-day period, it shall be
conclusively presumed that (1) this lease is in full force and effect without
any subleases or assignments and is unamended or modified except for amendments
verified by affidavit of Lessor to the prospective lienholder or purchaser, (2)
no rents, security deposits, or other charges have been prepaid, (3) the
statements contained in the estoppel certificate form are correct, (4) there are
no uncured defaults by Lessor, (5) Lessee has no right of offset or rescission,
and (6) any prospective purchaser or lienholder may conclusively rely on such
silence or noncompliance by
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Lessee and may conclusively assume no Lessor defaults within the 120 days
following Lessee's receipt of Lessor's request for an estoppel certificate.
31.1. SUCCESSORS: This lease shall bind and inure to the benefit of the
parties, any guarantors of this lease, and their respective successors and
assigns.
31.2. LEASING AGENT COMMISSIONS: No leasing commission shall be due by
Lessor to any leasing agent unless in writing. Commission agreements executed
by Lessor shall be binding on subsequent building owners if the tenant of the
lease in question is in possession at the time of transfer of building
ownership.
32.1. BUILDING OPERATING EXPENSE: In addition to the monthly base rent in
paragraph 2.1, Lessee shall pay additional rent on a monthly basis,
equivalent to Lessee's prorata share of actual building operating expenses as
per Exhibit B. Lessee's responsibility for payment of building operating
costs shall be subject to the expense stop referred to in paragraph 2.1.
32.2. BASE RENT ADJUSTMENT: At each annual anniversary date of this lease,
the monthly base rent shall increase by 0% of the previous lease year's base
rents.
33.1. REPRESENTATIONS AND WARRANTIES BY LESSOR: Lessor warrants that Lessor
is the sole owner of the land and improvements comprising the office building
and that Lessor has full right to enter into this lease. Lessor's duties and
warranties are limited to those expressly stated in this lease and shall not
include any implied duties or implied warranties, now or in the future. No
representations or warranties have been made by Lessor other than those
expressly contained in this lease.
34.1. REPRESENTATIONS AND WARRANTIES BY LESSEE: Lessee warrants to Lessor
that (1) the financial statements of Lessee heretofore furnished to Lessor
are true and correct to the best of Lessee's knowledge, (2) there has been no
significant adverse change in Lessee's financial condition since the date of
the financial statements, (3) the financial statements fairly represent the
financial condition of Lessee upon those dates and at the time of execution
hereof, (4) there are no delinquent taxes due and unpaid by Lessee, and (5)
Lessee and none of the officers or partners of Lessee (if Lessee is a
corporation or partnership) have ever declared bankruptcy. Lessee warrants
that Lessee has disclosed in writing to Lessor all lawsuits pending or
threatened against Lessee, and Lessee has made no material misrepresentation
or material omission of facts regarding Lessee's financial condition or
business operations. All financial statements must be dated and signed by
Lessee. Lessee acknowledges that Lessor has relied on the above information
furnished by Lessee to Lessor and that Lessor would not have entered into
this lease otherwise.
35.1. PLACE OF PERFORMANCE: Unless otherwise expressly stated in this lease,
all obligations under this lease, including payment of rent and other sums
due, shall be performed in the county where the office building is located,
at the address designated from time to time by Lessor.
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36.1. MISCELLANEOUS: This lease contains the entire agreement of the
parties. No other written or oral promises or representations have been made,
and none shall be binding. This lease supersedes and replaces any previous
lease between the parties on Lessee's office space, including any renewals or
extensions thereunder. Except for reasonable changes in written rules, this
lease shall not be amended or changed except by written instrument, signed by
both Lessor and Lessee. Lessor's agents do not and will not have authority to
(1) make exceptions, changes or amendments to this lease, or factual
representations, not expressly contained in this lease, (2) waive any right,
requirement, or provision of this lease, or (3) release Lessee from all or
part of this lease, unless such action is in writing. Multiple lessees shall
be jointly and severally liable under this lease. Notices, requests, or
agreements to, from, or with one of multiple lessees shall be deemed to be
to, from, or with all such Lessees. Under no circumstances shall Lessor or
Lessee be considered an agent of the other. Nonsubstantial errors in space
footage calculations shall entitle the parties to correct the rental figures
in the lease and adjust previously paid rentals accordingly, but not to
terminate the lease. The lease shall not be construed against either party
more or less favorably by reason of authorship or origin of language. Texas
law applies. If any date of performance or exercise of a right ends on a
Saturday, Sunday, or state holiday, such date shall be automatically extended
through the next business day. Time is of the essence; and all performance
dates, time schedules, and conditions precedent to exercising a right shall
be strictly adhered to without delay except where otherwise expressly
provided. If any provision of this lease is invalid under present or future
laws, the remainder of this lease shall not be affected.
37.1. GUARANTY: This lease ( ) is or ( X ) is not guaranteed by others.
The names and titles of any guarantors are shown on the signature page(s) at
the end of this lease. The specific obligations of such guarantors, if any,
shall be pursuant to attached Exhibit H entitled "Lease Guaranty". Such
guaranty shall continue and shall be unaffected by any modification or
amendment to this lease or any renewal or extension thereof. The signature
requirements and corporate resolution requirements for any guarantors shall
conform to the requirements for Lessees in paragraph 39.1 below.
37.2. SPECIAL CONDITIONS: Additional provisions of this lease are set forth
in Addendum .
38.1. EXHIBIT LIST: The exhibits attached to this lease are listed below.
All exhibits are a part of this lease except for those which have been lined
out or which have been shown below as omitted.
Exhibit A Floor Plan of Lessee's Office Space (paragraph 1.1)
Exhibit B Building Operating Expense Passthrough Calculations (paragraphs
2.1 and 32.1)
Exhibit C Building Rules and Regulations (paragraph 23.1)
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39.1. LESSEE SIGNATURE REQUIREMENTS: Lessee is ( ) an individual, ( ),
several individuals, ( ) a general partnership, ( )a limited partnership,
( ) a joint venture, ( ) an unincorporated association, ( ) a
professional corporation, ( ) a professional association, or ( X ) a
corporation (check one). Such partnership, joint venture, unincorporated
association, or corporation is organized or chartered under the laws of the
State of Texas. Lessee's name stated at the beginning of this lease ( ) is
or ( X ) is not an assumed name. If so, an assumed name certificate has been
or will be filed by Lessee in the county where the office building is located
or with the Texas Secretary of State's Office in Austin, Texas, whichever is
appropriate. Lessee shall disclose to Lessor the names and addresses of all
partners or venturers of Lessee if Lessee is a partnership or joint venture.
If Lessee or Guarantor is a corporation, corporate resolutions shall be
executed on the form in Exhibit I. Corporate seals are unnecessary under
Texas law.
39.2. LEASE DATES AND AUTHORITY TO SIGN: The "identification" date of this
lease is the 22nd day of October, 1998. The "effective date" on which this
lease becomes binding is the date on which the lease has been signed by
Lessor, Lessee, and any guarantors. The names and signatures of all parties
are shown below; and all persons signing have been duly authorized to sign.
If Lessee is a corporation, a corporate resolution authorizing Lessee to
execute this lease is attached as Exhibit I. Corporate seals are unnecessary
under Texas law.
IN WITNESS WHEREOF
Landlord and Tenant have executed this Lease in multiple original
counterparts as of the day and year first written above.
LESSOR: LESSEE:
EXECUTIVE PLAZA JOINT VENTURE CORRIDOR TECHNOLOGIES, INC.
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
---------------------------- ---------------------------
Title: Partner Title: President
-------------------------- -------------------------
Date: 10-22-98 Date: 10-22-98
--------------------------- --------------------------
LEASING AGENT:
LePAGE PROPERTIES
By: /s/ [Illegible]
---------------------------
Date: 10-22-98
-------------------------
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EXHIBIT "B"
EXECUTIVE PLAZA
BUILDING OPERATING EXPENSE PASSTHROUGH CALCULATIONS
(see paragraphs 2.1 and 32.1 of lease)
(a) "ESTIMATED" PRORATA BUILDING OPERATING EXPENSES. On or before the
beginning of each calendar year, Lessor shall calculate the estimated
building operating expenses for that calendar year, according to the criteria
in subparagraph (c) below. One-twelfth of Lessee's prorata share of estimated
building operating expenses which are in excess of any expense stop shall be
due on the first of each month as additional rent.
(b) YEAR-END ADJUSTMENT FOR OVERPAYMENT OR UNDERPAYMENT BY LESSEE BECAUSE
OF DIFFERENCES BETWEEN "ESTIMATED" AND "ACTUAL" BUILDING OPERATING EXPENSES.
After each calendar year of the lease term and renewal or extension periods,
Lessor shall determine the actual building operating expenses for that
calendar year. If it is then determined that actual building operating
expenses were less than estimated expenses and that Lessee's monthly payments
of estimated expenses over Lessee's expense stop figure were too much, Lessor
shall promptly refund to Lessee the excess amount paid by Lessee. If it is
determined that actual building operating expenses were more than estimated
expenses and that Lessee's monthly payments of estimated expenses over
Lessee's expense stop figure were insufficient, Lessor shall invoice Lessee
for the amount of Lessee's underpayment. Payment thereof shall be due upon
delivery of invoice to Lessee. The foregoing calculations and adjustments may
also be made one or more times during the calendar year, at Lessor's option.
(c) DEFINITION OF BUILDING OPERATING EXPENSES. Building operating expenses
for each calendar year shall include: all ad valorem taxes, assessments and
related government charges becoming due on the office complex; and on-site
personal property used in operation of the office complex in such period;
utilities; insurance premiums for fire, extended coverage, vandalism, and
liability on the building and personal property used in building management;
landscape expenses; janitorial expenses; window cleaning; supplies; painting and
other maintenance expenses; licenses; permits; advertising; maintenance salaries
and bonuses; payroll taxes; management office overhead and management fees; and
all other managerial and operating expenses which are reasonably related to the
operation of the building and utilities serving same. No such category shall
include more than 12 months' worth of expenses. Building operating expenses
shall also include the following improvements if amortized over the useful life
of such improvements for IRS purposes together with interest at 12% per annum on
the unamortized cost: (i) improvements to reduce operating expenses, (ii)
improvements required by governmental agencies following completion of the
building, and (iii) carpeting, floor covering, draperies, and wall coverings for
the common areas of the building. Building operating expenses shall be
calculated on an accrual basis in accordance with generally accepted accounting
principles, consistently applied. The word "building" as referred to above shall
1
<PAGE>
include the building, parking areas, parking garage (if any), and common areas.
Building operating expenses shall not include: principal and interest
payments on mortgages; depreciation or improvements which IRS requires to be
depreciated (except as provided above); expenses of repairing damage of the
type normally covered by fire, vandalism, flood, and EC insurance; any
expense paid or reimbursed from insurance proceeds; costs of repairing damage
for which Lessor is entitled to reimbursement from others; remodeling costs
for new or existing tenants; common area improvements or personal property
required by other tenants to be made, purchased, or furnished to such
tenants; common area improvements or personal property required by other
tenants to be made, purchased, or furnished to such tenants; utility and air
conditioning or heating costs or other expenses which are separately billed
to specific tenants; franchise and income taxes of Lessor; leasing
commissions; expenses of marketing vacant space in the building; legal fees;
structural repairs to roof, foundation, and walls; asbestos removal; and
installation of sprinklers, fire alarms, and smoke detector systems.
If utilities and taxes included in "Building Operating Expense" are not
payable, billed or otherwise due so as to allow an accurate calculation of
said factors annually, then Lessor, in its reasonable discretion, may
estimate and prorata said expenses on an annual basis, and said factors shall
be properly adjusted by Lessor when they actually become due and payable.
Otherwise, expenses must be supported by invoice and actually paid.
(d) DEFINITION OF PRORATA SHARE. Lessee's prorata share of estimated and
actual building operating expenses is the percentage result of dividing
"Lessee's rentable area" (which is set forth in paragraph 1.4) by the total
rentable area in the entire building.
(e) DELAY IN IMPLEMENTATION. At Lessor's option, adjustments may be
delayed. Lessor's delay in implementing such adjustments shall not waive
Lessor's right thereto, and the most recent monthly rental figures shall
continue to be paid during such delay. If Lessor delays in timely
calculating adjustments, such adjustments shall be retroactive to the
respective date on which Lessor had a right to make such adjustment; and such
delayed rent adjustments shall become due upon written notice to Lessee.
(f) EXAMINATION OF RECORDS. Upon reasonable notice to Lessor in writing,
Lessee may examine Lessor's accounting records for building operating
expenses and other data used in calculating additional rents or rent
adjustments. Such examination shall be during normal business hours.
2
<PAGE>
EXHIBIT "C"
EXECUTIVE PLAZA
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by Tenant or used by Tenant for any
purpose other than ingress and egress to and from the leased premises
and for going from one part of the Building to another.
2. No signs, advertisements or notices, including political signs, shall be
painted or affixed on or to any windows, doors, corridors, or other
parts of the Building except of such color, size, and style and in such
places as shall be first approved in writing by Building Management.
3. All locks for doors in each Tenant's leased areas shall be building
standard and no tenant shall place any additional lock or locks on any
door in its leased area without Building Management's consent.
4. Movement of furniture or office equipment, or dispatch or receipt by
Tenants of any bulky material, merchandise or materials which requires
use of elevators or stairways, or movement through the Building
entrances or lobby, shall be restricted to such hours as Building
Management shall designate, and such movement shall be subject to
control of Building Management.
5. Building Management shall have authority to prescribe the weight and
position of safes and other heavy equipment, said items shall in all
cases (to distribute weight) stand on supporting devices approved by
Building Management.
6. Corridor doors, when not in use, shall be kept closed.
7. Should a tenant require a telegraphic, telephonic, annunciator or other
communication service, Building Management will direct the electricians
where and how wires are to be introduced and placed and none shall be
introduced or placed except as Building Management shall direct.
8. No animals or birds shall be brought into or kept in, on or about
Tenant's area.
9. No vending machines of any type shall be allowed in Tenant's space
without the prior written consent of Building Management.
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10. Tenants are requested to lock all office doors leading to corridors and
to turn out all lights at the close of their working day.
11. Lessor reserves the right to close Tenant's blinds, if in Lessor's
judgement, Tenant's interior is offensive to other Lessees.
12. Lessee agrees that no flammable liquids of any type at any time shall be
stored in Lessee's lease space.
13. Lessor reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its
judgement shall, from time to time, be required for the safety,
protection, care and cleanliness of the Building, the operation thereof,
the preservation of good order therein and the protection and comfort of
the tenants and their agents, employees and invitees, which rules and
regulations shall be binding upon it in like manner as if originally
herein prescribed.
AGREED AND ACCEPTED
this 22nd day of Oct, 1998
CORRIDER TECHNOLOGIES, INC.
- -------------------------------------
"Tenant"
2
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[MAP]
FLOOR AND ELECTRICAL PLAN
<PAGE>
EXHIBIT 10.7
AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE REGISTRANT AND ARIANNE CO.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
ARIANNE CO.
AND
ONE COMMERCE CORPORATION
<PAGE>
TABLE OF CONTENTS
1. Plan of Reorganization . . . . . . . . . . . . . . . . . . . . .1
2. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . .1
3. Pre-Closing events . . . . . . . . . . . . . . . . . . . . . . .2
4. Exchange of Securities . . . . . . . . . . . . . . . . . . . . .2
5. Other Events Occurring at Closing. . . . . . . . . . . . . . . .2
6. Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . .4
7. Representations of OCC Stockholders. . . . . . . . . . . . . . .4
8. Representations of OCC . . . . . . . . . . . . . . . . . . . . .4
9. Representations of ACO and Ryan. . . . . . . . . . . . . . . . .6
10. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
11. Conditions Precedent to the Obligations of OCC . . . . . . . . .8
12. Conditions Precedent to the Obligations of ACO . . . . . . . . .9
13. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 10
14. Nature and Survival of Representations . . . . . . . . . . . . 10
15. Documents at Closing . . . . . . . . . . . . . . . . . . . . . 11
16. Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . . . 12
17. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 12
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit A - OCC Stockholder Schedule
Exhibit B - Amendment to Articles of Incorporation
Exhibit C - Investment Letter
(i)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter the "Agreement")
is entered into effective as of this 17th day of March 1999, by and among
Arianne Co., a Nevada corporation (hereinafter "ACO"); Lisa D. Ryan, a
shareholder of ACO (hereinafter "Ryan"); One Commerce Corporation, a Texas
corporation (hereinafter "OCC"), and the owners of the outstanding shares of
common stock of OCC (hereinafter the "OCC Stockholders").
RECITALS:
WHEREAS, the OCC Stockholders own all of the issued and outstanding
common stock of OCC (the "OCC Common Stock"). ACO desires to acquire the OCC
Common Stock solely in exchange for voting common stock of ACO, making OCC a
wholly-owned subsidiary of ACO; and
WHEREAS, the OCC Stockholders (as set forth on Exhibit "A" to be
delivered on or before Closing) desire to acquire voting common stock of ACO
in exchange for the OCC Common Stock, as more fully set forth herein.
NOW THEREFORE, for the mutual consideration set out herein and other
good and valuable consideration, the legal sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. PLAN OF REORGANIZATION. It is hereby agreed that the OCC Common
Stock shall be acquired by ACO in exchange solely for ACO common voting stock
(the "ACO Shares"). It is the intention of the parties hereto that all of the
issued and outstanding shares of capital stock of OCC shall be acquired by
ACO in exchange solely for ACO common voting stock and that this entire
transaction qualify as a corporate reorganization under Section 368(a)(1)(B)
and/or Section 351 of the Internal Revenue Code of 1986, as amended, and
related or other applicable sections thereunder.
2. EXCHANGE OF SHARES. ACO and OCC Stockholders agree that on the
Closing Date or at the Closing as hereinafter defined, the OCC Common Stock
shall be delivered at Closing to ACO in exchange for the ACO Shares, after
giving effect to a 1.8 for 1 forward stock split (the "ACO Forward Stock
Split") as to all presently outstanding shares of ACO common stock, as
follows:
(a) At Closing, ACO shall, subject to the conditions set forth herein,
issue an aggregate of 14,545,000 shares of ACO common stock (after giving
effect to the ACO Forward Stock Split) for immediate delivery to the OCC
Stockholders in exchange for ACO Shares. The 14,545,000 shares shall be
inclusive of shares reserved for issuance upon exercise of options granted by
ACO to optionholders of OCC at Closing, if any, in exchange for existing OCC
options as set forth on Exhibit "A".
<PAGE>
(b) Each OCC Stockholder shall execute this Agreement or a written
consent to the exchange of their OCC Common Stock for ACO Shares.
(c) Unless otherwise agreed by ACO and OCC this transaction shall close
only in the event ACO is able to acquire at least 80% of the outstanding OCC
Common Stock; however, it is the intent of the parties to have ACO acquire
all of the OCC Common Stock.
3. PRE-CLOSING EVENTS. The Closing is subject to the completion of the
following:
(a) ACO shall have authorized 50,000,000 shares of $.001 par value
common stock and at Closing shall amend its Articles of Incorporation to
authorize 500,000 shares of $.001 par value preferred stock. The preferred
stock shall be subject to issuance in such series and with such rights,
preferences and designations as determined in the sole discretion of the
board of directors.
(b) ACO shall have received 4,958,333 shares for cancellation leaving
it with 416,666 shares outstanding and shall have then effectuated the ACO
Forward Stock Split at or about the Closing, and shall have 750,000 shares of
its common stock issued and outstanding and no other shares of capital stock
issued or outstanding.
(c) ACO shall demonstrate to the reasonable satisfaction of OCC that it
has no material assets and no liabilities contingent or fixed.
4. EXCHANGE OF SECURITIES. As of the Closing Date each of the
following shall occur:
(a) All shares of OCC Common Stock issued and outstanding on the
Closing Date shall be exchanged for the ACO Shares (up to an aggregate amount
of 14,545,000 ACO Shares to be delivered at Closing). All such outstanding
shares of OCC Common Stock shall be deemed, after Closing, to be owned by
ACO. The holders of such certificates previously evidencing shares of OCC
Common Stock outstanding immediately prior to the Closing Date shall cease to
have any rights with respect to such shares of OCC Common Stock except as
otherwise provided herein or by law;
(b) Any shares of OCC Common Stock held in the treasury of OCC
immediately prior to the Closing Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto;
(c) The 750,000 shares of ACO common stock previously issued and
outstanding prior to the Closing, after giving effect to the ACO Forward
Split, will remain outstanding.
5. OTHER EVENTS OCCURRING AT CLOSING. At Closing, the following shall
be accomplished:
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<PAGE>
(a) ACO shall file an amendment to its Articles of Incorporation with
the Secretary of State of the State of Nevada in substantially the form
attached hereto as Exhibit "B" effecting an amendment to its Articles of
Incorporation to reflect (1) a name change, (2) authorize 500,000 shares of
preferred stock, and (3) to put of record the ACO Forward Stock Split as set
forth in the attached Exhibit "B".
(b) The resignation of the existing ACO sole officer and director and
appointment of new officers and directors as directed by OCC.
(c) ACO shall have completed a limited offering under Regulation D,
Rule 504, as promulgated by the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933, as amended, of 1,600,000 shares of its
common stock at $.50 per share. The gross proceeds of this offering (the
"ACO Financing") shall be $800,000, which amount, less agreed upon costs,
shall be delivered to the control of new management of ACO at Closing in good
funds or shall be represented by the conversion of previous loans to OCC
arranged for by Baytree. The ACO Financing shall have been completed in
compliance with all applicable state and federal securities laws and the
securities sold shall be delivered at Closing to the investors in the ACO
Financing. Persons who have loaned money to OCC, if any, up to $800,000,
shall be given the opportunity to convert the principal of said loans to the
purchase of shares in the limited offering prior to Closing upon the same
terms as other investors in the limited offering.
(d) It is recognized by the parties hereto that OCC entered into an
agreement, including all amendments thereto (the "Baytree Agreement") dated
March 5, 1999, with Baytree Capital Associates, LLC ("Baytree") wherein
Baytree agreed to identify a public company to be involved in a "reverse
merger" with OCC, and that ACO is the public company agreed to by Baytree and
OCC. Under said Baytree Agreement, at Closing of the transactions described
herein, ACO shall issue 20,000 shares of its common stock (after given effect
to the ACO Forward Stock Split) to Baytree. These shares are deemed to be
covered by the defined term "ACO Shares" as set forth herein for purposes of
all representations and warranties of ACO and the legal opinion given on behalf
of ACO herein. Out of the proceeds of the ACO Financing (as further defined
herein) there shall be paid at Closing, a non-accountable expense allowance
of $10,000 to Baytree and the fees and reasonable disbursements of Acquiror's
legal counsel not to exceed $35,000.00 (to be paid from the proceeds of the
ACO Financing). Furthermore, ACO recognizes and hereby assumes, at Closing,
the obligations of OCC set forth in the Baytree Agreement including the
obligation to register shares of its common stock issued to Baytree hereunder
at the request of Baytree in accordance with the express terms and conditions
of said Baytree Agreement including "Piggyback" registration rights.
(e) ACO shall issue 85,000 shares of its common stock to H.L. Lanzet,
Inc.
6. DELIVERY OF SHARES. On or as soon as practicable after the Closing
Date, OCC will use its best efforts to cause the OCC Stockholders to
surrender certificates for cancellation representing their shares of OCC
Common Stock, against delivery of certificates representing the ACO Shares
for which the shares of OCC Common Stock are to be exchanged at Closing.
3
<PAGE>
7. REPRESENTATIONS OF OCC STOCKHOLDERS. Each OCC Stockholder hereby
represents and warrants each only as to its own OCC Common Stock, effective
this date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the OCC Common Stock is
free from claims, liens, or other encumbrances, and at the Closing Date said
OCC Stockholder will have good title and the unqualified right to transfer
and dispose of such OCC Common Stock.
(b) Said OCC Stockholder is the sole owner of the issued and
outstanding OCC Common Stock as set forth in Exhibit "A";
(c) Said OCC Stockholder has no present intent to sell or dispose of
the ACO Shares and is not under a binding obligation, formal commitment, or
existing plan to sell or otherwise dispose of the ACO Shares.
8. REPRESENTATIONS OF OCC. OCC hereby represents and warrants as
follows, which warranties and representations shall also be true as of the
Closing Date:
(a) Except as noted on Exhibit "A", the OCC Stockholders listed on the
attached Exhibit "A" are the sole owners of record and beneficially of the
issued and outstanding common stock of OCC.
(b) OCC has no outstanding or authorized capital stock, warrants,
options or convertible securities other than as described in the OCC
Financial Statements or on Exhibit "A", attached hereto.
(c) The unaudited financial statements as of and for the periods ended
December 31, 1997 and 1998, which have been (or will be prior dissemination
of an Information Statement by ACO) delivered to ACO (hereinafter referred to
as the "OCC Financial Statements") are complete and accurate and fairly
present the financial condition of OCC as of the dates thereof and the
results of its operations for the periods covered. There are no material
liabilities or obligations, either fixed or contingent, not disclosed in the
OCC Financial Statements or in any exhibit thereto or notes thereto other
than contracts or obligations in the ordinary course of business; and no such
contracts or obligations in the ordinary course of business constitute liens
or other liabilities which materially alter the financial condition of OCC as
reflected in the OCC Financial Statements. OCC has good title to all assets
shown on the OCC Financial Statements subject only to dispositions and other
transactions in the ordinary course of business, the disclosures set forth
therein and liens and encumbrances of record. The OCC Financial Statements
have been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of OCC as of the
dates thereof and the results of its operations and changes in financial
position for the periods then ended.
4
<PAGE>
(d) Since the date of the OCC Financial Statements, there have not been
any material adverse changes in the financial position of OCC except changes
arising in the ordinary course of business, which changes will in no event
materially and adversely affect the financial position of OCC.
(e) OCC is not a party to any material pending litigation or, to its
best knowledge, any governmental investigation or proceeding not reflected
in the OCC Financial Statements, and to its best knowledge, no material
litigation, claims, assessments or any governmental proceedings are
threatened against OCC.
(f) OCC is in good standing in its jurisdiction of incorporation, and
is in good standing and duly qualified to do business in each jurisdiction
where required to be so qualified except where the failure to so qualify
would have no material negative impact on OCC.
(g) OCC has (or, by the Closing Date, will have filed) all material
tax, governmental and/or related forms and reports (or extensions thereof)
due or required to be filed and has (or will have) paid or made adequate
provisions for all taxes or assessments which have become due as of the
Closing Date.
(h) OCC has not materially breached any material agreement to which it
is a party. OCC has previously given ACO copies or access thereto of all
material contracts, commitments and/or agreements to which OCC is a party
including all relationships or dealings with related parties or affiliates.
(i) OCC has no subsidiary corporations except as described in writing
to ACO.
(j) OCC has made all material corporate financial records, minute
books, and other corporate documents and records available for review to
present management of ACO prior to the Closing Date, during reasonable
business hours and on reasonable notice.
(k) The execution of this Agreement does not materially violate or
breach any material agreement or contract to which OCC is a party and has
been duly authorized by all appropriate and necessary corporate action under
Texas of other applicable law and OCC, to the extent required, has obtained
all necessary approvals or consents required by any agreement to which OCC is
a party.
(l) All disclosure information regarding OCC which is to be set forth
in disclosure documents of ACO or otherwise delivered to ACO by OCC for use
in connection with the transaction (the "Acquisition") described herein is
true, complete and accurate in all material respects.
9. REPRESENTATIONS OF ACO AND RYAN. ACO, and Ryan to the best of his
knowledge, hereby jointly and severally represent and warrant as follows,
each of which representations and warranties shall continue to be true as of
the Closing Date:
5
<PAGE>
(a) As of the Closing Date, the ACO Shares, to be issued and delivered
to the OCC Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of ACO common
stock, fully-paid and nonassessable. ACO shall have completed its forward
stock split wherein each holder of ACO Shares shall have received 1.8 shares
of the ACO Shares for each one ACO Share previously held. The total number of
ACO shares of common stock outstanding shall be 750,000.
(b) ACO has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the board of directors of ACO. The execution and
performance of this Agreement will not constitute a material breach of any
agreement, indenture, mortgage, license or other instrument or document to
which ACO is a party and will not violate any judgment, decree, order, writ,
rule, statute, or regulation applicable to ACO or its properties. The
execution and performance of this Agreement will not violate or conflict with
any provision of the Articles of Incorporation or by-laws of ACO.
(c) ACO has delivered to OCC (or shall deliver prior to Closing) a true
and complete copy of its audited financial statements for the years ended
December 31, 1996, 1997, and 1998 (the "ACO Financial Statements"). The ACO
Financial Statements are complete, accurate and fairly present the financial
condition of ACO as of the dates thereof and the results of its operations
for the periods then ended. There are no material liabilities or obligations
either fixed or contingent not reflected therein. The ACO Financial
Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and fairly present the financial
position of ACO as of the dates thereof and the results of its operations and
changes in financial position for the periods then ended.
(d) Since December 31, 1998, there have not been any material adverse
changes in the financial condition of ACO except with regard to disbursements
to pay reasonable and ordinary expenses in connection with maintaining its
corporate status and pursuing the matters contemplated in this Agreement.
Prior to Closing, all accounts payable and other liabilities of ACO shall be
paid and satisfied in full and ACO shall have no liabilities either
contingent or fixed.
(e) ACO is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the ACO
Financial Statements or otherwise disclosed herein, and there are no
lawsuits, claims, assessments, investigations, or similar matters, to the
best knowledge of Ryan, threatened or contemplated against or affecting ACO,
its management or its properties.
(f) ACO is duly organized, validly existing and in good standing under
the laws of the State of Nevada; has the corporate power to own its property
and to carry on its business as now
6
<PAGE>
being conducted and is duly qualified to do business in any jurisdiction
where so required except where the failure to so qualify would have no
material negative impact on it.
(g) ACO has filed all federal, state, county and local income, excise,
property and other tax, governmental and/or related returns, forms, or
reports, which are due or required to be filed by it prior to the date
hereof, except where the failure to do so would have no material adverse
impact on ACO, and has paid or made adequate provision in the ACO Financial
Statements for the payment of all taxes, fees, or assessments which have or
may become due pursuant to such returns or pursuant to any assessments
received. ACO is not delinquent or obligated for any tax, penalty, interest,
delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights
or commitments of any character relating to the issued or unissued capital
stock or other securities of ACO, except as contemplated in this Agreement.
(i) The corporate financial records, minute books, and other documents
and records of ACO have been made available to OCC prior to the Closing and
shall be delivered to new management of ACO at Closing.
(j) ACO has not breached, nor is there any pending, or to the knowledge
of management, any threatened claim that ACO has breached, any of the terms
or conditions of any agreements, contracts or commitments to which it is a
party or by which it or its assets are is bound. The execution and
performance hereof will not violate any provisions of applicable law or any
agreement to which ACO is subject. ACO hereby represents that it has no
business operations or material assets and it is not a party to any material
contract or commitment other than appointment documents with its transfer
agent, and that it has disclosed to OCC all relationships or dealings with
related parties or affiliates.
(k) ACO common stock is currently approved for quotation on the OTC
Bulletin Board under the symbol "ARAN" and there are no stop orders in effect
with respect thereto.
(l) All information regarding ACO which has been provided to OCC or
otherwise disclosed in connection with the transactions contemplated herein,
is true, complete and accurate in all material respects. ACO and Ryan
specifically disclaim any responsibility regarding disclosures as to OCC, its
business or its financial condition.
10. CLOSING. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing is expected to take place on or about
March 30, 1999, but no later than April 6, 1999, unless extended by mutual
consent of all parties hereto. The "Closing Date" of the transactions
described herein (the "Acquisition"), shall be that date on which all
conditions set forth herein have been met and the ACO Shares are issued in
exchange for the OCC Common Stock.
7
<PAGE>
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF OCC. All obligations of
OCC under this Agreement are subject to the fulfillment, prior to or as of
the Closing and/or the Closing Date, as indicated below, of each of the
following conditions:
(a) The representations and warranties by or on behalf of Ryan and ACO
contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at
and as of the Closing and Closing Date as though such representations and
warranties were made at and as of such time.
(b) ACO shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and
delivered all documents required by this Agreement to be performed or
complied with or executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of ACO, shall
have approved in accordance with applicable state corporation law the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein.
(d) On or before the Closing Date, ACO shall have delivered to OCC
certified copies of resolutions of the board of directors and shareholders of
ACO approving and authorizing the execution, delivery and performance of this
Agreement and authorizing all of the necessary and proper action to enable
ACO to comply with the terms of this Agreement including the election of
OCC's nominees to the Board of Directors of ACO and all matters outlined
herein.
(e) The Acquisition shall be permitted by applicable law and ACO shall
have sufficient shares of its capital stock authorized to complete the
Acquisition.
(f) At Closing, the existing sole officer and director of ACO shall
have resigned in writing from all positions as director and officer of ACO
effective upon the election and appointment of the OCC nominees.
(g) At the Closing, all instruments and documents delivered to OCC and
OCC Stockholders pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for OCC.
(h) The shares of restricted ACO capital stock to be issued to OCC
Stockholders and in the ACO Financing at Closing will be validly issued,
nonassessable and fully-paid under Delaware corporation law and will be
issued in compliance with all federal, state and applicable corporation and
securities laws.
(i) OCC and OCC Stockholders shall have received the advice of their
tax advisor, if deemed necessary by them, as to all tax aspects of the
Acquisition.
8
<PAGE>
(j) OCC shall have received all necessary and required approvals and
consents from required parties and its shareholders.
(k) ACO shall have completed the ACO Financing.
(l) At the Closing, ACO shall have delivered to OCC an opinion of its
counsel dated as of the Closing to the effect that:
(i) ACO is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement has been duly authorized, executed and
delivered by ACO and is a valid and binding obligation of ACO enforceable
in accordance with its terms;
(iii) ACO through its board of directors and stockholders has taken
all corporate action necessary for performance under this Agreement;
(iv) The documents executed and delivered by ACO to OCC and OCC
Stockholders hereunder are valid and binding in accordance with their terms
and vest in OCC Stockholders, as the case may be, all right, title and
interest in and to the ACO Shares to be issued pursuant to the terms
hereof, and the ACO Shares when issued will be duly and validly issued,
fully-paid and nonassessable;
(v) ACO has the corporate power to execute, deliver and perform
under this Agreement;
(vi) Legal counsel for ACO is not aware of any liabilities, claims
or lawsuits involving ACO;
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACO. All obligations of
ACO under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
(a) The representations and warranties by OCC and OCC Stockholders
contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at
and as of the Closing as though such representations and warranties were made
at and as of such time.
(b) OCC shall have performed and complied with, in all material
respects, all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing;
(c) OCC shall deliver on behalf of the OCC Stockholders a letter commonly
known as an "Investment Letter," signed by each of said shareholders, in
substantially the form attached
9
<PAGE>
hereto as Exhibit "C", acknowledging that the ACO Shares are being acquired
for investment purposes.
(d) OCC shall deliver an opinion of its legal counsel to the effect
that:
(i) OCC is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is
duly qualified to do business in any jurisdiction where so required except
where the failure to so qualify would have no material adverse impact on
OCC;
(ii) This Agreement has been duly authorized, executed and
delivered by OCC.
(iii) The documents executed and delivered by OCC and OCC
Stockholders to ACO hereunder are valid and binding in accordance with
their terms and vest in ACO all right, title and interest in and to the OCC
Common Stock, which stock is duly and validly issued, fully-paid and
nonassessable.
13. INDEMNIFICATION. For a period of one year from the Closing, ACO and
Ryan agree to jointly and severally indemnify and hold harmless OCC, and OCC
agrees to indemnify and hold harmless ACO and Ryan, at all times after the
date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees incident to any of the
foregoing, resulting from any material misrepresentations made by an
indemnifying party to an indemnified party, an indemnifying party's breach of
covenant or warranty or an indemnifying party's nonfulfillment of any
agreement hereunder, or from any material misrepresentation in or omission
from any certificate furnished or to be furnished hereunder.
14. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations,
warranties and covenants made by any party in this Agreement shall survive
the Closing and the consummation of the transactions contemplated hereby for
one year from the Closing. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement and not upon any investigation upon which it might have made or any
representation, warranty, agreement, promise or information, written or oral,
made by the other party or any other person other than as specifically set
forth herein.
15. DOCUMENTS AT CLOSING. At the Closing, the following documents
shall be delivered:
(a) OCC will deliver, or will cause to be delivered, to ACO the following:
(i) a certificate executed by the President and Secretary of OCC
to the effect that all representations and warranties made by OCC under
this Agreement are true and correct as of the Closing, the same as though
originally given to ACO on said date;
10
<PAGE>
(ii) a certificate from the jurisdiction of incorporation of OCC
dated at or about the Closing to the effect that OCC is in good standing
under the laws of said jurisdiction;
(iii) Investment Letters in the form attached hereto as Exhibit "C"
executed by each OCC Stockholder;
(iv) such other instruments, documents and certificates, if any, as
are required to be delivered pursuant to the provisions of this Agreement;
(v) certified copies of resolutions adopted by the shareholders
and directors of OCC authorizing this transaction; and
(vi) all other items, the delivery of which is a condition precedent
to the obligations of ACO as set forth herein.
(vii) the legal opinion required by Section 12(d) hereof.
(b) ACO will deliver or cause to be delivered to OCC:
(i) stock certificates representing the ACO Shares to be issued as
a part of the stock exchange as described herein;
(ii) a certificate of the President of ACO, to the effect that all
representations and warranties of ACO made under this Agreement are true
and correct as of the Closing, the same as though originally given to OCC
on said date;
(iii) certified copies of resolutions adopted by ACO's board of
directors and ACO's Stockholders authorizing the Acquisition and all
related matters described herein;
(iv) certificate from the jurisdiction of incorporation of ACO
dated at or about the Closing Date that ACO is in good standing under the
laws of said state;
(v) opinion of ACO's counsel as described in Section 11(1) above;
(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of the existing officer and director of ACO;
(viii) all corporate and financial records of ACO; and
(ix) all other items, the delivery of which is a condition
precedent to the obligations of OCC, as set forth in Section 12 hereof.
11
<PAGE>
16. FINDER'S FEES. ACO, represents and warrants to OCC, and OCC
represents and warrants to ACO that neither of them, or any party acting on
their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or
any of the transactions contemplated hereby other than the arrangements
described in Section 5(d) hereof. In this regard, ACO, on the one hand, and
OCC on the other hand, will indemnify and hold the other harmless from any
claim, loss, cost or expense whatsoever (including reasonable fees and
disbursements of counsel) from or relating to any such express or implied
liability other than as disclosed herein.
17. MISCELLANEOUS.
(a) FURTHER ASSURANCES. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
(b) WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) AMENDMENT. This Agreement may be amended only in writing as agreed
to by all parties hereto.
(d) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested.
(e) HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(g) GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada.
(h) BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) ENTIRE AGREEMENT. This Agreement and the attached Exhibits
constitute the entire agreement of the parties covering everything agreed
upon or understood in the transaction.
12
<PAGE>
There are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof.
(j) TIME: Time is of the essence.
(k) SEVERABILITY. If any part of this Agreement is deemed to be
unforseeable the balance of this Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
ARIANNE CO.
By: /s/ Lisa D. Ryan
----------------------------------
Lisa D. Ryan, President
/s/ Lisa D. Ryan
--------------------------------------
Lisa D. Ryan, Individually
ONE COMMERCE CORPORATION
By: /s/ David B. Carolan
-----------------------------------
David Carolan, President
STOCKHOLDERS OF ONE COMMERCE
CORPORATION
/s/ David B. Carolan
-----------------------------------
David Carolan
/s/ Gil Lozano
-----------------------------------
Gil Lozano
/s/ John Baker Welch
-----------------------------------
John Baker Welch
13
<PAGE>
EXHIBIT "A"
TO AGREEMENT AND PLAN OF REORGANIZATION
LIST OF OCC STOCKHOLDERS
<PAGE>
Shareholder of OneCommerce as of 3/15/99
<TABLE>
<CAPTION>
Total Shs Shs
Name Address # Qty. Date One Comm Arianne Co
<S> <C> <C> <C> <C> <C> <C>
1. Gil Lozano 2907 Grenn Run San antonio, Tx 78231 31 18000 11/27/97 5,002,200 4,573,697
Gil Lozano 2907 Grenn Run San antonio, Tx 78231 32 2547000 10/1/98
2. Phillip Galtan 16500 Henderson pass #1402 San Antonio, Tx. 78232 33 45000 10/31/98 45,000 41,145
3. Jonathan T. Casser 16500 Henderson pass #208 San Antonio, Tx. 78232 34 45000 10/31/98 45,000 41,145
4. Chrystal M. Galtan 16500 Henderson pass #1402 San Antonio, Tx. 78232 35 45000 10/31/98 45,000 41,145
5. Greg Mongolls 540 Glendale Ave. Glenridge, Ill. 60137 36 93798 10/31/98 93,798 85,763
6. Philip Gruenwald 376 South State St. Elgin, Ill. 60120 37 42678 10/31/98 71,874 65,717
7. John B. Welch One Clyde St. Golf, Ill. 60029 38 202104 10/31/98 1,644,732 1,503,839
8. Annette Duncovick 765 Berkley Ave. Elmhurst, Ill. 60126 39 90090 10/31/98 90,090 82,370
9. David Baum 2424 Lincoln St. Evenston, Ill. 60201 40 213462 10/31/98 333,252 304,705
10. Mike Gagilardo 1015 Forrest View Ln. Glenview, Ill. 60025 41 257868 10/31/98 437,868 400,355
11. James B. Carolan 1114 Linwood Dr. Wharton, Tx 77488 42 90000 10/31/98 90,000 82,291
Gil Lozano 2907 Grenn Run San antonio, Tx 78231 43 585000 12/31/98
12. David Carolan 555 IH 35 S. New Braunfels, Tx 78130 44 4725000 12/31/98 7,106,400 6,497,644
David Carolan 555 IH 35 S. New Braunfels, Tx 78130 45 2381400 12/31/98
John B. Welch One Clyde St. Golf, Ill 60029 46 1058400 12/31/98
Gil Lozano 2907 Grenn Run San antonio, Tx 78231 47 1852200 12/31/98
David M. Baum 2424 Lincoln St. Evenston, Ill. 60201 48 119790 1/15/99
Phil Gruenwald 376 South State St. Elgin, Ill. 60120 49 29196 1/15/99
John B. Welch One Clyde St. Golf Ill. 60029 50 45000 1/15/99
Mike Gagilardo 1015 Forrest View Ln. Glenview, Ill. 60025 51 180000 1/15/99
John B. Welch One Clyde St. Golf Ill. 60029 52 45000 1/15/99
John B. Welch One Clyde St. Golf Ill. 60029 53 294228 3/1/99
13. Thomas H. Dittmer C/O Refco Group One World Financial Center 54 300096 3/15/99 300,096 274,380
Twr.A 200 Liberty St. 22nd Fl. New York, N.Y. 10281
14. Harry M. Howell 12995 South Cleveland Ave. Suite 219 55 300096 3/15/99 300,096 274,380
Pinebrook, Ft. Myers, Fla. 33907 -------- ---------- ----------
15605406 15,605,406 14,268,600
ratio .914336993
</TABLE>
<PAGE>
EXHIBIT "B"
To Agreement and Plan of Reorganization
FORM OF AMENDMENT TO ARTICLES OF INCORPORATION
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
ARIANNE CO.
Pursuant to the applicable provisions of the Nevada Business
Corporations Act, Arianne Co. (the "Corporation") adopts the following
Articles of Amendment to its Articles of Incorporation:
FIRST: The present name of the Corporation is Arianne Co.
SECOND: The following amendments, to its Articles of Incorporation
were adopted by the board of directors and by majority consent of
shareholders of the Corporation in the manner prescribed by applicable law.
(1) The Article entitled ARTICLE I - NAME, is amended to read as follows:
ARTICLE I - NAME
The name of the corporation shall be: One E-Commerce Corporation
(2) The Article entitled ARTICLE IV - STOCK, is amended to read as
follows:
ARTICLE IV STOCK
COMMON. The aggregate number of common shares which this Corporation
shall have authority to issue is 50,000,000 shares of Common Stock having a
par value of $.001 per share. All common stock of the Corporation shall be of
the same class, common, and shall have the same rights and preferences.
Fully-paid common stock of this Corporation shall not be liable to any
further call or assessment.
PREFERRED. The Corporation shall be authorized to issue 500,000 shares
of Preferred Stock having a par value of $.001 per share and with such
rights, preferences and designations determined by the board of directors.
THIRD: The Corporation has effectuated, effective with the
commencement of business on Wednesday, March 31, 1999, a 1.8 to 1 forward
stock split as to its shares of common stock outstanding as of the opening of
business on Tuesday, March 30, 1999, which increases the outstanding shares
as of that date from 416,666 shares to 750,000 shares. The reverse split
shall not change the number of shares of Common Stock authorized for issuance
by the Corporation.
<PAGE>
FOURTH: The number of shares of the Corporation outstanding and
entitled to vote at the time of the adoption of said amendment was 5,375,000.
FIFTH: The number of shares voted for such amendments was 5,294,400
(98.5%) and no shares were voted against such amendment.
DATED this ___ day of March, 1999.
ARIANNE CO.
By:
------------------------------------
Lisa D. Ryan, President/Secretary
VERIFICATION
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states: that the
undersigned is the President of Arianne Co., that the undersigned has read the
Certificate of Amendment and knows the contents thereof and that the same
contains a truthful statement of the Amendment duly adopted by the board of
directors and stockholders of the Corporation.
------------------------------------
Lisa D. Ryan, President
<PAGE>
STATE OF UTAH )
:ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of Arianne Co., a
Nevada corporation, and signed the foregoing Articles of Amendment as her
own free and voluntary acts and deeds pursuant to a corporate resolution for
the uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this ___ day of March,
1999.
------------------------------------
NOTARY PUBLIC
Notary Seal:
<PAGE>
EXHIBIT "C"
TO AGREEMENT AND PLAN OF REORGANIZATION
FORM OF INVESTMENT LETTER
<PAGE>
INVESTMENT LETTER
TO THE BOARD OF DIRECTORS OF ARIANNE CO. ("CORPORATION")
The undersigned hereby represents to the Corporation, that (1) the
shares of the Corporation's common stock (the "Securities") which are being
acquired by the undersigned are being acquired for his own account and for
investment and not with a view to the public resale or distribution thereof;
(2) the undersigned will not sell, transfer or otherwise dispose of the
securities except in compliance with the Securities Act of 1933, as amended
(the "Act"); and (3) he is aware that the Securities are "restricted
securities" as that term is defined in Rule 144 or the General Rules and
Regulations under the Act.
The undersigned acknowledges that he has been afforded access to
disclosure documents and information regarding the Corporation as requested
by the undersigned.
The undersigned further acknowledges that he has had an opportunity to
ask questions of and receive answers from duly designated representatives of
the Corporation concerning the terms and conditions pursuant to which the
Securities are being purchased. The undersigned acknowledges that he has been
afforded an opportunity to examine such documents and other information which
he has requested for the purpose of verifying the information set forth in
the documents referred to above.
The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
The undersigned further acknowledges that he is fully aware of the
applicable limitations on the resale of the Securities. These restrictions
for the most part are set forth in Rule 144. The Rule permits sales of
"restricted securities" upon compliance with the requirements of such Rule.
If the Rule is available to the undersigned, the undersigned may make only
routine sales of securities, in limited amounts, in accordance with the terms
and conditions of that Rule.
The Company is the only person which may register its Securities under
the Act and it currently is not contemplating registering any of its
Securities. Furthermore, the Company has not made any representations,
warranties or covenants to the undersigned regarding registration of the
Securities or compliance with any exemption under the Act.
<PAGE>
By reason of my knowledge and experience in financial and business
matters in general, and investments in particular, I am capable of
evaluating the merits and risks of an investment by me in the Securities.
I am capable of bearing the economic risks of an investment in the
Securities. I fully understand the speculative nature of the Securities.
My present financial condition is such that I am under no present or
contemplated future need to dispose of any portion of the Securities to
satisfy any existing or contemplated undertaking, need, or indebtedness.
Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear
the following legend, which the undersigned has read and understands:
The shares represented by this Certificate have not been registered under
the Securities Act of 1933 (the "Act") and are "restricted securities" as
that term is defined in Rule 144 under the Act. The shares may not be
offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act or pursuant to an exemption
from registration under the Act, the availability of which is to be
established to the satisfaction of the Company.
The undersigned further agrees that the Corporation shall have the right
to issue stop-transfer instructions to its transfer agent and acknowledges
that the Corporation has informed the undersigned of its intention to issue
such instructions.
Very truly yours,
--------------------------------------
Date: ______________, 1999
<PAGE>
EXHIBIT 24.1
CONSENT OF DAVID PATRICK AND COMPANY, P.C.
<PAGE>
[LETTERHEAD]
Consent of Independent Auditors
To the Board of Directors of One eCommerce Corporation
We consent to the inclusion of our report dated July 9, 1998, with respect
to the financial statements of One Commerce Corporation as of December 31,
1998 and for the two years then ended, in the form SB-2 registration
statement filed under the Securities Act of 1933 for One eCommerce
Corporation.
/s/ DAVID PATRICK AND COMPANY, P.C.
July 12,1999
<PAGE>
EXHIBIT 24.3
CONSENT OF TANNER & CO.
<PAGE>
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
SINERGIA SERVICIOS, S.C.
We hereby consent to the use in this Registration Statement on Form
SB-2 of our report dated June 11, 1999, relating to the financial statements of
Sinergia Servicios, S.C., and to the reference to our Firm in the Prospectus.
TANNER + CO.
Salt Lake City, Utah
July 12, 1999
