<PAGE>
As filed with the Securities and Exchange Commission on November 22, 1999
Registration No. _________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________
FORM S-1
Registration Statement
Under the Securities Act of 1933
____________________________________
EBASEONE CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7379 13-3911740
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
</TABLE>
6060 Richmond Avenue, Houston, Texas 77057, (713) 975-8700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Charles W. Skamser
ebaseOne Corporation
6060 Richmond Avenue
Houston, Texas 77057, (713) 975-8700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Thomas C. Pritchard or
Cavas S. Pavri
Brewer & Pritchard, P.C.
1111 Bagby, 24th Floor
Houston, Texas 77002
Phone (713) 209-2911
Facsimile (713) 209-2921
_____________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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, check
the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for 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,
please check the following box. [ ]
__________________________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================
Title Of Each Class of Amount Proposed Proposed Amount of
Securities To Be Being Maximum Maximum Registration
Registered Registered Offering Price Aggregate Fee
Per Share/(1)/ Offering Price/(1)/
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock to be Resold... 4,556,609 $8.00 $36,452,872 $10,134
- -------------------------------------------------------------------------------------------
TOTAL....................... 4,556,609 $8.00 $36,452,872 $10,134
===========================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457, based on the closing price per share of $8.00 on
November 19, 1999 as reported on the OTC Electronic Bulletin Board.
_________________________
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 or until the registration statement shall become effective
on such date as the SEC, acting pursuant to said Section 8(a), may determine.
<PAGE>
Subject to Completion,Dated November 22, 1999
Preliminary Prospectus
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell the common stock covered by this prospectus
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell the common
stock and it is not soliciting an offer to buy the common stock in any state
where the offer or sale is not permitted.
_______________
ebaseOne Corporation
Resale of 4,556,609 shares of common stock
This prospectus relates to the resale of 4,556,609 shares of our common
stock by some of our current stockholders, which is not being underwritten. We
will not receive any proceeds from the sale of these shares. The selling
stockholders may offer and resell our common stock under this prospectus for
their own account. Shares offered by the selling stockholders may be sold by
ordinary brokerage transactions in which a broker solicits purchases or in face
to face transactions between the selling stockholders and purchasers without a
broker. The selling stockholders will be responsible for any commissions or
discounts due to brokers or dealers. We will pay all of the other offering
expenses.
Each selling stockholder or dealer selling the common stock is required to
deliver a current prospectus upon the sale. In addition, for the purposes of the
Securities Act of 1933, selling stockholders may be deemed underwriters.
Therefore, the selling stockholders may be subject to statutory liabilities if
the registration statement, which includes this prospectus, is defective by
virtue of containing a material misstatement or failing to disclose a statement
of material fact. We have agreed to indemnify the selling stockholders regarding
this liability.
Our common stock trades on the OTC Electronic Bulletin Board under the
symbol "EBAS." On November 19, 1999, the last reported bid price of our common
stock was $8.00.
___________________________
This investment involves a high risk. Neither the SEC nor any state
You should purchase shares only if you securities commission has approved or
can afford a complete loss. We urge you disapproved of these securities, or
to read the "Risk Factors" section determined if this prospectus is
beginning on page 4 along with the rest truthful or complete. Any
of this prospectus before you make your representation to the contrary is a
investment decision. criminal offense.
___________________________
The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................................................................... 1
Risk Factors.......................................................................... 4
Use of Proceeds....................................................................... 13
Price Range of Common Stock........................................................... 14
Dividend Policy....................................................................... 14
Selected Financial Data............................................................... 15
Management Discussion and Analysis of Financial Condition and Results of Operations... 16
Business.............................................................................. 21
Management............................................................................ 29
Certain Transactions and Related Transactions......................................... 37
Principal Stockholders................................................................ 39
Description of Capital Stock.......................................................... 41
Shares Available for Future Sale...................................................... 44
Selling Stockholders.................................................................. 46
Plan of Distribution.................................................................. 48
Experts............................................................................... 49
Legal Matters......................................................................... 49
Where You Can Find More Information................................................... 49
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. To understand this offering fully, you should read the entire
prospectus carefully, including the risk factors beginning on page 4 and the
financial statements. Unless otherwise indicated, this prospectus assumes that
no outstanding options or warrants are exercised and that no outstanding
convertible debt is converted.
ebaseOne Corporation
We are an application service provider, or ASP. We offer a complete ASP
solution including state-of-the-art computer technology and facilities, system
engineers, systems integration services, application experts, end-user training,
best-practices consulting and 24 hour per day customer service, all focused on
hosting software applications which are accessible via the Internet or private
leased lines. We currently support two ASP offerings, OneServ(SM) for the small
and medium sized business market and CorServ(SM) for independent software
vendors and other third party software providers.
In today's fast paced and competitive business environment, we believe it is
essential for small and medium sized businesses to utilize leading packaged
software solutions and Internet based technology to compete. However, these
solutions are often too expensive for many small and medium sized businesses, as
the total cost of ownership includes the up-front cost of hardware and software
licenses, the initial cost of customization, installation and training, and the
ongoing costs of hardware and software maintenance combined with the ongoing
costs of the technical personnel.
Through our OneServ(SM) offering, we provide an integrated and
comprehensive solution of leading packaged software applications such as sales
force automation, customer information management and financial management,
hosted in a high quality data center with 24-hour application and network
monitoring, requirements planning, installation, training and customer support,
all for a flat monthly fee. Under our ASP model, we enable small and medium-
sized businesses to lower the overall total cost of high-end software
application ownership and afford a state-of-the-art information technology
infrastructure with leading packaged software solutions without having to make a
large up-front investment or maintain an expensive information technology staff.
Through our CorServ(SM) offering, we provide state-of-the-art server
technology, technical infrastructure and network connectivity for independent
software vendors and systems integrators to host their applications and allow
their customers to access them via our high-speed fiber optics network. We
believe our CorServ(SM) offering will allow independent software vendors and
systems integrators to reach a larger market without incurring the expenses of
developing and maintaining state-of-the-art application delivery infrastructure.
To house our solutions, we have co-located our initial Enterprise
Application Center in Houston, Texas with Level 3 Communications. The Level 3
facility provides us with the latest in data center security, disaster
prevention and recovery, and international fiber optics based Internet
connectivity.
In addition, we are building a global command center in Houston less than
one mile from the Level 3 facility to house our 24-hour customer support
operations, our certified system engineers, network and application experts,
along with the latest real-time application and network monitoring and
management software and equipment. Our global command center is designed to
enable us to pursue a high level of guaranteed service and performance.
Providing this high level of service requires partnerships with other
technology companies that provide hardware, software and services essential to
our offering. We have already formed or are forming alliances with some of the
leading technology providers in the industry including Level 3, for
telecommunications and data
1
<PAGE>
center facilitates, Cisco Systems as part of its Cisco Hosted Application
Initiative, Sun Microsystems as part of its SunTone Partners Program for
ASPs, Marimba for application distribution over the Internet, remote desktop
management and Internet document management technology, and Microsoft for its
BackOffice products. In addition, we are forming partnerships with leading
packaged software providers as part of our OneServ(SM) solution. We currently
have a partnership with SalesLogix to provide sales force automation and
customer information management and a partnership with Paperchaser.com to host
their litigation-support portal. Discussions with other potential OneServ(SM)
and CorServ(SM) partners are underway.
We began offering our ASP services in November 1999. Prior to November
1999, our revenue had come from our software application value added reseller
business provided by Prime Net, our subsidiary. For the fiscal year ended
September 30, 1999, we had revenues of $653,809 and net losses of $2,188,185,
which losses were primarily the result of our efforts to initiate our ASP
services. As of November 1999, we had consolidated Prime Net's operations into
our ongoing operations, and although we intend to continue to operate Prime
Net's value added reseller business, our primary business operations will focus
on our ASP services.
As of November 17, 1999, we had signed three contracts to provide ASP
services, and we expect to begin recognizing revenue from our ASP services in
the future. Although we have a new ASP business model which requires our
partners to share in the cost of offering our ASP solutions, we will need to
invest in the hardware, software, and personnel needed to support the roll-out
of our ASP solutions. This will require a substantial investment in the early
years to build our client base, and as such we do not expect to generate net
income for the foreseeable future.
We maintain a web site at www.ebaseone.com. Information contained on our
web site does not constitute part of this prospectus. Our principal executive
offices are located at 6060 Richmond, Houston, Texas 77057, and our telephone
number is (713) 975-8700. All references to "we," "our," or "us," refer to
ebaseOne Corporation, a Delaware corporation and our subsidiaries.
We have applied for federal registration of the marks "OneServ(SM)" and
"CorServ(SM)," but we can provide no assurance that we will receive such marks.
This prospectus also includes trademarks, service marks, and trade names of
other companies.
2
<PAGE>
THE OFFERING
Common stock outstanding............. 37,556,161 shares.
Common stock to be offered by
our selling stockholders............. 4,556,609 shares. Includes 1,877,368
shares underlying warrants or
convertible debt.
Market for our common stock.......... Our common stock currently trades on
the OTC Bulletin Board under the symbol
EBAS. The market for our common stock
is highly volatile. We can provide no
assurance that there will be a market
in the future for our common stock.
SUMMARY FINANCIAL DATA
The following table sets forth certain historical and operating data of
ebaseOne for each of the three fiscal years ended September 30, which is derived
from our consolidated audited financial statements. This data is in the
thousands of dollars, except for per share amounts.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statement of Operations Data:
Revenues............................. $ 654 $ 684 $ 65
Gross Profit......................... 8 246 37
General and Administrative Expenses.. 2,149 700 253
Net Loss............................. (2,188) (472) (225)
Loss Per Share - Basic and Diluted... $ (.08) $ (.03) $ (.02)
Weighted Average Shares Outstanding
Basic and Diluted.................. 26,967 15,660 12,608
As of September 30,
-----------------------
1999 1998 1997
---- ---- ----
Balance Sheet Data:
Working Capital (Deficit) (398) 66 (15)
Total Assets......................... 701 371 97
Stockholders' Equity (Deficit)....... (464) 121 14
</TABLE>
Revenues for the year ended September 30, 1999 were derived from our non-ASP
services.
3
<PAGE>
RISK FACTORS
We have a limited operating history for you to evaluate our company.
We have a limited operating history for you to analyze or to aid you in
making an informed judgement as to the merits of an investment in our
securities. To date, substantially all of our revenue generating activities
have been derived from Prime Net's business. Although we have begun to
implement our ASP business strategy, we have to date conducted no revenue
generating operations with respect to our current ASP business strategy.
Accordingly we can provide no assurance that we will be able to generate revenue
from our proposed operations, or if we do generate revenue, that we will be
profitable. The financial information included in this prospectus describes the
historical business of Prime Net. As such, the financial information will not
help you to analyze our ongoing ASP business and should be viewed accordingly.
Any investment in our securities should be considered a high-risk
investment because you will be placing funds at risk in an unseasoned early-
stage company with unforeseen costs, expenses, competition, and other problems
to which early-stage ventures are often subject.
As an early-stage company, you should consider our prospects in light of
the risks, expenses, and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets. Such risks include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, we must, among other things:
. increase our client base and enter additional strategic relationships
with software application providers and technology infrastructure
providers;
. successfully execute our business and marketing strategy;
. continue to develop and upgrade our technology and infrastructure;
. respond to competitive developments; and
. attract, retain, and motivate qualified personnel in an industry with a
personnel shortage.
We can provide no assurance that we will be successful in addressing such
risks, and the failure to do so could have a material adverse effect on our
business.
We have had losses since inception and we expect to continue to have losses for
the foreseeable future.
All of our financial disclosures refer to our subsidiary, Prime Net. Since
inception, we have experienced operating losses for each quarterly and annual
period. For the year ended September 30, 1999 we had:
. revenues of $653,809;
. general and administrative expenses of $2,149,269; and
4
<PAGE>
. net losses of $2,188,185.
We anticipate increased expenses as we continue to expand and improve our
infrastructure, invest in additional applications, expand our sales and
marketing efforts, and pursue additional industry relationships. As a result,
we expect to incur operating losses for our fiscal year ending September 30,
2000, and thereafter. We cannot assure you that we will ever achieve
profitability or, if we ever achieve profitability, that it will be sustainable.
We will need additional capital to execute our business strategy past August
2000, and do not have any commitments for capital at this time.
We intend to invest heavily in marketing and promotion, technology and
operating infrastructure, and aggressively seek additional software providers.
As such, we believe that our success will depend in large part on our ability
to:
. extend our brand position;
. ally ourselves with software providers; and
. achieve sufficient volume to realize economies of scale.
In order to execute this strategy, we will require more capital than we
currently have or have commitments to receive. As of September 30, 1999, we
had:
. cash of $308,444;
. negative working capital of $398,401, which working capital position
is positive after the November 1999 $9 million financing; and
. an accumulated deficit of $2,886,383.
In October and November 1999, we raised $9,445,921 through the sale of
securities, of which $3 million will be funded on the effective date of this
registration statement. We can provide no assurance that this registration
statement will ever become effective, and if it does not we will adjust our
expenditures accordingly. Assuming that this registration statement becomes
effective, we estimate that we have sufficient cash to fund operations until
August 2000, although such period may be shortened by factors beyond our
control. These factors could include, among others, increased competition and
higher costs associated with hiring necessary personnel. After August 2000, we
will be required to seek additional capital in order to continue to fund our
business operations. As we have no credit facilities currently available to us,
we will need additional equity capital to fund our operations and finance our
growth for the foreseeable future, and we may not be able to obtain it on terms
acceptable to us, or at all. If additional funds are raised through the
issuance of equity or convertible debt securities, such financing may be
dilutive, the percentage ownership of our stockholders will be reduced, and such
newly issued securities may have rights, preferences, and privileges senior to
those of our common stock. The failure to obtain additional capital may result
in our ceasing to conduct business, curtailing operations, or otherwise bringing
cash flows into balance.
5
<PAGE>
Our financial statements include an explanatory paragraph about our ability to
continue as a going concern.
The operating losses incurred since our inception raise substantial doubt
about our ability to meet future expected expenditures necessary to fully
develop our business strategy and to continue as a going concern. Our
independent auditors have issued an explanatory paragraph in their opinion with
respect to our financial statements for the year ended September 30, 1999,
regarding the uncertainty concerning our ability to continue as a going concern.
While we believe we will be able to raise sufficient capital to pursue our
business strategy, as evidenced by the November 1999 $9 million financing, our
failure to do so could result in our ceasing to do business.
We only have a few ASP customers.
We began our ASP operations in November 1999, and as of November 17, 1999,
we had signed a total of three contracts with customers to provide ASP services.
As we have just begun to market our ASP services, we believe that we will
increase our customer base in the future. However, the ASP market is extremely
competitive and we can provide no assurance that we will be able increase our
customer base at a sufficient rate.
Due to our limited operating history, our future revenues may be unpredictable,
which may adversely effect the price of our common stock.
As a result of our limited operating history, we may be unable to
accurately forecast revenues. Sales and operating results generally depend on
the volume and timing of the services we contract to provide, which are
difficult to forecast. We may be unable to adjust spending in a timely manner
to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues in relation to our planned expenditures would
have an immediate adverse effect on our business.
As a technology company we may experience fluctuations in our operating results
that may effect the price of our common stock.
We expect to experience significant fluctuations in our future operating
results due to a variety of factors, many of which are outside our control.
Factors that may adversely affect our operating results include:
. the timing and demand by our clients of our ASP services;
. our ability to enter into ASP agreements with numerous software
providers and to maintain our relations with those software providers;
. the timing and the announcement or introduction of new services and
products by us and our competitors;
. our ability to enter into or renew service engagements with clients;
. changes in our pricing structures or those of our competitors;
. technical difficulties or system downtime;
6
<PAGE>
. non-cash compensation expenses resulting from our issuance of common
stock, at below market prices; and
. general economic conditions and economic conditions specific to our
industry.
We may not be able to deliver our services if third parties do not provide us
with key components of our infrastructure.
We will depend on other companies to supply key components of the
telecommunications and computer equipment, telecommunication services, and
software, which we will use to provide ASP services. Any failure to obtain
needed products or services in a timely fashion and at an acceptable cost could
have a material adverse effect on our business. Morever, a disruption in
telecommunications capacity, which is provided by third parties, could prevent
us from maintaining the standard of service that we commit to with our clients,
which may cause us to credit clients' accounts, thereby reducing revenues.
Our ability to provide ASP services depends on strategic relationships with
software vendors that we may not be able to maintain or obtain.
Our ability to provide cost efficient and reliable ASP services to our
clients is key to our business strategy. We will derive revenues from projects
in which we customize, implement, or host software applications developed by a
variety of software vendors. We are entering into software licensing agreements
with these software vendors. All the agreements may be terminated upon a breach
of the agreement, subject to cure. We cannot be sure that any of our agreements
with software vendors will be renewed in the future. If any of these agreements
are terminated, not renewed, or we otherwise cannot continue to use the
software, we may have to discontinue services or products or delay or reduce
their introduction unless we can find, license, and package comparable
technology. In addition, we can provide no assurance that if we were able to
obtain similar software products, that the terms of such licensing agreement
would be favorable, or that our clients would accept comparable software
products as substitutes.
Furthermore, upon the expiration of any software licensing agreement, the
software providers may choose to compete against us by providing ASP-type
services. Our success is dependent upon the continued popularity of the product
offerings of these vendors and on our ability to establish relationships with
new vendors in the future. If we are unable to obtain packaged applications
from these or comparable vendors or, if our vendors choose to compete with us or
the popularity of their products declines, our business may suffer.
In addition, we will need to enter into additional software licensing
agreements in the future as we add software applications from other software
vendors. As new software applications are released, if we are unable to enter
into agreements with these software vendors, we may be unable to compete in the
ASP market.
We have a new management team and we depend on key personnel in an industry that
has a shortage of qualified personnel.
Our success is substantially dependent on the continued service and
performance of our senior management and other key personnel. The majority of
our senior management and technical staff joined ebaseOne in 1999, have not
worked together previously, and are just being integrated as a management team.
As a result, our senior and technical managers may not work effectively as a
team. In addition, due to the competitive nature of our industry, we may not be
able to retain all of our senior managers.
Our performance also depends on our ability to retain and motivate other
key employees. The loss of the
7
<PAGE>
services of any of our key management personnel could have a material adverse
effect on our business. We do not maintain "key man" life insurance policies for
any key personnel. Our future success also depends on our ability to attract,
hire, and retain other highly skilled personnel. Competition for such personnel
in our industry is intense, and we can provide no assurance that we will be able
to successfully attract, assimilate, or retain sufficiently qualified personnel.
We face security risks in connection with our ability to protect our hardware
from damage, either physically or through computer viruses, and with our ability
to protect our customers confidential information.
Our success largely depends on the efficient and uninterrupted operation of
our computer and communications hardware systems. All of our computer and
communications hardware is currently located at a leased facility in Houston,
Texas. Although we have co-located our data center with Level 3 Communications
in a state-of-the-art facility which we believe minimizes our physical
vulnerability to damage or interruption from fire, flood, long-term power loss,
telecommunications failure, break-ins, and similar events, such risks exist. We
are presently formulating our disaster recovery plan which we expect to have in
place during the second quarter of our current fiscal year. While we currently
do not carry any business interruption insurance to compensate for losses that
may occur, we intend to obtain such insurance in the future in appropriate
amounts.
Although we utilize state-of-the-art security prevention measures, our
servers are vulnerable to computer viruses, physical or electronic break-ins,
and similar disruptions, which could lead to delays, loss of data, or
interruptions in service which could adversely effect our business. We maintain
substantial protections to prevent breaches to our computer systems and have
security systems and guards on duty at the physical location where the systems
are located.
Finally, a significant barrier to online commerce and communications is the
secure transmission of confidential information over public networks. We rely
on technology to provide the security to secure the transmission of confidential
information. However, we can provide no assurance that advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments will not result in a compromise or breach of the methods used to
protect customer data. If any compromise of our security were to occur, our
reputation and business would suffer. A party who is able to circumvent our
security measures could misappropriate proprietary information or cause
interruptions in our operations or the operations of our customers. We may be
required to expend significant capital and other resources to protect against
security breaches or to alleviate problems caused by security breaches.
Our failure to meet client expectations or deliver error-free services could
result in losses and substantial liability.
The application hosting services we provide our clients are critical to
their businesses. Any defects or errors in our services or any failure to meet
clients' expectations could result in:
. delayed or lost revenues due to adverse client reaction;
. requirements to provide additional services to a client at no charge;
. limited credits of monthly application hosting fees for failure to
meet service level obligations; and
. claims for substantial damages against us, regardless of our
responsibility for such failure, which may not be limited by the
contractual terms of our engagement.
In addition, we currently do not have any business liability insurance to
compensate for any losses or claims
8
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that may arise from our business operations.
We must manage our growth in operations efficiently to avoid straining our
resources.
We expect to expand our operations, and anticipate that further significant
expansion will be required to address potential growth in our customer base and
market opportunities. This expansion may place a significant strain on our
resources. We expect to hire new employees including a number of key
managerial, technical, and operations personnel in the near future. In order to
successfully manage growth of our operations, we may be required to:
. expand our network of data centers and increase infrastructure;
. improve existing and implement new operational and financial systems,
procedures, and controls; and
. maintain and expand our relationships with software providers,
infrastructure providers, and other third parties necessary to our
business.
There will also be additional demands on our customer service support,
sales, marketing, and administrative resources as we increase our service
offerings. If we are unable to manage growth effectively, our business will
suffer due to our failure to retain or obtain customers.
We are depending on the growth in demand for application hosting services, a new
and evolving industry.
Our ability to increase revenues and achieve profitability depends on the
growth in demand for and the acceptance of application hosting services by small
and medium-sized businesses. The market for these services has only begun to
develop and is evolving rapidly. We believe that many potential clients are not
currently aware of the advantages of outsourcing information technology
services. However, it is possible that these solutions may never achieve market
acceptance. If the market for our services does not grow or grows less rapidly
than we currently anticipate, our revenues will suffer.
If we are unable to develop brand awareness, we may not be able to increase
revenues as expected.
One element of our business strategy is to develop brand awareness of
the ebaseOne name among the small and medium-sized business market. To promote
brand awareness, we plan to increase marketing expenditures which will decrease
our operating margins. If the marketing expenditures are unsuccessful at
increasing our brand awareness, we will likely not experience an increase in
revenues and may incur substantial losses as an effect.
We are a new entrant in a highly competitive market and any failure to compete
in this market successfully will limit our ability to retain or increase our
market share.
The market for application hosting services is new, rapidly evolving, and
highly competitive, and we expect this trend to continue and intensify in the
future. Any failure to enhance our competitive position, both regionally and
nationally, will limit our ability to increase our market share. Most of our
competitors are substantially larger than us, serve larger markets, and have
much greater financial and personnel resources. Furthermore, many of our
competitors have well established and experienced marketing and sales
capabilities and greater name recognition than we have. As a result, our
competitors may be in a stronger position to respond quickly to new or emerging
technologies and changes in client requirements.
9
<PAGE>
To increase our competitive position, we must enhance and improve the
responsiveness, functionality, and features of our services. Our success will
depend, in part, on our ability to:
. enter additional strategic partnerships with software providers;
. develop additional special services and resources around software
applications; and
. respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of our services entails significant technical and business
risks. We can give no assurance that we will successfully use new technologies
effectively or adapt our services to customer requirements or emerging industry
standards. 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 would be materially adversely affected.
We may lose money on performance based contracts.
We derive the majority of our revenues from contracts where we provide
services and support to clients with the expectation of a specified measured
level and quality of service. If we misjudge the time or the constraints in
which we are to provide services or are otherwise unable to maintain the agreed
upon performance levels, we must credit a portion of our application hosting
fees, which may cause us to incur losses in connection with that client.
We may be unable to enforce or defend the ownership and use of our proprietary
rights.
If third parties infringe or misappropriate our trade secrets, copyrights,
trademarks, or other proprietary information, our business could be seriously
harmed. We can give no assurance that the steps we have taken to protect our
proprietary interests will be adequate or that third parties will not infringe
or misappropriate our proprietary interests. Moreover, we can give no assurance
that other parties will not assert infringement claims against us. We plan to
protect our proprietary rights through confidentiality agreements with
employees, consultants, advisors, and others. We can give no assurance that:
. such agreements will provide adequate protection for our proprietary
rights if there is any unauthorized use or disclosure;
. our employees, consultants, advisors, or others will maintain the
confidentiality of such proprietary information; or
. such proprietary information will not otherwise become known, or be
independently developed by competitors.
Furthermore, any infringement claims asserted against us could subject us
to significant liability for damages and could result in invalidation of our
proprietary rights and, even if not meritorious, could be time-consuming and
expensive to defend. They also could require us to enter into costly royalty or
licensing agreements.
Our business is dependent on the maintenance and development of the Internet
infrastructure, which we do not control.
10
<PAGE>
Our success will depend, in large part, upon the maintenance of the
Internet infrastructure, as a reliable network backbone with the necessary
speed, data capacity, and security. To the extent that the Internet continues
to experience increased numbers of users and increased requirements of users, we
can provide no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it or that the performance or reliability
of the Internet will not be adversely affected. Furthermore, the Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and such outages and delays could adversely
affect our ability to provide services. In addition, the Internet could lose
its viability as a form of media due to delays in the development or adoption of
new standards and protocols that can handle increased levels of activity.
As a technology company we face greater Year 2000 implications, which may hurt
our business.
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from dates prior to the year
2000. Many companies' software and computer systems may need to be upgraded or
replaced in order to correctly process dates beginning in 2000 and to comply
with the Year 2000 requirements. We have reviewed our internal programs and
have determined that there are no significant Year 2000 issues within our
systems or services. However, although we believe that our systems are Year
2000 compliant, we utilize third-party equipment and software that may not be
Year 2000 compliant. Failure of such third-party equipment or software to
properly process dates for the year 2000 could require us to incur unanticipated
expenses to remedy any problems, which could hurt our business.
We have reserved a significant number of shares of our common stock for issuance
upon the exercise of warrants and options, and upon the conversion of a
convertible note. The issuance of these shares will have a dilutive effect on
our common stock and may effect our stock price.
As of November 22, 1999, we have reserved 25,248,314 shares of common stock
for issuance on the exercise of outstanding warrants, options issued outside of
our stock option plan, and on the conversion of a convertible note. The warrants
and options have exercise prices ranging from $0.125 to $5.18 per share and
expire between November 2000 and August 2006. In addition, as of November 16,
1999, we have reserved 5,000,000 shares of common stock for issuance under our
stock option plan of which we have issued options to purchase 631,300 shares at
exercise prices ranging from $0.25 to $2.75 per share, which expire between
April 2009 and November 2009. In addition to the above warrants, as part of our
November 1999 financing in which we raised $9 million, we issued to each
investor a two-year adjustable warrant that vests and becomes exercisable on and
after February 15, 2000 in the event that our common stock is trading below
$5.31 per share. The purchase price is $.001 per share and the number of shares
underlying the adjustable warrants is based on the market price of our common
stock on and prior to the date such adjustable warrants vest, and therefore, can
not be determined at this time. Furthermore, we may cancel the adjustable
warrants as to any future vesting if our stock price is at least $8.64 per share
for 20 consecutive trading days following the effective date of this
registration statement. These adjustable warrants were one of three warrants
issued to each investor in the $9 million financing, all of which have
registration rights. The other two warrants are included above, and the shares
underlying the other two warrants are included in this registration statement.
We have included 23,810 shares underlying the adjustable warrants in this
registration statement. This amount is our good faith estimate of the number of
shares that we believe will need to be issued under the adjustable warrants at
this time. We can provide no assurance that more shares will need to be issued,
and if we are required to issue additional shares we will be required to file an
additional registration statement for those shares, a process which is costly
and time consuming. For a more detailed description of the adjustable warrants,
please see the "Description of Capital Stock -- Warrants" section. The issuance
of shares upon the exercise or conversion of the above securities will have a
dilutive effect on our common stock, which may adversely effect the price of our
common stock.
Seventy-five percent of our total outstanding shares are restricted from
immediate resale but may be sold into the market in the near future. This could
cause the market price of our common stock to drop significantly, even if our
business is doing well.
11
<PAGE>
As of November 22, 1999, we have 37,556,161 shares of common stock issued
and outstanding. Of these shares, we are registering 2,679,242 shares of
outstanding common stock for resale under this registration statement, and
accordingly, upon the effective date of this registration statement these shares
will be freely tradeable without restriction. In addition, by May 2000,
substantially all of our remaining shares of common stock will be freely
tradeable subject to Rule 144, which regulates the sale of restricted
securities. However, 15,741,958 of these shares are subject to a lock-up
agreement expiring in November 2000, after which they will become freely
tradeable subject to Rule 144. As the restrictions on resale end and these
shares are sold into the market, the price of our common stock could drop
significantly if the holders of these restricted shares sell them or are
perceived by the market as intending to sell them.
Our directors are authorized to issue blank check preferred stock that could
delay or prevent an acquisition and could adversely affect the price of our
common stock.
Provisions of our articles of incorporation may defer or prevent an
acquisition or change of control or otherwise adversely affect the price of our
common stock. Our articles of incorporation permit our board to issue shares of
preferred stock without stockholder approval. In addition to delaying or
preventing an acquisition, the issuance of a substantial number of preferred
shares could adversely affect the price of our common stock.
Our stock price has experienced extreme volatility.
The market for our securities is highly volatile. The closing price of our
common stock has fluctuated between $0.39 and $17.50 per share since June 11,
1999, the date our common stock began trading on the OTC Bulletin Board as
ebaseOne Corporation under the symbol "EBAS." It is likely that the price of
our common stock will continue to fluctuate widely in the future. Factors
affecting the trading price of our common stock include:
. responses to quarter-to-quarter variations in operating results;
. announcements of new services by us or our competitors;
. general conditions in our markets and our industry; and
. changes in earnings estimates by analysts.
Any return on your investment in our common stock will depend on your ability to
sell our common stock at a profit and will likely not be from the receipt of
dividends.
Some investors favor companies that pay dividends. We have never declared
or paid any dividends. In addition. we anticipate that we will not declare
dividends at any time in the foreseeable future. Instead, we will retain any
earnings for use in our business. As a result, your return on an investment in
our stock will likely depend on your ability to sell our stock at a profit.
We could be de-listed from the OTC Electronic Bulletin Board.
We could be de-listed from the OTC Electronic Bulletin Board if we do not
become a "reporting" company by February 24, 2000. On January 4, 1999, the SEC
approved amendments to the National Association of Securities Dealer's Rules
6530 and 6540 to limit quotations on the OTC Electronic Bulletin Board to the
securities of companies that report their current financial information to the
SEC. The rules allow for a phase-in period for compliance with the new rules,
and according to the phase-in period we have until February 24, 2000 to comply.
In order to comply we will have to file a registration statement with the SEC
and have the SEC declare the registration statement to be effective prior to our
February 24, 2000 deadline. This prospectus is part of the registration
statement that has been filed with the SEC. If the SEC does not declare our
registration statement effective prior to our February 24, 2000 deadline, our
common stock will no longer trade on the OTC Electronic Bulletin Board, and will
begin trading on the "pink sheets." As such, your ability to sell our common
stock could be severely limited, if any market for our common stock remains at
all.
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<PAGE>
Penny stock regulations may decrease your ability to sell our common stock by
reducing the amount of trading volume that occurs in our common stock.
The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in the
penny stock market. These disclosure requirements may have the effect of
reducing the level of trading activity in any secondary market for a stock that
becomes subject to the penny stock rules. Our common stock may be subject to
the penny stock rules, and accordingly, investors purchasing shares under this
prospectus may find it difficult to sell their shares in the future, if at all.
You should carefully consider the above risk factors and warnings before
making an investment decision. The risks described above are not the only ones
facing us. Additional risks that we do not yet know of or that we currently
think are not material may also have an adverse effect on our business
operations. If any of those risks or any of the risks described above actually
occur, our business could be adversely affected. In that case, the price of our
common stock could decline, and you could lose all or part of your investment.
You should also refer to the other information set forth or incorporated by
reference in this prospectus.
A NOTE REGARDING FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
Some of the statements contained in this prospectus, in particular the
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business" sections, discuss future expectations,
contain projections of results of operation or financial condition, or state
other "forward-looking" information. These statements are subject to known and
unknown risks, uncertainties, and other factors that could cause our actual
results to differ materially from those contemplated by the statements. The
forward-looking information is based on various factors and is derived using
numerous assumptions. Important factors that may cause actual results to differ
from projections include:
. the success or failure of our efforts to execute our business
strategy;
. our ability to raise sufficient capital to meet operating
requirements;
. the uncertainty of demand for our ASP services;
. our ability to protect our intellectual property rights;
. our ability to compete with major established companies;
. the effect of changing economic conditions;
. our ability to attract and retain quality employees; and
. other risks which may be described in future filings with the SEC.
We do not promise to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those
statements.
USE OF PROCEEDS
We will not receive any proceeds from the resale of the common stock
offered under this prospectus. We may receive the proceeds from the exercise of
the warrants, the resale of the underlying common stock of which is being
registered. We intend to utilize any proceeds for general corporate purposes.
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<PAGE>
PRICE RANGE OF COMMON STOCK
Since June 21, 1999, our common stock has traded on the OTC Electronic
Bulletin Board under the symbol EBAS. Prior to that time, our stock traded
under the symbol NRSK. The market for our common stock is highly volatile. As
of November 12, 1999, there were approximately 306 holders of record of our
common stock. On November 19, 1999, the closing price of our common stock was
$8.00 per share.
The following table provides the range of high and low bid information of
our common stock for the last two fiscal years as reflected by the OTC
Electronic Bulletin Board. Such quotations reflect inter-dealer prices, without
retail mark up, mark down or commission, and may not represent actual
transactions.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Fiscal 1999 High Low
----------- ---- ---
<S> <C> <C>
1/st/ Quarter $ 0.125 $ 0.125
2/nd/ Quarter $ 0.50 $ 0.125
3/rd/ Quarter $ 1.1875 $ 0.5313
4/th/ Quarter $ 3.9688 $ 0.39
Fiscal 1998 High Low
----------- ---- ---
1/st/ Quarter $ 4.00 $ 2.00
2/nd/ Quarter $ 3.25 $ 2.25
3/rd/ Quarter $ 4.00 $ 1.00
4/th/ Quarter $ 0.4375 $ 0.25
----------------------------------------------------------------------------------
</TABLE>
DIVIDEND POLICY
We have not declared or paid cash dividends on our common stock to date.
Our current policy is to retain earnings, if any, to provide funds for operating
and expansion of our business. Such policy will be reviewed by our board of
directors from time to time in light of, among other things, our earnings and
financial position.
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<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain historical consolidated financial
and operating data of ebaseOne for each of the three fiscal years ended
September 30, 1999, which was derived from our consolidated audited financial
statements, and for each of the two fiscal years ended September 30, 1996, which
was derived from unaudited financial statements of ebaseOne. In the opinion of
management, the unaudited financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial data for such years. This data should be read in
conjunction with ebaseOne's Consolidated Financial Statements, including the
notes thereto, and "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" included in this prospectus. These historical results
are not necessarily indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
Years Ended September 30
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues..................................... $ 654 $ 684 $ 65 $ 133 $ 146
Gross Profit................................. 8 246 37 133 146
General and Administrative
Expenses.................................... 2,149 700 253 129 138
Net Income (Loss)............................ (2,188) (472) (225) 4 (16)
Loss Per Share-Basic and Diluted............. $ (.08) $ (.03) $ (.02)
Weighted Average Shares
Outstanding -- Basic and Diluted............ 26,967 15,660 12,608 1,039 701
Balance Sheet Data:
Working Capital (Deficit).................... $ (398) $ 66 $ (15) $ 103 $ 4
Total Assets................................. 701 371 97 189 81
Stockholders' Equity (Deficit)............... (464) 121 14 121 28
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements.
General
We are an ASP, offering an integrated solution that provides clients the
ability to use leading business software applications through our Internet-based
network. Since June 1999, we have devoted substantially all of our efforts to:
. developing our network infrastructure;
. recruiting and training personnel;
. establishing strategic business partnerships with application software
providers; and
. raising capital.
As of September 30, 1999, we had not begun to provide ASP services. We
began providing ASP services in November 1999 and as of November 17, 1999 had
entered into three contracts to provide ASP services. We have incurred a
cumulative net loss since inception and expect to incur additional losses in the
current fiscal year and thereafter, due primarily to additional early-stage
costs related to implementation of our services and the continued expansion and
enhancement of our network. As of September 30, 1999, we had an accumulated
deficit of approximately $2,886,383. The operating losses incurred since our
inception raise substantial doubt about our ability to meet future expected
expenditures necessary to fully develop our business strategy and to continue as
a going concern. Our independent auditors have issued an explanatory paragraph
in their opinion with respect to our financial statements for the year ended
September 30, 1999 regarding the uncertainty concerning our ability to continue
as a going concern. Our plan to address this uncertainty is discussed in the
"Plan of operations for fiscal year 2000" section below.
We currently have two non-operating subsidiaries: Synoptech Solutions
Group, Inc., a Nevada corporation and Prime Net Corporation, a Texas
corporation. In May 1999, we acquired substantially all of the outstanding
capital stock of Synoptech Solutions in a transaction commonly referred to as a
"reverse merger." In August 1998, Synoptech Solutions acquired substantially
all of the outstanding capital stock of Prime Net in a reverse merger. Prime Net
specialized in providing computer based solutions for small and medium-sized
businesses as a software application value added reseller. As Synoptech
Solutions has no business operations, we acquired it in order to obtain many of
Prime Net's sales and technical personnel, which we believed would aid us in
establishing our ASP services. In November 1999, we completed the consolidation
of Prime Net's business operations into ebaseOne. Although we have continued
Prime Net's former business operations, we do not intend the operations to be a
material portion of our ongoing operations. As we only began conducting our ASP
operations in November 1999, Prime Net's former business operations have
accounted for substantially all of our revenues. We intend to merge Synoptech
Solutions and Prime Net into ebaseOne in the future as they currently conduct no
substantial operations.
We currently have no exposure to foreign currency exchange rate
fluctuations, as we currently have no foreign operations. If we initiate future
foreign operations, we will seek to minimize our exposure to foreign currency
exchange rate fluctuations by requesting that our customers purchase our
products in United States dollars or by entering into transactions to attempt to
hedge some of the risks of foreign currency exchange rate fluctuations.
Significant accounting policies
Revenue. We expect that future revenue will be generated primarily from the
delivery of our OneServ(SM) and CorServ(SM) solutions, and to a lesser extent
from our operations related to Prime Net's former operations. Revenue from ASP
services will consist of monthly recurring fees from ongoing delivery of our
solutions and will
16
<PAGE>
be recognized ratably as earned over the contract term.
Costs and Expenses and Capitalized Software License Costs. We will incur
up-front costs related to the delivery of our ASP services. The costs to
operate our network and data centers will be recognized as period costs. Costs
related to the acquisition of hardware will be capitalized and depreciated over
the estimated useful life of the hardware. Costs related to the acquisition of
software licenses will be capitalized and amortized over either the shorter of
the useful life of the license or the term of the license agreement, or the term
of the individual client contract, depending on the nature of the software
license agreement. Amortization will be based on current and future revenue from
each product, but will not be less than that computed on a straight-line basis
over the remaining useful life. Direct costs related to the integration of
software applications for a client on our network will be capitalized and
amortized over the related contract period.
Concentration of Credit Risk. Financial instruments which potentially
expose us to concentrations of credit risk consist primarily of accounts
receivable. We do not believe a significant credit risk exists at September 30,
1999. We maintain deposits in banks which exceed, at times, the federal deposit
insurance available. We periodically assess the financial condition of the
institutions and believe that any possible deposit loss is minimal.
Results of operations
The results of operations for the years ended September 1997, 1998, and
1999 are based on the former business operations of Prime Net, and do not
reflect our new ASP business operations. In view of the rapidly changing nature
of our business, our recent entrance into the ASP market, and our limited
operating history, we believe that period to period comparisons of our revenue
and operating results are not necessarily meaningful and should not be relied
upon as indications of our future performance.
Year Ended September 30, 1999 Compared to the Year Ended September 30, 1998
Revenues. For the year ended September 30, 1999, revenues decreased to
$653,809 from $684,019 during the year ended September 30, 1998. The decrease
of 4% was attributable to repositioning our business to focus on the ASP market.
Cost of Sales. For the year ended September 30, 1999, cost of sales
increased to $645,431 from $438,503 during the year ended September 30, 1998.
The increase of 47% was primarily attributable to the hiring of personnel that
devoted a portion of their time to developing our ASP business and not to
revenue generating activities.
General and Administrative Expenses. For the year ended September 30,
1999, general administrative expenses increased to $2,149,269 from $700,192
during the year ended September 30, 1998. The increase of 207% was partially
attributable to $145,407 of non-cash compensation expense to employees and
service providers during the year ended September 30, 1999 and was due to an
increase in personnel to facilitate the development of our ASP business.
Net Loss. For the year ended September 30, 1999, our net loss increased to
$2,188,185 from $471,844 during the year ended September 30, 1998. The increase
of 364% was attributable to the increase in general and administrative expenses
and the increase in the cost of sales discussed above.
Our operating activities used net cash of $1,181,208 in fiscal 1999 and
$432,051 in fiscal 1998. Net cash used by operating activities in fiscal 1999
and fiscal 1998 was primarily attributable to net operating losses for both
years, offset in fiscal 1999 by issuing our securities for services rendered,
and increasing our accounts payable and accrued liabilities.
Our investing activities used net cash of $224,126 in fiscal 1999 and
$57,438 in fiscal 1998. Our investing activities consisted primarily of
purchases of furniture and equipment.
17
<PAGE>
Our financing activities provided cash of $1,561,496 in fiscal 1999 and
$611,442 in fiscal 1998. In fiscal 1999, financing activities consisted
primarily of the sale of common stock, the issuance of common stock in
connection with our reorganization, and advances on notes payable, which was
partially offset by the repayment of notes payable. In fiscal 1998, financing
activities consisted primarily of the exercise of warrants, the issuance of
common stock in connection with our predecessor's reorganization, and advances
on notes payable, which was partially offset by the repayment of notes payable.
Year Ended September 30, 1998 Compared to the Year Ended September 30, 1997
Revenues. For the year ended September 30, 1998, revenues increased to
$684,019 from $64,937 during the year ended September 30, 1997. The increase of
953% was attributable to an increase in contracts related to our software value
added reseller business.
Cost of Sales. For the year ended September 30, 1998, cost of sales
increased to $438,503 from $28,203 during the year ended September 30, 1997.
The increase of 1455% was attributable to an increase in our expenses resulting
from our increased operations.
General and Administrative Expenses. For the year ended September 30,
1998, general administrative expenses increased to $700,192 from $253,216 during
the year ended September 30, 1997. The increase of 177% was attributable to the
hiring of increased personnel to service the increased business for the period.
Net Loss. For the year ended September 30, 1998, our net loss increased to
$471,844 from $224,652 during the year ended September 30, 1997. The increase
of 110% was primarily attributable to the increase in general and administrative
expenses, which was not offset by increased revenues for the period.
Plan of operations for fiscal year 2000
As of September 30, 1999, we had cash and cash equivalents in the amount of
$308,444. In October and November 1999, we sold 500,168 shares of common stock
or common stock equivalents for aggregate gross proceeds of $445,921. In
addition, in November 1999 we sold 2,083,333 shares of common stock for $9
million to a few investors. Of this $9 million investment, we received $6
million on November 15, 1999, and we are to receive $3 million on the effective
date of this registration statement. We intend to use the above proceeds to
further our business plan. Specifically, our business plan requires:
. hiring additional executive, marketing, and technical personnel;
. launching an extensive marketing campaign;
. building our global command center to provide customer support,
application management, and network monitoring; and
. other general corporate expenditures incurred in implementing our
business plan.
At this time, it is difficult to estimate how we will allocate our funds. The
allocation will be based on a variety of business factors that we can not
predict with certainty at this time, including, among other, the rate we obtain
new customers and the rate we hire new employees. At this time, we also can not
predict with certainty what our monthly operating expenditure will be. These
factors notwithstanding, assuming that this registration statement becomes
effective, we estimate that the proceeds from the sale of securities in October
and November 1999, will provide sufficient liquidity until August 2000, although
such period may be shortened by factors beyond our control. These factors could
include, among others, increased competition and higher costs associated with
hiring necessary personnel. After August 2000, we will be required to seek
additional capital in order to continue to fund our business operations, as
further discussed in the "Liquidity and capital resources" sub-section described
below.
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<PAGE>
Liquidity and capital resources
Assuming this registration statement becomes effective, and we receive the
$3 million portion of the above financing, we should have sufficient funds to
last until August 2000. We do not have any significant credit facilities
available with financial institutions or other third parties and, accordingly,
until we can generate cash flow from operations, we will be dependent upon
external sources of best-efforts financing. We do not expect to receive cash
flow from operations during the current fiscal year and we cannot estimate when
we will receive cash flow from operations, if at all. Accordingly, for the
foreseeable future, we will likely be dependent upon best efforts equity and/or
debt financing, of which we have no firm commitments or arrangements, and on the
exercise of outstanding warrants. In connection with this $9 million financing,
we issued warrants to purchase 833,332 shares of common stock at an exercise
price of $5.18 per share. Of these warrants, we are able to redeem warrants to
purchase 624,998 shares if the closing price of our common stock is at least
$10.36 per share for 20 consecutive trading days. If we choose to redeem the
warrants, the warrant holders have the ability to exercise the warrants prior to
redemption. We intend to redeem the warrants in full, as soon as we are able
to, and if the warrant holders choose to exercise the warrants subject to
redemption, we will receive $3,237,490 on exercise. We can provide no assurance
that we will be successful in any future financing effort to obtain the
necessary working capital to support our operations. In the event that we are
unable to obtain necessary financing from external sources, on or before August
2000, we may need to curtail operations, sell assets, or otherwise bring cash
flows in balance.
As of September 30, 1999, we had long-term notes payable consisting
of:
. various notes payable totaling $292,107 to financial institutions due
through October 2004 in monthly installments ranging from $239 to
$1,147 at interest rates ranging from 7.95% to 21.03%;
. a note payable of $23,107 to a stockholder due in October 2002 in
monthly installments of $723 at an interest rate of 9.5%; and
. a note payable of $99,000 to an individual with principal and interest
due in October 2000 at an interest rate of 10%, which is convertible
into 105,319 shares of our common stock at the option of the holder.
Of the above notes payable, an aggregate of approximately $54,567 is due during
fiscal 2000. In addition, during fiscal 2000 we have capital lease commitments
on equipment totaling $29,982 and lease commitments on office space of $150,305.
As of September 30, 1999, we also had $110,000 of past due short-term debt.
While we believe our current cash position will be sufficient to fund our
obligations through August 2000, such period may be shortened based upon factors
outside of our control.
IMPACT OF YEAR 2000
The year 2000 poses issues for business and consumer computing,
particularly the functionality of software for two-digit storage of dates and
special meanings for dates such as 9/9/99. The year 2000 is also a leap year,
which may also lead to incorrect calculations, functions, or system failure. The
problem exists for many kinds of software, including software for mainframes,
PCs, and embedded systems.
In assessing the effect of the Year 2000 problem, we determined that there
existed three general areas that needed to be evaluated:
. Software applications hosted for customers;
. Internal infrastructure; and
. Supplier/third-party relationships.
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<PAGE>
A discussion of the various activities related to assessment and actions
resulting from those evaluations is set forth below.
Software applications hosted for customers.
We do not intend to host any software applications that are not deemed to
be Year 2000 compliant by their manufacturers. However, the software
applications that we host will be run on computer systems that are not
completely under our control. If the computer systems that view or utilize our
hosted applications are not Year 2000 compliant the application may not function
properly. As such, the variability of definitions of "compliance" with the Year
2000 and of different combinations of software, firmware, and hardware may lead
to lawsuits. The outcomes of any such lawsuits and the impact on us are not
estimable at this time.
Internal infrastructure.
Since the inception of our ASP business, we have required that all internal
technology be Year 2000 complaint prior to purchase. The costs related to these
efforts have not been and are not expected to be material to our business.
Suppliers/third-party relationships.
We rely on outside vendors for water, electrical, and telecommunications
services as well as climate control, and other infrastructure services. We do
not intend to independently evaluate the Year 2000 compliance of the systems
utilized to supply these services. We have received no assurance of compliance
from the providers of these services. We can provide no assurance that these
suppliers will resolve any or all Year 2000 Problems with these systems before
the occurrence of a material disruption to our business. Any failure of these
third-parties to resolve Year 2000 problems with their systems in a timely
manner could have a material adverse effect on our business.
Contingency plans.
Based on the above actions, we have not currently developed a formal
contingency plan to be implemented as part of our efforts to identify and
correct Year 2000 Problems affecting our internal systems. However, if we deem
it necessary, we may take the following actions:
. Short to medium-term use of backup equipment and software;
. Increased work hours for our personnel; and
. Other similar approaches.
If we are required to implement any of these contingency plans, such plans
could have a material adverse effect on our business.
Based on the actions taken to date as discussed above, we are reasonably
certain that we have or will identify and resolve all Year 2000 problems that
could hurt our business.
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BUSINESS
Overview of Our Business
ebaseOne is an application service provider, or ASP, concentrating on the
market for small and medium-sized businesses. We provide an integrated and
comprehensive solution of leading packaged software applications hosted in a
high quality data center with 24-hour monitoring and customer service for a flat
monthly fee. Under our ASP model, we enable small and medium-sized businesses
to lower the overall cost of high-end software application ownership and afford
a state-of-the-art information technology infrastructure with leading packaged
software solutions without having to make a large up-front investment or
maintain an expensive information technology staff. Our solution includes:
. hosting software applications in a state-of-the-art data center;
. software application installation and customization;
. end-user training and best practices consulting;
. software and hardware upgrades;
. worldwide access to a state-of-the-art fiber optics network;
. leading edge security and 24-hour operation; and
. application monitoring and customer service.
Our initial data center, called the Enterprise Application Center or EAC,
co-located with Level 3 Communications, LLP, became operational in September
1999. Construction of our command center, which will monitor the EAC and house
customer service support personnel is expected to be completed by January 2000.
Business Strategy
Our business strategy is based on our belief that many of the leading
software packages remain too complex and too costly to be effective solutions
for small to medium-sized companies. While many software providers offer
products that are targeted for such markets, implementation of these packages
generally still requires technologically skilled personnel and frequently takes
a long period of time. In addition, the infrastructure required to support
these packages is also beyond the capabilities of many small to medium-sized
businesses. Faced with these costs and time frames, many companies have decided
to forgo the capabilities of leading software packages in favor of less
functional products. We believe that a lower cost, more easily implemented
approach would allow these businesses to capitalize on the functionality of
leading software packages and better position these businesses against larger
competitors. We are initially concentrating on the high-end of the small to
medium-sized business market. Over time, we intend to migrate into the lower
tier of the large business market and divisions of very large corporations.
We estimate that as much as 80% of the total cost of ownership of a
packaged software application is the cost associated with human capital. We
believe that recruiting, training, managing, and retaining the technical human
resources necessary to effectively manage these applications has become a real
problem. A 1998 study by the Information Technology Association of America
estimated there were over 340,000 open information technology positions
nationwide. We believe this shortage in professionals has resulted in the
inability of small and medium-sized businesses to compete with larger
corporations for personnel.
We offer a high level of service to the small to medium-sized business
market through the use of our OneServ(SM) service. We believe the quality of
training and support that we offer differentiates us from other ASPs. As part of
our customer service, we offer a service level agreement, which we initially
believe will be one of the
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most comprehensive and flexible service level agreements in the ASP market.
These agreements are important to the customer because they carry assurances of
our ability to perform. Credits are issued to the customer if their application
is unavailable for a period of time, or if application response time rises above
a predetermined level for too long. We have capped the total number of credits
that may be given in any particular period to a customer. Our agreements also
guarantee a process for escalating trouble reports, reaching an executive
officer within 48 hours for critical problems. This gives the customer the
assurance that any problems will be given a high level of attention.
We provide software applications and services for a flat monthly fee,
generally without customers having to pay any amount in advance. In addition to
hosting applications, we provide installation, application tailoring, training,
customer support, maintenance, upgrades, and consulting. Our applications will
initially include sales force automation, customer relationship management,
electronic commerce, financial management, and human resources, although as of
the date of this prospectus we had not entered into agreements with providers
for all of these applications. Our goal is for these applications to be
supplemented by relationships with software publishers offering applications for
other markets not competing with our core software offerings, including vertical
markets. We believe these relationships will provide us with added
differentiation within the ASP market.
Our pricing model enables customers to pay a flat monthly fee under a
minimum 24 month contract to access and run packaged applications over the
Internet or via secure, high-speed, fiber-optics based, private leased lines.
We do not require customers to purchase or maintain any data or application
hardware or pay for installation, basic customization, or basic training up-
front.
In order for us to maintain our pricing model of only charging customers a
flat monthly fee, we are developing subscription-based agreements with the
software providers required to support our model. Under the subscription model,
we pay the software providers a monthly fee for the usage of their software as
opposed to a one-time up-front fee plus up-grades. To achieve the same effect
with hardware vendors, we have initiated a master lease under which we can pay
for hardware from our cash flow.
We consider pricing to be a key competitive advantage in the ASP
marketplace. We estimate that the total cost of ownership for applications
through ASPs is typically 30 percent less than purchasing the software license.
Our price not only represents savings in actual costs, but also relieves the
corporation of:
. installing all the hardware and software;
. recruiting, training, and managing the associated information
technology personnel; and
. upgrading all the hardware and software as vendors release new
versions.
We believe our pricing structure provides an attractive alternative to
businesses that are unable to afford up-front fees, and support the related
hosting, training, and staffing functions.
Our OneServ(SM) Solutions
In an ASP, the server-side of the actual software application resides at
the ASP, not on the customer's network or desktop computers. We license the
software from the software company and host the application on our own servers.
Customers rent the services from us on a per-user, per-month basis, without the
up-front hardware costs and with lower support and implementation costs, as well
as with quicker implementation than traditional software licensing. We are able
to share costs among many customers, allowing for a much lower cost structure
than traditional solutions.
OneServ(SM) is the our premier ASP-based solution. OneServ(SM) is the
initial comprehensive and integrated suite of small and medium-sized business
software and will include:
. sales force automation;
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. customer relationship management;
. financial management;
. human resource management; and
. e-commerce.
In addition to hosting these applications, under our OneServ(SM) service we
will:
. consult with the customer and configure the application to best meet
their individual needs;
. implement the application and optimize the application performance;
. train the client on how to best utilize the application; and
. provide ongoing help desk support to the customer.
We plan to license each of the individual applications in OneServ(SM) from
the best-of-breed software vendors and then, over time, integrate them into a
single source solution delivered through an Internet portal.
We believe that an opportunity exists in the small and medium-sized
business market to offer best practices training. This goes beyond traditional
training on the software itself and addresses the business processes that can be
implemented to make the customer successful. We plan to initially offer
training based upon the use of SalesLogix. We will offer training internally
and will also contract with certified third party organizations. As we
integrate additional packaged software applications for customer relationship
management, accounting, and electronic business, we will also create and offer
additional best practices training.
We began offering our OneServ(SM) service in November 1999, and do not have
any contracts for these services at this time.
Our CorServ(SM) Solution
Through our CorServ(SM) offering, independent software vendors and system
integrators will be able to host their applications and allow their customers to
access them via our network. This can be done quickly and easily, without
requiring the independent software vendors or system integrators to build the
technological infrastructure required. CorServ(SM) will be a basic
infrastructure service that will include:
. the physical facility;
. network connections;
. servers, operating systems, and database software;
. security measures, such as firewall, intrusion detection, virus
scanning, and 24-hour monitoring;
. administration and management;
. backup;
. disaster recovery; and
. other standard data services.
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CorServ(SM) will allow independent software vendors or system integrators
to deliver applications to their customers in a secure, reliable, managed host
environment. We will take care of the infrastructure, so that our clients can
concentrate on delivering products that meet the needs of their customers. We
will allow them to deliver a hosted alternative for software delivery and
subscription-based licensing, while still allowing them to focus on their core
competencies. Our CorServ(SM) service will provide an easy way for them to
essentially become an ASP and reach smaller businesses which, taken together,
represent a large new market for their products.
We began providing our CorServ(SM) service in November 1999, and as of
November 17, 1999, we had signed three contracts to provide our CorServ(SM)
services.
Prime Net's Former Operations
In November 1999, we consolidated the operations of our subsidiary Prime
Net into ebaseOne. Although we do not anticipate that these operations will
consist of a material portion of our ongoing revenues, we do intend to continue
Prime Net's former operations. Prime Net specialized in middle-market business
technology solutions for mid-size companies. Its market is businesses that have
outgrown their low-end systems, but do not have the ability to implement newer
systems due to their long implementation periods and the businesses lack of
qualified information technology personnel. Prime Net provided project planning
and management, application design and prototyping, data conversion,
documentation, support and maintenance, and training. During the previous
fiscal year Prime Net serviced approximately 25 to 30 customers, of which one
customer, International Exhibition, Inc. accounted for over 10% of its revenues.
Many of these customers require one time service and we can provide no assurance
that we will continue to provide services to any of these customers.
Technology Alliances
The foundation of our technology strategy is to form strategic alliances
with the leading technology infrastructure hardware and software providers in
the industry. Through the utilization and integration of the technology from
these alliances, it is our goal to continually provide the most advanced
packaged software solutions running on the most sophisticated server technology,
network infrastructure, network and application management and monitoring
systems and security technology available on the market.
Our strategic alliances are described below.
Level 3 Communications. Level 3 is a leading communications and information
services company that is building and reselling bandwidth on the first
international fiber optics network optimized for Internet Protocol technology.
In addition, Level 3 has built approximately 47 state-of-the-art co-location
data centers around the world to house the telecommunications and other
computing equipment for their alliances. Level 3's co-locations provide carrier
grade data center facilities with raised flooring, sophisticated computer grade
climate control, overhead cable ladders, 24-hour multi-faceted and multi-level
security including building wide closed circuit TV, backups for short-term
brown-outs, and diesel powered generators for long term power failures. We
have arranged an alliance with Level 3 to co-locate our initial enterprise
application center in Level 3's Houston, Texas facility, expand to other Level 3
facilities, and brand and resell their international telecommunications
bandwidth as an integral part of our solutions.
Based upon our relationship with Level 3, we have access to Internet and
private leased line bandwidth via a direct connection to the SONET ring that
surrounds Houston, and connections to additional smaller rings, as well as a
long-haul connections to an international network. Since the bandwidth required
for Internet access is small compared to that required to access applications,
we believe we can reduce the cost of standard Internet access for our customers.
Our current agreement with Level 3 expires in three years with the option to
renew, although we have a verbal commitment to extend the agreement for an
additional seven years. To date, we have not entered into a definitive
agreement to extend the term.
Cisco Systems. Cisco is a worldwide leader in networking for the Internet.
Cisco products include routers, LAN and ATM switches, dial-up access servers,
and network management software. These products, integrated by Cisco software,
link geographically dispersed networks. We are forming an alliance with Cisco to
join the Cisco Hosted Application Initiative partnership program or CHAI through
the execution of a memorandum of understanding. To date, we have not entered
into a definitive agreement with Cisco. The CHAI brings together packaged
software application vendors that have applications suitable for hosting, ASPs
to host the applications, Cisco Powered Network Service Providers to install and
support Cisco-based network infrastructures, and customers that can benefit from
hosted solutions. In addition, it includes co-marketing activities such as lead
sharing, joint advertising, co-sponsored seminars highlighting customer success
stories, tradeshows, and conferences. This alliance will provide us with access
to Cisco's Hosted Application Development Lab, providing integration and
benchmarking services that we believe will help maximize the performance of
hosted applications running on Cisco-based Internet infrastructures. Our EAC
utilizes a Cisco Powered Network built specifically to deliver high-end packaged
software solutions.
Marimba. Marimba is a leading provider of Internet-based software
management solutions. We have formed a strategic relationship with Marimba to
use their technology referred to as Castanet, to support key aspects of our ASP
offering, including software distribution, application usage monitoring, remote
desktop management, and an ebaseOne desktop portal. Castanet will enable us to
have an ebaseOne presence on our customer's desktop and install and manage
applications on a customer's desktop over the Internet. We believe it will
reduce the requirement for software engineers at the customer's site, and
thereby reduce the overall cost to our users.
Marimba has agreed to provide ebaseOne with their software to distribute,
manage, and maintain all the software applications and related data that we
intend to offer our clients. Our agreement with Marimba expires in September
2002, but may be renewed year-to-year for up to an additional two years.
In addition, Marimba recently chose us to be the first ASP to host their
new Internet DocServices technology. DocServices delivers virtually any type of
document simply and easily over the Internet or private leased lines, including
simple text files as well as complex HTML documents that include links and sub-
documents aggregated as a single logical document. Current document delivery
mechanisms, such as e-mail, Web servers, document management solutions, or hard
copy, each have advantages in specific situations, but they typically lack
DocService's ability to automate the entire delivery and update process. With
DocService, if a document publisher makes a change, that change can immediately
be reflected back through the enterprise, ensuring that everyone is always
working from the latest document version.
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Sun Microsystems. Sun is a leading provider of industrial-strength
hardware, software, and services that power the Internet. We have formed an
alliance with Sun to utilize Sun server technology as our Unix platform and
participate as an executive member of the SunTone partnership program. The
SunTone program is one of the industry's first collaborative efforts to define
and audit service provider infrastructure, operational practices, hardware,
software, and ultimately, overall service delivery, to ensure guaranteed levels
of performance, security, availability and uptime. Our relationship with Sun
will include cooperative marketing activities and access to their worldwide
business partners.
Microsoft. Microsoft is the worldwide leader in software for personal and
business computing. In November 1999, we formed a partnership with Microsoft to
participate in their ASP partnering initiatives as part of the rollout of their
ASP commercial licensing program. Under this partnership, we can host Microsoft
Back Office products such as Microsoft SQL Server, Microsoft Exchange, Microsoft
Site Server, Microsoft Terminal Server and Windows NT Server as a part of our
CorServSM and OneServSM commercial hosting solutions which enables us to pay
Microsoft based on the number of users on a per month basis as opposed to paying
license fees up front. Our agreement with Microsoft expires in June 2001, but
may be extended for up to two additional years if we have an outstanding
agreement with any of our customers at the expiration date.
Phonoscope. Phonoscope Communications, Ltd. is a wholly owned subsidiary
of Phonoscope, Ltd., a 46 year old Houston business with the city's largest
privately owned and operated fiber optic network. Our alliance with Phonoscope
enables us to immediately offer Houston customers a variety of choices of
connections to our EAC.
The initial term of our agreement with Phonoscope is three years, and is
renewable thereafter on a year-to-year to basis. We will not be the exclusive
reseller of Phonoscope's fiber optic network. However, Phonoscope has agreed
that it will not offer fiber optic network access at a price lower than the
price that we pay for access. In addition, we have agreed to undertake a joint
marketing program relating to all telecommunications services we have agreed to
offer.
SalesLogix. SalesLogix is a leading provider of front office and e-commerce
software for mid-market companies. We have formed an alliance with SalesLogix
to include their full range of sales force automation and customer relationship
management solution in our OneServSM solution. Under the terms of the agreement
we will pay SalesLogix a monthly fee based upon the number of OneServSM users
utilizing their products. This subscription based pricing enables us to pay
SalesLogix from the monthly revenues that we receive from our customers under
our ASP pricing model as opposed to paying them license fees up-front. The
agreement expires in October 2002, unless extended by mutual agreement on a year
to year basis.
PaperChaser.com. PaperChaser.com is an emerging leader in providing complete
litigation support solutions. At the foundation of PaperChaser's offering is a
electronic document management system. PaperChaser has a flexible client/server
architecture, easy-to-use document capture and coding technology, powerful
database management and full text search and retrieval.
We have entered into a preliminary CorServ(SM) agreement to host
iPaperChaser.com's electronic litigation document management portal.
iPaperChaser.com will enable legal professionals to store their electronic case
documents in a secure and centralized location, and then access and manage these
documents from their desktops and laptops via the Internet or private leased
lines. Under the terms of the agreement, PaperChaser.com will pay us a flat
monthly fee for each customer site and additional monthly fees for each
additional user.
Sales and Marketing
Our market
The initial target market for our OneServ(SM) service is small to medium-
sized businesses located within the United States. We consider this market to
include companies that have less than $500 million in annual revenues and not
enough resources to build and maintain complex applications internally.
Therefore, we believe these companies will benefit from packaged software
solutions such as sales force automation, financial management systems, customer
relationship management systems, electronic commerce, and human resources
management systems that can help operate their companies. We have designed our
sales and marketing strategy to specifically address our target market.
The market for our CorServ(SM) service is independent software providers
and system integrators. Our market is based on the need of these independent
software vendors and system integrators to have access to a quality network for
distribution of their products, but not having the resources to create and
maintain such a network.
Our marketing strategy
With respect to our OneServ(SM) services, we intend to support a direct
field sales organization including both account executives and field sales
engineers. We plan to have seven account executives by December 1999, with the
intent of rapidly hiring additional account executives in the next year,
although we can provide no assurance that we will have the funding to do so. In
addition, we plan to maintain one field sales engineer for every three account
executives. Further, we intend to support the channel through our hotline
support group and plan to build and maintain a team of technical experts that
will be available to assist our sales partners as required.
We also intend to build and maintain a national accounts sales
organization. Beginning in January 2000, we intend to hire a national accounts
manager and begin to target named accounts with more than 100 potential users
and more than $100 million in revenues.
We are aware of potential conflicts with some software publishers that will
not be as willing to give up the up-front commission revenue in exchange for a
subscription-based commission model. We will attempt to educate such publishers
on the benefits of this model and will work closely with those entities. We
believe our ASP solution provides software companies with a new channel to sell
their products. As such, we believe we will not be a competitive product line
to software companies as we will offer a new opportunity to sell to corporations
that would not otherwise be able to purchase systems under the software
companies existing pricing model. We will allow companies in the packaged
software industry to continue to write software and sell products to large
corporations, while providing a sales channel to reach small to medium-sized
business.
With respect to our CorServ(SM) services, we intend to market our services
directly to independent software vendors and system integrators through the use
of direct mail, tele-marketing, and face-to-face contact with our sales
representatives. In November 1999, we hired a vice president to oversee the
marketing of our CorServ(SM)
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services.
Facilities
Our headquarters are located in Houston, Texas at a leased facility that is
approximately 8,900 square feet. Our lease expires in April 2002. We believe
our lease rates to be competitive in the market. At the present time, we
consider this space to be adequate to meet our needs.
Our initial EAC, which is co-located with Level 3 Communications is
currently operational. The Level 3 Communications facility is located in
Houston, Texas, and is approximately 50,000 square feet. We lease floor space
from Level 3 Communications under an agreement expiring August 2002, with a
right for ebaseOne to extend until 2009. We believe our lease rates to be
competitive in the market. The EAC houses all of the servers and communications
equipment required to support our clients.
We are in the process of completing our state-of-the-art command center in
Houston, Texas, which we expect to be approximately 10,000 square feet. We
expect the command center to be completed by January 2000. We intend to enter
into a long-term lease agreement for use of the command center, but as of
November 17, 1999 we had not entered into any definitive agreements. Our
command center will include leading-edge application management and monitoring
software and equipment along with state-of-the-art backup technology. We will
staff the center and provide application monitoring and hotline support 24 hours
per day, 365 days per year.
Technology
Our network will utilize IP technology end-to-end. IP technology is a
digital communications protocol, as opposed to a traditional analog protocol. We
believe that in the future the communications industry will primarily utilize
digital technology. As such, we believe that our initial use of IP technology
will better position us for future growth. Our CorServ(SM) and OneServ(SM)
services include a selection of low-cost Internet access services at varying
capacity levels. We believe the use of an IP network will make it possible to
move information at a much lower cost.
Our network is designed to be continuously upgradeable. The network can
evolve as technology changes and customer demand for capacity increases. We
believe our IP-based network will enable business customers to benefit from the
lower cost and service offerings made possible by IP technology.
Customers will access our services through one of three methods:
. Dial-in Service;
. Private Lines; or
. the Internet.
Dial-in Service
Our dial-in service will allow end users to access a high-quality network.
We will provide this service via a dial-in service provider that has simplified
the local Internet dialing network by securing local numbers, deploying modems
in major metropolitan areas, and staffing a full-time operations center to
manage the network and hardware. The service offers the customer the ability to
give their users dial-in connectivity to their private network. By dialing a
local number provided by us, users will send their data traffic over this dial-
in connection to modems housed in the dial-in services provider's facility,
where it is then forwarded to the Level 3 Communication's network and to our
facility where the customer's servers are housed. If needed, we can also send
the users' traffic to the customer's site via a dedicated connection.
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The dial-in service is sold on a per user basis for a flat monthly fee. The
monthly charge includes local dial-in numbers, complete network coverage for a
specific region, modems to collect the incoming traffic, and managed routers.
Private Lines
We can link a customer directly to our EAC to access applications via a
variety of private access methods. Each access method carries different prices
and different advantages and disadvantages for specific situations. The choice
of access method will depend on the customer's physical locations, the demands
of the particular application being hosted and the customer's preference.
Internet
In addition to the connection to our EAC, we can also provide a secure
high-speed Internet connection via Level 3's network. To ensure reliability in
the case of a Level 3 network outage, this connection will be backed up by
redundant connections supplied by other carriers.
We offer encrypted services via the Internet, thus creating a data stream
between the customer and our EAC that is essentially "private" even though the
Internet is a public network. Since the data stream is encrypted with keys that
are unique to the specific customer, others with access to the Internet cannot
read the data. Response time is still subject to the overall response time of
the Internet. For those customers that are not satisfied with this level of
security or performance, we have our private line options described above.
Competition
The ASP market is extremely competitive. The tremendous growth and
potential size of the ASP market has attracted many start-ups as well as
extensions of existing business from different industries. Current and
prospective competitors include:
. new "pure-play" ASPs;
. systems integrators;
. national, regional and local Internet Service Providers;
. hardware and software suppliers; and
. telecommunications companies.
Pure-Play ASPs
A new breed of pure-play ASPs has emerged to capitalize on the ASP market.
We consider ebaseOne to be a pure-play ASP or a company that focuses solely on
providing ASP services. Unlike ebaseOne, many of the companies in this market
are focused specifically on the high-end of the ASP market. However, if the ASP
market grows, we expect this segment of our competition to grow rapidly, and
many of these pure-play ASP's may target the same market as we have, namely,
small to medium-sized businesses.
System Integrators
National, regional, and local commercial systems integrators who bundle
their services with software and hardware providers and perform a management
outsourcing role are moving into the ASP market. These companies provide
professional consulting services and integration of software applications in
single-project client engagements. Large systems integrators may establish
strategic relationships with software vendors to offer ASP
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services as well.
Internet Service Providers
ISPs with a significant national presence are also entering the ASP
marketplace. These companies could prove to be formidable competition with
significant market presence, brand recognition, established technical resources,
and financial stability.
Hardware and Software Companies
Traditional hardware and software companies are entering the ASP market and
are establishing strategic ASP partnerships in an attempt to hold market share.
Telecommunication Companies
Many of the major telecommunication companies, offer Internet access
services. In order to address the Internet connectivity requirements of
customers of long distance and local carriers, we believe that there is a move
toward horizontal integration through joint ventures with ISPs. Accordingly, we
expect that we will experience increased competition from the traditional
telecommunications carriers.
All of the companies mentioned above are well financed and will be able to
devote more resources to sales, marketing, and technology than we will. We can
provide no assurance that we will be able to compete in this market.
Intellectual Properties
We regard intellectual property rights as essential to our success, and
rely extensively on trademark rights, trade secret protection and
confidentiality agreements, between and amongst our alliances, employees, and
others, to protect our proprietary interests. As such, we require all our
employees to sign non-disclosure and confidentiality agreements. We have
applied for federal registration of the marks "OneServ(SM)" and "CorServ(SM),"
but we can provide no assurance that we will receive such marks. We can provide
no assurance that the steps taken to protect our proprietary rights will be
adequate, or that third parties will not infringe or misappropriate our
trademarks, copyrights, or similar proprietary rights.
Legal Proceedings
In November 1998, Prime Net was named as a defendant in a lawsuit filed by
Keith Jordan in the District Court of Harris County, Texas, 295/th/ Judicial
District, which petition was amended in September 1999 to include ebaseOne and
John Frazier Overstolz, whereby the plaintiff alleged, among other claims,
breach of contract, breach of implied duties of good faith and fair dealing,
breach of fiduciary duties, fraud, conversion, and negligent misrepresentation
in connection with denying him ownership of 769,761 shares of ebaseOne common
stock and an additional 19,135 shares of common stock allegedly owed him, along
with an alleged failure to issue plaintiff a warrant to purchase 647,870 shares
of common stock. Discovery is currently being conducted by the parties. We
intend to vigorously defend this claim.
We are aware that a wrongful termination lawsuit has been threatened by a
former employee. We believe such claim is wholly without merit and intend to
vigorously defend this claim in the event litigation is actually initiated.
Employees
As of November 1, 1999, we employed 26 persons, on a full-time basis,
including management, sales, and office employees. No employees are covered by
a collective bargaining agreement. Management considers
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relations with its employees to be satisfactory.
Insurance
We believe we have sufficient general liability insurance covering over
headquarters located at 6060 Richmond, Houston, Texas 77057. We do not
currently have any business interruption or business liability insurance.
MANAGEMENT
Directors and Executive Officers
The following table sets forth our directors and officers and their
respective ages and positions:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John Frazier Overstolz 38 Chairman of the Board
Charles W. Skamser 42 Director, President, and Chief Executive Officer
Robert J. Horn 57 Chief Financial Officer, Secretary, and Treasurer
Michael A. Sooley 49 Chief Technology Officer
Scott Feuless 39 Senior Vice President of Technology
Michael M. Rotolo 60 Director
</TABLE>
John Frazier Overstolz is the founder of ebaseOne and has served as
chairman of the board since August 1999 and chief executive officer from May
1999 until August 1999. Mr. Frazier previously was the founder and served as
chief executive officer of Prime Net Corporation from 1990 until August 1999,
and as chief executive officer of Synoptech Solutions Group, Inc. from August
1998 until August 1999. Mr. Frazier has been an entrepreneur and business owner
for over 18 years involved in both start-up and emerging companies. Over the
length of his career, Mr. Frazier has been involved with both the technology and
investment banking industry, personally handling many acquisitions and growth-
financing projects either as a consultant, principal, or financier. As a long-
time small business advocate, he is a recipient of the District Director's Award
in 1992 by the U.S. Small Business Administration, author, and former
legislative advisor on small business issues. He has extensive experience in
technology and enterprise resource planning systems.
Charles W. Skamser has served as director, president and chief executive
officer since August 1999 after serving as the chief operating officer from May
1999 to August 1999. Previously, Mr. Skamser was the founder and managing
partner of New Enterprise Solutions, a consulting firm specializing in strategic
business development, marketing and venture capital funding for high-tech start-
up and high growth companies. From February 1997 through March 1998, Mr.
Skamser was president and chief operating officer of Applied Voice Recognition,
Inc., a Houston based public voice recognition technology company. From January
1991 through October of 1996, Mr. Skamser was a co-founder and vice president of
worldwide business development for Dynasty Technologies, Inc., a Chicago based
software development tools company. Mr. Skamser currently sits on the board of
directors of PaperChaser.com, Inc., a Houston based electronic document
management technology and services company. Mr. Skamser received his B.A. in
political science and economics from Macalaster College in St. Paul, Minnesota.
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Robert J. Horn has served as chief financial officer, secretary, and
treasurer since December 1998. From July 1998 until December 1998, Mr. Horn
served as president of the CFO Channel, Inc. From April 1998 until July 1998,
Mr. Horn served as vice president of mergers and acquisitions for Clearwork
Technologies, Inc. From June 1994 until April 1998, Mr. Horn served as chief
financial officer of NSE, Inc., which filed a petition under chapter 11 in
December 1997, which was converted into a chapter 7 bankruptcy proceeding in
April 1998. Mr. Horn served as debtor in possession during such proceedings.
Mr. Horn holds a degree in Business Administration from Arizona State University
and completed his post graduate work at the University of Colorado.
Michael A. Sooley has been the chief technology officer since May 1999.
Since November 1998, Mr. Sooley has been a technology consultant. From October
1997 until October 1998, Mr. Sooley served as executive vice president and chief
operating officer of BrightStar Information Technology Group, Inc. From October
1992 until September 1997, Mr. Sooley served as director of information systems
for Vinson & Elkins, LLP in Houston, Texas. Mr. Sooley earned his B.S. in
Engineering from Trinity College, Hartford, Connecticut and his M.S. in
Management Science from Rensselaer Polytechnic Institute, Hartford Graduate
Center, Hartford, Connecticut.
Scott Feuless has served as senior vice president of technology operations
since August 1999 after serving as vice president of technology operations from
May 1999 until August 1999 and director of professional services from March 1999
to May 1999. From December 1997 until March 1999, Mr. Feuless worked at Co-
Counsel, as a director of information systems. From August 1992 until October
1997, Mr. Feuless worked at CDI Engineering Group as a director of information
systems. From June 1991 until August 1992, Mr. Feuless served as manager of
advanced computer technology for the M.W. Kellogg Company. Mr. Feuless served on
technical advisory boards for Borland and Ashton Tate from 1991 to 1992 and
holds a B.S. in Mechanical Engineering from Rice University.
Michael M. Rotolo has served as a director of ebaseOne since May 1999 and
as a director of two predecessor companies since October 1996. Mr. Rotolo has
extensive international and domestic operating and administrative corporate
experience. From April 1988 to December 1995, Mr. Rotolo was an officer with
Chiquita Brands International serving as vice president for government affairs
shortly after the U.S. Treasury Department initiated sanctions against Panama
where he was charged with the responsibility of insuring regulatory compliance
in Chiquita's largest production division, and subsequent thereto, Mr. Rotolo
assumed responsibility for Chiquita's Panama and Philippine operations. Prior to
joining Chiquita Brands, Mr. Rotolo's served as corporate vice president
responsible for Dole's beverage and related operations, as well as sugar, edible
oils and real estate. Mr. Rotolo worked at Dole for nearly twenty years in Latin
America, Asia, and the U.S. Mr. Rotolo has an M.B.A. from Loyola University and
a B.S. from the University of Southwestern Louisiana.
All directors will hold office until our next annual meeting. All our
executive officers are chosen by the board of directors and serve at the board's
discretion. There are no family relationships among the officers and directors.
Directors are not paid compensation for attending meetings, other than
reimbursements for expenses incurred in attendance. At this time, we do not
have an audit, compensation, or nominating committee.
30
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid or
accrued for the fiscal year ended September 30, 1999, for the benefit of our
named executive officers. As we were not subject to the SEC reporting
requirements prior to fiscal 1999, only information for fiscal 1999 has been
included.
Summary Compensation Table
<TABLE>
<CAPTION>
ANNUAL LONG TERM OTHER
COMPENSATION COMPENSATION COMPENSATION
Fiscal Restricted Securities
Name and Principal Positions Year Salary Stock Underlying Other
Award Options/
Warrants
<S> <C> <C> <C> <C> <C>
Charles Skamser........................... 1999 $37,000 -- 10,108,000 --
President, Chief Executive Officer, and
Director
John Frazier Overstolz.................... 1999 $93,375 -- 7,140,000 --
Chairman of the Board and Former Chief
Executive Officer
Kyran O'Dwyer............................. 1999 -- $31,659 3,000 --
Former Chief Executive Officer
</TABLE>
Mr. O'Dwyer's restricted stock award consists of 30,700 shares of common
stock issued in April 1999 for services rendered. The value is based on the
market price on the date of grant of $1.03125 per share. The shares of common
stock issued to Mr. O'Dwyer were fully vested on issuance. At September 30,
1999, the value of the shares was $69,075 based on the market price of $2.25 per
share on such date.
The table above does not include perquisites and other personal benefits in
amounts less than 10% of the total annual salary and bonus of the named
executive officer. The table includes information for each individual that
served as our chief executive officer during fiscal 1999. Mr. Skamser has
served as our chief executive officer since August 1999. Prior to that, Mr.
Overstolz served as our chief executive officer from May 1999 until August 1999.
Prior to that, Mr. O'Dwyer served as our chief executive officer from October
1998 until May 1999.
Employment and Consulting Agreements
In August 1999, as amended in October 1999, we entered into an employment
agreement with Mr. Skamser, terminating December 31, 2002, which provides for a
monthly base salary of $12,500 until December 31, 1999, and a monthly base
salary of $15,000 until December 31, 2002. The employment agreement provides
for a bonus to be determined by the board of directors of up to $125,000,
payable before January 31, 2000. The bonus is based on the company meeting the
following objectives: (a) raise working capital necessary to begin
implementation of the business strategy; (b) build an enterprise center in
Houston, Texas; (c) secure agreements to host packaged software applications
under a subscription agreement or like agreement with one or more vendors for
sales force automation, financial management, customer relationship management,
human resource management and electronic business; (d) hire the necessary
personnel to execute the business strategy; and (e) secure initial customers.
Additionally, the employment agreement provides for a bonus of up to $180,000,
payable based on objectives to be achieved prior to December 31, 2000. The
objectives are to be determined by the board of directors prior to January 31,
2000. If the board of directors is unable to agree on the objectives, Mr.
Skamser shall receive the bonus if we have net revenues of $12 million for the
12 months ended December 31, 2000. The employment agreement grants Mr. Skamser
31
<PAGE>
warrants to purchase 10,000,000 shares of our common stock as follows:
. one warrant to purchase 4,000,000 shares of common stock at an exercise
price of $0.38 per share, vesting monthly over a period of 24 months,
expiring August 2004, provided Mr. Skamser's continuing employment with
ebaseOne,
. one warrant to purchase 2,000,000 shares of common stock at an exercise
price of $1.00 per share, vesting monthly over a period of 24 months,
expiring August 2004, provided Mr. Skamser's continuing employment with
ebaseOne, and
. four warrants each to purchase 1,000,000 shares of common stock at an
exercise prices of $1.50 per share, $2.00 per share, $2.50 per share, and
$3.00 per share, all of which expire August 2006, and all of which vest
upon the earlier of the following to occur: (a) the date on which the last
sales price of ebaseOne's common stock exceeds $5.00 per share for at least
30 consecutive trading days, (b) if ebaseOne obtains net revenues of
$12,000,000 for the 12 months ending December 31, 2000, as determined by
its independent auditors, or (c) if ebaseOne obtains net revenues of
$50,000,000 for the 12 months ending December 31, 2001, as determined by
its independent auditors.
Notwithstanding the above vesting terms, all of the warrants vest upon a
"change of control" of ebaseOne. A change of control includes the following
transactions or situations:
. A sale, transfer, or other disposition by ebaseOne through a single
transaction or a series of transactions of securities representing 50% or
more of the combined voting power of ebaseOne's then outstanding securities
to any unrelated person or unrelated persons acting in concert with one
another.
. A sale, transfer, or other disposition through a single transaction or a
series of transactions of all or substantially all of the assets of
ebaseOne to an unrelated person or unrelated persons acting in concert with
one another.
. A change in the ownership of ebaseOne through a single transaction or a
series of transactions such that any unrelated person or unrelated persons
acting in concert with one another become the beneficial owner, directly or
indirectly, of securities representing at least 50% of the combined voting
power of ebaseOne's then outstanding securities.
. Any consolidation or merger of ebaseOne with or into an unrelated person,
unless immediately after the consolidation or merger the holders of the
common stock of ebaseOne immediately prior to the consolidation or merger
are the beneficial owners of securities of the surviving corporation
representing at least 50% of the combined voting power of the surviving
corporation's then outstanding securities.
. During any period of two years, individuals who, at the beginning of such
period, constituted the board of directors of ebaseOne cease, for any
reason, to constitute at least a majority, unless the election or
nomination for election of each new director was approved by the vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of the period.
. A change in control of ebaseOne of a nature that would be required to be
reported by the SEC's proxy rules, regardless of whether ebaseOne is
subject to such rules.
The employment agreement may be terminated by either party. If Mr. Skamser
terminates the employment agreement voluntarily or if we terminate the agreement
for cause or Mr. Skamser's death or disability, Mr. Skamser is entitled to his
accrued salary and any earned but unpaid bonus. If Mr. Skamser's employment
agreement is terminated for any other reason, Mr. Skamser is entitled to the
greater of: (a) the remaining base salary at the then base salary rate for the
remainder of the employment term, or (b) the base salary rate for a period of
six months, and all unreimbursed expenses, any bonus earned in respect of a
prior year and not yet paid, and the pro-rata portion of any bonus for the
current year.
32
<PAGE>
In August 1999, as amended in October 1999, we entered into an employment
agreement with John Frazier Overstolz, terminating December 31, 2002, which
provides for a monthly base salary of $11,500 until December 31, 1999, a monthly
base salary of $12,500 until December 31, 2000, and a monthly base salary of
$18,750 until December 31, 2002. The employment agreement provides for a bonus
to be determined by the board of directors of up to $28,000, payable before
January 31, 2000. The bonus is based on the company meeting the following
objectives: (a) raise working capital necessary to begin implementation of the
business strategy; (b) build an enterprise center in Houston, Texas; (c) secure
agreements to host packaged software applications under a subscription agreement
or like agreement with one or more vendors for sales force automation, financial
management, customer relationship management, human resource management and
electronic business; (d) hire the necessary personnel to execute the business
strategy; and (e) secure initial customers. The employment agreement provides
for a bonus of up to $75,000, payable based on objectives to be achieved prior
to December 31, 2000. The objectives are to be determined by the board of
directors prior to January 31, 2000. If the board of directors is unable to
agree on the objectives, Mr. Overstolz shall receive the bonus if ebaseOne has
net revenues of $12 million for the 12 months ended December 31, 2000. The
employment agreement grants Mr. Overstolz warrants to purchase 1,000,000 shares
of our common stock at an exercise price of $2.125 per share, expiring in
October 2004, which vest monthly over a period of 24 months, provided Mr.
Overstolz continued employment with ebaseOne. The warrants will vest
immediately upon a change of control of ebaseOne. Refer to the description of
Mr. Skamser's employment agreement above for a discussion of what constitutes a
change of control. The employment agreement may be terminated by either party.
If Mr. Overstolz terminates the employment agreement voluntarily or if we
terminate the agreement for cause or Mr. Overstolz's death or disability, Mr.
Overstolz is entitled to his accrued salary and any earned but unpaid bonus. If
Mr. Overstolz's employment agreement is terminated for any other reason, Mr.
Overstolz is entitled to the greater of: (a) the remaining base salary at the
then base salary rate for the remainder of the employment term, or (b) the base
salary rate for a period of six months, and all unreimbursed expenses, any bonus
earned in respect of a prior year and not yet paid, and the pro-rata portion of
any bonus for the current year.
In May 1999, we entered into a consulting agreement with Michael A. Sooley,
which provided for a monthly base salary of $5,000, and a monthly warrant to
purchase 9,000 shares of common stock at an exercise price of $0.22 per share.
This consulting agreement was canceled and replaced by our November 1999
employment agreement with Mr. Sooley that terminates December 31, 2002 and
provides for a monthly base salary of $11,250, payable in regular semi-monthly
installments through December 31, 2000. The employment agreement provides for a
performance bonus up to 75% of his base salary, to be determined in the
discretion of the board of directors. The employment agreement grants Mr. Sooley
warrants to purchase 1,000,000 shares of our common stock as follows:
. one warrant to purchase 250,000 shares of common stock at an exercise price
of $2.37 per share, vesting monthly over a period of 24 months, expiring in
November 2004, provided Mr. Sooley's continuing employment with ebaseOne;
and
. three warrants each to purchase 250,000 shares of common stock at
exercise prices of $2.50 per share, $2.75 per share, and $3.00 per share,
all of which expire in November 2004, and all of which vest upon the
earlier of the following to occur: (a) the date on which the last sales
price of ebaseOne's common stock exceeds $10.00 per share for at least 30
consecutive trading days commencing on July 1, 2000, (b) if ebaseOne
obtains net revenues of $12,000,000 for the 12 months ending December 31,
2000, as determined by its independent auditors, or (c) if ebaseOne obtains
net revenues of $50,000,000 for the 12 months ending December 31, 2001, as
determined by its independent auditors.
The warrants will vest immediately upon a change of control of ebaseOne. Refer
to the description of Mr. Skamser's employment agreement above for a discussion
of what constitutes a change of control. The employment agreement may be
terminated by either party. If Mr. Sooley terminates the employment agreement
voluntarily or if we terminate the agreement for cause or Mr. Sooley's death or
disability, Mr. Sooley is entitled to his accrued salary and any earned but
unpaid bonus. If Mr. Sooley's employment agreement is terminated for any other
reason, Mr. Sooley is entitled to the base salary rate for a period of three
months, and all unreimbursed expenses, any bonus earned in respect of a prior
year and not yet paid, and the pro-rata portion of any bonus for the current
year.
33
<PAGE>
In November 1999, we entered into an employment agreement with Scott
Feuless terminating December 31, 2002, which provides for a monthly base salary
of $9,583.33, payable in regular semi-monthly installments through December 31,
2000. Mr. Sooley's base salary will be increased thereafter at the discretion of
the board of directors. The employment agreement provides for a bonus to be
determined in the discretion of the board of directors. The employment agreement
grants Mr. Feuless warrants to purchase 750,000 shares of our common stock as
follows:
. one warrant to purchase 187,500 shares of common stock at an exercise price
of $2.37 per share, vesting monthly over a period of 24 months, expiring in
November 2004, provided Mr. Feuless' continuing employment with ebaseOne;
and
. three warrants each to purchase 187,500 shares of common stock at
exercise prices of $2.50 per share, $2.75 per share, and $3.00 per share,
all of which expire in November 2004, and all of which vest identically to
the terms of Mr. Sooley's warrants described above.
The warrants will vest immediately upon a change of control of ebaseOne. Refer
to the description of Mr. Skamser's employment agreement above for a discussion
of what constitutes a change of control. The employment agreement may be
terminated by either party. If Mr. Feuless terminates the employment agreement
voluntarily or if we terminate the agreement for cause or Mr. Feuless' death or
disability, Mr. Feuless is entitled to his accrued salary and any earned but
unpaid bonus. If Mr. Feuless' employment agreement is terminated for any other
reason, Mr. Feuless is entitled to the base salary rate for a period of three
months, and all unreimbursed expenses, any bonus earned in respect of a prior
year and not yet paid, and the pro-rata portion of any bonus for the current
year.
None of our other executive officers or directors have employment or
consulting agreements.
Stock Options and Warrants
In May 1999, our board of directors approved and our stockholders adopted,
the 1999 Incentive Stock Option Plan. The stock option plan will allow:
. stock option grants;
. stock appreciation rights or SARs;
. restricted stock awards; and
. performance stock awards.
The board has reserved 5,000,000 shares of common stock for issuance under
the stock option plan.
Options. The stock option plan provides for grants of incentive stock
options to our employees including officers and employee directors and non-
statutory stock options to our consultants including non-employee directors. The
purposes of our stock option plan is to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to our employees and consultants and to promote the success of our
business. The board of directors administers our stock option plan and
determines the optionees and the terms of options granted, including the
exercise price, number of shares subject to the option, and the exercisability
of any options.
The term of an option granted under the stock option plan is stated in the
option agreement. However, the term of an incentive stock option may not exceed
ten years and, in the case of an option granted to an optionee who owns more
than 10% of our outstanding stock at the time of grant, the term of an option
may not exceed five years. Options granted under the stock option plan vest and
become exercisable as set forth in each option agreement.
With respect to any optionee who owns more than 10% of our outstanding
stock, the exercise price of any incentive stock option granted must be at least
110% of the fair market value on the grant date.
34
<PAGE>
No incentive stock options may be granted to an optionee, which, when
combined with all other incentive stock options becoming exercisable in any
calendar year that are held by that person, would have an aggregate fair market
value in excess of $100,000.
Stock appreciation rights or SARs. SARs may be included in each option
granted under the stock option plan to permit the optionee to surrender that
option, or a portion of the part which is then exercisable, and receive in
exchange an amount equal to the excess of the fair market value of the stock
covered by the option, over the aggregate exercise price of the stock.
Restricted stock awards. The board may issue shares of stock to an eligible
person subject to the terms of a restricted stock agreement. Restricted stock is
subject to restrictions as to sale, transfer, or other encumbrance and generally
will be subject to vesting over a period of time specified in the restricted
stock agreement.
Performance based awards. The board may award shares of stock, without any
payment for such shares, to designated persons if specified performance goals
established by the board are satisfied.
As of November 16, 1999, we had issued options to purchase 631,300 shares,
we had not issued any SARs, restricted stock awards, or performance based
awards, and 4,368,700 shares were available for future grants under the stock
option plan. Of the above issued options, in May 1999 we issued an officer a
ten-year option to purchase 214,500 shares of common stock at an exercise price
of $0.25 per share, and the remaining options to purchase 416,800 shares of
common stock were issued to employees at exercise prices ranging from $0.25 to
$2.75 per share.
In addition, during the fiscal year ended September 30, 1999, we issued
non-qualified options outside of our stock option plan to purchase an aggregate
of 100,000 shares of our common stock at exercise prices of between $2.00 and
$4.00 per share, which expire between January 2000 and March 2008.
35
<PAGE>
The following table provides information on the warrants and options granted
to our named executive officers during the fiscal year ended September 30, 1999:
Individual Grants
<TABLE>
<CAPTION>
Shares Percent of total Potential realizable value at
underlying warrant/options assumed annual rates of
warrants / to employees in Exercise Expiration stock price appreciation for
Name options granted fiscal year price date warrant/option term
- --- ---------------- ---------- ----- ---- --------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
John Frazier Overstolz... 7,140,000 35.4% $0.125 4/22/04 $246,581 $544,880
Charles W. Skamser....... 108,000 * $ 0.22 9/30/04 $ 6,564 $ 14,506
4,000,000 19.8% $ 0.38 8/11/04 $419,948 $463,988
2,000,000 9.9% $ 1.00 8/11/04 -- --
1,000,000 5.0% $ 1.50 8/11/04 -- --
1,000,000 5.0% $ 2.00 8/11/04 -- --
1,000,000 5.0% $ 2.50 8/11/04 -- --
1,000,000 5.0% $ 3.00 8/11/04 -- --
Kyran O'Dwyer............ 3,000 * $ 2.00 4/6/09 -- $ 2,024
</TABLE>
____________
* Indicates less than one percent.
The 5% and 10% assumed rates of appreciation are prescribed by the rules
and regulations of the SEC and do not represent our estimate or projection of
the future trading prices of our common stock. We can provide no assurance that
any of the values reflected in this table will be achieved. Actual gains, if
any, on warrant or option exercises are dependent on numerous factors, including
our future performance, overall market conditions and the holder's continued
employment with ebaseOne throughout the entire vesting period, if any, and
warrant or option term, which factors are not reflected in this table.
The potential realizable value is calculated by assuming that the fair
market value of our common stock at the time of grant appreciates at the
indicated rate for the entire term of the warrant or option and that the warrant
or option is exercised at the exercise price and sold on the last day of the
warrant or option term, at the appreciated price. The lack of a potential
realizable value in the table above indicates that the warrant or option will
not be in-the-money prior to its expiration date if our common stock appreciates
at the indicated rate.
Mr. Overstolz's warrant to purchase 7,140,000 shares of common stock was
granted by a predecessor corporation of ebaseOne, which was not publicly traded
at the time of the warrant grant. The board of directors of the predecessor
corporation deemed the exercise price of the warrant to be at fair market value
at the time of the grant.
36
<PAGE>
Aggregated Warrant/Options Exercises in Last Fiscal Year And Fiscal Year-End
Warrant/Options Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money
Name Exercise Realized Warrants/Options Warrants/Options
- ----- -------- -------- ---------------- ----------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
John Frazier Overstolz... -- -- 7,140,000 -- $15,172,500 --
Charles W. Skamser....... -- -- 10,108,000 -- $11,199,240 --
Kyran O'Dwyer............ -- -- 3,000 -- $ 750 --
</TABLE>
The values given to the warrants or options in the table above are based on
the differences between the closing market price of $2.25 as of September 30,
1999 and the aggregate exercise prices of the warrants or options in question.
401(k) Plan.
In June 1999, we adopted a Retirement Savings and Investment Plan, the
401(k) Plan, covering our full-time employees. The 401(k) Plan is intended to
qualify under Section 401(k) of the Internal Revenue Code, so that contributions
to the 401(k) Plan by employees or by us and the investment earnings thereon are
not taxable to the employees until withdrawn. If our 401(k) Plan qualifies
under Section 401(k) of the Internal Revenue Code, our contributions will be
deductible by us when made. Our employees may elect to reduce their current
compensation by up to 20% and to have those funds contributed to the 401(k)
Plan. The 401(k) Plan permits us, but does not require us, to make additional
matching contributions on behalf of all participants. For the fiscal year ended
September 30, 1999, we had not made any contributions to the 401(k) Plan on
behalf of any of our named executive officers.
Limitation of Directors' Liability
Our amended and restated articles of incorporation eliminate, to the
fullest extent permitted by Delaware law, the personal liability of our
directors for monetary damages for breaches of fiduciary duty. However, our
amended and restated articles of incorporation do not provide for the
elimination or limitation of the personal liability of a director for acts or
omissions which involve intentional misconduct, fraud, or a knowing violation of
the law, or unlawful corporate distributions. This provision will limit the
remedies available to the stockholder who is dissatisfied with a decision of the
board of directors protected by this provision, and the stockholder's only
remedy may be to bring a suit to prevent the action of the board. This remedy
may not be effective in many situations, because stockholders are often unaware
of a transaction or an event prior to the board's action. In these cases, the
stockholders and ebaseOne could be injured by a board's decision and have no
effective remedy.
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
In connection with the 1990 organization of a predecessor of ebaseOne and
for additional nominal consideration, (i) Mr. Overstolz was issued 6,050,546
shares of common stock and a warrant, expiring in April 2004, to purchase
8,160,000 shares of common stock at an exercise price of $.125 per share, of
which the right to purchase 1,020,000 shares was assigned concurrently
therewith, and (ii) Mr. Pritchard was issued 2,706,283 shares of common stock.
Mr. Rotolo purchased 4,437,755 shares of common stock during fiscal 1998 for an
aggregate of $107,450. Brewer & Pritchard, P.C., the law firm of which Mr.
Pritchard is an officer, was issued 280,818 shares of common stock for services
rendered during fiscal 1999.
37
<PAGE>
For services rendered from May 1999 through July 1999, Mr. Skamser was
issued a five-year warrant to purchase 108,000 shares of common stock at an
exercise price of $.22 per share. Mr. Skamser entered into an employment
agreement in August 1999, in which he was issued warrants to purchase an
aggregate of 10,000,000 shares of common stock at exercise prices ranging from
$.38 to $3.00 per share. Mr. Overstolz entered into an employment agreement in
August 1999, and in October 1999, Mr. Overstolz was issued a warrant to purchase
1,000,000 shares of common stock at an exercise price of $2.125 per share.
Mr. Horn purchased 816,000 shares of common stock for nominal consideration
in April 1999 and, in connection with his employment, in April 1999 he was
issued a five-year warrant to purchase 408,000 shares of common stock at an
exercise price of $.25 per share, of which the right to purchase 100,000 shares
was assigned concurrently therewith.
In May 1999, Mr. Feuless was issued a ten-year option to purchase 214,500
shares of common stock at an exercise price of $.25 per share. In connection
with Mr. Fueless' employment agreement in November 1999, Mr. Fueless was issued
warrants to purchase an aggregate of 750,000 shares of common stock at exercise
prices ranging from $2.37 to $3.00 per share.
For services rendered from May 1999 through October 1999, Mr. Sooley was
issued a five-year warrant to purchase 45,000 shares of common stock at an
exercise price of $.22 per share. In November 1999, Mr. Sooley was issued
warrants to purchase 750,000 shares of common stock at exercise prices ranging
from $2.37 to $3.00 per share.
38
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth, as of November 22, 1999, the beneficial
ownership of common stock of:
. our directors;
. our named executive officers;
. the holders of five percent or more of our common stock; and
. our officers and directors as a group.
<TABLE>
<CAPTION>
Number of Shares of
Name of Beneficial Owners Common Stock Beneficially Owned Percentage of Ownership
- ------------------------- ------------------------------- -----------------------
<S> <C> <C>
John Frazier Overstolz.......... 13,273,879 29.6%
Charles W. Skamser.............. 1,358,000 3.5%
Michael M. Rotolo............... 4,437,755 11.8%
Kent Forrest.................... 3,547,462 9.4%
Thomas C. Pritchard............. 2,889,890 7.6%
Kyran O'Dwyer................... 58,700 *
All officers and directors
as a group, (6) persons... 20,489,592 43.8%
</TABLE>
__________
* Indicates less than one percent of the outstanding shares of common stock.
The address of each person listed on the table is 6060 Richmond Avenue,
Houston, Texas 77057, except for Mr. Forrest, whose offices location is 133
Grogan's Point Road, The Woodlands, Texas 77380, Mr. Pritchard, whose office
location is 1111 Bagby Street, Suite 2450, Houston, Texas 77002, and Mr.
O'Dwyer, whose office location is 55 High Street, Ruislip, Middlesex, England
HAA7AZ.
We have determined beneficial ownership in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, we have included the shares of common stock
subject to options or warrants held by that person that are currently
exercisable or will become exercisable within 60 days after November 22, 1999,
but we have not included those shares for purposes of computing the percentage
ownership of any other person. We have assumed unless otherwise indicated below
that the persons and entities named in the table have sole voting and investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
39
<PAGE>
The beneficial ownership of the persons set forth in the table above
includes the following options or warrants to purchase our common stock that are
currently exercisable or may be exercised by such person within 60 days of
November 22, 1999:
Securities Exercisable Within 60 Days of November 22, 1999
- ---------------------------------------------------------------------------
Options/Warrants
----------------
John Fraizier Overstolz................................ 7,223,333
Charles W. Skamser..................................... 1,358,000
Michael M. Rotolo...................................... --
Kent Forrest........................................... --
Thomas C. Pritchard.................................... 340,000
Kyran O'Dwyer.......................................... 3,000
All officers and directors as a group.................. 9,185,291
- ---------------------------------------------------------------------------
The beneficial ownership for John Frazier Overstolz includes 6,050,546
shares of common stock held by The Overstolz Family Living Trust. Mr. Overstolz
is the trustee and beneficiary of the trust.
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 75,000,000 shares of common stock, $0.001 par
value, and 10,000,000 shares of preferred stock, $0.001 par value.
Common stock
As of November 22, 1999 there were 37,556,161 shares of common stock issued
and outstanding, of which:
. 25,042,995 shares are reserved for issuance upon exercise of
warrants, not including the adjustable warrant discussed below;
. 105,319 shares are reserved for issuance upon conversion of
convertible debt;
. 100,000 shares are reserved for issuance upon exercise of options
outside our stock option plan; and
. 631,300 shares are reserved for issuance upon exercise of options
issued under our stock option plan.
The holders of shares of common stock are entitled to one vote per share on
each matter submitted to a vote of stockholders. In the event of liquidation,
holders of common stock are entitled to share ratably in the distribution of
assets remaining after payment of liabilities, if any. Holders of common stock
have no cumulative voting rights, and, accordingly, the holders of a majority of
the outstanding shares have the ability to elect all of the directors. Holders
of common stock have no preemptive or other rights to subscribe for shares.
Holders of common stock are entitled to such dividends as may be declared by the
board of directors out of funds legally available. The outstanding common stock
is validly issued, fully paid, and non-assessable.
Preferred stock
Our board of directors has the authority, without action by our
stockholders, to designate and issue preferred stock in one or more series. Our
board of directors may also designate the rights, preferences, and privileges of
each series of preferred stock, any or all of which may be greater than the
rights of the common stock. It is not possible to state the actual effect of the
issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of the preferred stock. However, these effects might include:
. restricting dividends on the common stock;
. diluting the voting power of the common stock;
. impairing the liquidation rights of the common stock; and
. delaying or preventing a change in control of our company without
further action by the stockholders.
We have no present plans to issue any shares of preferred stock.
Warrants
As of November 22, 1999, we had issued warrants to purchase 25,042,995
shares of our common stock.
41
<PAGE>
Our officers and directors hold warrants to purchase an aggregate of 20,351,000
shares of common stock at exercise prices ranging from $0.125 to $3.00 per
share, and with expiration dates ranging from April 2004 to August 2006. All of
the foregoing warrants may be exercised on a "cash-less" basis. Additional
warrants grant an aggregate purchase of 3,441,999 shares of common stock, have
exercise prices ranging from $0.125 to $2.25 per share, and have expiration
dates ranging from September 2001 to April 2004. Of the warrants not issued to
officers and directors, warrants authorizing the purchase of 1,219,000 shares of
common stock are exercisable on a "cash-less" basis.
In November 1999, we issued additional warrants in connection with our $9
million financing. We issued warrants to purchase an aggregate of 1,283,330
shares of common stock at an exercise price of $5.18 per share with expiration
dates ranging from November 2000 to November 2004. In addition, we may redeem
warrants authorizing the purchase of 624,998 shares of common stock if our
common stock is at or above $10.36 per share for 20 consecutive trading days
after the effective date of this registration statement. The shares underlying
these warrants are included in this registration statement.
In addition to the above warrants, we also issued two year adjustable
warrants that vest and become exercisable on or after February 15, 2000 in the
event that our common stock is trading below $5.31 per share. The purchase price
is $.001 per share and the number of shares issuable is calculated as follows:
Warrant shares = 2,083,333 x ($5.31 - adjustment price)
--------------------------------------
adjustment price
The adjustment price is the average of our three lowest common stock prices for
any 30 consecutive trading days preceding a vesting date. The number of shares
issuable under these warrants increase if and as the price of the common stock
falls below $5.31. These warrants will cease to vest and become null and void as
to shares that have not vested if the closing price of our common stock is at or
above $8.64 per share for 20 consecutive trading days after the effective date
of this registration statement. As there is no limit on the number of shares
issuable under these warrants, the issuance of shares pursuant to these warrants
may have a severe dilutive effect. We have included 23,810 shares underlying
these warrants in this registration statement. If we are required to issue any
additional shares under this warrant, we will be required to register the resale
of such shares on a new registration statement.
Delaware anti-takeover statute and certain charter provisions
Delaware anti-takeover statute. We are subject to the provisions of
Section 203 of the Delaware General Corporation Law, an anti-takeover law.
Subject to some exceptions, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
. Prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
. Upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares
owned (x) by persons who are directors and also officers and (y) by
employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
. On or subsequent to such date, the business combination is approved
by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by
42
<PAGE>
the interested stockholder.
For purposes of Section 203, a "business combination" includes a merger,
asset sale, or other transaction resulting in a financial benefit to the
interested stockholder, and an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years prior to
the date of determination whether the person is an "interested stockholder," did
own, 15% or more of the corporation's voting stock.
Certificate of incorporation. Our certificate of incorporation provides:
. For the authorization of the board of directors to issue, without
further action by the stockholders, up to 10,000,000 shares of
preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions on the preferred stock; and
. That special meetings of stockholders may be called only by our
chairman of the board, our president, or a majority of the members of
our board of directors.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of our board of directors and in the policies
formulated by our board of directors and to discourage transactions that may
involve an actual or threatened change of control of ebaseOne. These provisions
are designed to reduce the vulnerability of ebaseOne to an unsolicited proposal
for a takeover of ebaseOne. However, these provisions could discourage potential
acquisition proposals and could delay or prevent a change in control of
ebaseOne. Such provisions may also have the effect of preventing changes in the
management of ebaseOne.
Transfer agent
Liberty Transfer Company serves as the transfer agent for our common stock.
43
<PAGE>
SHARES AVAILABLE FOR FUTURE SALE
There is a limited market for our common stock. Future sales of substantial
amounts of common stock in the public market could adversely affect market
prices prevailing from time to time. As described below, as of the date of this
prospectus, only a limited number of shares will be available for sale.
Nevertheless, sales of substantial amounts of our common stock in the public
market in the future could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
. As of November 22, 1999, we have 37,556,161 shares of common stock
issued and outstanding.
. Of these shares, upon the date of this prospectus, 10,350,247 shares
will be freely tradeable without restriction or further registration
under the Securities Act, unless the shares are held by "affiliates"
of ebaseOne, as defined in Rule 144 of the Securities Act.
. The 27,205,914 remaining shares outstanding are eligible for public
sale pursuant to Rule 144, commencing 90 days after the effective date
of this registration statement, once these shares have been held for
one year, except for 15,741,958 shares subject to a contractual lock-
up agreement expiring on November 30, 2000.
. In addition, 1,877,367 shares underlying warrants and a convertible
note, the resale of which is being registered in this registration
statement, will be freely tradeable when issued upon exercise of these
warrants and upon conversion of the convertible note.
Shares owned for at least one year may be sold under Rule 144.
In general, under Rule 144, a person who has beneficially owned restricted
shares for at least one year, including a person who may be deemed our
affiliate, would be entitled to sell, within any three-month period, a number of
shares that does not exceed one percent of the number of shares of our common
stock then outstanding. Rule 144 is available for sales beginning 90 days after
the effective date of this prospectus and substantially all of our restricted
shares will have been held for one year by May 2000, excluding 15,741,958 shares
of common stock subject to a lock-up agreement. Sales under Rule 144 are also
subject to manner of sale provisions and notice requirements and to the
availability of current public information. We are unable to estimate accurately
the number of restricted shares that will be sold under Rule 144 because this
will depend in part on the market price of our common stock, the personal
circumstances of the seller, and other factors.
Shares owned for at least two years may be sold under Rule 144(k) by non-
affiliates of ebaseOne.
Under Rule 144(k), a person who is not deemed to have been an "affiliate"
of ebaseOne at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, would
be entitled to sell shares without complying with the manner of sale, public
information, volume limitation, or notice requirements discussed above.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
following completion of the two year holding period without limitation.
Shares issued on conversion of options issued under our stock option plan may be
sold under Rule 701.
In general, under Rule 701, any employee, consultant, or advisor of
ebaseOne who purchased shares from
44
<PAGE>
us in connection with a compensatory stock or option plan is eligible to resell
such shares 90 days after the effective date of this prospectus in reliance on
Rule 144, by complying with the applicable requirements of Rule 144 other than
the holding period conditions. Ninety days after the effective date of this
offering, options to purchase approximately 466,300 shares of common stock will
be vested and exercisable and upon exercise may be sold under Rule 701.
In the future we may file one or more registration statements on Form S-8
under the Securities Act to register additional shares of common stock issued
under our 1999 Incentive Stock Option Plan or any other similar plan. Such
registration statements may be filed after the effective date of this prospectus
and will automatically become effective upon filing. Accordingly, shares
registered under such registration statements will be available for sale in the
open market, unless the shares are subject to vesting or other restrictions.
Lock-up agreements.
All directors, all executive officers, except Robert Horn, and a few
stockholders together hold an aggregate of approximately 18,519,951 shares of
common stock, and warrants and options to purchase 19,444,500 shares of common
stock. These stockholders have signed lock-up agreements which prevent them from
selling 15,741,958 of the aforementioned shares of common stock, and 16,527,825
of the shares underlying the warrants and options until November 30, 2000. Upon
expiration of the lock-up period, all of these shares will be freely tradable,
subject to the limitations described above regarding Rule 144.
45
<PAGE>
SELLING STOCKHOLDERS
On November 15, 1999 Deephaven Private Placement Trading Ltd., Deephaven
Opportunity Trading Fund, L.P. and certain other investors purchased an
aggregate of 2,083,333 shares of our common stock and acquired certain warrants
to purchase an aggregate of 833,332 shares of our common stock as well as
certain adjustable warrants to purchase shares of our common stock as more fully
described in the "Description of Capital Stock -- Warrants" section of this
prospectus. Each holder of the warrants and adjustable warrants is prohibited
from using them to acquire shares of our common stock to the extent that such
acquisition would result in such holder, together with any affiliate of such
holder, beneficially owning in excess of 4.999% of the outstanding shares of our
common stock following such acquisition. This restriction may be waived by each
holder on not less than 61 days' notice to us.
Since the number of shares of our common stock that will be issuable upon
exercise of the adjustable warrants is based upon fluctuations of the market
price of our common stock prior to any vesting date, the actual number of shares
of our common stock that will be issuable and beneficially owned upon exercise
of such adjustable warrants cannot be determined at this time. Because of this
fluctuating characteristic, we have agreed to register a number of shares of our
common stock that exceeds the number of our shares of common stock currently
beneficially owned by the holders of the adjustable warrants. The number of
shares of our common stock listed in the table below as being beneficially owned
by each of Deephaven Private Placement Trading Ltd., Deephaven Opportunity
Trading Fund, L.P. and the other investors in the November 1999 financing
includes the shares of our common stock that are issuable to it, subject to the
4.999% limitation, upon exercise of the warrants. However, the 4.999% limitation
would not prevent Deephaven Private Placement Trading Ltd., Deephaven
Opportunity Trading Fund, L.P. and the other investors in the November 1999
financing from acquiring and selling in excess of 4.999% of shares of our common
stock through a series of acquisitions and sales under the warrants while never
beneficially owning more than 4.999% at any one time.
This prospectus relates to the resale of 4,556,609 shares of common stock by
the selling stockholders. The table below sets forth information with respect to
the resale of shares of common stock by the selling stockholders. We will not
receive any proceeds from the resale of common stock by the selling
stockholders, although we may receive proceeds from the exercise of warrants,
the underlying common stock of which is registered in this registration
statement. Assuming all of the shares registered below are sold by the
respective selling stockholders, none of the selling stockholders will continue
to own any shares of our common stock.
Resale of Common Stock by Selling Stockholders
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Stockholder Owned Before Resale Amount Offered Owned After Resale
- ----------- ------------------- -------------- ------------------
<S> <C> <C> <C>
Anders, David L. 10,000 10,000 0
Applbaum, Isaac 53,191 53,191 0
Bailey, Michelle M. 3,191 3,191 0
Bhandara Family Living Trust 122,340 122,340 0
Black, F. Darlene 26,596 26,596 0
Black, Marvin/(1)/ 31,019 31,019 0
Buddingh, Robert W. 11,000 11,000 0
Cardinal Securities, LLC/(2)/ 450,000 450,000 0
</TABLE>
46
<PAGE>
<TABLE>
<S> <C> <C> <C>
Vijay Alim Chandani Family
Revocable Trust 25,927 26,139 0
Deephaven Opportunity Trading
Fund, L.P. 243,054 245,038 0
Deephaven Private Placement
Trading, Ltd. 891,201 898,476 0
Dimitry, Theodore 26,000 26,000 0
Franz Jr., A.M. 10,638 10,638 0
Franz, Allan 50,000 50,000 0
House, Vicki L. 10,638 10,638 0
Kahalifa, Mohamed Ghaus 81,018 81,679 0
Kazi, Zubair 184,722 186,230 0
Kerbow, R..B. 15,000 15,000 0
Littleton, Alvin J. 15,957 15,957 0
Marburger, Robert 26,597 26,597 0
Mazda Construction, Inc. 26,596 26,596 0
McCartney, J.W. 15,000 15,000 0
McClendon, III, Sidney 26,000 26,000 0
Meehan, John E. 11,000 11,000 0
Milner, Ronnie 30,000 30,000 0
New Crescent Investors, L.L.C. 1,263,887 1,274,204 0
Newall, German 30,319 30,319 0
Owesh, Tajunnisa 226,851 228,703 0
Regency Crossing LLC. 63,830 63,830 0
Smith, Douglas P. 6,000 6,000 0
Thomason, Paul/(3)/ 204,319 204,319 0
Thomson Kernaghan & Co. Ltd./(4)/ 340,909 340,909 0
Total Shares 4,532,800 4,556,609 0
</TABLE>
____________
(1) Includes 25,000 shares of common stock underlying a warrant.
(2) Consists of 450,000 shares of common stock underlying a warrant.
(3) Consists of 99,000 shares of common stock underlying a warrant and 105,319
shares of common stock underlying a convertible note.
(4) Consists of 340,909 shares of common stock underlying a warrant.
47
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees, and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market, or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
. ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers;
. block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
. an exchange distribution in accordance with the rules of the
applicable exchange;
. privately negotiated transactions;
. short sales;
. broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
. a combination of any such methods of sale; and
. any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in our securities or in derivatives of our
securities and may sell or deliver shares in connection with these trades. The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration
of the shares, including fees and disbursements of counsel to the selling
stockholders. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
48
<PAGE>
EXPERTS
The financial statements of ebaseOne Corporation appearing in this S-1
Registration Statement have been audited by Hein + Associates, LLP, independent
auditors, as set forth in their report appearing elsewhere herein and are
included in reliance upon the report given upon the authority of Hein +
Associates, LLP, as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the issuance of shares of common
stock offered hereby will be passed upon by Brewer & Pritchard, P.C., Houston,
Texas. Principals of Brewer & Pritchard, P.C. beneficially own 3,757,101 shares
of common stock.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC in
connection with this offering. In addition, after we complete this offering, we
will be required to file annual, quarterly, and current reports with the SEC.
We intend to furnish our common stockholders with annual reports containing,
among other information, audited financial statements certified by an
independent public accounting firm.
This prospectus is part of the registration statement and does not contain
all of the information included in the registration statement and all of its
exhibits. Whenever a reference is made in this prospectus to any material
document of ours, the reference may not be complete and you should refer to the
exhibits that are a part of the registration statement for a copy of the
document.
You may read and copy our registration statement and all of its exhibits at
the SEC public reference room located at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the SEC public
reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. The
registration statement is also available from the SEC's web site at
http://www.sec.gov, which contains reports, proxy and information statements,
and other information regarding issuers that file electronically.
49
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
EbaseOne Corporation (previously Prime Net Corporation)
Houston, Texas
We have audited the accompanying consolidated balance sheets of EbaseOne
Corporation (previously Prime Net Corporation) as of September 30, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity (deficit) and cash flows for each of the years in the
three-year period ended September 30, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EbaseOne Corporation
(previously Prime Net Corporation) as of September 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1999, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that EbaseOne Corporation (previously Prime Net Corporation) will continue as a
going concern. As more fully discussed in Note 10 to the financial statements,
the Company incurred losses of $2,188,185, $471,844, and $224,652 for the years
ended September 30, 1999, 1998 and 1997, respectively. As a result of these
losses, the Company's working capital position and ability to generate
sufficient cash flows from operations to meet its operating and capital
requirements have deteriorated. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 10. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Hein + Associates llp
Houston, Texas
October 25, 1999
(except for Note 14, as to which
the date is November 16, 1999)
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
-----------------------------------------
1999 1998
----------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 308,444 $ 152,282
Accounts receivable, no allowance for doubtful accounts:
Trade 39,698 126,851
Employee 2,500 1,700
Other current assets - 2,378
----------- ---------
Total current assets 350,642 283,211
INVESTMENT IN MARKETABLE EQUITY SECURITIES, at market 6,000 -
PROPERTY AND EQUIPMENT, net 332,557 81,131
OTHER ASSETS 11,940 6,463
----------- ---------
Total assets $ 701,139 $ 370,805
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 110,000 $ -
Current portion of long-term debt 54,567 26,173
Current portion of capital lease obligation 19,319 2,058
Notes payable to stockholders 5,000 32,150
Trade accounts payable 372,613 132,854
Accrued liabilities 113,637 24,182
Deferred revenue 73,907 -
----------- ---------
Total current liabilities 749,043 217,417
LONG-TERM DEBT, net of current portion 360,095 30,583
CAPITAL LEASE OBLIGATION, net of current portion 56,020 2,066
----------- ---------
Total liabilities 1,165,158 250,066
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
STOCKHOLDERS' EQUITY (DEFICIT):
Note receivable from stockholder (8,000) -
Preferred stock, $.001 par value, 10,000,000 shares authorized; none issued - -
Common stock subscribed (279,959 shares) 280 -
Common stock, $.001 par value; 75,000,000 shares authorized; 34,697,704 and
21,642,030 shares issued and outstanding at September 30, 1999 and 1998,
respectively 34,698 21,641
Additional paid-in capital 2,392,086 797,296
Accumulated deficit (2,886,383) (698,198)
Accumulated other comprehensive income 3,300 -
----------- ---------
Total stockholders' equity (deficit) (464,019) 120,739
----------- ---------
Total Liabilities and Stockholders' Equity (Deficit) $ 701,139 $ 370,805
=========== =========
</TABLE>
See accompanying notes to these consolidated financial statements.
2
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------------------------------------
1999 1998 1997
----------------- ------------------ ------------------
<S> <C> <C> <C>
REVENUES $ 653,809 $ 684,019 $ 64,937
COST OF SALES 645,431 438,503 28,203
----------- ----------- -----------
GROSS PROFIT 8,378 245,516 36,734
GENERAL AND ADMINISTRATIVE EXPENSES 2,149,269 700,192 253,216
INTEREST, NET 47,294 17,168 8,170
----------- ----------- -----------
NET LOSS $(2,188,185) $ (471,844) $ (224,652)
=========== =========== ===========
NET LOSS PER SHARE - BASIC AND DILUTED $ (.08) $ (.03) $ (.02)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF 26,966,773 15,660,008 12,607,872
COMMON SHARES OUTSTANDING =========== =========== ===========
</TABLE>
See accompanying notes to these consolidated statements.
3
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
AND COMPREHENSIVE INCOME
PERIOD FROM OCTOBER 1, 1996 TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Common Stock
Note Subscribed Common Stock
Receivable ------------------- ---------------------------
Stockholder Shares Amount Shares Amount
---------- ------ ------ ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCES, October 1, 1996 (restated) $ - - $ - 11,505,280 $11,506
Common stock issued for cash (restated) - - - 1,725,795 1,725
Exercise of warrants (restated) - - - 479,388 479
Net loss - - - - -
------- ------- ---- ---------- -------
BALANCES, September 30, 1997 (restated) - - - 13,710,463 13,710
Common stock issued for compensation (restated) - - - 119,851 120
Common stock issued for cash (restated) - - - 781,400 782
Exercise of warrants (restated) - - - 1,284,762 1,284
Conversion of notes payable and related accrued - - - 441,554 442
interest due to stockholders (restated)
Issuance of common stock to acquire Vectron - - - 5,304,000 5,304
Net loss - - - - -
------- ------- ---- ---------- -------
BALANCES, September 30, 1998 - - - 21,642,030 21,642
Issuance of common stock to acquire Norske - - - 6,307,357 6,307
Common stock issued for services - - - 113,636 114
Conversion of accounts payable - 159,234 159 121,584 122
Exercise of warrants - - - 2,876,322 2,876
Common stock issued for compensation and cash (8,000) - - 816,000 816
Proceeds from sale of common stock - - - 1,457,139 1,457
Common stock issued for cash - 120,725 121 1,363,636 1,364
Warrants issued for consulting - - - - -
Warrants issued for compensation - - - - -
Comprehensive loss:
Net loss - - - - -
Unrealized gain on marketable equity securities - - - - -
Comprehensive loss - - - - -
------- ------- ---- ---------- -------
BALANCES, September 30, 1999 $(8,000) 279,959 $280 34,697,704 $34,698
======= ======= ==== ========== =======
Accumulated
Additional Other
Paid in Accumulated Comprehensive
Capital Deficit Income Total
---------- ------------ ------------- -----
BALANCES, October 1, 1996 (restated) $ 98,705 $ (1,702) - $ 108,509
Common stock issued for cash (restated) 103,275 - - 105,000
Exercise of warrants (restated) 24,521 - - 25,000
Net loss - (224,652) - (224,652)
---------- ----------- ------ -----------
BALANCES, September 30, 1997 (restated) 226,501 (226,354) - 13,857
Common stock issued for compensation (restated) 6,107 - - 6,227
Common stock issued for cash (restated) 33,218 - - 34,000
Exercise of warrants (restated) 100,690 - - 101,974
Conversion of notes payable and related accrued
interest due to stockholders (restated) 36,113 - - 36,555
Issuance of common stock to acquire Vectron 394,666 - - 399,970
Net loss - (471,844) - (471,844)
---------- ----------- ------ -----------
BALANCES, September 30, 1998 797,295 (698,198) - 120,739
Issuance of common stock to acquire Norske 632,758 - - 639,065
Common stock issued for services 119,795 - - 119,909
Conversion of accounts payable 43,619 - - 43,900
Exercise of warrants 47,124 - - 50,000
Common stock issued for compensation and cash 80,830 - - 73,646
Proceeds from sale of common stock 144,340 - - 145,797
Common stock issued for cash 411,997 - - 413,482
Warrants issued for consulting 36,567 - - 36,567
Warrants issued for compensation 77,761 - - 77,761
Comprehensive loss:
Net loss - (2,188,185) - (2,188,185)
Unrealized gain on marketable equity securities - - 3,300 3,300
-----------
Comprehensive loss - - - (2,184,885)
---------- ----------- ------ -----------
BALANCES, September 30, 1999 $2,392,086 $(2,886,383) $3,300 $ (464,019)
========== =========== ====== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
4
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------------------------------------
1999 1998 1997
------------------ ------------------ ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,188,185) $(471,844) $(224,652)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation 54,022 23,131 17,715
Bad debt expense 20,178
Common stock issued for compensation 67,646 6,227 -
Issuance of stock to retire accrued interest to
stockholder - 1,305 -
Common stock issued for services 240,706 - -
Warrant issued for compensation 77,761 - -
Warrant issued for consulting 36,567 - -
Changes in assets and liabilities:
Accounts receivable 66,175 (110,189) 12,683
Deferred revenue 73,907 - -
Trade accounts payable 283,659 96,173 16,281
Accrued liabilities 89,455 24,182 (500)
Prepaid expenses - (7,673) -
Other assets (3,099) 6,637 (7,374)
----------- --------- ---------
Net cash used in operating activities (1,181,208) (432,051) (185,847)
CASH FLOWS FROM INVESTING ACTIVITIES:
Furniture and equipment (221,426) (57,438) (7,184)
Purchase of marketable equity securities (2,700) - -
----------- --------- ---------
Net cash used in investing activities (224,126) (57,438) (7,184)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on demand notes payable from stockholders 5,000 47,400 20,000
Advances on notes payable 617,605 270,420 -
Repayments of notes payable (181,849) (240,599) (20,007)
Repayments of capital lease obligations (12,807) (1,723) -
Proceeds from sale of common stock 444,482 34,000 105,000
Issuance of common stock to acquire Vectron - 399,970 -
Issuance of common stock to acquire Norske 639,065 - -
Exercise of warrants 50,000 101,974 25,000
----------- --------- ---------
Net cash provided by financing activities 1,561,496 611,442 129,993
----------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 156,162 121,953 (63,038)
CASH AND CASH EQUIVALENTS, at beginning of year 152,282 30,329 93,367
----------- --------- ---------
Cash and Cash Equivalents, at end of year $ 308,444 $ 152,282 $ 30,329
=========== ========= =========
Supplemental Cash Flow Information:
Cash paid for interest $ 43,522 $ 15,863 $ 8,220
=========== ========= =========
Equipment acquired under capital leases $ 84,022 $ 5,847 $ -
=========== ========= =========
Notes payable and accrued interest payable to
stockholders converted to common stock $ - $ 36,555 $ -
=========== ========= =========
Account payable converted to common stock $ 43,900 $ - $ -
=========== ========= =========
Note received in exchange for common stock $ 8,000 $ - $ -
=========== ========= =========
</TABLE>
See accompanying notes to these consolidated financial statements.
5
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization - Vectron, Inc. ("Vectron") was incorporated under the laws of
Nevada on November 7, 1997. On August 18, 1998, Vectron acquired the
majority of the outstanding common stock of Prime Net Corporation ("Prime
Net") and changed its name to Synoptech Solutions Group, Inc. ("SSGI").
Norske Energy Corporation ("Norske") was incorporated under the laws of the
state of Delaware on September 15, 1997. On April 22, 1999, Norske acquired
all of the outstanding common stock of SSGI and changed its name to EbaseOne
Corporation (referred to herein as the "Company"). Prime Net, a privately
held corporation and operating subsidiary, was incorporated under the laws
of the state of Texas in October 1990 to provide financial services in the
small business arena. In October 1996, Prime Net began developing computer
and business software solutions for small and mid-market companies. In
September 1998, Prime Net's business model changed to begin the process of
becoming a high tech business solutions firm while developing an
applications data center. The Company is currently located in Houston,
Texas. See Note 2 "Reverse Acquisitions." For accounting purposes, the
acquisitions have been treated as reverse acquisitions. Accordingly, the
historical financial statements prior to April 22, 1999 are those of Prime
Net. No proforma information giving effect to these transactions has been
presented since these transactions are accounted for as reverse
acquisitions. No goodwill arose from these transactions, and all transaction
costs were expensed as incurred.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company and all of its wholly-owned
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.
Revenue Recognition - Service revenue is recognized as the related services
are provided to the customer. Revenue from product sales is recognized as
product is delivered and the related services, to the extent applicable, are
delivered.
Property and Equipment - Property and equipment is stated at cost, less
accumulated depreciation and amortization. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets
ranging from 5 to 7 years. Leasehold improvements are amortized using the
straight-line method over the term of the lease. Major improvements are
capitalized; minor replacements, maintenance and repairs are charged to
current operations.
Income Taxes - The Company accounts for income taxes on the liability method
under which the amount of deferred income taxes is based upon the tax
effects of the differences between the financial and income tax basis of the
Company's assets and liabilities and operating loss carryforwards at the
balance sheet date based upon existing laws. Deferred tax assets are
recognized if it is more likely than not that the future income tax benefit
will be realized.
6
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
Long-lived Assets - The Company reviews for the impairment of long-lived
assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss would
be recognized when estimated future cash flows expected to result from the
use of the asset and its eventual disposition is less than its carrying
amount. The Company has not identified any such impairment losses.
Cash Equivalents - For purposes of reporting cash flows, cash equivalents
include highly liquid investments purchased with maturity of three months or
less at the date of purchase.
Concentration of Credit Risk - Financial instruments which potentially
expose the Company to concentrations of credit risk consist primarily of
accounts receivable. Management does not believe a significant credit risk
exists at September 30, 1999. The Company maintains deposits in banks which
exceed, at times, the federal deposit insurance available. Management
periodically assesses the financial condition of the institutions and
believes that any possible deposit loss is minimal.
Use of Estimates - The preparation of the Company's financial statements, in
conformity with generally accepted accounting principles, requires the
Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
Comprehensive Income (Loss) - Comprehensive income is defined as all changes
in stockholders' equity, exclusive of transactions with owners, such as
capital investments. Comprehensive income includes net income or loss,
changes in certain assets and liabilities that are reported directly in
equity such as translation adjustments on investments in foreign
subsidiaries, and certain changes in minimum pension liabilities. The
Company's comprehensive income was equal to its net loss for the year ended
September 30, 1998.
Marketable Securities - The Company's marketable equity securities are
accounted for as available for sale securities. Accordingly, the Company's
marketable equity securities are stated at fair value, with unrealized gains
and losses recognized in stockholders' equity. The Company records the
purchases and sales of marketable securities and records realized gains and
losses on the trade date. Realized gains or losses on the sale of securities
are recognized on the specific identification method.
7
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
Earnings Per Share - Basic earnings per share is computed based on the
weighted average number of common shares outstanding. Diluted earnings per
share is calculated under the treasury stock method and reflects the
potential dilution that could occur if certain options were exercised. The
dilutive effect of stock options was not calculated in 1999 and 1998 since
the Company incurred a loss in those years.
2. REVERSE ACQUISITION BY PRIME NET:
On August 18, 1998, the shareholders of Prime Net approved a merger with
Vectron (the "Merger"). After the completion of the Merger, Vectron changed
its name to SSGI. Pursuant to the Merger Agreement, each outstanding share
of common stock of Prime Net, par value $.01 per share, was converted to the
right to receive .4699 shares of SSGI, par value $.01 per share. For
financial statement purposes, Prime Net is considered the acquiring company,
and this transaction has been treated as a purchase by Prime Net of SSGI.
For legal purposes, however, SSGI remained the surviving entity. Therefore,
the combined entity retained SSGI's capital structure, and the common stock
transactions prior to the merger have been restated based upon the .4699
exchange ratio.
In addition, SSGI assumed Prime Net's existing warrants issued in connection
with certain services provided and various financing transactions. The
number of shares subject to purchase under the warrant agreements was
adjusted by multiplying the number of Prime Net warrant shares by the
exchange ratio of .4699 shares. The exercise price of the warrants was
adjusted by dividing the stated exercise price by the exchange ratio. At the
conclusion of the Merger, the Company had 21,603,678 shares of common stock
outstanding.
On April 22, 1999, the stockholders of SSGI approved a merger with Norske
(the "Second Merger"). Pursuant to the Second Merger Agreement, each
outstanding share of common stock of SSGI, par value $.01 per share, was
converted to the right to receive 4.08 shares of Norske, par value $.001 per
share. For financial statement purposes, SSGI is considered the acquiring
company, and this transaction has been treated as a purchase by SSGI of
Norske. For legal purposes, however, Norske remained the surviving entity.
Therefore, the combined entity retained Norske's capital structure, and the
common stock transactions prior to the Second Merger have been restated
based upon the 4.08 exchange ratio.
8
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. REVERSE ACQUISITION BY PRIME NET: (continued)
In addition, Norske assumed SSGI's existing warrants issued in connection
with certain services provided and various financing transactions. The
number of shares subject to purchase under the warrant agreements was
adjusted by multiplying the number of SSGI warrant shares by the exchange
ratio of 4.08 shares. The exercise price of the warrants was adjusted by
dividing the stated exercise price by the exchange ratio. After the
completion of the Second Merger, Norske changed its name to EbaseOne
Corporation. At the conclusion of the Second Merger, the Company had
33,220,432 shares of common stock outstanding.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
September 30,
-----------------------------------
1999 1998
---------------- ------------
Furniture and fixtures $ 104,660 $ 49,042
Computer equipment 259,004 108,375
Equipment 18,482 -
Vehicles 45,478 26,915
Leasehold improvements 53,366 6,912
--------- ---------
480,990 191,244
Accumulated depreciation (148,433) (110,113)
--------- ---------
$ 332,557 $ 81,131
========= =========
4. SHORT-TERM BORROWINGS:
At September 30, 1999 and 1998, short-term borrowings consisted of the
following:
1999 1998
-------- -------
Revolving line of credit
with a bank $ 50,000 $ -
Note payable to a company 60,000 -
-------- -----
$110,000 $ -
======== =====
In October 1998, the Company obtained a $50,000 revolving line of credit
("Line of Credit") with a bank with a maturity date of October 29, 1999,
collateralized by bank accounts at the bank. Interest is payable monthly at
prime plus 1% (9.25% at September 30, 1999).
9
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SHORT-TERM BORROWINGS: (continued)
During July 1999, the Company borrowed $60,000 from an entity, with interest
at 10%. The note, which was due August 30, 1999, is unsecured and is
currently in default. The entity is pursuing legal means to collect on this
indebtedness.
5. LONG-TERM DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
September 30,
-------------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Demand note payable to a bank, due in monthly installments of
$1,425 with interest of 9.50% through October 1999, and
collateralized by furniture and equipment. This note is
guaranteed by a significant stockholder of the Company. $ 448 $ 15,600
Note payable to a financial institution, due in monthly
installments of $541 with interest of 7.70% through October
2000, and collateralized by a vehicle. - 12,382
Note payable to a stockholder, due in monthly installments of
$723 with interest of 9.50% through October 2002, and
collateralized by equipment. 23,107 28,774
Notes payable to financial institutions due in monthly
installments ranging from $239 to $1,147 with interest ranging
from 7.95% to 21.03% through October 2004, collateralized by a
vehicle, computer equipment, furniture and other equipment. 292,107 -
Convertible note payable to an individual. Principal and
interest at 10% is due October 2000. The note is unsecured and
is convertible into approximately 105,319 shares of the
Company's common stock at any time before October 2002. 99,000 -
-------- --------
414,662 56,756
Less current maturities (54,567) (26,173)
-------- --------
Total long-term debt $360,095 $ 30,583
======== ========
</TABLE>
10
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT: (continued)
The following are scheduled maturities of notes payable at September 30,
1999:
Years Ending
September 30, Amount
------------- --------
2000 $ 54,567
2001 161,570
2002 72,478
2003 75,834
2004 49,425
Thereafter 788
--------
$414,662
========
6. STOCKHOLDERS' EQUITY:
Common Stock Subscribed - In September 1999, the Company received $113,482
and services totaling $29,000 for 279,959 shares of common stock. As of
September 30, 1999, the shares have not been issued and have been accounted
for as common stock subscribed.
Stock Issuances - The Company sold 1,725,795 shares of common stock to
various individuals during fiscal year 1997 for cash of $105,000. During
1997, warrants were exercised by a stockholder to purchase 479,388 shares of
common stock at an exercise price of approximately $.05.
The Company sold 781,400 shares of common stock to various individuals
during fiscal year 1998 for cash of $34,000. During 1998, the Chairman of
the Board and another stockholder each converted a note payable and accrued
interest totaling $36,555 to 441,554 shares of common stock. The Company
issued 119,852 shares of common stock to various individuals for services
provided to the Company during fiscal 1998. During 1998, warrants were
exercised by two stockholders to purchase 1,246,407 and 38,355 shares of
stock at an exercise price of approximately $.08 and $.05, respectively.
The net assets of Vectron, which totaled approximately $400,000 as of the
merger date, and the 5,304,000 common shares of Vectron outstanding prior to
the merger have been recorded as an increase in common stock and additional
paid-in capital.
11
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. STOCKHOLDERS' EQUITY: (continued)
The Company sold 1,729,815 shares of common stock to various individuals
during fiscal year 1999 for cash of $467,482. During 1999, the Chief
Financial Officer purchased 816,000 shares of common stock for $14,000.
Compensation expense of $6,000 was recorded in connection with this
transaction to reflect the sale of stock below fair value. The Company
issued 121,584 shares of common stock to convert accounts payable totaling
$43,900. One individual purchased 1,457,139 shares of common stock for
$25,000. Consulting expense of $19,714 was recorded in connection with this
transaction to reflect the sale of stock below fair value. During 1999,
warrants were exercised by one stockholder to purchase 2,876,322 shares of
common stock at an exercise price of approximately $.02.
The net assets at Norske, which totaled approximately $639,065 as of the
merger date, and the 6,307,357 common shares of Norske outstanding prior to
the Merger have been recorded as an increase in common stock and additional
paid-in capital.
7. RELATED PARTY TRANSACTIONS:
The Company had a convertible note payable to a stockholder of $20,000 as of
September 30, 1997. The note accrued interest at 12% and was due on December
11,1997. This amount was convertible into 38,352 shares, as adjusted for the
reverse acquisition. This note and the related accrued interest were
converted to 77,222 shares of common stock in January 1998. This advance
arose to fund operations. During March 1998, the Chairman of the Board
advanced the Company $15,250 to fund operations. This note was converted
into 364,332 shares of common stock in August 1998.
The Company had unsecured notes payable to the Chairman of the Board and
another stockholder of $32,150 as of September 30, 1998, which accrue
interest at 6%. This amount was funded in several advances, which amounts
and related accrued interest are due on demand. These advances arose to fund
operating expenses. As of September 30, 1999, the notes have been paid in
full.
12
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RELATED PARTY TRANSACTIONS: (continued)
The Company had an unsecured note payable to a stockholder of $5,000 as of
September 30, 1999, which accrues interest at 6% and is due on demand.
The Company had a note payable to a stockholder of $23,107 as of September
30, 1999 (see Note 5).
The Company's former Chief Executive Officer assigned a warrant to acquire
1,020,000 shares of its common stock at $.125 per share to an attorney for
services provided to the Company.
8. INCOME TAXES:
There were no material deferred tax assets and liabilities as of September
30, 1999, 1998 and 1997, with the exception of the Company's net operating
loss carryforwards ("NOLs"). The Company has provided a valuation allowance
in the full amount of its net deferred tax asset totaling $874,000 and
$179,000 at September 30, 1999 and 1998, respectively.
As of September 30, 1999, the Company has NOLs of approximately $2,708,000
which begin to expire in 2009. Future utilization of the NOLs may be limited
by changes in the ownership of the Company under section 382 of the Internal
Revenue Code.
9. COMMITMENTS AND CONTINGENCIES:
Lease Commitments - The Company is obligated under capital leases for
equipment which expire on various dates throughout 2003. The carrying value
of the leased equipment and related accumulated amortization included in
equipment is as follows:
September 30,
----------------------------------
1999 1998
----------------- ----------
Equipment $ 90,263 $ 6,241
Less accumulated amortization (11,942) (1,144)
-------- -------
$ 78,321 $ 5,097
======== =======
13
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENCIES: (continued)
The future minimum lease payments under the Company's capital leases at
September 30, 1999 are as follows:
Years Ending September 30,
- --------------------------
2000 $ 29,982
2001 27,620
2002 27,620
2003 12,909
--------
Total 98,131
Less: amount representing
interest (22,792)
--------
75,339
Less current portion (19,319)
--------
Capital lease obligations,
net of current portion $ 56,020
========
The Company leases office space and certain equipment under operating leases
which expire on various dates through 2002. Rent expense was $160,098,
$118,000 and $57,000 for the years ended September 30, 1999, 1998, and 1997,
respectively.
Future minimum lease payments under noncancellable leases with terms in
excess of one year are as follows:
Years Ending September 30, Operating Leases
- -------------------------- ----------------
2000 $150,305
2001 140,057
2002 77,464
--------
$367,826
========
Contingencies - The Company is involved in two legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial condition or results of operations.
The Company has agreed to repurchase hardware from a customer and refund
software costs. Management estimates the range of loss to be $0 to $75,000;
no amount has been accrued at September 30, 1999.
14
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. MANAGEMENT'S PLANS:
The Company's losses for the years ended September 30, 1999, 1998 and 1997
amounted to approximately $2,188,000, $472,000, and $225,000, respectively.
As a result of these losses, the Company's working capital position and
ability to generate sufficient cash flows from operations to meet its
operating and capital requirements have deteriorated. These matters raise
substantial doubt about the Company's ability to continue as a going concern
without a substantial infusion of equity capital and ultimately achieving
profitable operations. The Company is pursuing other sources of financing,
but there is no assurance any other source of financing will be available.
The losses incurred during the fiscal years ended September 30, 1999 and
1998 are the result of the Company changing its core business. In October
1996, the Company began developing computer and business software solutions
for small and mid-market companies. In September 1998, the Company started
to evolve into an Application Service Provider ("ASP") and plans to begin
leasing software applications in the fiscal year ended September 30, 2000.
The financial statements do not include any adjustments that might result
from these uncertainties.
11. STOCK OPTIONS AND WARRANTS:
Options - The Company's stock option plan (the "Plan") authorizes the grant
of options to purchase a maximum of 5,000,000 shares of common stock. The
Plan provides for the issuance of incentive stock options or non-statutory
stock options, as defined by the Internal Revenue Code. Pursuant to the
terms of the Plan, the exercise price of incentive stock options must not be
less than 100% of the fair market value of the shares of stock on the date
the option is granted or the aggregate par value of the shares of stock on
the date the option is granted. In the case of any 10% stockholder, the
exercise price of incentive stock options shall not be less than 110% of the
fair market value of the stock on the date the incentive option is granted.
The exercise price of non-statutory options may be any amount equal to or
greater than the par value of the shares of stock on the date the option is
granted. Vesting terms vary from immediate at date of grant to five years
from date of grant. The Compensation Committee of the Board of Directors
determines the vesting period of each grant. Options have a 10-year life
from the date of grant.
15
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
Transactions with regard to incentive options issued pursuant to the Plan
are as follows:
WEIGHTED
AVERAGE
TOTAL SHARES PRICE
UNDER OPTION PER SHARE
------------ -------------
Balance - October 1, 1998 - $ -
Granted 741,700 .40
Canceled (275,400) .25
Exercised - -
--------
Balance - September 30, 1999 466,300 $.44
========
As of September 30, 1999, an aggregate of 466,300 incentive stock options
have been issued and are exercisable at option prices ranging from $.25 to
$1.00 per share. The weighted average fair market value on the date of grant
was $.01 per share, the weighted average remaining contract life of these
options is 9.52 years, and the weighted average exercise price is $.49 per
share.
As of September 30, 1999, 100,000 non-qualified stock options have been
issued and are exercisable at option prices ranging from $2.00 to $4.00 per
share. These options had no fair market value on the date of grant. The
weighted average contract life of these options is 7.31 years, and the
weighted average exercise price is $2.10 per share.
Transactions with regard to non-qualified stock options issued are as
follows:
WEIGHTED
AVERAGE
TOTAL SHARES PRICE
UNDER OPTION PER SHARE
------------ -----------
Balance - October 1, 1996 - $ -
Granted 26,000 1.00
Canceled - -
Exercised - -
-------
Balance -September 30, 1997 26,000 1.00
Granted 74,000 2.14
Canceled - -
Exercised - -
-------
Balance - September 30, 1998 100,000 2.10
Granted - -
Canceled - -
Exercised - -
-------
Balance - September 30, 1999 100,000 2.10
=======
16
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
Warrants - In connection with the Merger with Vectron, the Company issued
warrants to acquire 191,756 shares of common stock to a financing company,
each of which entitles the holder to purchase one share of common stock at
an exercise price of $.52 per share at any time prior to the expiration date
of March 31, 2001. Prior to the Merger transaction, Vectron had issued
warrants to acquire 1,632,000 shares of common stock, each of which entitles
the holder to purchase one share of common stock at an exercise price of
$.25 per share at any time prior to the expiration date of September 5,
2001. These warrants were issued in connection with the sale of Vectron
common stock to certain individuals prior to the Merger.
The Company issued a warrant to acquire 8,160,000 shares of common stock to
the Company's former Chief Executive Officer at an exercise price of $.13
per share at any time prior to the expiration date on April 22, 2004. The
Company issued a warrant to acquire 408,000 shares of common stock to the
Company's current Chief Financial Officer at an exercise price of $.25 per
share at any time prior to the expiration date of April 22, 2004. The
Company issued a warrant to acquire 108,000 shares of common stock to the
Chief Executive Officer at an exercise price of $.22 per share. The warrant
may be exercised at any time prior to expiring at various dates through July
31, 2004. The Company issued a warrant to acquire 45,000 shares of common
stock to one individual at an exercise price of $.22 per share at any time
prior to expiration. The warrants expire at various times through September
30, 2004. Warrants were issued to an investor to purchase 340,909 shares of
common stock at an exercise price of $.41 per share at any time prior to
August 31, 2002. These warrants were issued in connection with the sale of
common stock. The Company issued warrants to acquire 6,000,000 shares of
common stock to the Chief Executive Officer at an exercise price ranging
from $.38 to $1.00 per share vesting monthly over 24 months. The warrants
expire August 11, 2004. The Company issued warrants to acquire 4,000,000
shares of common stock to the Company's Chief Executive Officer at an
exercise price ranging from $1.50 to $3.00 per share, vesting once certain
performance objectives are achieved. The warrants expire August 11, 2006.
The Company issued a warrant to acquire 1,000,000 shares of common stock to
the former Chief Executive Officer at an exercise price of $.38 per share,
vesting monthly over 24 months. The warrant expires August 11, 2004. The
Company issued warrants to acquire 2,000,000 shares of common stock to the
former Chief Executive Officer at an exercise price ranging from $1.50 to
$3.00 per share, vesting once certain performance objectives are achieved.
The warrants expire August 11, 2006.
17
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
The following table summarizes information about warrants outstanding at
September 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------- -------------------------------
Weighted-
Weighted- Average Fair
Average Weighted- Market Weighted-
Range of Number Remaining Average Value on Number Average
Exercise Outstanding Contractual Exercise Date of Exercisable Exercise
Price at 9/30/99 Life Price Grant at 9/30/99 Price
- -------------- ----------- ------------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
$.07 to $.50 15,885,665 3.40 years $ .23 $.03 12,135,664 $ .19
$1.00 to $3.00 8,000,000 6.03 1.94 .02 83,333 1.00
---------- ----------
23,885,665 4.29 .81 .02 12,218,997 .20
========== ==========
</TABLE>
Subsequent to September 30, 1999, the former Chief Executive Officer
canceled warrants to acquire 3,000,000 shares of common stock and was issued
a warrant to acquire 1,000,000 shares of common stock at an exercise price
of $2.125, vesting monthly over 24 months. The warrant expires October 27,
2004.
Transactions with regard to warrants are as follows:
WEIGHTED
AVERAGE
TOTAL PRICE
WARRANTS PER SHARE
---------- ---------
Balance - October 1, 1997 - $ -
Granted 4,815,131 .16
Canceled - -
Exercised - -
----------
Balance - September 30, 1998 4,815,131 .16
Granted 22,061,909 .85
Canceled (115,053) .43
Exercised (2,876,322) .07
----------
Balance - September 30, 1999 23,885,665 .81
==========
Compensation expense of $77,761 has been recognized in fiscal 1999 for
various options and warrants issued to employees with exercise prices below
the fair value of the Company's common stock on the date of grant.
Consulting expense of $36,567 has been recognized in fiscal 1999 in
connection with a warrant issued to a consultant. Fair value for this
warrant was determined based upon the Black-Scholes option pricing model.
18
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock Based Compensation," encourages but does not require companies to
recognize compensation expense for grants of stock, stock options, and other
equity instruments to employees based on fair value. Fair value is generally
determined under an option pricing model using the criteria set forth in
SFAS No. 123.
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized in 1999 or 1998 for
its stock option plans and warrants issued to employees, except as disclosed
in the preceding paragraphs. Had compensation expense for the Company's
stock-based compensation plans been determined based on fair value at the
grant dates for awards under those plans consistent with the method of SFAS
No. 123, the Company's net loss and loss per common share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net loss
As reported $(2,188,185) $(471,844) $(224,652)
Pro forma (2,451,467) (471,844) (224,652)
Net loss per common share
As reported $ (.08) $ (.03) $ (.02)
Pro forma (.09) (.03) (.02)
</TABLE>
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions: risk
free rates of 5.0% to 5.5%; volatility of 86.76% to 243.05% for 1999; no
assumed dividend yield; and expected lives of 1.5 and 2 years.
12. CONCENTRATIONS OF CREDIT RISK:
Sales by the Company to one customer, International Exhibition, Inc., were
approximately $82,000 (12.5% of revenues) for the year ended September 30,
1999. Trade receivables from International Exhibition, Inc. amounted to
$12,990 at September 30, 1999. No other customer accounted for a material
portion of revenue or trade receivables.
19
<PAGE>
EBASEONE CORPORATION
(PREVIOUSLY PRIME NET CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. EMPLOYEE BENEFITS:
In July 1999, the Company established a Profit Sharing/Retirement Plan which
provides for an employee salary deferral contribution and Company
contributions. Employees are permitted to contribute a percentage of their
compensation as defined by the Plan documents. Contributions made by the
Company are based on the Company's performance and are at the discretion of
the Board of Directors. The Company made no contributions for the period
ended September 30, 1999.
14. SUBSEQUENT EVENTS:
Between October 2, 1999 and November 12, 1999, the Company issued 475,168
shares of common stock at $.94 per share for total proceeds of $445,921.
On November 15, 1999 the Company executed an agreement whereby it agreed to
issue 2,083,333 shares of common stock for $9,000,000, of which the Company
received $6,000,000 ($5,481,200, net of transaction costs) and the remaining
$3,000,000, net of transaction cost will be received on the second trading
day following the date that the registration statement to be filed by the
Company with the Securities Exchange Commission has been declared effective.
In addition, the purchasers were issued two warrants each to acquire 416,666
shares of common stock at $5.18 per share. These warrants expire on November
15, 2004. A third adjustable warrant was issued to acquire common stock of
the Company at an exercise price of $.001 per share based upon the following
formula:
2,083,333 X ($5.31 - Per Share Market Value) / Per Share Market Value
The adjustable warrant expires on November 15, 2001.
A warrant was also issued to the placement agent to acquire 450,000 shares
of common stock at $5.18 per share. This warrant expires on November 15,
2004.
20
<PAGE>
4,556,609 Shares
ebaseOne Corporation
Common Stock
____________________
PROSPECTUS
____________________
____________________
______________, 2000
____________________
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. The selling security holders are offering to sell,
and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. 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 sale of common stock.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The amended and
restated articles of incorporation of ebaseOne limit the liability of directors
to ebaseOne or its stockholders to the fullest extent permitted by Delaware law.
Specifically, directors will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the company or its
stockholders, (ii) for acts or omissions not in good faith that constitute a
breach of duty of the director to the company or an act or omission which
involves intentional misconduct or a knowing violation of law, (iii) for an act
or omission for which the liability of a director is expressly provided by an
applicable statute, or (iv) for any transaction from which the director received
an improper personal benefit, whether the benefit resulted from an action taken
within the scope of the director's office.
The inclusion of this provision in the amended and restated articles of
incorporation may have the effect of reducing the likelihood of derivative
litigation against directors, and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefitted
the company and its stockholders.
ebaseOne's amended articles of incorporation provide for the
indemnification of its executive officers and directors, and the advancement to
them of expenses in connection with any proceedings and claims, to the fullest
extent permitted by Delaware law. The amended and restated articles of
incorporation include related provisions meant to facilitate the indemnities'
receipt of such benefits. These provisions cover, among other things: (i)
specification of the method of determining entitlement to indemnification and
the selection of independent counsel that will in some cases make such
determination, (ii) specification of certain time periods by which certain
payments or determinations must be made and actions must be taken, and (iii) the
establishment of certain presumptions in favor of an indemnitee. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the company pursuant to
the foregoing provisions, the company has been informed that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses shall be paid by the Registrant.
SEC Registration Fee................ $10,134
Printing and Engraving Expenses..... *
Legal Fees and Expenses............. *
Accounting Fees and Expenses........ *
Miscellaneous....................... *
-------
TOTAL............................... $10,134
=======
* To be provided by amendment.
Item 26. Recent Sales of Unregistered Securities
As used herein, the term "accredited" is as defined in Rule 501(a)(3)
promulgated under the Securities Act.
In November 1999, seven accredited investors acquired 2,083,333 shares of
common stock for an
II-1
<PAGE>
aggregate purchase price of $9 million, or $4.32 per share. In connection with
the above issuance, the company issued three warrants to each of these
investors, plus one other accredited investor, to purchase an aggregate of
1,283,330 shares of common stock at an exercise price of $5.18 per share,
expiring November 2004. In addition, in connection with the above transaction,
the company issued an adjustable warrant to issue shares of common stock at an
exercise price of $0.001 per share expiring two years from the effective date of
this registration statement. The number of shares issuable under the warrant is
based on the market price of the common stock, and will not vest unless the
stock price is less than $5.31 per share. In October and November 1999, the
company issued 475,168 shares of common stock and a warrant to purchase 25,000
shares of common stock at an exercise price of $2.25 per share expiring October
2002 for an aggregate purchase price of $445,922 to 18 accredited investors. In
September 1999, the company issued 120,729 shares of common stock to four
accredited investors at a purchase price of $0.94 per share. In September 1999,
the company issued 131,118 shares of common stock to a accredited third party
for services rendered from April 1999 through August 1999 at a value of
approximately $0.25 per share. In August 1999, the company issued an aggregate
of 113,636 shares of common stock to two accredited investors for services
rendered valued at approximately $0.44 per share. The company believes the above
transactions were exempt from registration pursuant to Rule 506 promulgated
under Section 4(2) of the Securities Act as privately negotiated, isolated, non-
recurring transactions to accredited investors not involving any public
solicitation.
In August 1999, the company issued an aggregate of 113,636 shares of common
stock to two individuals for services rendered. In April and May 1999, the
company issued an aggregate of 307,097 shares of common stock to 13 individuals
for services rendered. The company believes the above transactions were exempt
from registration pursuant to Section 4(2) of the Securities Act, as the
issuances were to sophisticated persons with specific knowledge of the company
and with general expertise in financial and business matters that they were able
to evaluate the merits and risks of an investment in the company.
In April 1999, the company issued warrants to purchase 408,000 shares of
common stock to an officer of the company at an exercise price of $2.125 per
share for services rendered and issued 816,000 shares of common stock to the
same officer for nominal consideration. In September and October 1999, the
company issued warrants to two officers to purchase an aggregate of 153,000
shares of common stock at an exercise price of $.22 per share for services
rendered from April 1999 through August 1999. In August 1999, the company
issued warrants to purchase an aggregate of 10,000,000 shares of common stock to
an officer and director of the company, with prices ranging from $0.38 to $5.00
per share for services rendered. In October 1999, the company issued warrants
to purchase 1,000,000 shares of common stock to a director of the company at an
exercise price of $2.125 per share for services rendered in November 1999, the
company issued warrants to purchase 1,750,000 shares of common stock to two
executive officers of the company at exercise prices ranging from $2.37 to $3.00
per share for services rendered. The company believes the above transactions
were exempt from registration pursuant to Section 4(2) of the Securities Act, as
the issuances were to accredited investors and, and since the transactions were
non-recurring and privately negotiated.
In May 1999, the company issued warrants to purchase an aggregate of
10,391,758 shares at prices ranging from $0.125 to $0.50 per share in exchange
for warrants held by nine former Synoptech Solutions warrant holders, all of
which were accredited investors. In May 1999, the company issued an aggregate
of 26,913,074 shares of company common stock 34 accredited investors in exchange
for capital stock of Synoptech Solutions. The company believes the above
transactions were exempt from registration pursuant to Rule 506 promulgated
under Section 4(2) of the Securities Act as privately negotiated, isolated, non-
recurring transactions to accredited investors not involving any public
solicitation.
In May 1999, the company issued options pursuant to the employee's stock
option plan to purchase an aggregate of 405,850 shares of common stock at
purchase prices ranging from $.25 to $1.00 per share in exchange for options
held by four former Synoptech Solutions option holders, all of which were
employees of the company. From May 1999 to November 1999, the company issued
options to purchase an aggregate of 631,300 shares of common stock at prices
ranging from $.25 to $2.25 per share to 18 employees pursuant to the company's
employee stock option plan. In September 1999, the company issued 10,000 shares
of common stock at a purchase price of $1.00 per share to one employee pursuant
to an exercise of such employee's stock option originally issued in May 1999.
The company believes the above transactions were exempt from registration
pursuant to Rule 701
II-2
<PAGE>
promulgated under Section 3(b) of the Securities Act.
In August 1999, the company issued 1,363,636 shares of common stock and a
warrant to purchase 340,909 shares of common stock at an exercise price of
$0.40625 expiring August 2002 to one accredited investor for gross proceeds of
$300,000. In April 1999, an aggregate of 3,500,000 shares of common stock were
issued to 22 entities for an aggregate purchase price of $600,000. In July
1997, an aggregate of 115,000 shares of common stock were issued to four
individuals for an aggregate purchase price of $50,000. The company believes the
above transactions were exempt from registration pursuant to Rule 504
promulgated under Section 3(b) of the Securities Act.
Item 27. Exhibits
INDEX TO EXHIBITS
Exhibit No. Identification of Exhibit
- -----------
2.1/(1)/ Exchange Agreement between Norske Energy Corporation and
Synoptech Solutions Group, Inc.
3.1/(1)/ Amended and Restated Articles of Incorporation
3.2/(1)/ By-Laws
4.1/(1)/ Form of Specimen of common stock
5.1/(2)/ Legal Opinion
10.1/(1)/ Employment Agreement of John Frazier Overstolz
10.2/(1)/ Employment Agreement of Charles W. Skamser
10.3/(1)/ Employment Agreement of Michael A. Sooley
10.4/(1)/ Employment Agreement of Scott Feuless
10.5/(1)/ 1999 Stock Option Plan
10.6/(2)/ ASP License Agreement with SalesLogix Corporation
10.7/(2)/ Microsoft Direct Commercial Service License Agreement
21.1/(1)/ List of Subsidiaries
23.1/(1)/ Consent of Hein + Associates, LLP
23.2/(2)/ Consent of legal counsel
27.1/(1)/ Financial Data Schedule
___________________
(1) Filed herewith.
(2) To be filed by amendment.
Item 28. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement. (iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided that the
registrant includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the prospectus is
at least as current as the date of those financial statements. Notwithstanding
the foregoing, with respect to registration statements on Form F-3, a post-
effective amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter
if such financial statements and information are contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Form F-3.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and authorized this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Texas, on the ____ day of November, 1999.
EBASEONE CORPORATION
By: //s// CHARLES W. SKAMSER
___________________________________________
CHARLES W. SKAMSER, Chief Executive Officer
_________________________
This registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
<TABLE>
<CAPTION>
<S> <C> <C>
//S// JOHN FRAZIER OVERSTOLZ Chairman of the Board November 22, 1999
- ----------------------------
JOHN FRAZIER OVERSTOLZ
//S// CHARLES W. SKAMSER Chief Executive Officer, November 22, 1999
- ----------------------------
CHARLES W. SKAMSER President, and Director
//S// MICHAEL M. ROTOLO Director November 22, 1999
- ----------------------------
MICHAEL M. ROTOLO
//S// ROBERT J. HORN Chief Financial Officer, November 22, 1999
- ----------------------------
ROBERT J. HORN Secretary and Treasurer
//S// MICHAEL A. SOOLEY Chief Technology Officer November 22, 1999
- ----------------------------
MICHAEL A. SOOLEY
//S// SCOTT FUELESS Sr. Vice President of November 22, 1999
- ---------------------------- Technology
SCOTT FEULESS
</TABLE>
II-5
<PAGE>
EXHIBIT 2.1
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement"), is
entered into as of this 22nd day of April 1999, by and among Norske Energy
Corp., a Delaware corporation ("Norske"), Synoptech Solutions Group, Inc., a
Nevada corporation ("Synoptech"), those persons identified in Schedule A-1
attached hereto who are the beneficial owners of 6,596,342 shares of common
stock of Synoptech ("Common Stock"), which constitutes 100% of the outstanding
capital stock of Synoptech ("Synoptech Shareholders"), those persons identified
in Schedule A-2 attached hereto who are the holders of Synoptech Common Stock
purchase warrants ("Warrants") having the right to purchase a total of 2,546,999
shares of Synoptech Common Stock, and those persons identified in Schedule A-3
attached hereto who are the holders of Synoptech Common Stock purchase options
("Options") having the right to purchase a total of 110,000 shares of Synoptech
Common Stock.
PREMISES
This Agreement provides for the acquisition by Norske of all of the issued
and outstanding shares of Synoptech solely in exchange for voting shares of
Norske, on the terms and conditions hereinafter provided, all for the purpose of
effecting a so-called "tax-free" reorganization pursuant to Sections
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended.
AGREEMENT
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF NORSKE
As an inducement to, and to obtain the reliance of the Synoptech
Shareholders, Norske represents and warrants as follows:
Section 1.01 ORGANIZATION. Norske is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Delaware.
Norske has the corporate power and is duly authorized, qualified, franchised,
and licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in Schedule 1.01 are complete
and correct copies of the certificate of incorporation, as amended, and bylaws
of Norske as in effect on the date hereof. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any provision of
the certificate of incorporation or bylaws. Norske has taken all action
required by laws, its articles of incorporation, its bylaws, or otherwise to
authorize the execution and delivery of this Agreement. Norske has full power,
authority, and legal right and has taken all action required by law, its
certificate of incorporation, bylaws, and otherwise to consummate the
transactions herein contemplated.
Section 1.02 CAPITALIZATION. The authorized capitalization of Norske
consists of 50,000,000 shares of common stock, $.001 par value per share, of
which 6,307,358 shares are currently issued and outstanding. A shareholder list
is set forth in Schedule 1.02. All issued and outstanding shares are legally
issued, fully paid, and non-assessable and not issued in violation of the pre-
emptive or other rights of any person. There are no options, warrants, rights
or convertible securities outstanding to purchase any capital stock of Norske,
except as set forth in Schedule 1.02.
Section 1.03 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Norske does not
have any subsidiaries and does not own, beneficially or of record, any shares of
any other corporation.
<PAGE>
Section 1.04 FINANCIAL STATEMENTS.
(a) Included in Schedule 1.04(a) are the unaudited financial
statements of Norske for each of its last two fiscal years ended March 31,
1999.
(b) All such financial statements have been prepared in accordance
with generally accepted accounting principles. The audited balance sheet
presents fairly as of its date the financial condition of Norske. Norske
did not have, as of the date of such balance sheet, except as and to the
extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in a balance
sheet or the notes thereto, prepared in accordance with generally accepted
accounting principles, and all assets reflected therein are properly
reported and present fairly the value of the assets of Norske in accordance
with generally accepted accounting principles. The statements of income,
stockholders' equity, and changes in financial condition reflect fairly the
information required to be set forth therein by generally accepted
accounting principles.
(c) Norske has not filed any state, federal, or local income tax
returns required to be filed by it from inception to the date hereof.
Norske does not owe any federal, state, county, local, or other taxes
(including any deficiencies, interest, or penalties) through the date
hereof, for which Norske may be liable in its own right or as a transferee
of the assets of, or as a successor to, any other corporation or entity.
Furthermore, except as accruing in the normal course of business, Norske
does not owe any accrued and unpaid taxes to date of this Agreement.
(d) The books and records, financial and otherwise, of Norske are in
all material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(e) Norske has good and marketable title to its assets and, except as
set forth in the financial statements of Norske or the notes thereto, have
no material contingent liabilities, direct or indirect, matured or
unmatured.
Section 1.05 INFORMATION. The information concerning Norske set forth in
this Agreement and in Schedules attached hereto is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading.
Section 1.06 OPTIONS OR WARRANTS. There are no existing options,
warrants, calls, or commitments of any character relating to the authorized and
unissued Norske Common Stock, except as described in Schedule 1.02.
Section 1.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
this Agreement, since March 31, 1999:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Norske; or (ii)
any damage, destruction, or loss to Norske (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of Norske;
(b) Norske has not (i) amended its certificate of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or redeem, any
of its capital stock; (iii) waived any rights of value which in the
aggregate are extraordinary or material considering the business of Norske;
(iv) made any material change in its method of management, operation, or
accounting; (v) entered into any other material transaction; (vi) made any
accrual or arrangement for payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or former
officer or employee; (vii) increased the rate of compensation payable or to
become payable by it to any of its officers or directors or any of its
employees whose monthly compensation exceeds $1,000; or (viii) made any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or
arrangement made to, for, or with its officers, directors, or employees;
<PAGE>
(c) Norske has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
(absolute or contingent); (ii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in or
shown on the most recent Norske balance sheet; (iii) sold or transferred,
or agreed to sell or transfer, any of its assets, properties, or rights
(except assets, properties, or rights not used or useful in its business
which, in the aggregate have a value of less than $1,000), or canceled, or
agreed to cancel, any debts or claims (except debts or claims which in the
aggregate are of a value of less than $1,000); (iv) made or permitted any
amendment or termination of any contract, agreement, or license to which it
is a party if such amendment or termination is material, considering the
business of Norske; or (v) except as reflected on Schedule 1.02, issued,
delivered, or agreed to issue or deliver any stock, bonds or other
corporate securities including debentures (whether authorized and unissued
or held as treasury stock); and
(d) to the best knowledge of the Norske Shareholder, Norske has not
become subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business, operations,
properties, assets, or condition of Norske.
Section 1.08 TITLE AND RELATED MATTERS. Norske has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the ordinary course of
business), free and clear of all liens, pledges, charges, or encumbrances except
(a) statutory liens or claims not yet delinquent; and (b) such imperfections of
title and easements as do not and will not materially detract from or interfere
with the present or proposed use of the properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties. Norske owns, free and clear of any liens, claims, encumbrances,
royalty interests, or other restrictions or limitations of any nature
whatsoever, any and all products it is currently manufacturing, including the
underlying technology and data, and all procedures, techniques, marketing plans,
business plans, methods of management, or other information utilized in
connection with Norske's business. No third party has any right to, and Norske
has not received any notice of infringement of or conflict with asserted rights
of others with respect to any product, technology, data, trade secrets, know-
how, proprietary techniques, trademarks, service marks, tradenames, or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling, or finding, would have a materially adverse effect on the
business, operations, financial condition, income, or business prospects of
Norske or any material portion of its properties, assets, or rights.
Section 1.09 LITIGATION AND PROCEEDINGS. There are no actions, suits,
proceedings, or investigations pending or, to the knowledge of Norske after
reasonable investigation, threatened by or against Norske or affecting Norske or
its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind. Norske does not have any knowledge of any default on its part with
respect to any judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator, or governmental agency or instrumentality
or of any circumstances which, after reasonable investigation, would result in
the discovery of such a default.
Section 1.10 CONTRACTS.
(a) Except for Media Communications, there are no material contracts,
agreements, franchises, license agreements, or other commitments to which
Norske is a party or by which it or any of its assets, products,
technology, or properties are bound;
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which Norske is a party or by which its properties are
bound and which are material to the operations of Norske taken as a whole
are valid and enforceable by Norske in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally;
(c) Norske is not a party to or bound by, and the properties of Norske
are not subject to, any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any judgment,
order, writ, injunction, decree, or award which materially and adversely
affects, or in the future may (as far as Norske can now foresee) materially
and adversely affect, the business, operations, properties, assets, or
condition of Norske; and
<PAGE>
(d) Norske is not a party to any oral or written (i) contract for the
employment of any officer or employee; (ii) profit sharing, bonus, deferred
compensation, stock option, severance pay, pension benefit or retirement
plan, agreement, or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract, or
indenture relating to the borrowing of money; (iv) guaranty of any
obligation, other than one on which Norske is a primary obligor, for the
borrowing of money or otherwise, excluding endorsements made for collection
and other guaranties of obligations, which, in the aggregate do not exceed
more than one year or providing for payments in excess of $1,000 in the
aggregate; (vi) collective bargaining agreement; (vii) agreement with any
present or former officer or director of Norske or (viii) contract,
agreement, or other commitment involving payments by it of more than $1,000
in the aggregate.
Section 1.11 MATERIAL CONTRACT DEFAULTS. Norske is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or condition of Norske and there is no event of default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which Norske or the Norske Shareholder has not taken adequate steps
to prevent such a default from occurring.
Section 1.12 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which Norske is a
party or to which any of its properties or operations are subject.
Section 1.13 GOVERNMENTAL AUTHORIZATIONS. Norske has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by Norske of this Agreement and the consummation by
Norske of the transactions contemplated hereby.
Section 1.14 COMPLIANCE WITH LAWS AND REGULATIONS. Norske has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Norske or except to the extent that noncompliance would
not result in the incurrence of any material liability for Norske.
Section 1.15 INSURANCE. All the insurable properties of Norske are
insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
Section 1.16 APPROVAL OF AGREEMENT. The board of directors of Norske has
authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby, and approved the submission of this Agreement
and the transactions contemplated hereby to the shareholders of Norske for their
approval with the recommendation that the reorganization be accepted if it has
been deemed necessary.
Section 1.17 LABOR RELATIONS. Norske has not had a work stoppage
resulting from labor problems. To the knowledge of Norske, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Norske.
Section 1.18 NORSKE SCHEDULES. Norske has delivered to Synoptech a copy of
the board of directors' and shareholders' minutes (if applicable) of Norske
approving this transaction.
Section 1.19 STOCKHOLDERS' EQUITY. At Closing, there shall be at least
$700,000 of cash in Norske, no liabilities, and stockholders' equity of at least
$700,000.
<PAGE>
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF SYNOPTECH'S SHAREHOLDERS
As an inducement to, and to obtain reliance of Norske, Synoptech
Shareholders represent and warrant as follows:
Section 2.01 OWNERSHIP OF SYNOPTECH SHARES. Each Synoptech Shareholder
hereby represents and warrants with respect to itself that it is the legal and
beneficial owner of the number of Synoptech shares set forth opposite its name
at the foot of this agreement, free and clear of any claims, charges, equities,
liens, security interests, and encumbrances whatsoever, and each such
shareholder has full right, power, and authority to transfer, assign, convey,
and deliver its Synoptech shares; and delivery of such shares at the closing
will convey to Norske good and marketable title to such shares free and clear of
any claims, charges, equities, liens, security interests, and encumbrances
whatsoever.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF SYNOPTECH SOLUTIONS GROUP, INC.
As an inducement to, and to obtain the reliance of Norske, Synoptech
represents and warrants as follows:
Section 3.01 ORGANIZATION. Synoptech is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Nevada.
Synoptech has the corporate power and is duly authorized, qualified, franchised,
and licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in Schedule 3.01 are complete
and correct copies of the articles of incorporation, as amended, and bylaws of
Synoptech as in effect on the date hereof. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any provision of
these articles of incorporation or bylaws. Synoptech has taken all action
required by laws, its articles of incorporation, its bylaws, or otherwise to
authorize the execution and delivery of this Agreement. Synoptech has full
power, authority, and legal right and has taken all action required by law, its
certificate of incorporation, bylaws, and otherwise to consummate the
transactions herein contemplated.
Section 3.02 CAPITALIZATION. The authorized capitalization of Synoptech
consists of 20,000,000 shares of common stock, $.01 par value per share, of
which 6,596,342 shares are currently issued and outstanding, 2,546,999 shares
are reserved for issuance upon exercise of currently outstanding warrants with
exercise prices ranging from $.50 to $2.13 per share, and 110,000 shares are
reserved for issuance upon exercise of currently outstanding options with
exercise prices of $1.00 per share. A shareholder list, warrant list and option
list are set forth in Schedules A-1, A-2 and A-3. All issued and outstanding
shares are legally issued, fully paid, and non-assessable and not issued in
violation of the pre-emptive or other rights of any person. Except as set forth
in the Schedules, there are no other options, warrants, rights or convertible
securities outstanding to purchase any capital stock of Synoptech.
Section 3.03 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Other than the
ownership of Prime Net Corporation, Synoptech does not have any other
subsidiaries and does not own, beneficially or of record, any shares of any
other corporation.
Section 3.04 FINANCIAL STATEMENTS.
(a) Included in Schedule 3.04 (a) are unaudited financial statements
for each of the last two fiscal years ended December 31, 1998.
<PAGE>
(b) All such financial statements have been prepared in accordance
with generally accepted accounting principles. The unaudited balance sheet
presents fairly as of its date the financial condition of Synoptech.
Synoptech did not have, as of the date of such balance sheet, except as and
to the extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in a balance
sheet or the notes thereto, prepared in accordance with generally accepted
accounting principles, and all assets reflected therein are properly
reported and present fairly the value of the assets of Synoptech in
accordance with generally accepted accounting principles. The statements
of income, stockholders' equity, and changes in financial condition reflect
fairly the information required to be set forth therein by generally
accepted accounting principles.
(c) Synoptech has filed all state, federal, and local income tax
returns required to be filed by it from inception to the date hereof.
Included in Schedule 3.04(b) are true and correct copies of the federal
income tax returns of Synoptech filed since 1996. None of such federal
income tax returns have been examined by the Internal Revenue Service.
Each of such income tax returns reflects the taxes due for the period
covered thereby, except for amounts which, in the aggregate, are
immaterial.
(d) Synoptech does not owe any unpaid federal, state, county, local,
or other taxes (including any deficiencies, interest, or penalties) through
the date hereof, for which Synoptech may be liable in its own right or as a
transferee of the assets of, or as a successor to, any other corporation or
entity. Furthermore, except as accruing in the normal course of business,
Synoptech does not owe any accrued and unpaid taxes to date of this
Agreement.
(e) The books and records, financial and otherwise, of Synoptech are
in all material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(f) Synoptech has good and marketable title to its assets and, except
as pledged in the ordinary course of business or as set forth in the
financial statements of Synoptech or the notes thereto, has no material
contingent liabilities, direct or indirect, matured or unmatured.
Section 3.05 INFORMATION. The information concerning Synoptech set forth
in this Agreement and in Schedules attached hereto is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
Section 3.06 OPTIONS OR WARRANTS. Except the warrants and options
referred to in Section 3.02, there are no existing options, warrants, calls, or
commitments of any character relating to the authorized and unissued Synoptech
common stock.
Section 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Synoptech or (ii)
any damage, destruction, or loss to Synoptech (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of Synoptech;
(b) Synoptech has not (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or redeem, any
of its capital stock; (iii) waived any rights of value which in the
aggregate are extraordinary or material considering the business of
Synoptech; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material transaction;
(vi) made any accrual or arrangement for payment of bonuses or special
compensation of any kind or any severance or termination pay to any present
or former officer or employee; (vii) increased the rate of compensation
payable or to become payable by it to any of its officers or directors or
any of its employees whose monthly compensation exceeds $5,000; or (viii)
made any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment, or
arrangement made to, for, or with its officers, directors, or employees;
<PAGE>
(c) Synoptech has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary course
of business; (ii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent Synoptech balance sheet, and current liabilities incurred since
that date in the ordinary course of business; (iii) sold or transferred, or
agreed to sell or transfer, any of its assets, properties, or rights
(except assets, properties, or rights not used or useful in its business
which, in the aggregate have a value of less than $10,000), or canceled, or
agreed to cancel, any debts or claims (except debts or claims which in the
aggregate are of a value of less than $10,000); (iv) made or permitted any
amendment or termination of any contract, agreement, or license to which it
is a party if such amendment or termination is material, considering the
business of Synoptech; or (v) except as reflected in Schedule A-1, issued,
delivered, or agreed to issue or deliver any stock, bonds or other
corporate securities including debentures (whether authorized and unissued
or held as treasury stock); and
(d) to the best knowledge of Synoptech, Synoptech has not become
subject to any law or regulation which materially and adversely affects, or
in the future may adversely affect, the business, operations, properties,
assets, or condition of Synoptech.
Section 3.08 TITLE AND RELATED MATTERS. Synoptech has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the ordinary course of
business), free and clear of all liens, pledges, charges, or encumbrances except
(a) statutory liens or claims not yet delinquent; (b) such imperfections of
title and easements as do not and will not materially detract from or interfere
with the present or proposed use of the properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties; and (c) except as pledged in the ordinary course of business.
Except as pledged in the ordinary course of business, Synoptech owns, free and
clear of any liens, claims, encumbrances, royalty interests, or other
restrictions or limitations of any nature whatsoever, any and all products it is
currently manufacturing, including the underlying technology and data, and all
procedures, techniques, marketing plans, business plans, methods of management,
or other information utilized in connection with Synoptech's business. No
third party has any right to, and Synoptech has not received any notice of
infringement of or conflict with asserted rights of others with respect to any
product, technology, data, trade secrets, know-how, proprietary techniques,
trademarks, service marks, tradenames, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding, would
have a materially adverse effect on the business, operations, financial
condition, income, or business prospects of Synoptech or any material portion of
its properties, assets, or rights.
Section 3.09 LITIGATION AND PROCEEDINGS. Except as set forth in Schedule
3.09, there are no actions, suits, proceedings, or investigations pending or, to
the knowledge of Synoptech after reasonable investigation, threatened by or
against Synoptech or affecting Synoptech or its properties, at law or in equity,
before any court or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind. Synoptech does not have any
knowledge of any default on its part with respect to any judgment, order, writ,
injunction, decree, award, rule, or regulation of any court, arbitrator, or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.
Section 3.10 CONTRACTS.
(a) There are no material contracts, agreements, franchises, license
agreements, or other commitments to which Synoptech is a party or by which
it or any of its assets, products, technology, or properties are bound
outside of the ordinary course of business;
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which Synoptech is a party or by which its properties
are bound and which are material to the operations of Synoptech taken as a
whole are valid and enforceable by Synoptech in all respects, except as
limited by bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally;
(c) Synoptech is not a party to or bound by, and the properties of
Synoptech are not subject to, any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any judgment,
order, writ, injunction, decree, or award which materially and adversely
affects, or in the future may
<PAGE>
(as far as Synoptech can now foresee) materially and adversely affect, the
business, operations, properties, assets, or condition of Synoptech; and
(d) Except as incurred in the ordinary course of business or reflected
in the most recent Synoptech balance sheet, Synoptech is not a party to any
oral or written (i) contract for the employment of any officer or employee
which is not terminable on 30 days or less notice; (ii) profit sharing,
bonus, deferred compensation, stock option, severance pay, pension benefit
or retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract, or indenture relating to the borrowing of money; (iv) guaranty of
any obligation, other than one on which Synoptech is a primary obligor, for
the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations, which, in the aggregate do
not exceed more than one year or providing for payments in excess of
$10,000 in the aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director of Synoptech or
(viii) contract, agreement, or other commitment involving payments by it of
more than $10,000 in the aggregate.
Section 3.11 MATERIAL CONTRACT DEFAULTS. Synoptech is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets, or condition of Synoptech and there is no event of default
in any material respect under any such contract, agreement, lease, or other
commitment in respect of which Synoptech has not taken adequate steps to prevent
such a default from occurring.
Section 3.12 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which Synoptech
is a party or to which any of its properties or operations are subject.
Section 3.13 GOVERNMENTAL AUTHORIZATIONS. Synoptech has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by Synoptech of this Agreement and the consummation by
Synoptech of the transactions contemplated hereby.
Section 3.14 COMPLIANCE WITH LAWS AND REGULATIONS. Synoptech has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Synoptech or except to the extent that noncompliance
would not result in the incurrence of any material liability for Synoptech.
Section 3.15 INSURANCE. All the insurable properties of Synoptech are
insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
Section 3.16 APPROVAL OF AGREEMENT. The board of directors of Synoptech
has authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby.
Section 3.17 LABOR RELATIONS. Synoptech has not had a work stoppage
resulting from labor problems. To the knowledge of Synoptech, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Synoptech.
Section 3.18 SYNOPTECH SCHEDULES. Synoptech has delivered to Norske a
copy of the board of directors' minutes of Synoptech approving this transaction.
<PAGE>
ARTICLE IV
PLAN OF EXCHANGE
Section 4.01 THE EXCHANGE. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 4.05), each
of the Synoptech Shareholders hereby agrees to assign, transfer, and deliver to
Norske, free and clear of all liens, pledges, encumbrances, charges,
restrictions, or known claims of any kind, nature, or description, the number of
shares of common stock of Synoptech set after his signature at the foot of this
Agreement, in the aggregate constituting all of the issued and outstanding
shares of common stock of Synoptech, or 6,596,342 shares, and Norske agrees to
acquire such shares on such date by issuing and delivering in exchange therefor
solely shares of Norske restricted common stock, par value $0.001, in the amount
of 4.08 shares of Norske for each outstanding share of Synoptech, or an
aggregate amount of approximately 26,913,074 shares of Norske common stock, or
approximately 81% of the outstanding shares of Norske common stock. At the
Closing, each of the Synoptech Shareholders shall, on surrender of his
certificate or certificates representing such Synoptech shares to the registrar
and transfer agent, be entitled to receive a certificate or certificates
evidencing shares of the Exchanged Norske Stock as provided herein. Upon the
consummation of the transaction contemplated herein, all shares of capital stock
of Synoptech shall be held by Norske.
Section 4.02 EXCHANGE OF WARRANTS AND OPTIONS. In addition to the
exchange of stock set forth herein, at the Closing Norske will issue warrants
and options to purchase shares of Norske Common Stock to the individuals as
described in Schedules A-2 and A-3.
Section 4.03 APPOINTMENT OF NEW DIRECTORS. In connection with the Closing
of the transactions contemplated by this Agreement, the existing directors of
Norske shall resign, seriatim, and shall appoint John Frazier Overstoltz and
Michael M. Rotolo as directors to fill the vacancies created thereby, to serve
until the next annual stockholders' meeting of Norske and their successors shall
have been elected and qualified.
Section 4.04 CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date"), no later than Monday, May 10, 1999 provided
that the covenants and conditions set forth in Articles V, VI and VII have been
satisfied. Such Closing shall take place at a mutually agreeable time and
place.
Section 4.05 CLOSING EVENTS. At the Closing, each of the respective
parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings, or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby.
Section 4.06 POST CLOSING ADJUSTMENTS. Norske has agreed to provide
Synoptech and the Synoptech Shareholders certain indemnification, as more fully
described in Section 5.07. Norske hereby acknowledges and agrees that in the
event that Synoptech or Synoptech Shareholders are entitled to a claim of
indemnification, Synoptech on a pro-rata basis is entitled to, among pursuing
other legal rights and remedies, issue additional shares of Norske Common Stock
to the Synoptech Shareholders (as determined prior to Closing) and to the
exclusion of the Norske shareholders (as determined prior to Closing) in amounts
and determinations made by the then Board of Directors of Norske.
ARTICLE V
SPECIAL COVENANTS
Section 5.01 BOARD OF DIRECTORS ACTION BY NORSKE. Prior to the Closing,
the Board of Directors of Norske shall:
(a) effect the authorization and approval of this Agreement and the
transactions contemplated thereby;
(b) effect the action described in Section 4.03; and
<PAGE>
(c) take such other actions as the directors may determine are
appropriate.
Section 5.02 ACCESS TO PROPERTIES AND RECORDS. Norske and Synoptech will
each afford to the officers and authorized representatives of the other full
access to the properties, books, and records of each other as the case may be,
in order that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of each other, as the case
may be, as the other shall from time to time reasonably request.
Section 5.03 DELIVERY OF BOOKS AND RECORDS. At the Closing, each company
shall deliver each other the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents now in each
company's possession or its representatives.
Section 5.04 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE EXCHANGED
STOCK. The consummation of this Agreement and the transactions herein
contemplated, including the issuance of the Exchanged Norske Stock to the
shareholders of Synoptech as contemplated hereby, constitutes the offer and sale
of securities under the Securities Act and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter alia,
upon the circumstances under which the Synoptech Shareholders acquire such
securities. In connection with reliance upon exemptions from the registration
and prospectus delivery requirements for such transactions, at the Closing the
Synoptech Shareholders shall deliver to Norske letters of representation in the
form attached hereto as Schedule 5.04.
Section 5.05 THIRD PARTY CONSENTS AND CERTIFICATES. Norske and Synoptech
agree to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein and therein contemplated.
Section 5.06 ACTIONS PRIOR TO CLOSING.
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the Agreement or Schedules attached hereto or as
permitted or contemplated by this Agreement, Norske and Synoptech
respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and
tear and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligation under
material contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither Synoptech nor Norske will:
(i) make any change in their articles of incorporation (except as
provided for in Section 5.01) or bylaws;
<PAGE>
(ii) take any action described in section 1.07 in the case of
Norske, or in section 3.07, in the case of Synoptech (all except as
permitted therein or as disclosed in the applicable party's schedules); or
(iii) enter into or amend any contract, agreement, or other
instrument of any of the types described in such party's schedules, except
that a party may enter into or amend any contract, agreement, or other
instrument in the ordinary course of business involving the sale of goods
or services.
Section 5.07 INDEMNIFICATION.
(a) Synoptech hereby agrees to indemnify Norske and each of the
officers, agents and directors of Norske as of the date of execution of
this Agreement against any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever), to which it or they may
become subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article III of this Agreement. The
indemnification, as well as the rights and remedies thereto, provided for
in this paragraph shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this Agreement.
(b) Norske hereby agrees to indemnify Synoptech, the Synoptech
Shareholders, and each of the officers, agents and directors of Synoptech
as of the date of execution of this Agreement against any loss, liability,
claim, damage, or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or based
on any inaccuracy appearing in or misrepresentation made under Article I of
this Agreement. The indemnification, as well as the rights and remedies
thereto, provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of
this Agreement.
Section 5.08 REVERSE SPLIT. The Board of Directors of Synoptech (prior to
the Closing of this Agreement) which will initially constitute the Board of
Directors of Norske upon consummation of this Agreement, hereby agrees not to
effect a reverse split in connection with the Norske Common Stock for a period
of 60 days from the Closing, unless the shares of Norske Common Stock fail to
trade at or above $1.00 per share for a period of 10 consecutive business days,
commencing 10 days after the Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF NORSKE
The obligations of Norske under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.01 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Synoptech in this Agreement were true when made and shall be
true at the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and Synoptech shall have
performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Synoptech prior to or at the
Closing. Norske shall be furnished with a certificate, signed by a duly
authorized officer of Synoptech and dated the Closing Date, to the foregoing
effect.
Section 6.02 GOOD STANDING. Norske shall have received a certificate of
good standing from the Secretary of State of the State of Nevada or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that Synoptech is in good standing as a corporation in the State of
Nevada and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 6.03 OTHER ITEMS. Norske shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as Norske may reasonably request in order to satisfy due
diligence concerns.
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SYNOPTECH
AND THE SYNOPTECH SHAREHOLDERS
The obligations of Synoptech and the Synoptech Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 7.01 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Norske in this Agreement were true when made and shall be
true as of the Closing Date (except for changes therein permitted by this
Agreement) with the same force and effect as if such representations and
warranties were made at and as of the Closing Date, and Norske shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with by Norske prior to or at the Closing.
Synoptech shall have been furnished with a certificate, signed by a duly
authorized executive officer of Norske and dated the Closing Date, to the
foregoing effect.
Section 7.02 GOOD STANDING. Synoptech shall have received a certificate
of good standing from the Secretary of State of the state of Delaware or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that Norske is in good standing as a corporation in the State of
Delaware and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 7.03 FINANCING. Norske shall have completed a financing
effected in March and April 1999 to New York and Offshore investors compliant
with Rule 504 of Regulation D, as promulgated under the Securities Act of 1933,
as amended, as well as with applicable state securities laws, resulting in gross
proceeds of not less than $600,000.
Section 7.04 OTHER ITEMS.
(a) Synoptech shall have received a shareholders and option list of
Norske containing the name, address, and number of shares and options held
by each Norske shareholder and option holder as of the date of Closing
certified by an executive officer of Norske as being true, complete, and
accurate.
(b) Synoptech shall have received bank confirmation evidencing
compliance with Section 1.20 (including "good funds" status of such
money)and bank cards appointing John S. Frazier (or John Frazier
Overstoltz) as sole signatory.
(c) Synoptech shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as Synoptech may reasonably request in order to satisfy due
diligence concerns.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 BROKERS. Norske and Synoptech agree that there were no
finders or brokers involved in bringing the parties together or who were
instrumental in the negotiation, execution, or consummation of this Agreement.
Synoptech and Norske each agree to indemnify the other against any claim by
any third person other than those described above for any commission, brokerage,
or finders' fee arising from the transactions contemplated hereby based on any
alleged agreement or understanding between the indemnifying party and such third
person, whether express or implied from the actions of the indemnifying party.
Section 8.02 GOVERNING LAW. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
Texas.
<PAGE>
Section 8.03 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to Norske to: Charles McLaughlin
Norske Energy Corp.
50 Broadway, Suite 2300
New York, New York 10004
With copies to: Gerry Adler
Bondy & Schloss
6 East 43/rd/ Street
New York, New York 10007
If to Synoptech to: John Frazier Overstoltz
Synoptech Solutions Group, Inc.
6060 Richmond, Suite 190
Houston, Texas 77057
With copies to: Thomas C. Pritchard, Esq.
Brewer & Pritchard
1111 Bagby, Suite 2450
Houston, Texas 77002
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 8.04 ATTORNEY'S FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
Section 8.05 CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the transactions contemplated by this Agreement
have been consummated, it and its representatives will hold in strict confidence
all data and information obtained with respect to another party or any
subsidiary thereof from any representative, officer, director, or employee, or
from any books or records or from personal inspection, os such other party, and
shall not use such data or information or disclose the same to others, except
(i) to the extent such data or information is published, is a matter of public
knowledge, or is required by law to be published; and (ii) to the extent that
such data or information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
Section 8.06 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 8.07 THIRD PARTY BENEFICIARIES. This contract is solely between
Norske and Synoptech and the Synoptech Shareholders, and, except as specifically
provided, no director, officer, stockholder, employee, agent, independent
contractor, or any other person or entity shall be deemed to be a third party
beneficiary of this Agreement.
Section 8.08 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof, including
this Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
<PAGE>
Section 8.09 SURVIVAL; TERMINATION. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated.
Section 8.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 8.11 AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, as of the
date first above-written.
NORSKE ENERGY CORP.
By:____________________________________
________________________, President
SYNOPTECH SOLUTIONS GROUP, INC.
By: /s/ John Frazier Overstoltz
_________________________________
John Frazier Overstoltz, Chief
Executive Officer
SYNOPTECH SOLUTIONS GROUP, INC.
SHAREHOLDERS
_______________________________________
By: ___________________________________
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
NORSKE ENERGY CORP.
Norske Energy Corp ("Corporation"), a corporation formed in the State of
Delaware on July 10, 1996, hereby adopts the following Amended and Restated
Certificate of Incorporation pursuant to Sections 242 and 245 of the Delaware
General Corporation Law:
ARTICLE I
The name of the Corporation is ebaseOne Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, Wilmington, New Castle County, Delaware 19805, and the name
of its registered agent at such address is Prentice-Hall Corporation System,
Inc.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE IV
The period of duration of the Corporation is perpetual.
ARTICLE V
The total number of shares of stock which the Corporation shall have
authority to issue is 85,000,000 consisting of 75,000,000 shares of common
stock, par value $.001 per share ("Common Stock"), and 10,000,000 shares of
preferred stock, par value $.001 per share ("Preferred Stock").
Shares of Preferred Stock of the Corporation may be issued from time to
time in one or more classes or series, each of which class or series shall have
such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated in
a resolution or resolutions providing for the issue of such class or series of
Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the laws of the State of
Delaware.
ARTICLE VI
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors consisting of not less than one nor more
than 10 directors, the exact number of directors to be determined from time to
time by resolution adopted by the Board of Directors. The number of directors
may be increased or decreased, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until his successor is elected and qualified, subject, however, to his
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors howsoever resulting, may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
<PAGE>
ARTICLE VII
Elections of directors at an annual or special meeting of stockholders
shall be by written ballot unless the Bylaws of the Corporation shall otherwise
provide.
ARTICLE VIII
Special meetings of the stockholders of the Corporation for any purpose or
purposes may only be called at any time by the Board of Directors or a committee
thereof, the Chairman of the Board, or the President.
ARTICLE IX
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which such
director derived an improper personal benefit. No amendment to or repeal of this
Article IX shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
ARTICLE X
(a) The Corporation 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 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 such action, suit or proceeding if he acted
in good faith and in a manner 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, shall 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, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation 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 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 attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation 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 Corporation 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.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
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<PAGE>
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this Article
(unless ordered by a court) shall 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 because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
Article. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the Corporation 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 he is not entitled to be indemnified by the Corporation as
authorized by this Article. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) The Corporation shall have the power to purchase and maintain insurance
on behalf of any person who 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 any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under this Article.
(h) For purposes of this Article, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, 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 this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
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 Corporation" as referred to in this
Article.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of
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such a person.
(k) No amendment or repeal of this Article X shall apply to or have any
effect on any right to indemnification provided hereunder with respect to any
acts or omissions occurring prior to such amendment or repeal.
ARTICLE XI
Whenever the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice of, and
the right to vote at, any meeting of stockholders. Whenever the Corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
Certificate of Incorporation, or a designation thereunder, shall entitle the
holder thereof to the right to vote at any meeting of stockholders, except as
the provisions of the law shall otherwise require.
Notwithstanding the foregoing, and except as otherwise provided by law or
in the resolution or resolutions of the Board of Directors providing for the
issuance of any particular class or series of Preferred Stock, the holders of
Common Stock shall have the exclusive right to vote for the election of
Directors and for all other purposes except that, with respect to any amendment
of any provision of the Certificate of Incorporation which consists of a series
designation, or portion thereof, for any series of Preferred Stock, the holders
of Common Stock shall not be entitled to any vote. Except as otherwise provided
by law or in the resolution or resolutions of the Board of Directors providing
for the issuance of any particular class or series of Preferred Stock, the
holders of Common Stock and any other capital stock of the corporation at the
time entitled thereto shall vote together as one class.
ARTICLE XII
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class or creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE XIII
In furtherance of, and not in limitation of the powers conferred by
statute, the stockholders or the Board of Directors are expressly authorized to
adopt, repeal, alter, amend or rescind the Bylaws of the Corporation.
ARTICLE XIV
The foregoing Amended and Restated Certificate of Incorporation was
proposed by the Board of Directors and adopted by the Stockholders of the
Corporation pursuant to Sections 242 and 228 of the Delaware General Corporation
Law.
4
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its president this 14th day of May,
1999.
NORSKE ENERGY CORP.
By /s/ John Frazier Overstolz
-------------------------------------
John Frazier Overstolz, President
5
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
ebaseOne Corporation
a Delaware corporation
ARTICLE 1.
DEFINITIONS
1.1 Definitions. Unless the context clearly requires otherwise, in these
Bylaws:
(a) "Board" means the board of directors of the Company.
(b) "Bylaws" means these bylaws as adopted by the Board and includes
amendments subsequently adopted by the Board or by the Stockholders.
(c) "Certificate of Incorporation" means the Certificate of
Incorporation of ebaseOne Corporation as filed with the Secretary of State of
the State of Delaware and includes all amendments thereto and restatements
thereof subsequently filed.
(d) "Company" means ebaseOne Corporation, a Delaware corporation.
(e) "Section" refers to sections of these Bylaws.
(f) "Stockholder" means stockholders of record of the Company.
1.2 Offices. The title of an office refers to the person or persons who at
any given time perform the duties of that particular office for the Company.
ARTICLE 2.
OFFICES
2.1 Principal Office. The Company may locate its principal office within
or without the state of incorporation as the Board may determine.
2.2 Registered Office. The registered office of the Company required by
law to be maintained in the state of incorporation may be, but need not be, the
same as the principal place of business of the Company. The Board may change the
address of the registered office from time to time.
2.3 Other Offices. The Company may have offices at such other places,
either within or without the state of incorporation, as the Board may designate
or as the business of the Company may require from time to time.
<PAGE>
ARTICLE 3.
MEETINGS OF STOCKHOLDERS
3.1 Annual Meetings. The Stockholders of the Company shall hold their
annual meetings for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings at such time, date
and place as the Board shall determine by resolution.
3.2 Special Meetings. Only the Board, the Chairman of the Board, the
President or a committee of the Board duly designated and whose powers and
authority include the power to call meetings may call special meetings of the
Stockholders of the Company at any time for any purpose or purposes.
3.3 Place of Meetings. The Stockholders shall hold all meetings at such
places, within or without the State of Delaware, as the Board or a committee of
the Board shall specify in the notice or waiver of notice for such meetings.
3.4 Notice of Meetings. Except as otherwise required by law, the Board or
a committee of the Board shall give notice of each meeting of Stockholders,
whether annual or special, not less than 10 nor more than 60 days before the
date of the meeting. The Board or a committee of the Board shall deliver a
notice to each Stockholder entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope, directed to him
at his address as it appears on the records of the Company, or by transmitting a
notice thereof to him at such address by telegraph, telecopy, cable or wireless.
If mailed, notice is given on the date deposited in the United States mail,
postage prepaid, directed to the Stockholder at his address as it appears on the
records of the Company. An affidavit of the Secretary or an Assistant Secretary
or of the Transfer Agent of the Company that he has given notice shall
constitute, in the absence of fraud, prima facie evidence of the facts stated
therein.
Every notice of a meeting of the Stockholders shall state the place,
date and hour of the meeting and, in the case of a special meeting, also shall
state the purpose or purposes of the meeting. Furthermore, if the Company will
maintain the list at a place other than where the meeting will take place, every
notice of a meeting of the Stockholders shall specify where the Company will
maintain the list of Stockholders entitled to vote at the meeting.
3.5 Stockholder Notice. Subject to the Certificate of Incorporation, the
Stockholders who intend to nominate persons to the Board of Directors or propose
any other action at an annual meeting of Stockholders must timely notify the
Secretary of the Company of such intent. To be timely, a Stockholder's notice
must be delivered to
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or mailed and received at the principal executive offices of the Company not
less than 60 days nor more than 90 days prior to the date of such meeting;
provided, however, that in the event that less than 75 days' notice of the date
of the meeting is given or made to Stockholders, notice by the Stockholder to be
timely must be received not later than the close of business on the 15th day
following the date on which such notice of the date of the annual meeting was
mailed. Such notice must be in writing and must include a (i) a brief
description of the business desired to the brought before the annual meeting and
the reasons for conducting such business at the meeting; (ii) the name and
record address of the Stockholder proposing such business; (iii) the class,
series and number of shares of capital stock of the Company which are
beneficially owned by the Stockholder; and (iv) any material interest of the
Stockholder in such business. The Board of Directors reserves the right to
refuse to submit any such proposal to stockholders at an annual meeting if, in
its judgment, the information provided in the notice is inaccurate or
incomplete.
3.6 Waiver of Notice. Whenever these Bylaws require written notice, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall constitute the equivalent of notice.
Attendance of a person at any meeting shall constitute a waiver of notice of
such meeting, except when the person attends the meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. No written
waiver of notice need specify either the business to be transacted at, or the
purpose or purposes of any regular or special meeting of the Stockholders,
directors or members of a committee of the Board.
3.7 Adjournment of Meeting. When the Stockholders adjourn a meeting to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Stockholders may transact any business
which they may have transacted at the original meeting. If the adjournment is
for more than 30 days or, if after the adjournment, the Board or a committee of
the Board fixes a new record date for the adjourned meeting, the Board or a
committee of the Board shall give notice of the adjourned meeting to each
Stockholder of record entitled to vote at the meeting.
3.8 Quorum. Except as otherwise required by law, the holders of a majority
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes at any meeting of
the Stockholders. In the absence of a quorum at any meeting or any adjournment
thereof, the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, or, in the absence therefrom of
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all the Stockholders, any officer entitled to preside at, or to act as secretary
of, such meeting may adjourn such meeting to another place, date or time.
If the chairman of the meeting gives notice of any adjourned special
meeting of Stockholders to all Stockholders entitled to vote thereat, stating
that the minimum percentage of stockholders for a quorum as provided by Delaware
law shall constitute a quorum, then, except as otherwise required by law, that
percentage at such adjourned meeting shall constitute a quorum and a majority of
the votes cast at such meeting shall determine all matters.
3.9 Organization. Such person as the Board may have designated or, in the
absence of such a person, the highest ranking officer of the Company who is
present shall call to order any meeting of the Stockholders, determine the
presence of a quorum, and act as chairman of the meeting. In the absence of the
Secretary or an Assistant Secretary of the Company, the chairman shall appoint
someone to act as the secretary of the meeting.
3.10 Conduct of Business. The chairman of any meeting of Stockholders shall
determine the order of business and the procedure at the meeting, including such
regulations of the manner of voting and the conduct of discussion as he deems in
order.
3.11 List of Stockholders. At least 10 days before every meeting of
Stockholders, the Secretary shall prepare a list of the Stockholders entitled to
vote at the meeting or any adjournment thereof, arranged in alphabetical order,
showing the address of each Stockholder and the number of shares registered in
the name of each Stockholder. The Company shall make the list available for
examination by any Stockholder for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting will take place or at the
place designated in the notice of the meeting.
The Secretary shall produce and keep the list at the time and place of
the meeting during the entire duration of the meeting, and any Stockholder who
is present may inspect the list at the meeting. The list shall constitute
presumptive proof of the identity of the Stockholders entitled to vote at the
meeting and the number of shares each Stockholder holds.
A determination of Stockholders entitled to vote at any meeting of
Stockholders pursuant to this Section shall apply to any adjournment thereof.
3.12 Fixing of Record Date. For the purpose of determining Stockholders
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, or Stockholders entitled to receive payment of any
dividend,
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or in order to make a determination of Stockholders for any other proper
purpose, the Board or a committee of the Board may fix in advance a date as the
record date for any such determination of Stockholders. However, the Board shall
not fix such date, in any case, more than 60 days nor less than 10 days prior to
the date of the particular action.
If the Board or a committee of the Board does not fix a record date
for the determination of Stockholders entitled to notice of or to vote at a
meeting of Stockholders, the record date shall be at the close of business on
the day next preceding the day on which 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 or the date on which the Board adopts the resolution declaring a
dividend.
3.13 Voting of Shares. Each Stockholder shall have one vote for every share
of stock having voting rights registered in his name on the record date for the
meeting. The Company shall not have the right to vote treasury stock of the
Company, nor shall another corporation have the right to vote its stock of the
Company if the Company holds, directly or indirectly, a majority of the shares
entitled to vote in the election of directors of such other corporation. Persons
holding stock of the Company in a fiduciary capacity shall have the right to
vote such stock. Persons who have pledged their stock of the Company shall have
the right to vote such stock unless in the transfer on the books of the Company
the pledgor expressly empowered the pledgee to vote such stock. In that event,
only the pledgee, or his proxy, may represent such stock and vote thereon.
A plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote shall determine all
elections and, except when the law or Certificate of Incorporation requires
otherwise, the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote shall determine all
other matters.
Where a separate vote by a class or classes is required, a majority of
the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
shares of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class.
The Stockholders may vote by voice vote on all matters. Upon demand by
a Stockholder entitled to vote, or his proxy, the Stockholders shall vote by
ballot. In that event, each ballot shall state the name of the
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Stockholder or proxy voting, the number of shares voted and such other
information as the Company may require under the procedure established for the
meeting.
3.14 Inspectors. At any meeting in which the Stockholders vote by ballot,
the chairman may appoint one or more inspectors. Each inspector shall take and
sign an oath to execute the duties of inspector at such meeting faithfully, with
strict impartiality, and according to the best of his ability. The inspectors
shall ascertain the number of shares outstanding and the voting power of each;
determine the shares represented at a meeting and the validity of proxies and
ballots; count all votes and ballots; determine and retain for a reasonable
period a record of the disposition of any challenges made to any determination
by the inspectors; and certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
certification required herein shall take the form of a subscribed, written
report prepared by the inspectors and delivered to the Secretary of the Company.
An inspector need not be a Stockholder of the Company, and any officer of the
Company may be an inspector on any question other than a vote for or against a
proposal in which he has a material interest.
3.15 Proxies. A Stockholder may exercise any voting rights in person or by
his proxy appointed by an instrument in writing, which he or his authorized
attorney-in-fact has subscribed and which the proxy has delivered to the
secretary of the meeting pursuant to the manner prescribed by law.
A proxy is not valid after the expiration of 13 months after the date
of its execution, unless the person executing it specifies thereon the length of
time for which it is to continue in force (which length may exceed 12 months) or
limits its use to a particular meeting. Each proxy is irrevocable if it
expressly states that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an irrevocable power.
The attendance at any meeting of a Stockholder who previously has
given a proxy shall not have the effect of revoking the same unless he notifies
the Secretary in writing prior to the voting of the proxy.
3.16 Action by Consent. Any action required to be taken at any annual or
special meeting of stockholders of the Company or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents 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 and shall be delivered to the
Company by delivery to its registered office, its principal place of business,
or
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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.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this section to the
Company, written consents signed by a sufficient number of holders to take
action are delivered to the Company by delivery to its registered office, 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.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE 4.
BOARD OF DIRECTORS
4.1 General Powers. The Board shall manage the property, business and
affairs of the Company.
4.2 Number. The number of directors who shall constitute the Board shall
equal not less than one nor more than 10, as the Board may determine by
resolution from time to time.
4.3 Election of Directors and Term of Office. The Stockholders of the
Company shall elect the directors at the annual or adjourned annual meeting
(except as otherwise provided herein for the filling of vacancies). Each
director shall hold office until his death, resignation, retirement, removal, or
disqualification, or until his successor shall have been elected and qualified.
4.4 Resignations. Any director of the Company may resign at any time by
giving written notice to the Board or to the Secretary of the Company. Any
resignation shall take effect upon receipt or at the time specified in the
notice. Unless the notice specifies otherwise, the effectiveness of the
resignation shall not depend upon its acceptance.
4.5 Removal. Stockholders holding a majority of the outstanding shares
entitled to vote at an election of directors may remove any director or the
entire Board of Directors at any time, with or without cause.
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4.6 Vacancies. A majority of the remaining directors, although less than a
quorum, or a sole remaining director may fill any vacancy on the Board, whether
because of death, resignation, disqualification, an increase in the number of
directors, or any other cause. Any director elected to fill a vacancy shall hold
office until his death, resignation, retirement, removal, or disqualification,
or until his successor shall have been elected and qualified.
4.7 Chairman of the Board. At the initial and annual meeting of the Board,
the directors may elect from their number a Chairman of the Board of Directors.
The Chairman shall preside at all meetings of the Board and shall perform such
other duties as the Board may direct. The Board also may elect a Vice Chairman
and other officers of the Board, with such powers and duties as the Board may
designate from time to time.
4.8 Compensation. The Board may compensate directors for their services
and may provide for the payment of all expenses the directors incur by attending
meetings of the Board or otherwise.
ARTICLE 5.
MEETINGS OF DIRECTORS
5.1 Regular Meetings. The Board may hold regular meetings at such places,
dates and times as the Board shall establish by resolution. If any day fixed
for a meeting falls on a legal holiday, the Board shall hold the meeting at the
same place and time on the next succeeding business day. The Board need not
give notice of regular meetings.
5.2 Place of Meetings. The Board may hold any of its meetings in or out of
the State of Delaware, at such places as the Board may designate, at such places
as the notice or waiver of notice of any such meeting may designate, or at such
places as the persons calling the meeting may designate.
5.3 Meetings by Telecommunications. The Board or any committee of the
Board may hold meetings by means of conference telephone or similar
telecommunications equipment that enable all persons participating in the
meeting to hear each other. Such participation shall constitute presence in
person at such meeting.
5.4 Special Meetings. The Chairman of the Board, the President, or one-
half of the directors then in office may call a special meeting of the Board.
The person or persons authorized to call special meetings of the Board may fix
any place, either in or out of the State of Delaware as the place for the
meeting.
5.5 Notice of Special Meetings. The person or persons calling a special
meeting of the Board shall give written notice to each director of the time,
place, date and purpose of the meeting of not less than three business days if
by mail and not less than 24 hours if by telegraph or in person before the date
of the meeting. If mailed, notice is
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given on the date deposited in the United States mail, postage prepaid, to such
director. A director may waive notice of any special meeting, and any meeting
shall constitute a legal meeting without notice if all the directors are present
or if those not present sign either before or after the meeting a written waiver
of notice, a consent to such meeting, or an approval of the minutes of the
meeting. A notice or waiver of notice need not specify the purposes of the
meeting or the business which the Board will transact at the meeting.
5.6 Waiver by Presence. Except when expressly for the purpose of objecting
to the legality of a meeting, a director's presence at a meeting shall
constitute a waiver of notice of such meeting.
5.7 Quorum. A majority of the directors then in office shall constitute a
quorum for all purposes at any meeting of the Board. In the absence of a
quorum, a majority of directors present at any meeting may adjourn the meeting
to another place, date or time without further notice. No proxies shall be
given by directors to any person for purposes of voting or establishing a quorum
at a directors meetings.
5.8 Conduct of Business. The Board shall transact business in such order
and manner as the Board may determine. Except as the law requires otherwise, the
Board shall determine all matters by the vote of a majority of the directors
present at a meeting at which a quorum is present. The directors shall act as a
Board, and the individual directors shall have no power as such.
5.9 Action by Consent. The Board or a committee of the Board may take any
required or permitted action without a meeting if all members of the Board or
committee consent thereto in writing and file such consent with the minutes of
the proceedings of the Board or committee.
ARTICLE 6.
COMMITTEES
6.1 Committees of the Board. The Board may designate, by a vote of a
majority of the directors then in office, committees of the Board. The
committees shall serve at the pleasure of the Board and shall possess such
lawfully delegable powers and duties as the Board may confer.
6.2 Selection of Committee Members. The Board shall elect by a vote of a
majority of the directors then in office a director or directors to serve as the
member or members of a committee. By the same vote, the Board may designate
other directors as alternate members who may replace any absent or disqualified
member at any meeting of a committee. In the absence or disqualification of any
member of any committee and any alternate member in his place,
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the member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
appoint by unanimous vote another member of the Board to act at the meeting in
the place of the absent or disqualified member.
6.3 Conduct of Business. Each committee may determine the procedural rules
for meeting and conducting its business and shall act in accordance therewith,
except as the law or these Bylaws require otherwise. Each committee shall make
adequate provision for notice of all meetings to members. A majority of the
members of the committee shall constitute a quorum, unless the committee
consists of one or two members. In that event, one member shall constitute a
quorum. A majority vote of the members present shall determine all matters. A
committee may take action without a meeting if all the members of the committee
consent in writing and file the consent or consents with the minutes of the
proceedings of the committee.
6.4 Authority. Any committee, to the extent the Board provides, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Company, and may authorize the affixation of the
Company's seal to all instruments which may require or permit it. However, no
committee shall have any power or authority with regard to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets, recommending to the
Stockholders a dissolution of the Company or a revocation of a dissolution of
the Company, or amending these Bylaws of the Company. Unless a resolution of the
Board expressly provides, no committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger.
6.5 Minutes. Each committee shall keep regular minutes of its proceedings
and report the same to the Board when required.
ARTICLE 7.
OFFICERS
7.1 Officers of the Company. The officers of the Company shall consist of
a President, a Secretary and such Vice Presidents, Assistant Secretaries,
Assistant Treasurers, and other officers as the Board may designate and elect
from time to time. The same person may hold at the same time any two or more
offices, except the offices of President and Secretary.
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7.2 Election and Term. The Board shall elect the officers of the Company.
Each officer shall hold office until his death, resignation, retirement, removal
or disqualification, or until his successor shall have been elected and
qualified.
7.3 Compensation of Officers. The Board shall fix the compensation of all
officers of the Company. No officer shall serve the Company in any other
capacity and receive compensation, unless the Board authorizes the additional
compensation.
7.4 Removal of Officers and Agents. The Board may remove any officer or
agent it has elected or appointed at any time, with or without cause.
7.5 Resignation of Officers and Agents. Any officer or agent the Board has
elected or appointed may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President, or the Secretary of the
Company. Any such resignation shall take effect at the date of the receipt of
such notice or at any later time specified. Unless otherwise specified in the
notice, the Board need not accept the resignation to make it effective.
7.6 Bond. The Board may require by resolution any officer, agent, or
employee of the Company to give bond to the Company, with sufficient sureties
conditioned on the faithful performance of the duties of his respective office
or agency. The Board also may require by resolution any officer, agent or
employee to comply with such other conditions as the Board may require from time
to time.
7.7 President. The President shall be the chief operating officer of the
Company and, subject to the Board's control, shall supervise and direct all of
the business and affairs of the Company. When present, he shall sign (with or
without the Secretary, an Assistant Secretary, or any other officer or agent of
the Company which the Board has authorized) deeds, mortgages, bonds, contracts
or other instruments which the Board has authorized an officer or agent of the
Company to execute. However, the President shall not sign any instrument which
the law, these Bylaws, or the Board expressly require some other officer or
agent of the Company to sign and execute. In general, the President shall
perform all duties incident to the office of President and such other duties as
the Board may prescribe from time to time.
7.8 Vice Presidents. In the absence of the President or in the event of
his death, inability or refusal to act, the Vice Presidents in the order of
their length of service as Vice Presidents, unless the Board determines
otherwise, shall perform the duties of the President. When acting as the
President, a Vice President shall have all the powers and
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restrictions of the Presidency. A Vice President shall perform such other duties
as the President or the Board may assign to him from time to time.
7.9 Secretary. The Secretary shall (a) keep the minutes of the meetings of
the Stockholders and of the Board in one or more books for that purpose, (b)
give all notices which these Bylaws or the law requires, (c) serve as custodian
of the records and seal of the Company, (d) affix the seal of the corporation to
all documents which the Board has authorized execution on behalf of the Company
under seal, (e) maintain a register of the address of each Stockholder of the
Company, (f) sign, with the President, a Vice President, or any other officer or
agent of the Company which the Board has authorized, certificates for shares of
the Company, (g) have charge of the stock transfer books of the Company, and (h)
perform all duties which the President or the Board may assign to him from time
to time.
7.10 Assistant Secretaries. In the absence of the Secretary or in the event
of his death, inability or refusal to act, the Assistant Secretaries in the
order of their length of service as Assistant Secretary, unless the Board
determines otherwise, shall perform the duties of the Secretary. When acting as
the Secretary, an Assistant Secretary shall have the powers and restrictions of
the Secretary. An Assistant Secretary shall perform such other duties as the
President, Secretary or Board may assign from time to time.
7.11 Treasurer. The Treasurer shall (a) have responsibility for all funds
and securities of the Company, (b) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, (c) deposit all moneys in
the name of the Company in depositories which the Board selects, and (d) perform
all of the duties which the President or the Board may assign to him from time
to time.
7.12 Assistant Treasurers. In the absence of the Treasurer or in the event
of his death, inability or refusal to act, the Assistant Treasurers in the order
of their length of service as Assistant Treasurer, unless the Board determines
otherwise, shall perform the duties of the Treasurer. When acting as the
Treasurer, an Assistant Treasurer shall have the powers and restrictions of the
Treasurer. An Assistant Treasurer shall perform such other duties as the
Treasurer, the President, or the Board may assign to him from time to time.
7.13 Delegation of Authority. Notwithstanding any provision of these Bylaws
to the contrary, the Board may delegate the powers or duties of any officer to
any other officer or agent.
7.14 Action with Respect to Securities of Other Corporations. Unless the
Board directs otherwise, the President shall have the power to vote and
otherwise act on behalf of the Company, in person or by proxy, at any
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meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Company holds securities. Furthermore, unless the
Board directs otherwise, the President shall exercise any and all rights and
powers which the Company possesses by reason of its ownership of securities in
another corporation.
7.15 Vacancies. The Board may fill any vacancy in any office because of
death, resignation, removal, disqualification or any other cause in the manner
which these Bylaws prescribe for the regular appointment to such office.
ARTICLE 8.
CONTRACTS, LOANS, DRAFTS,
DEPOSITS AND ACCOUNTS
8.1 Contracts. The Board may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name and on behalf of the Company. The Board may make such authorization
general or special.
8.2 Loans. Unless the Board has authorized such action, no officer or
agent of the Company shall contract for a loan on behalf of the Company or issue
any evidence of indebtedness in the Company's name.
8.3 Drafts. The President, any Vice President, the Treasurer, any
Assistant Treasurer, and such other persons as the Board shall determine shall
issue all checks, drafts and other orders for the payment of money, notes and
other evidences of indebtedness issued in the name of or payable by the Company.
8.4 Deposits. The Treasurer shall deposit all funds of the Company not
otherwise employed in such banks, trust companies, or other depositories as the
Board may select or as any officer, assistant, agent or attorney of the Company
to whom the Board has delegated such power may select. For the purpose of
deposit and collection for the account of the Company, the President or the
Treasurer (or any other officer, assistant, agent or attorney of the Company
whom the Board has authorized) may endorse, assign and deliver checks, drafts
and other orders for the payment of money payable to the order of the Company.
8.5 General and Special Bank Accounts. The Board may authorize the opening
and keeping of general and special bank accounts with such banks, trust
companies, or other depositories as the Board may select or as any officer,
assistant, agent or attorney of the Company to whom the Board has delegated such
power may select. The Board may make such special rules and regulations with
respect to such bank accounts, not inconsistent with the provisions of these
Bylaws, as it may deem expedient.
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ARTICLE 9.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
9.1 Certificates for Shares. Every owner of stock of the Company shall
have the right to receive a certificate or certificates, certifying to the
number and class of shares of the stock of the Company which he owns. The Board
shall determine the form of the certificates for the shares of stock of the
Company. The Secretary, transfer agent, or registrar of the Company shall number
the certificates representing shares of the stock of the Company in the order in
which the Company issues them. The President or any Vice President and the
Secretary or any Assistant Secretary shall sign the certificates in the name of
the Company. Any or all certificates may contain facsimile signatures. In case
any officer, transfer agent, or registrar who has signed a certificate, or whose
facsimile signature appears on a certificate, ceases to serve as such officer,
transfer agent, or registrar before the Company issues the certificate, the
Company may issue the certificate with the same effect as though the person who
signed such certificate, or whose facsimile signature appears on the
certificate, was such officer, transfer agent, or registrar at the date of
issue. The Secretary, transfer agent, or registrar of the Company shall keep a
record in the stock transfer books of the Company of the names of the persons,
firms or corporations owning the stock represented by the certificates, the
number and class of shares represented by the certificates and the dates thereof
and, in the case of cancellation, the dates of cancellation. The Secretary,
transfer agent, or registrar of the Company shall cancel every certificate
surrendered to the Company for exchange or transfer. Except in the case of a
lost, destroyed, stolen or mutilated certificate, the Secretary, transfer agent,
or registrar of the Company shall not issue a new certificate in exchange for an
existing certificate until he has cancelled the existing certificate.
9.2 Transfer of Shares. A holder of record of shares of the Company's
stock, or his attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary, transfer agent or registrar of the Company, may
transfer his shares only on the stock transfer books of the Company. Such person
shall furnish to the Secretary, transfer agent, or registrar of the Company
proper evidence of his authority to make the transfer and shall properly endorse
and surrender for cancellation his existing certificate or certificates for such
shares. Whenever a holder of record of shares of the Company's stock makes a
transfer of shares for collateral security, the Secretary, transfer agent, or
registrar of the Company shall state such fact in the entry of transfer if the
transferor and the transferee request.
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9.3 Lost Certificates. The Board may direct the Secretary, transfer agent,
or registrar of the Company to issue a new certificate to any holder of record
of shares of the Company's stock claiming that he has lost such certificate, or
that someone has stolen, destroyed or mutilated such certificate, upon the
receipt of an affidavit from such holder to such fact. When authorizing the
issue of a new certificate, the Board, in its discretion may require as a
condition precedent to the issuance that the owner of such certificate give the
Company a bond of indemnity in such form and amount as the Board may direct.
9.4 Regulations. The Board may make such rules and regulations, not
inconsistent with these Bylaws, as it deems expedient concerning the issue,
transfer and registration of certificates for shares of the stock of the
corporation. The Board may appoint or authorize any officer or officers to
appoint one or more transfer agents, or one or more registrars, and may require
all certificates for stock to bear the signature or signatures of any of them.
9.5 Holder of Record. The Company may treat as absolute owners of shares
the person in whose name the shares stand of record as if that person had full
competency, capacity and authority to exercise all rights of ownership, despite
any knowledge or notice to the contrary or any description indicating a
representative, pledge or other fiduciary relation, or any reference to any
other instrument or to the rights of any other person appearing upon its record
or upon the share certificate. However, the Company may treat any person
furnishing proof of his appointment as a fiduciary as if he were the holder of
record of the shares.
9.6 Treasury Shares. Treasury shares of the Company shall consist of
shares which the Company has issued and thereafter acquired but not canceled.
Treasury shares shall not carry voting or dividend rights.
ARTICLE 10.
INDEMNIFICATION
10.1 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 he 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 in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to
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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
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 in which he 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 reasonable cause to believe that his conduct
was unlawful.
10.2 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 or
suit by or in the right of the Company 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 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) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he 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.
10.3 To the extent that a director, officer, employee or agent of the
Company has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections 10.1 and 10.2 of this Article, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
10.4 Any indemnification under subsections 10.1 and 10.2 of this Article
(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 director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections 10.1 and 10.2 of this
Article. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b)
16
<PAGE>
if such quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
10.5 Expenses (including attorneys' fees) incurred by an officer or
director in defending in a civil, criminal, administrative or investigative
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 he is not entitled to be indemnified by the
Company as authorized by this Article. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
10.6 The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
10.7 The Company shall have the power to 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 him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under this Article.
10.8 For purposes of this section 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 which, 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 this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
17
<PAGE>
10.9 The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
10.10 Nothing contained in this Article 10, or elsewhere in these Bylaws,
shall operate to indemnify any director or officer is such indemnification is
contrary to law, either as a matter of public policy, or under the provisions of
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, or any other applicable state or Federal law.
ARTICLE 11.
TAKEOVER OFFERS
In the event the Company receives a takeover offer, the Board of
Directors shall consider all relevant factors in evaluating such offer,
including, but not limited to, the terms of the offer, and the potential
economic and social impact of such offer on the Company's stockholders,
employees, customers, creditors and community in which it operates.
ARTICLE 12.
NOTICES
12.1 General. Whenever these Bylaws require notice to any Stockholder,
director, officer or agent, such notice does not mean personal notice. A person
may give effective notice under these Bylaws in every case by depositing a
writing in a post office or letter box in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram addressed to such Stockholder, director, officer
or agent at his address on the books of the Company. Unless these Bylaws
expressly provide to the contrary, the time when the person sends notice shall
constitute the time of the giving of notice.
12.2 Waiver of Notice. Whenever the law or these Bylaws require notice,
the person entitled to said notice may waive such notice in writing, either
before or after the time stated therein.
18
<PAGE>
ARTICLE 13.
MISCELLANEOUS
13.1 Facsimile Signatures. In addition to the use of facsimile signatures
which these Bylaws specifically authorize, the Company may use such facsimile
signatures of any officer or officers, agents or agent, of the Company as the
Board or a committee of the Board may authorize.
13.2 Corporate Seal. The Board may provide for a suitable seal containing
the name of the Company, of which the Secretary shall be in charge. The
Treasurer, any Assistant Secretary, or any Assistant Treasurer may keep and use
the seal or duplicates of the seal if and when the Board or a committee of the
Board so directs.
13.3 Fiscal Year. The Board shall have the authority to fix and change the
fiscal year of the Company.
ARTICLE 14.
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, the
Stockholders or the Board may amend or repeal these Bylaws at any meeting.
The undersigned hereby certifies that the foregoing constitutes a
true and correct copy of the Bylaws of the Company as adopted by the Directors
on the ____ day of May, 1999.
Executed as of this ______ day of May, 1999.
/s/ John Frazier Overstolz
-----------------------------------------------
John Frazier Overstolz, Chief Executive Officer
19
<PAGE>
EXHIBIT 4.1
-----------
[LOGO]
SPECIMEN XXXXXXXX
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
EBASEONE CORPORATION
CAPITAL STOCK: 75,000,000 SHARES COMMON STOCK @ $.001 PAR VALUE. FULLY PAID AND
NON-ASSESSABLE
THIS CERTIFIES THAT________________________________ is the registered holder
of___________________ SHARES OF THE CAPITAL STOCK OF ebaseOne Corporation,
transferable only on the books of the Corporation by the holder hereof, in
person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed or accompanied by a proper assignment. This Certificate is not
valid until countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed in
facsimile by its duly authorized officer and the facsimile corporate seal to be
duly affixed hereto.
DATED:_____________________
PRESIDENT & CHIEF EXECUTIVE OFFICER CHAIRMAN OF THE BOARD
/s/ CHARLES W. SKAMSER /s/ JOHN FRAZIER OVERSTOLZ
--------------------------------- ----------------------------
CHARLES W. SKAMSER JOHN FRAZIER OVERSTOLZ
EBASEONE CORPORATION EBASEONE CORPORATION
<PAGE>
The corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT- as Custodian under
Uniform Gifts to
Minors Act
TEN ENT -- as tenants by the entireties JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________________________ hereby sell, assign and transfer
unto:
______________________________
______________________________
______________________________
(Please print or typewrite name and address, including zip code, of assignee.)
Shares of Common Stock represented by the within certificate, and do hereby
irrevocably appoint _________________________________ to transfer the said stock
on the books of the within named Corporation with full power of substitution in
the premises.
Please insert social security or other identifying number of assignee
________________________________
Dated: ___________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 11th day of August, 1999, between
ebaseOne Corporation, a Delaware corporation, currently having its principal
place of business at 6060 Richmond Avenue, Houston, Texas 77057 (the "Company"),
and John Frazier Overstoltz (the "Executive") an individual currently residing
at 9506 Meadowcroft, Houston, Texas 77063.
WHEREAS, the Company desires to employ Executive and Executive desires
to be employed by the Company, as Executive Vice President of the Company.
WHEREAS, the Executive is willing to enter into an agreement with the
Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the term of
-----------------
employment of the Executive under this Employment Agreement shall be for the
period commencing on the date hereof (the "Commencement Date) and terminating on
December 31, 2002, unless sooner terminated as provided in accordance with the
provisions of Section 5 hereof. (Such term of employment is herein sometimes
called the "Employment Term.")
2. Employment. As of the Commencement Date, the Company hereby agrees to
----------
employ the Executive as Executive Vice President of the Company, and the
Executive hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder in accordance with the terms and conditions
hereinafter set forth.
3. Duties and Responsibilities; Board Membership.
---------------------------------------------
(a) Duties. Executive shall perform such duties as are usually performed by a
Executive Vice President of a business similar in size and scope as the
Company and such other reasonable additional duties as may be prescribed
from time-to-time by the Company's board of directors which are reasonable
and consistent with the Company's operations, taking into account
Executive's expertise and job responsibilities. This agreement shall
survive any job title or responsibility change agreed to by Executive.
Executive shall report directly to the board of directors of the Company
regarding implementation of all business matters. All actions of Executive
shall be subject and subordinate to the review and approval of the board of
directors. No other person or group shall be given authority to supervise
or direct Executive in the performance of his duties. The board of
directors shall be the final and exclusive arbiter of all policy decisions
relative to the Company's business.
(c) Devotion of Time. During the term of this agreement, Executive agrees to
devote sufficient time and attention during normal business hours to the
business and affairs of the company to the extent necessary to discharge
the responsibilities assigned to Executive and to use reasonable best
efforts to perform faithfully and efficiently such responsibilities. During
the
<PAGE>
term of this agreement it shall not be a violation of this agreement for
Executive to (i) serve on the boards of corporations or charitable
institutions (with the permission from the Company's board of directors);
(ii) deliver lectures, fulfill speaking engagements to teach at educational
institutions; (iii) manage personal investments or companies in which
personal investments are made so long as such activities do not
significantly interfere with the performance of Executive's
responsibilities with the Company and which companies are not in direct
competition with the Company. Any income received by Executive outside the
scope of his employment and permitted pursuant to the provisions hereof,
shall inure to the benefit of Executive, and the Company shall not claim
any entitlement thereto
4. Compensation and Benefits During the Employment Term:
----------------------------------------------------
(a) Base Compensation. The Executive's base compensation from the Commencement
Date through December 31, 1999, shall be at the rate of $11,500 per month,
payable in regular semi-monthly installments in accordance with the
Company's practice for its executives, less applicable withholding for
income and employment taxes as required by law and other deductions as to
which the Executive shall agree. Executive acknowledges that initially such
base compensation may have to be accrued, based upon the Company's current
working capital. Thereafter, the Executive's base compensation shall be
$12,500 per month through December 31, 2000 and $18,750 per month through
the end of the term of this agreement.
(b) Bonus Compensation. In addition to the Executive's base compensation,
Executive will be entitled to a performance bonus as follows:
(i) Before December 31, 1999, the Executive has agreed to work toward
meeting the following objectives ("MBOs"): (i) raise working capital
necessary to begin implementation of the business plan; (ii) build an
enterprise center in Houston; (ii) secure agreements to host packaged
software applications under a subscription agreement or like
agreement with one or more vendors for sales force automation,
financial management, customer relationship management, human
resource management and electronic business; (iii) hire the necessary
personnel to execute the business plan; and (iv) secure initial
customers per the business plan. After December 31, 1999, the
Company's board of directors shall determine what material progress
the Executive has made toward meeting the above captioned MBOs and
shall pay the Executive a bonus of up to $28,000 based upon the
percentage of MBOs met. Said bonus shall be paid on or before the end
of January 2000.
(ii) If, no later than December 31, 2000, the Company successfully
implements and meets certain agreed upon milestones, as determined by
the Company's board of directors in January 2000, Executive will be
entitled to receive 50% of his then base salary rate. If the board of
directors is unable to agree on the milestones, the Executive will
receive the bonus in the event the Company attains $12 million in net
revenues for December 31, 2000, as determined by the Company's
independent auditors. In any event, the bonus shall be paid upon the
earlier of (x) 12 month financial statements filed with the
2
<PAGE>
Securities and Exchange Commission, or (y) March 31, 2001.
(iii) Subsequent bonuses will be determined by the board of directors.
(c) Warrants. The Executive will be entitled to receive five year warrants to
purchase an aggregate 3,000,000 shares of Company common stock having the
terms set forth in the warrant agreement attached hereto as Exhibit "A."
(d) Automobile Allowance. For the Employment Term, Executive shall be entitled
to receive an automobile allowance of $750 per month plus the operating
cost and insurance of such vehicle. The automobile allowance shall increase
yearly by $100 beginning each the 1/st/ of January. This vehicle may be
provided either as a company car or direct payment of the allowance at the
Executive's option.
(e) Expense Reimbursement. The Executive shall be entitled to reimbursement of
all reasonable, ordinary and necessary business related expenses incurred
by him in the course of his duties and upon compliance with the Company's
procedures.
(f) Participation in Employee Benefit Plans. Executive shall be entitled to
participate, subject to eligibility and other terms generally established
by the Company's board or directors, in any employee benefit plan
[including but not limited to life insurance plans, stock option plans,
group hospitalization, hearth, dental care (which health insurance shall
also cover Executive's dependents) profit sharing, pension and other
benefit plans], as may be adopted or amended by the Company from time-to-
time.
5. Termination. Subject to the notice and other provisions of this Section 5,
-----------
the Company shall have the right to terminate the Executive's employment with
the Company, and the Executive shall have the right to resign from such
employment, at any time and for no stated reason.
(a) Disability. The Company shall have the right to terminate the employment
of the Executive under this Agreement for disability in the event Executive
suffers an injury, illness or incapacity as defined in the Company's Long
Term Disability Insurance Policy in effect as of the date hereof for a
period of more than six (6) months provided that during such six month
period the Company shall have given at least ten (10) days written notice
of termination; provided further, however, that if the Executive is
eligible to receive disability payments pursuant to a disability policy
paid for by the Company, the Executive shall assign such benefits to the
Company for all periods as to which he is receiving full payment under this
agreement.
(b) Death. This agreement shall terminate upon the death of Executive.
(c) With Cause. The Company may terminate this agreement at any time because
of:
(i) Executive's material breach of any term of this agreement, which is not
cured after ten (10) days written notice from the board of directors, or
3
<PAGE>
(ii) commission by the Executive of a felony or an act of fraud against the
Company.
In the event Executive's employment with the Company is terminated pursuant
to items 5(a), (b) or (c), Executive or his beneficiary shall be entitled to
receive all base compensation earned by Executive up to the date of termination,
all unreimbursed expenses, and any bonus earned in respect of a prior year and
not yet paid. For a termination by the Company without good cause, Executive
shall be entitled to receive the greater of (i) the remaining base salary at the
then base salary rate for the remainder of the Employment Term or (ii) the base
salary rate for the period of six months, and all unreimbursed expenses, any
bonus earned in respect of a prior year and not yet paid, and the pro-rata
portion of any bonus for the current year.
In the event Executive's employment with the company is terminated for
whatever reason, the Company shall indemnify and hold Executive harmless for any
personal guaranty made by Executive on behalf of the Company.
6. Revealing of Trade Secrets, etc. Executive acknowledges the interest of
-------------------------------
the Company in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term or thereafter,
directly or indirectly, reveal or cause to be revealed to any person or entity
the supplier lists, customer lists or other confidential business information of
the Company; provided, however, that the parties acknowledge that it is not the
intention of this paragraph to include within its subject matter (a) information
not proprietary to the Company, (b) information which is then in the public
domain, or (c) information required to be disclosed by law.
7. Arbitration. If a dispute should arise regarding this agreement, all
-----------
claims, disputes, controversies, differences or other matters in question
arising out of this relationship shall be settled finally, completely and
conclusively by arbitration of a single arbitrator in Houston, Texas, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules"). Arbitration shall be initiated by written demand.
This agreement to arbitrate shall be specifically enforceable only in the
District Court of Harris County, Texas. A decision of the arbitrator shall be
final, conclusive and binding on the Company and the Executive, and judgement
may be entered in the District Court of Harris County, Texas, for enforcement
and other benefits. On appointment, the arbitrator shall then proceed to decide
the arbitration subjects in accordance with the Rules. Any arbitration held in
accordance with this paragraph shall be private and confidential and no person
shall be entitled to attend the hearings except the arbitrator, Executive,
Executive's attorneys, and an designated representatives of the Company and
their respective attorneys. The matters submitted for arbitration, the hearings
and proceedings and the arbitration award shall be kept and maintained in
strictest confidence by Executive and the Company and shall not be discussed,
disclosed or communicated to any persons. On request of any party, the record of
the proceeding shall be sealed and may not be disclosed except insofar, and only
insofar, as may be necessary to enforce the award of the arbitrator and any
judgement enforcing an award. The prevailing party shall be entitled to recover
reasonable and necessary attorneys' fees and costs from the non-prevailing
party.
4
<PAGE>
8. Covenants Not to Compete.
------------------------
(a) Executive's Acknowledgment. Executive agrees and acknowledges that in
--------------------------
order to assure the Company that it will retain its value as a going concern, it
is necessary that Executive undertake not to utilize his special knowledge of
the business and his relationships with customers and suppliers to compete with
the Company. Executive further acknowledges that:
(i) the Company is and will be engaged in the business;
(ii) Executive will occupy a position of trust and confidence with the
Company prior to the date of this agreement and, during such period
and Executive's employment under this agreement, Executive has, and
will become familiar with the Company's trade secrets and with other
proprietary and confidential information concerning the Company;
(iii) the agreements and covenants contained in this Section 8 are
essential to protect the Company and the goodwill of the business;
and
(iv) Executive's employment with the Company has special, unique and
extraordinary value to the Company and the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of the provisions of this agreement.
(b) Competitive Activities. Executive hereby agrees that for a period
----------------------
commencing on the date hereof and ending one year following the later of (i)
termination of Executive's employment with the Company for whatever reason, and
(ii) the conclusion of the period, if any, during which the Company is making
payments to Executive, he will not, directly or indirectly, as employee, agent,
consultant, stockholder, director, co-partner or in any other individual or
representative capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as a consultant or advisor to, render services
for (alone or in association with any person, firm, corporation or entity), or
otherwise assist any person or entity (other than the Company) that engages in
or owns, invests in, operates, manages or controls any venture or enterprise
that directly or indirectly engages or proposes in engage in the business of the
manufacturing, distribution or sale of (i) products manufactured, distributed,
sold or licensed by the Company or services provided by the Company at the time
of termination or (ii) products or services proposed at the time of such
termination to be manufactured, distributed, sold, licensed or provided by the
Company within the united States (the "Territory"); provided, however, that
nothing contained herein shall be construed to prevent Executive from (i)
investing in the stock of any competing corporation listed on a national
securities exchange or traded in the over-the-counter market, but only if
Executive is not involved in the business of said corporation and if Executive
and his associates (as such term is defined in Regulation 14(A) promulgated
under the Securities Exchange Act of 1934, as in effect on the date hereof),
collectively, do not own more than an aggregate of two percent of the stock of
such corporation. With respect to the Territory, Executive specifically
acknowledges that the Company has conducted the business throughout those areas
comprising the Territory and the Company intends to continue to expand the
business throughout the Territory.
5
<PAGE>
(c) Blue Pencil. If an arbitrator shall at any time deem the terms of this
-----------
agreement or any restrictive covenant too lengthy or the Territory too
extensive, the other provisions of this section 8 shall nevertheless stand, the
restrictive period shall be deemed to be the longest period permissible by law
under the circumstances and the Territory shall be deemed to comprise the
largest territory permissible by law under the circumstances. The arbitrator in
each case shall reduce the restricted period and/or the Territory to permissible
duration or size.
9. Opportunities. During his employment with the Company, and for one year
-------------
thereafter, Executive shall not take any action which might divert from the
Company any opportunity learned about by him during his employment with the
Company (including without limitation during the Employment Term) which would be
within the scope of any of the businesses then engaged in or planned to be
engaged in by the Company.
10. Survival. In the even that this Agreement shall be terminated, then
--------
notwithstanding such termination, the obligations of Executive pursuant to
Sections 6,7,8 and 9 of this agreement shall survive such termination.
11. Contents of Agreement, Parties in Interest, Assignment, etc. This
-----------------------------------------------------------
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Executive hereunder which are of
a personal nature shall neither be assigned nor transferred in whole or in part
by Executive. This Agreement shall not be amended except by a written instrument
duly executed by the parties.
12. Severability. If any term or provision of this Agreement shall be held to
------------
be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
13. Notices. Any notice, request, instruction or other document to be given
-------
hereunder by any party to the other party shall be in writing and shall be
deemed to have been duly given when delivered personally or five (5) days after
dispatch by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to the Company addressed to:
ebaseOne Corporation
6060 Richmond Avenue
Houston, Texas 77057
6
<PAGE>
with a copy to:
Brewer & Pritchard, P.C.
1111 Bagby, Suite 2450
Houston, Texas 77002
If to Executive addressed to:
John Frazier Overstolz
9506 Meadowcroft
Houston, TX 77063
or to such other address as the one party shall specify to the other party in
writing.
14. Counterparts and Headings. This agreement may be executed in one or more
-------------------------
counterparts, each of which shall be deemed an original and all which together
shall constitute one and the same instrument. All headings are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EBASEONE CORPORATION
By: /s/ Michael Rotolo
-------------------------------
Michael Rotolo
Director
By: /s/ John Frazier Overstolz
-------------------------------
John Frazier Overstoltz
Director and Executive Officer
EXECUTIVE
By: /s/ John Frazier Overstolz
-------------------------------
John Frazier Overstoltz
7
<PAGE>
ADDENDUM #1
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, which consideration includes but is not limited to, not
being required to issue management of ebaseOne Corporation additional warrants,
the parties hereby agree that this Addendum, entered into this 27/th/ day of
October, 1999, shall amend, to the extent set forth in this Addendum, the
employment agreement entered into on August 11, 1999 between EBASEONE
CORPORATION, a Delaware corporation ("Company") and John Frazier Overstolz, an
individual ("Overstolz") (the "Agreement").
Notwithstanding anything in the Agreement, the Company and Overstolz agree
to amend and restate in its entirety Section 4(c) of the Agreement as follows:
(4)(c) Warrants. The Executive will be entitled to receive a five year
warrant to purchase 1,000,000 shares of Company common stock at $2.50 per share,
vesting over a period of 24-months, and expiring October 27, 2004.
Overstolz hereby agrees to waive any and all rights to the warrant to purchase
3,000,000 shares of Company common stock ("Warrant"), which was provided in the
Agreement, and has concurrently delivered to the Company, the Warrant marked
canceled. The Company agrees to issue Overstolz a new warrant to purchase
1,000,000 shares of Company common stock, which is attached hereto as Exhibit
"A".
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to the
Agreement to be executed on the day and year set forth above.
EBASEONE CORPORATION
By: /s/ Charles Skamser
-------------------------------
Charles Skamser, President
JOHN FRAZIER OVERSTOLZ, an individual
By: /s/ John Frazier Overstolz
-------------------------------
John Frazier Overstolz
8
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 16th day of August, 1999, between ebaseOne
Corporation, a Delaware corporation, currently having its principal place of
business at 6060 Richmond Avenue, Houston, Texas 77057 (the "Company"), and
Charles Skamser (the "Executive") an individual currently residing at 7814
Oxfordshire Drive, Houston, Texas 77379.
WHEREAS, the Company desires to employ Executive and Executive desires to
be employed by the Company, as President and Chief Executive Officer of the
Company.
WHEREAS, the Executive is willing to enter into an agreement with the
Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the term of
-----------------
employment of the Executive under this Employment Agreement shall be for the
period commencing on the date hereof (the "Commencement Date") and terminating
on December 31, 2001, unless sooner terminated as provided in accordance with
the provisions of Section 5 hereof. (Such term of employment is herein
sometimes called the "Employment Term.")
2. Employment. As of the Commencement Date, the Company hereby agrees to
----------
employ the Executive as President and Chief Executive Officer of the Company,
and the Executive hereby accepts such employment and agrees to perform his
duties and responsibilities hereunder in accordance with the terms and
conditions hereinafter set forth.
3. Duties and Responsibilities; Board Membership.
---------------------------------------------
(a) Duties. Executive shall perform such duties as are usually performed by a
President/Chief Executive Officer of a business similar in size and scope as the
Company and such other reasonable additional duties as may be prescribed from
time-to-time by the Company's board of directors which are reasonable and
consistent with the Company's operations, taking into account Executive's
expertise and job responsibilities. This agreement shall survive any job title
or responsibility change agreed to by Executive. Executive shall report directly
to the board of directors of the Company regarding implementation of all
business matters. All actions of Executive shall be subject and subordinate to
the review and approval of the board of directors. No other person or group
shall be given authority to supervise or direct Executive in the performance of
his duties. The board of directors shall be the final and exclusive arbiter of
all policy decisions relative to the Company's business.
(b) Board Membership. Upon commencement of this agreement, the board of
directors shall
<PAGE>
use its best efforts to nominate and cause the election of Executive to the
Company's board of directors to fill a currently existing vacancy.
(c) Devotion of Time. During the term of this agreement, Executive agrees to
devote sufficient time and attention during normal business hours to the
business and affairs of the company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the term of
this agreement it shall not be a violation of this agreement for Executive to
(i) serve on the boards of PaperChaser.com, IDT (or its successor),
AtlanticPacific Communications, and ChillOut Misters as an active director; (ii)
deliver lectures, fulfill speaking engagement to teach at educational
institutions; (iii) manage personal investments or companies in which personal
investments are made so long as such activities do not significantly interfere
with the performance of Executive's responsibilities with the Company and which
companies are not in direct competition with the Company; or (iv) provide
consulting services to Bradford Brothers, KnowledgeWire, and other companies
that are currently supported by Executive's consulting practice, New Enterprise
Solutions, however it is expressly understood that Executive will limit his
participation with the foregoing companies. Executive has agreed not to pursue
any additional clients unless they have strategic value to the Company, as
approved by the board of directors. In addition, Executive must obtain written
permission from the Company's board of directors in order to serve on any
additional boards. Any income received by Executive outside the scope of his
employment and permitted pursuant to the provisions hereof, shall inure to the
benefit of Executive, and the Company shall not claim any entitlement thereto.
Executive has agreed not to pursue any additional clients unless they have
strategic value to the Company, as approved by the board of directors.
4. Compensation and Benefits During the Employment Term.
----------------------------------------------------
(a) Base Compensation. The Executive's base compensation from the Commencement
Date through December 31, 1999, shall be at the rate of $12,500 per month,
payable in regular semi-monthly installments in accordance with the
Company's practice for its executives, less applicable withholding for
income and employment taxes as required by law and other deductions as to
which the Executive shall agree. Executive acknowledges that initially
such base compensation may have to be accrued, based upon the Company's
current working capital. Thereafter, the Executive's base compensation
shall be $15,000 per month. Such base compensation shall be subject to
increases as and when determined by the Company's board of directors in its
sole discretion.
(b) Bonus Compensation. In addition to the Executive's base compensation,
Executive will be entitled to a performance bonus as follows:
(i) Before December 31, 1999, the Executive has agreed to work toward
meeting the following objectives ("MBOs"): (i) raise working capital
necessary to begin implementation of the business plan; (ii) build an
enterprise center in Houston; (ii) secure agreements to host packaged
software applications under a subscription agreement or like agreement
with one or more vendors for sales force automation,
<PAGE>
financial management, customer relationship management, human
resource management and electronic business; (iii) hire the necessary
personnel to execute the business plan; and (iv) secure initial
customers per the business plan. After December 31, 1999, the
Company's board of directors shall determine what material progress
the Executive has made toward meeting the above captioned MBOs and
shall pay the Executive a bonus of up to $125,000 based upon the
percentage of MBOs met. Said bonus shall be paid on or before the end
of January 2000.
(ii) If, no later than December 31, 2000, the Company successfully
implements and meets certain agreed upon milestones, as determined by
the Company's board of directors in January 2000, Executive will be
entitled to receive $180,000. If the board of directors is unable to
agree on the milestones, the Executive will receive the bonus in the
event the Company attains $12 million in net revenues for December
31, 2000, as determined by the Company's independent auditors. In any
event, the bonus shall be paid upon the earlier of (x) 12 month
financial statements filed with the Securities and Exchange
Commission, or (y) March 31, 2001.
(iii) Subsequent bonuses will be determined by the board of directors.
(c) Warrants. The Executive will be entitled to receive five year warrants to
purchase an aggregate 10,000,000 shares of Company common stock having the
terms set forth in the warrant agreement attached hereto as Exhibit "A."
(d) Expense Reimbursement. The Executive shall be entitled to reimbursement of
all reasonable, ordinary and necessary business related expenses incurred
by him in the course of his duties and upon compliance with the Company's
procedures.
(e) Participation in Employee Benefit Plans. Executive shall be entitled to
participate, subject to eligibility and other terms generally established
by the Company's board or directors, in any employee benefit plan
[including but not limited to life insurance plans, stock option plans,
group hospitalization, hearth, dental care (which health insurance shall
also cover Executive's dependents) profit sharing, pension and other
benefit plans], as may be adopted or amended by the Company from time-to-
time.
5. Termination. Subject to the notice and other provisions of this Section 5,
-----------
the Company shall have the right to terminate the Executive's employment with
the Company, and the Executive shall have the right to resign from such
employment, at any time and for no stated reason.
(a) Disability. The Company shall have the right to terminate the employment
of the Executive under this Agreement for disability in the event Executive
suffers an injury, illness or incapacity as defined in the Company's Long
Term Disability Insurance Policy in effect as of the date hereof for a
period of more than six (6) months provided that during such six month
period the Company shall have given at least ten (10) days written notice
of termination; provided further, however, that if the Executive is
eligible to receive disability payments pursuant to a disability policy
paid for by the Company, the Executive shall assign such
<PAGE>
benefits to the Company for all periods as to which he is receiving full
payment under this agreement.
(b) Death. This agreement shall terminate upon the death of Executive.
(c) With Cause. The Company may terminate this agreement at any time because
of:
(i) Executive's material breach of any term of this agreement, which is
not cured after ten (10) days written notice from the board of
directors, or
(ii) commission by the Executive of a felony or an act of fraud against
the Company.
In the event Executive's employment with the Company is terminated pursuant
to items 5(a), (b) or (c), Executive or his beneficiary shall be entitled to
receive all base compensation earned by Executive up to the date of termination,
all unreimbursed expenses, and any bonus earned in respect of a prior year and
not yet paid. For a termination by the Company without good cause, Executive
shall be entitled to receive the greater of (i) the remaining base salary at the
then base salary rate for the remainder of the Employment Term or (ii) the base
salary rate for the period of six months, and all unreimbursed expenses, any
bonus earned in respect of a prior year and not yet paid, and the pro-rata
portion of any bonus for the current year.
6. Revealing of Trade Secrets, etc. Executive acknowledges the interest of
-------------------------------
the Company in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term or thereafter,
directly or indirectly, reveal or cause to be revealed to any person or entity
the supplier lists, customer lists or other confidential business information of
the Company; provided, however, that the parties acknowledge that it is not the
intention of this paragraph to include within its subject matter (a) information
not proprietary to the Company, (b) information which is then in the public
domain, or (c) information required to be disclosed by law.
7. Arbitration. If a dispute should arise regarding this agreement, all
-----------
claims, disputes, controversies, differences or other matters in question
arising out of this relationship shall be settled finally, completely and
conclusively by arbitration of a single arbitrator in Houston, Texas, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules"). Arbitration shall be initiated by written demand.
This agreement to arbitrate shall be specifically enforceable only in the
District Court of Harris County, Texas. A decision of the arbitrator shall be
final, conclusive and binding on the Company and the Executive, and judgement
may be entered in the District Court of Harris County, Texas, for enforcement
and other benefits. On appointment, the arbitrator shall then proceed to decide
the arbitration subjects in accordance with the Rules. Any arbitration held in
accordance with this paragraph shall be private and confidential and no person
shall be entitled to attend the hearings except the arbitrator, Executive,
Executive's attorneys, and an designated representatives of the Company and
their respective attorneys. The matters submitted for arbitration, the hearings
and proceedings and the arbitration award shall be kept and maintained in
strictest confidence by Executive and the Company and shall
<PAGE>
not be discussed, disclosed or communicated to any persons. On request of any
party, the record of the proceeding shall be sealed and may not be disclosed
except insofar, and only insofar, as may be necessary to enforce the award of
the arbitrator and any judgement enforcing an award. The prevailing party shall
be entitled to recover reasonable and necessary attorneys' fees and costs from
the non-prevailing party.
8. Covenants Not to Compete.
(a) Executive's Acknowledgment. Executive agrees and acknowledges that in
order to assure the Company that it will retain its value as a going
concern, it is necessary that Executive undertake not to utilize his
special knowledge of the business and his relationships with customers and
suppliers to compete with the Company. Executive further acknowledges
that:
(i) the Company is and will be engaged in the business;
(ii) Executive will occupy a position of trust and confidence with the
Company prior to the date of this agreement and, during such period
and Executive's employment under this agreement, Executive has, and
will become familiar with the Company's trade secrets and with other
proprietary and confidential information concerning the Company;
(iii) the agreements and covenants contained in this Section 8 are
essential to protect the Company and the goodwill of the business;
and
(iv) Executive's employment with the Company has special, unique and
extraordinary value to the Company and the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of the provisions of this agreement.
(b) Competitive Activities. Executive hereby agrees that for a period
commencing on the date hereof and ending one year following the later of
(i) termination of Executive's employment with the Company for whatever
reason, and (ii) the conclusion of the period, if any, during which the
Company is making payments to Executive, he will not, directly or
indirectly, as employee, agent, consultant, stockholder, director, co-
partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any manner
in, act as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or otherwise
assist any person or entity (other than the Company) that engages in or
owns, invests in, operates, manages or controls any venture or enterprise
that directly or indirectly engages or proposes in engage in the business
of the manufacturing, distribution or sale of (i) products manufactured,
distributed, sold or licensed by the Company or services provided by the
Company at the time of termination or (ii) products or services proposed at
the time of such termination to be manufactured, distributed, sold,
licensed or provided by the Company within the united States (the
<PAGE>
"Territory"); provided, however, that nothing contained herein shall be
construed to prevent Executive from (i) investing in the stock of any
competing corporation listed on a national securities exchange or traded in
the over-the-counter market, but only if Executive is not involved in the
business of said corporation and if Executive and his associates (as such
term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do
not own more than an aggregate of two percent of the stock of such
corporation, or (ii) investments in PaperChaser.com, IDT (or its
successor), AtlanticPacific Communications, and ChillOut Misters
("Permitted Investments"). With respect to the Territory, Executive
specifically acknowledges that the Company has conducted the business
throughout those areas comprising the Territory and the Company intends to
continue to expand the business throughout the Territory.
(c) Blue Pencil. If an arbitrator shall at any time deem the terms of this
agreement or any restrictive covenant too lengthy or the Territory too
extensive, the other provisions of this section 8 shall nevertheless
stand, the restrictive period shall be deemed to be the longest period
permissible by law under the circumstances and the Territory shall be
deemed to comprise the largest territory permissible by law under the
circumstances. The arbitrator in each case shall reduce the restricted
period and/or the Territory to permissible duration or size.
9. Opportunities. During his employment with the Company, and for one year
-------------
thereafter, Executive shall not take any action which might divert from the
Company any opportunity learned about by him during his employment with the
Company (including without limitation during the Employment Term) which would be
within the scope of any of the businesses then engaged in or planned to be
engaged in by the Company.
10. Survival. In the even that this Agreement shall be terminated, then
--------
notwithstanding such termination, the obligations of Executive pursuant to
Sections 6,7,8 and 9 of this agreement shall survive such termination.
11. Contents of Agreement, Parties in Interest, Assignment, etc. This
-----------------------------------------------------------
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Executive hereunder which are of
a personal nature shall neither be assigned nor transferred in whole or in part
by Executive. This Agreement shall not be amended except by a written
instrument duly executed by the parties.
12. Severability. If any term or provision of this Agreement shall be held to
------------
be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
13. Notices. Any notice, request, instruction or other document to be given
-------
hereunder by any
<PAGE>
party to the other party shall be in writing and shall be deemed to have been
duly given when delivered personally or five (5) days after dispatch by
registered or certified mail, postage prepaid, return receipt requested, to the
party to whom the same is so given or made:
If to the Company addressed to:
ebaseOne Corporation
6060 Richmond Avenue
Houston, Texas 77057
`with a copy to:
Brewer & Pritchard, P.C.
1111 Bagby, Suite 2450
Houston, Texas 77002
If to Executive addressed to:
Charles W. Skamser
7814 Oxfordshire Drive
Spring, TX 77379
or to such other address as the one party shall specify to the other party in
writing.
14. Counterparts and Headings. This agreement may be executed in one or more
-------------------------
counterparts, each of which shall be deemed an original and all which together
shall constitute one and the same instrument. All headings are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EBASEONE CORPORATION
By: /s/ John Frazier Overstolz
-------------------------------
John Frazier Overstolz, Chairman of the Board
EXECUTIVE
By: /s/ Charles Skamser
---------------------------------
Charles Skamser
<PAGE>
ADDENDUM #1
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree that this Addendum, entered
into this 27/th/ day of October, 1999, shall amend, to the extent set forth in
this Addendum, the employment agreement entered into on August ___, 1999 between
EBASEONE CORPORATION, a Delaware corporation ("Company") and Charles Skamser, an
individual ("Skamser") (the "Agreement").
Notwithstanding anything in the Agreement, the Company and Skamser agree to
amend and restate in its entirety, the following section of the Agreement as
follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the term of
employment of the Executive under this Employment Agreement shall be for the
period commencing on the date hereof (the "Commencement Date") and terminating
on December 31, 2002, unless sooner terminated as provided in accordance with
the provisions of Section 5 hereof. (Such term of employment is herein
sometimes called the "Employment Term.")
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to the
Agreement to be executed on the day and year set forth above.
EBASEONE CORPORATION
By: /s/ John Frazier Overstolz
------------------------------------
John Frazier Overstolz, Chairman of the Board
CHARLES SKAMSER, an individual
By: /s/ Charles Skamser
------------------------------------
Charles Skamser
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 18/th/ day of November 1999, between
ebaseOne Corporation, a Delaware corporation, currently having its principal
place of business at 6060 Richmond Avenue, Houston, Texas 77057 (the "Company"),
and Michael A. Sooley (the "Executive") an individual currently residing in
Houston, Texas. The Company and the Executive may be referred to collectively
as the "Parties."
WHEREAS, the Company desires to employ Executive and Executive desires to
be employed by the Company, as Chief Technology Officer.
WHEREAS, the Executive is willing to enter into an agreement with the
Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the term of
-----------------
employment of the Executive under this Employment Agreement shall be for the
period commencing on the date hereof (the "Commencement Date") and terminating
on December 31, 2002, unless sooner terminated as provided in accordance with
the provisions of Section 5 hereof. (Such term of employment is herein
sometimes called the "Employment Term.")
2. Employment. As of the Commencement Date, the Company hereby agrees to
----------
employ the Executive as Chief Technology Officer of the Company, and the
Executive hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder in accordance with the terms and conditions
hereinafter set forth.
3. Duties and Responsibilities.
---------------------------
(a) Duties. Executive shall perform such duties as are usually performed by a
Chief Technology Officer of a business similar in size and scope as the
Company and such other reasonable additional duties as may be prescribed
from time-to-time by the Company's board of directors which are reasonable
and consistent with the Company's operations, taking into account
Executive's expertise and job responsibilities. This agreement shall
survive any job title or responsibility change agreed to by Executive.
Executive shall report directly to the Chief Executive Officer of the
Company regarding implementation of all business matters. All actions of
Executive shall be subject and subordinate to the review and approval of
the board of directors. No other person or group shall be given authority
to supervise or direct Executive in the performance of his duties. The
board of directors shall be the final and exclusive arbiter of all policy
decisions relative to the Company's business.
(b) Devotion of Time. During the term of this agreement, Executive agrees to
devote sufficient time and attention during normal business hours to the
business and affairs of the company
1
<PAGE>
to the extent necessary to discharge the responsibilities assigned to
Executive and to use reasonable best efforts to perform faithfully and
efficiently such responsibilities.
4. Compensation and Benefits During the Employment Term:
----------------------------------------------------
(a) Base Compensation. The Executive's base compensation from the Commencement
Date through December 31, 2000, shall be at the rate of $11,250.00 per
month, payable in regular semi-monthly installments in accordance with the
Company's practice for its executives, less applicable withholding for
income and employment taxes as required by law and other deductions as to
which the Executive shall agree. Such base compensation shall be subject to
increases as and when determined by the Company's board of directors in its
sole discretion. In addition, beginning in 2000 and continuing for the term
of this agreement the company agrees to pay the Executive a monthly car
allowance of $1,000 per month.
(b) Bonus Compensation. In addition to The Executive's base compensation,
Executive will be entitled to a performance bonus up to 75% of base salary
for 2000. Performance criteria for said bonus will be determined before
January 31, 2000 by the board of directors, as recommended by the Chief
Executive Officer. Bonus amounts and performance criteria for additional
years under this agreement, shall also be determined by the board of
directors, as recommended by the Chief Executive Officer. In addition to
the Executive's base compensation, Executive will be entitled to a
performance bonus as determined by the board of directors, as recommended
by the Chief Executive Officer.
(c) Warrants. The Executive will be entitled to receive five year warrants to
purchase an aggregate 1,000,000 shares of Company common stock having the
terms set forth in the warrant agreements attached hereto as Exhibit "A."
(d) Expense Reimbursement. The Executive shall be entitled to reimbursement of
all reasonable, ordinary and necessary business related expenses incurred
by him in the course of his duties and upon compliance with the Company's
procedures.
(e) Participation in Employee Benefit Plans. Executive shall be entitled to
participate, subject to eligibility and other terms generally established
by the Company's board or directors, in any employee benefit plan
[including but not limited to life insurance plans, stock option plans,
group hospitalization, hearth, dental care (which health insurance shall
also cover Executive's dependents) profit sharing, pension and other
benefit plans], as may be adopted or amended by the Company from time-to-
time.
5. Termination. Subject to the notice and other provisions of this Section 5,
-----------
the Company shall have the right to terminate the Executive's employment with
the Company, and the Executive shall have the right to resign from such
employment, at any time and for no stated reason.
(a) Disability. The Company shall have the right to terminate the employment
of the Executive under this Agreement for disability in the event Executive
suffers an injury, illness or incapacity as defined in the Company's Long
Term Disability Insurance Policy in effect as of the date hereof for a
period of more than six (6) months provided that during such six month
period the Company shall have given at least ten (10) days written notice
of termination; provided further, however, that if the Executive is
eligible to receive disability payments pursuant to a disability policy
paid for by the Company, the Executive shall assign such benefits to the
Company for all periods as to which he is receiving full payment under this
2
<PAGE>
agreement. If Executive is determined to be disabled, as defined within
the Americans with Disabilities Act, the Company will make reasonable
accommodations, including but not limited to the following: (i) job
restructuring; (ii) modification of work schedules, (iii) job
reassignments, (iv) acquisition of devices to help accommodate an
individual with a disability; and (v) use of interpreters or other support
personnel for an individual with a disability.
(b) Death. This agreement shall terminate upon the death of Executive.
(c) With Cause. The Company may terminate this agreement effective upon
delivery of written notice to Executive given at any time (without any necessity
for prior notice) if any of the following shall occur:
(1) any material breach of Executive's obligations of this Agreement, not
cured after ten (10) days notice from the board of directors;
(2) Executive's gross negligence in the performance of his duties
hereunder;
(3) any material acts or events which may inhibit Executive from fully
performing his or her responsibilities to the Company in good faith,
and upon which the board of directors in the exercise of its reasonable
judgment, determines that the Executive has committed any of the
following: (w) a felony criminal conviction; (x) any other criminal
conviction involving Executive's lack of honesty or moral turpitude;
(y) drug or alcohol abuse; or (z) acts of dishonesty, gross
carelessness or gross misconduct.
In the event Executive's employment with the Company is terminated pursuant
to items 5(a), (b) or (c), Executive or his beneficiary shall be entitled to
receive all base compensation earned by Executive up to the date of termination,
all unreimbursed expenses, and any bonus earned in respect of a prior year and
not yet paid. For a termination by the Company without good cause, Executive
shall be entitled to receive the base salary rate for the period of three
months, and all unreimbursed expenses, any bonus earned in respect of a prior
year and not yet paid, and the pro-rata portion of any bonus for the current
year.
6. Revealing of Trade Secrets, etc. Executive acknowledges the interest of
-------------------------------
the Company in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term or thereafter,
directly or indirectly, reveal or cause to be revealed to any person or entity
the supplier lists, customer lists or other confidential business information of
the Company; provided, however, that the parties acknowledge that it is not the
intention of this paragraph to include within its subject matter (a) information
not proprietary to the Company, (b) information which is then in the public
domain, or (c) information required to be disclosed by law.
7. Arbitration. If a dispute should arise regarding this agreement, all
-----------
claims, disputes, controversies, differences or other matters in question
arising out of this relationship shall be settled finally, completely and
conclusively by arbitration of a single arbitrator in Houston, Texas, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules"). Arbitration shall be initiated by written demand.
This agreement to arbitrate shall be
3
<PAGE>
specifically enforceable only in the District Court of Harris County, Texas. A
decision of the arbitrator shall be final, conclusive and binding on the Company
and the Executive, and judgement may be entered in the District Court of Harris
County, Texas, for enforcement and other benefits. On appointment, the
arbitrator shall then proceed to decide the arbitration subjects in accordance
with the Rules. Any arbitration held in accordance with this paragraph shall be
private and confidential and no person shall be entitled to attend the hearings
except the arbitrator, Executive, Executive's attorneys, and an designated
representatives of the Company and their respective attorneys. The matters
submitted for arbitration, the hearings and proceedings and the arbitration
award shall be kept and maintained in strictest confidence by Executive and the
Company and shall not be discussed, disclosed or communicated to any persons. On
request of any party, the record of the proceeding shall be sealed and may not
be disclosed except insofar, and only insofar, as may be necessary to enforce
the award of the arbitrator and any judgement enforcing an award. The prevailing
party shall be entitled to recover reasonable and necessary attorneys' fees and
costs from the non-prevailing party.
8. Confidentiality. In the course of the performance of Executive's duties
---------------
hereunder, Executive recognizes and acknowledges that Executive may have access
to certain confidential and proprietary information of Employer or any of its
affiliates. Without the prior written consent of Employer, Executive shall not
disclose any such confidential or proprietary information to any person or firm,
corporation, association, or other entity for any reason or purpose whatsoever,
and shall not use such information, directly or indirectly, for Executive's own
behalf or on behalf of any other party. Executive agrees and affirms that all
such information is the sole property of Employer and that at the termination
and/or expiration of this Agreement, at Employer's written request, Executive
shall promptly return to Employer any and all such information so requested by
Employer.
(a) The provisions of this Section 8 shall not, however, prohibit Executive
from disclosing to others or using in any manner information that:
(i) has been published or has become part of the public domain other than
by acts, omissions or fault of Executive;
(ii) has been furnished or made known to Executive by third parties (other
than those acting directly or indirectly for or on behalf of
Executive) as a matter of legal right without restriction on its use
or disclosure;
(iii) was in the possession of Executive prior to obtaining such
information from Employer in connection with the performance of this
Agreement; or
(iv) is required to be disclosed by law.
4
<PAGE>
9. Covenants Not to Compete.
------------------------
(a) Executive's Acknowledgment. Executive agrees and acknowledges that in
order to assure the Company that it will retain its value as a going concern, it
is necessary that Executive undertake not to utilize his special knowledge of
the business and his relationships with customers and suppliers to compete with
the Company. Executive further acknowledges that:
(i) the Company is and will be engaged in the business;
(ii) Executive will occupy a position of trust and confidence with the
Company prior to the date of this agreement and, during such period
and Executive's employment under this agreement, Executive has, and
will become familiar with the Company's trade secrets and with other
proprietary and confidential information concerning the Company;
(iii) the agreements and covenants contained in this Section 9 are
essential to protect the Company and the goodwill of the business;
and
(iv) Executive's employment with the Company has special, unique and
extraordinary value to the Company and the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of the provisions of this agreement.
(b) Competitive Activities. Executive hereby agrees that for a period
commencing on the date hereof and ending one year following the later of (i)
termination of Executive's employment with the Company for whatever reason, and
(ii) the conclusion of the period, if any, during which the Company is making
payments to Executive, he will not, directly or indirectly, as employee, agent,
consultant, stockholder, director, co-partner or in any other individual or
representative capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as a consultant or advisor to, render services
for (alone or in association with any person, firm, corporation or entity), or
otherwise assist any person or entity (other than the Company) that engages in
or owns, invests in, operates, manages or controls any venture or enterprise
that directly or indirectly engages or proposes in engage in the business of the
manufacturing, distribution or sale of (i) products manufactured, distributed,
sold or licensed by the Company or services provided by the Company at the time
of termination or (ii) products or services proposed at the time of such
termination to be manufactured, distributed, sold, licensed or provided by the
Company within the United States (the "Territory"); provided, however, that
nothing contained herein shall be construed to prevent Executive from investing
in the stock of any competing corporation listed on a national securities
exchange or traded in the over-the-counter market, but only if Executive is not
involved in the business of said corporation and if Executive and his associates
(as such term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do not own
more than an aggregate of two percent of the stock of such corporation. With
respect to the Territory, Executive specifically acknowledges that the Company
has conducted the business throughout those areas comprising the Territory and
the Company intends to continue to expand the business throughout the Territory.
5
<PAGE>
(c) Blue Pencil. If an arbitrator shall at any time deem the terms of this
agreement or any restrictive covenant too lengthy or the Territory too
extensive, the other provisions of this Section 8 shall nevertheless stand, the
restrictive period shall be deemed to be the longest period permissible by law
under the circumstances and the Territory shall be deemed to comprise the
largest territory permissible by law under the circumstances. The arbitrator in
each case shall reduce the restricted period and/or the Territory to permissible
duration or size.
10. Opportunities. During his employment with the Company, and for one year
-------------
thereafter, Executive shall not take any action which might divert from the
Company any opportunity learned about by him during his employment with the
Company (including without limitation during the Employment Term) which would be
within the scope of any of the businesses then engaged in or planned to be
engaged in by the Company.
11. Survival. In the even that this Agreement shall be terminated, then
--------
notwithstanding such termination, the obligations of Executive pursuant to
Sections 6,7,8 9, and 10 of this agreement shall survive such termination.
12. Contents of Agreement, Parties in Interest, Assignment, etc. This
-----------------------------------------------------------
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Executive hereunder which are of
a personal nature shall neither be assigned nor transferred in whole or in part
by Executive. This Agreement shall not be amended except by a written
instrument duly executed by the parties.
13. Severability. If any term or provision of this Agreement shall be held to
------------
be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
14. Notices. Any notice, request, instruction or other document to be given
-------
hereunder by any party to the other party shall be in writing and shall be
deemed to have been duly given when delivered personally or five (5) days after
dispatch by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to the Company addressed to:
Charles W. Skamser
ebaseOne Corporation
6060 Richmond Avenue
Houston, Texas 77057
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with a copy to:
Thomas C. Pritchard
Brewer & Pritchard, P.C.
1111 Bagby, Suite 2450
Houston, Texas 77002
If to Executive addressed to:
Michael A. Sooley
107 S. Meadowmist Circle
The Woodlands, TX 77387
or to such other address as the one party shall specify to the other party in
writing.
15. Counterparts and Headings. This agreement may be executed in one or more
-------------------------
counterparts, each of which shall be deemed an original and all which together
shall constitute one and the same instrument. All headings are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this agreement.
16. Termination of Prior Agreement. The Parties hereby agree that the
------------------------------
Consulting Agreement entered into between the Parties in May 1999 shall be
terminated as of November 16, 1999.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EBASEONE CORPORATION
By: /s/ CHARLES SKAMSER
____________________________________
Charles Skamser
Director and Chief Executive Officer
EXECUTIVE
By: /s/ MICHAEL A. SOOLEY
____________________________________
Michael A. Sooley
7
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 18/th/ day of November 1999, between
ebaseOne Corporation, a Delaware corporation, currently having its principal
place of business at 6060 Richmond Avenue, Houston, Texas 77057 (the "Company"),
and Scott Feuless (the "Executive") an individual currently residing in Houston,
Texas.
WHEREAS, the Company desires to employ Executive and Executive desires to
be employed by the Company, as Senior Vice President of Technology.
WHEREAS, the Executive is willing to enter into an agreement with the
Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the term of
-----------------
employment of the Executive under this Employment Agreement shall be for the
period commencing on the date hereof (the "Commencement Date") and terminating
on December 31, 2002, unless sooner terminated as provided in accordance with
the provisions of Section 5 hereof. (Such term of employment is herein
sometimes called the "Employment Term.")
2. Employment. As of the Commencement Date, the Company hereby agrees to
----------
employ the Executive as Senior Vice President of Technology of the Company, and
the Executive hereby accepts such employment and agrees to perform his duties
and responsibilities hereunder in accordance with the terms and conditions
hereinafter set forth.
3. Duties and Responsibilities.
---------------------------
(a) Duties. Executive shall perform such duties as are usually performed by a
Senior Vice President of Technology of a business similar in size and scope
as the Company and such other reasonable additional duties as may be
prescribed from time-to-time by the Company's board of directors which are
reasonable and consistent with the Company's operations, taking into
account Executive's expertise and job responsibilities. This agreement
shall survive any job title or responsibility change agreed to by
Executive. Executive shall report directly to the Chief Executive Officer
of the Company regarding implementation of all business matters. All
actions of Executive shall be subject and subordinate to the review and
approval of the board of directors. No other person or group shall be given
authority to supervise or direct Executive in the performance of his
duties. The board of directors shall be the final and exclusive arbiter of
all policy decisions relative to the Company's business.
(b) Devotion of Time. During the term of this agreement, Executive agrees to
devote sufficient time and attention during normal business hours to the
business and affairs of the company
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to the extent necessary to discharge the responsibilities assigned to
Executive and to use reasonable best efforts to perform faithfully and
efficiently such responsibilities.
4. Compensation and Benefits During the Employment Term:
----------------------------------------------------
(a) Base Compensation. The Executive's base compensation from the Commencement
Date through December 31, 2000, shall be at the rate of $9,583.33 per
month, payable in regular semi-monthly installments in accordance with the
Company's practice for its executives, less applicable withholding for
income and employment taxes as required by law and other deductions as to
which the Executive shall agree. Such base compensation shall be subject to
increases as and when determined by the Company's board of directors in its
sole discretion.
(b) Bonus Compensation. In addition to the Executive's base compensation,
Executive will be entitled to a performance bonus as determined by the
board of directors, as recommended by the Chief Executive Officer.
(c) Warrants. The Executive will be entitled to receive five year warrants to
purchase an aggregate 750,000 shares of Company common stock having the
terms set forth in the warrant agreements attached hereto as Exhibit "A."
(d) Expense Reimbursement. The Executive shall be entitled to reimbursement of
all reasonable, ordinary and necessary business related expenses incurred
by him in the course of his duties and upon compliance with the Company's
procedures.
(e) Participation in Employee Benefit Plans. Executive shall be entitled to
participate, subject to eligibility and other terms generally established
by the Company's board or directors, in any employee benefit plan
[including but not limited to life insurance plans, stock option plans,
group hospitalization, hearth, dental care (which health insurance shall
also cover Executive's dependents) profit sharing, pension and other
benefit plans], as may be adopted or amended by the Company from time-to-
time.
5. Termination. Subject to the notice and other provisions of this Section 5,
-----------
the Company shall have the right to terminate the Executive's employment with
the Company, and the Executive shall have the right to resign from such
employment, at any time and for no stated reason.
(a) Disability. The Company shall have the right to terminate the employment
of the Executive under this Agreement for disability in the event Executive
suffers an injury, illness or incapacity as defined in the Company's Long
Term Disability Insurance Policy in effect as of the date hereof for a
period of more than six (6) months provided that during such six month
period the Company shall have given at least ten (10) days written notice
of termination; provided further, however, that if the Executive is
eligible to receive disability payments pursuant to a disability policy
paid for by the Company, the Executive shall assign such benefits to the
Company for all periods as to which he is receiving full payment under this
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agreement. If Executive is determined to be disabled, as defined within the
Americans with Disabilities Act, the Company will make reasonable
accommodations, including but not limited to the following: (i) job
restructuring; (ii) modification of work schedules, (iii) job
reassignments, (iv) acquisition of devices to help accommodate an
individual with a disability; and (v) use of interpreters or other support
personnel for an individual with a disability.
(b) Death. This agreement shall terminate upon the death of Executive.
(c) With Cause. The Company may terminate this agreement effective upon
delivery of written notice to Executive given at any time (without any necessity
for prior notice) if any of the following shall occur:
(i) any material breach of Executive's obligations of this Agreement, not
cured after ten (10) days notice from the board of directors;
(ii) Executive's gross negligence in the performance of his duties
hereunder;
(iii) any material acts or events which may inhibit Executive from fully
performing his or her responsibilities to the Company in good faith,
and upon which the board of directors in the exercise of its
reasonable judgment, determines that the Executive has committed any
of the following: (w) a felony criminal conviction; (x) any other
criminal conviction involving Executive's lack of honesty or moral
turpitude; (y) drug or alcohol abuse; or (z) acts of dishonesty,
gross carelessness or gross misconduct.
In the event Executive's employment with the Company is terminated pursuant
to items 5(a), (b) or (c), Executive or his beneficiary shall be entitled to
receive all base compensation earned by Executive up to the date of termination,
all unreimbursed expenses, and any bonus earned in respect of a prior year and
not yet paid. For a termination by the Company without good cause, Executive
shall be entitled to receive the base salary rate for the period of three
months, and all unreimbursed expenses, any bonus earned in respect of a prior
year and not yet paid, and the pro-rata portion of any bonus for the current
year.
6. Revealing of Trade Secrets, etc. Executive acknowledges the interest of
-------------------------------
the Company in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term or thereafter,
directly or indirectly, reveal or cause to be revealed to any person or entity
the supplier lists, customer lists or other confidential business information of
the Company; provided, however, that the parties acknowledge that it is not the
intention of this paragraph to include within its subject matter (a) information
not proprietary to the Company, (b) information which is then in the public
domain, or (c) information required to be disclosed by law.
7. Arbitration. If a dispute should arise regarding this agreement, all
-----------
claims, disputes, controversies, differences or other matters in question
arising out of this relationship shall be settled finally, completely and
conclusively by arbitration of a single arbitrator in Houston, Texas, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules"). Arbitration shall be initiated by written demand.
This agreement to arbitrate shall be
3
<PAGE>
specifically enforceable only in the District Court of Harris County, Texas. A
decision of the arbitrator shall be final, conclusive and binding on the Company
and the Executive, and judgement may be entered in the District Court of Harris
County, Texas, for enforcement and other benefits. On appointment, the
arbitrator shall then proceed to decide the arbitration subjects in accordance
with the Rules. Any arbitration held in accordance with this paragraph shall be
private and confidential and no person shall be entitled to attend the hearings
except the arbitrator, Executive, Executive's attorneys, and an designated
representatives of the Company and their respective attorneys. The matters
submitted for arbitration, the hearings and proceedings and the arbitration
award shall be kept and maintained in strictest confidence by Executive and the
Company and shall not be discussed, disclosed or communicated to any persons. On
request of any party, the record of the proceeding shall be sealed and may not
be disclosed except insofar, and only insofar, as may be necessary to enforce
the award of the arbitrator and any judgement enforcing an award. The prevailing
party shall be entitled to recover reasonable and necessary attorneys' fees and
costs from the non-prevailing party.
8. Confidentiality. In the course of the performance of Executive's duties
---------------
hereunder, Executive recognizes and acknowledges that Executive may have access
to certain confidential and proprietary information of Employer or any of its
affiliates. Without the prior written consent of Employer, Executive shall not
disclose any such confidential or proprietary information to any person or firm,
corporation, association, or other entity for any reason or purpose whatsoever,
and shall not use such information, directly or indirectly, for Executive's own
behalf or on behalf of any other party. Executive agrees and affirms that all
such information is the sole property of Employer and that at the termination
and/or expiration of this Agreement, at Employer's written request, Executive
shall promptly return to Employer any and all such information so requested by
Employer.
(a) The provisions of this Section 8 shall not, however, prohibit Executive
from disclosing to others or using in any manner information that:
(i) has been published or has become part of the public domain other
than by acts, omissions or fault of Executive;
(ii) has been furnished or made known to Executive by third parties
(other than those acting directly or indirectly for or on behalf of
Executive) as a matter of legal right without restriction on its use
or disclosure;
(iii) was in the possession of Executive prior to obtaining such
information from Employer in connection with the performance of this
Agreement; or
(iv) is required to be disclosed by law.
4
<PAGE>
9. Covenants Not to Compete.
------------------------
(a) Executive's Acknowledgment. Executive agrees and acknowledges that in order
to assure the Company that it will retain its value as a going concern, it is
necessary that Executive undertake not to utilize his special knowledge of the
business and his relationships with customers and suppliers to compete with the
Company. Executive further acknowledges that:
(i) the Company is and will be engaged in the business;
(ii) Executive will occupy a position of trust and confidence with the
Company prior to the date of this agreement and, during such period
and Executive's employment under this agreement, Executive has, and
will become familiar with the Company's trade secrets and with other
proprietary and confidential information concerning the Company;
(iii) the agreements and covenants contained in this Section 9 are
essential to protect the Company and the goodwill of the business;
and
(iv) Executive's employment with the Company has special, unique and
extraordinary value to the Company and the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of the provisions of this agreement.
(b) Competitive Activities. Executive hereby agrees that for a period
commencing on the date hereof and ending one year following the later of (i)
termination of Executive's employment with the Company for whatever reason, and
(ii) the conclusion of the period, if any, during which the Company is making
payments to Executive, he will not, directly or indirectly, as employee, agent,
consultant, stockholder, director, co-partner or in any other individual or
representative capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as a consultant or advisor to, render services
for (alone or in association with any person, firm, corporation or entity), or
otherwise assist any person or entity (other than the Company) that engages in
or owns, invests in, operates, manages or controls any venture or enterprise
that directly or indirectly engages or proposes in engage in the business of the
manufacturing, distribution or sale of (i) products manufactured, distributed,
sold or licensed by the Company or services provided by the Company at the time
of termination or (ii) products or services proposed at the time of such
termination to be manufactured, distributed, sold, licensed or provided by the
Company within the United States (the "Territory"); provided, however, that
nothing contained herein shall be construed to prevent Executive from investing
in the stock of any competing corporation listed on a national securities
exchange or traded in the over-the-counter market, but only if Executive is not
involved in the business of said corporation and if Executive and his associates
(as such term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do not own
more than an aggregate of two percent of the stock of such corporation. With
respect to the Territory, Executive specifically acknowledges that the Company
has conducted the business throughout those areas comprising the Territory and
the Company intends to continue to expand the business throughout the Territory.
5
<PAGE>
(c) Blue Pencil. If an arbitrator shall at any time deem the terms of this
agreement or any restrictive covenant too lengthy or the Territory too
extensive, the other provisions of this Section 8 shall nevertheless stand, the
restrictive period shall be deemed to be the longest period permissible by law
under the circumstances and the Territory shall be deemed to comprise the
largest territory permissible by law under the circumstances. The arbitrator in
each case shall reduce the restricted period and/or the Territory to permissible
duration or size.
10. Opportunities. During his employment with the Company, and for one year
-------------
thereafter, Executive shall not take any action which might divert from the
Company any opportunity learned about by him during his employment with the
Company (including without limitation during the Employment Term) which would be
within the scope of any of the businesses then engaged in or planned to be
engaged in by the Company.
11. Survival. In the even that this Agreement shall be terminated, then
--------
notwithstanding such termination, the obligations of Executive pursuant to
Sections 6,7,8 9, and 10 of this agreement shall survive such termination.
12. Contents of Agreement, Parties in Interest, Assignment, etc. This
-----------------------------------------------------------
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Executive hereunder which are of
a personal nature shall neither be assigned nor transferred in whole or in part
by Executive. This Agreement shall not be amended except by a written
instrument duly executed by the parties.
13. Severability. If any term or provision of this Agreement shall be held to
------------
be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
14. Notices. Any notice, request, instruction or other document to be given
-------
hereunder by any party to the other party shall be in writing and shall be
deemed to have been duly given when delivered personally or five (5) days after
dispatch by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to the Company addressed to:
Charles W. Skamser
ebaseOne Corporation
6060 Richmond Avenue
Houston, Texas 77057
6
<PAGE>
with a copy to:
Thomas C. Pritchard
Brewer & Pritchard, P.C.
1111 Bagby, Suite 2450
Houston, Texas 77002
If to Executive addressed to:
Scott Feuless
3203 Forrester Drive
Pearland, TX 77584
or to such other address as the one party shall specify to the other party in
writing.
15. Counterparts and Headings. This agreement may be executed in one or more
-------------------------
counterparts, each of which shall be deemed an original and all which together
shall constitute one and the same instrument. All headings are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EBASEONE CORPORATION
By: /s/ Charles Skamsrer
----------------------------
Charles Skamser
Director and Chief Executive Officer
EXECUTIVE
By: /s/ Scott Feuless
----------------------------
Scott Feuless
7
<PAGE>
EXHIBIT 10.5
EBASEONE CORPORATION
1999 STOCK OPTION PLAN
ARTICLE I - PLAN
1.1 PURPOSE. This Plan is a plan for key Employees (including officers
and employee directors) and Consultants of the Company and its Affiliates and is
intended to advance the best interests of the Company, its Affiliates, and its
stockholders by providing those persons who have substantial responsibility for
the management and growth of the Company and its Affiliates with additional
incentives and an opportunity to obtain or increase their proprietary interest
in the Company, thereby encouraging them to continue in the employ of the
Company or any of its Affiliates.
1.2 RULE 16b-3 PLAN. The Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and therefore the Plan is intended to comply with all applicable
conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated
under the 1934 Act. To the extent any provision of the Plan or action by the
Board of Directors or Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee. In
addition, the Board of Directors may amend the Plan from time to time as it
deems necessary in order to meet the requirements of any amendments to Rule
16b-3 without the consent of the shareholders of the Company.
1.3 EFFECTIVE DATE OF PLAN. The Plan shall be effective May 1999 (the
"Effective Date"), provided that within one year of the Effective Date, the Plan
shall have been approved by at least a majority vote of stockholders. No
Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted
Stock Award or Performance Stock Award shall be granted pursuant to the Plan ten
years after the Effective Date.
ARTICLE II - DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. The term
"subsidiary corporation" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
2.2 "AWARD" means each of the following granted under this Plan:
Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted
Stock Award or Performance Stock Award.
2.3 "BOARD OF DIRECTORS" means the board of directors of the Company.
2.4 "CHANGE IN CONTROL" shall mean and include the following
transactions or situations:
(a) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing thirty (30%) percent or more of the combined voting power of the
Company's then outstanding securities to any "Unrelated Person" or "Unrelated
Persons" acting in concert with one another. For purposes of this definition,
the term "Person" shall mean and include any individual, partnership, joint
venture, association, trust corporation, or other entity (including a "group" as
referred to in Section 13(d)(3) of the 1934 Act). For purposes of this
definition, the term "Unrelated Person" shall mean and include any Person other
than
1
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the Company, a wholly-owned subsidiary of the Company, or an employee benefit
plan of the Company; provided however, a sale to underwriters in connection with
a public offering of the Company's securities pursuant to a firm commitment
shall not be a Change of Control.
(b) A sale, transfer, or other disposition through a single
transaction or a series of transactions of all or substantially all of the
assets of the Company to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(c) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least thirty (30%) percent of the combined voting power of the Company's then
outstanding securities. For purposes of this definition, the term "Beneficial
Owner" shall have the same meaning as given to that term in Rule 13d-3
promulgated under the 1934 Act, provided that any pledgee of voting securities
is not deemed to be the Beneficial Owner thereof prior to its acquisition of
voting rights with respect to such securities.
(d) Any consolidation or merger of the Company with or into an
Unrelated Person, unless immediately after the consolidation or merger the
holders of the common stock of the Company immediately prior to the
consolidation or merger are the beneficial owners of securities of the surviving
corporation representing at least fifty (50%) percent of the combined voting
power of the surviving corporation's then outstanding securities.
(e) During any period of two years, individuals who, at the beginning
of such period, constituted the Board of Directors of the Company cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election of each new director was approved by the vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of such period.
(f) A change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the 1934 Act, or any successor regulation of similar
importance, regardless of whether the Company is subject to such reporting
requirement.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended.
2.6 "COMMITTEE" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors. The
Committee shall be comprised solely of at least two members who are both
Disinterested Persons and Outside Directors or by the Board of Directors in its
entirety.
2.7 "COMPANY" means ebaseOne Corporation.
2.8 "CONSULTANT" means any person, including an advisor, engaged by the
Company or Affiliate to render services and who is compensated for such
services.
2.9 "DISINTERESTED PERSON" means a "disinterested person" as that term
is defined in Rule 16b-3 under the 1934 Act.
2.10 "ELIGIBLE PERSONS" shall mean, with respect to the Plan, those
persons who, at the time that an Award is granted, are (i) key personnel
(including officers and directors) of the Company or Affiliate, or (ii)
Consultants or independent contractors who provide valuable services to the
Company or Affiliate as determined by the Committee.
2.11 "EMPLOYEE" means a person employed by the Company or any Affiliate
to whom an Award is granted.
2.12 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date on the
principal securities exchange on which the Stock is listed; or (b) if the Stock
is not listed on a securities exchange, the average of the high and low sale
prices of the Stock on that date as reported on
2
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the NASDAQ National Market System; or (c) if the Stock is not listed on the
NASDAQ National Market System, the average of the high and low bid quotations
for the Stock on that date as reported by the National Quotation Bureau
Incorporated; or (d) if none of the foregoing is applicable, an amount at the
election of the Committee equal to (x), the average between the closing bid and
ask prices per share of Stock on the last preceding date on which those prices
were reported or (y) that amount as determined by the Committee in good faith.
2.13 "INCENTIVE OPTION" means an option to purchase Stock granted under
this Plan which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code.
2.14 "NONQUALIFIED OPTION" means an option to purchase Stock granted
under this Plan other than an Incentive Option.
2.15 "OPTION" means both an Incentive Option and a Nonqualified Option
granted under this Plan to purchase shares of Stock.
2.16 "OPTION AGREEMENT" means the written agreement by and between the
Company and an Eligible Person which sets out the terms of an Option.
2.17 "OUTSIDE DIRECTOR" means a member of the Board of Directors serving
on the Committee who satisfies Section 162(m) of the Code.
2.18 "PLAN" means the ebaseOne Corporation 1999 Stock Option Plan, as
set out in this document and as it may be amended from time to time.
2.19 "PLAN YEAR" means the Company's fiscal year.
2.20 "PERFORMANCE STOCK AWARD" means an award of shares of Stock to be
issued to an Eligible Person if specified predetermined performance goals are
satisfied as described in Article VI.
2.21 "RESTRICTED STOCK" means Stock awarded or purchased under a
Restricted Stock Agreement entered into pursuant to this Plan, together with (i)
all rights, warranties or similar items attached or accruing thereto or
represented by the certificate representing the stock and (ii) any stock or
securities into which or for which the stock is thereafter converted or
exchanged. The terms and conditions of the Restricted Stock Agreement shall be
determined by the Committee consistent with the terms of the Plan.
2.22 "RESTRICTED STOCK AGREEMENT" means an agreement between the Company
or any Affiliate and the Eligible Person pursuant to which the Eligible Person
receives a Restricted Stock Award subject to Article VI.
2.23 "RESTRICTED STOCK AWARD" means an Award of Restricted Stock.
2.24 "RESTRICTED STOCK PURCHASE PRICE" means the purchase price, if any,
per share of Restricted Stock subject to an Award. The Restricted Stock
Purchase Price shall be determined by the Committee. It may be greater than or
less than the Fair Market Value of the Stock on the date of the Stock Award.
2.25 "STOCK" means the common stock of the Company, $.001 par value or,
in the event that the outstanding shares of common stock are later changed into
or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.
2.26 "STOCK APPRECIATION RIGHT" and "SAR" means the right to receive the
difference between the Fair Market Value of a share of Stock on the grant date
and the Fair Market Value of the share of Stock on the exercise date.
2.27 "10% STOCKHOLDER" means an individual who, at the time the Option
is granted, owns Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Affiliate.
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An individual shall be considered as owning the Stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and Stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its stockholders, partners,
or beneficiaries.
ARTICLE III - ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
Eligible Persons of the Company or any of its Affiliates as the Committee shall
determine from time to time. However, no member of the Committee shall be
eligible to receive any Award or to receive Stock, Options, Stock Appreciation
Rights or any Performance Stock Award under any other plan of the Company or any
of its Affiliates, if to do so would cause the individual not to be a
Disinterested Person or Outside Director. The Board of Directors of Directors
may designate one or more individuals who shall not be eligible to receive any
Award under this Plan or under other similar plans of the Company.
ARTICLE IV - GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant to those
Eligible Persons of the Company or any of its Affiliates as it shall from time
to time determine, Awards under the terms and conditions of this Plan. Subject
only to any applicable limitations set out in this Plan, the number of shares of
Stock to be covered by any Award to be granted to an Eligible Person shall be
determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with respect
to which Awards may be granted under the Plan shall be 5,000,000 shares. The
shares may be treasury shares or authorized but unissued shares. The maximum
number of shares subject to options or stock appreciation rights which may be
issued to any eligible person under the plan during each plan year shall be
determined by the compensation committee. The maximum number of shares subject
to restricted stock awards which may be granted to any eligible person under the
plan during each plan year shall be determined by the compensation committee.
The maximum number of shares subject to performance stock awards which may be
granted to any eligible person during each plan year shall be determined by the
compensation committee. The number of shares stated in this Section 4.2 shall
be subject to adjustment in accordance with the provisions of Section 4.5. In
the event that any outstanding Award shall expire or terminate for any reason or
any Award is surrendered, the shares of Stock allocable to the unexercised
portion of that Award may again be subject to an Award under the Plan.
4.3 NON-TRANSFERABILITY. Awards shall not be transferable by the
Eligible Person otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during the Eligible Person's lifetime,
only by him. Restricted Stock shall be purchased by and/or become vested under a
Restricted Stock Agreement during the Eligible Person's lifetime, only by him.
Any attempt to transfer an Award other than under the terms of the Plan and the
Agreement shall terminate the Award and all rights of the Eligible Person to
that Award.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Award if issuing that Stock would constitute or result
in a violation by the Eligible Person or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option or pursuant to any
Award, the Company shall not be required to issue any Stock unless the Committee
has received evidence satisfactory to it to the effect that the holder of that
Option or Award will not transfer the Stock except in accordance with applicable
law, including receipt of an opinion of counsel satisfactory to the Company to
the effect that any proposed transfer complies with applicable law. The
determination by the Committee on this matter shall be final, binding and
conclusive. The Company may, but shall in no event be obligated to, register any
Stock covered by this Plan pursuant to applicable securities laws of any country
or any political subdivision. In the event the Stock issuable on exercise of an
Option or pursuant to an Award is not registered, the Company may imprint on the
certificate evidencing the Stock any legend that counsel for the Company
considers necessary or advisable to comply with applicable law. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of an Option or vesting under an Award, or the issuance of shares
pursuant thereto, to comply with any law or regulation of any governmental
authority.
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4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Options or Awards shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Stock or its rights, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise. If the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the
payment of a Stock dividend, or other increase or reduction of the number of
shares of the Stock outstanding, without receiving compensation for it in money,
services or property, then (a) the number, class, and per share price of shares
of Stock subject to outstanding Options under this Plan shall be appropriately
adjusted in such a manner as to entitle an Eligible Person to receive upon
exercise of an Option, for the same aggregate cash consideration, the equivalent
total number and class of shares he would have received had he exercised his
Option in full immediately prior to the event requiring the adjustment; and (b)
the number and class of shares of Stock then reserved to be issued under the
Plan shall be adjusted by substituting for the total number and class of shares
of Stock then reserved, that number and class of shares of Stock that would have
been received by the owner of an equal number of outstanding shares of each
class of Stock as the result of the event requiring the adjustment.
(b) If the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or if the Company is
liquidated or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan:
(i) subject to the provisions of clause (c) below, after the
effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, each holder of an outstanding Option shall be
entitled, upon exercise of the Option, to receive, in lieu of shares of Stock,
the number and class or classes of shares of stock or other securities or
property to which the holder would have been entitled if, immediately prior to
the merger, consolidation, liquidation, sale or other disposition, the holder
had been the holder of record of a number of shares of Stock equal to the number
of shares as to which the Option shall be so exercised;
(ii) the Board of Directors may waive any limitations set out
in or imposed under this Plan so that all Options, from and after a date prior
to the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, specified by the Board of Directors, shall be
exercisable in full; and
(iii) all outstanding Options may be canceled by the Board of
Directors as of the effective date of any merger, consolidation, liquidation,
sale or other disposition, if (i) notice of cancellation shall be given to each
holder of an Option and (ii) each holder of an Option shall have the right to
exercise that Option in full (without regard to any limitations set out in or
imposed under this Plan or the Option Agreement granting that Option) during a
period set by the Board of Directors preceding the effective date of the merger,
consolidation, liquidation, sale or other disposition and, if in the event all
outstanding Options may not be exercised in full under applicable securities
laws without registration of the shares of Stock issuable on exercise of the
Options, the Board of Directors may limit the exercise of the Options to the
number of shares of Stock, if any, as may be issued without registration. The
method of choosing which Options may be exercised, and the number of shares of
Stock for which Options may be exercised, shall be solely within the discretion
of the Board of Directors.
(c) After a merger of one or more corporations into the Company or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Eligible Person shall be
entitled to have his Restricted Stock and shares earned under a Performance
Stock Award appropriately adjusted based on the manner the Stock was adjusted
under the terms of the agreement of merger or consolidation.
(d) In each situation described in this Section 4.5, the Committee
will make similar adjustments, as appropriate, in outstanding Stock Appreciation
Rights.
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(e) The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Awards.
4.6 ELECTION UNDER SECTION 83(b) OF THE CODE. No Employee shall
exercise the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Employee doing so shall forfeit all Awards
issued to him under this Plan.
ARTICLE V - OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 TYPE OF OPTION. The Committee shall specify at the time of grant
whether a given Option shall constitute an Incentive Option or a Nonqualified
Option. Incentive Stock Options may only be granted to Employees.
5.2 OPTION PRICE. The price at which Stock may be purchased under an
Incentive Option shall not be less than the greater of: (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under an Incentive Option shall be more than 100% of Fair
Market Value. In the case of any 10% Stockholder, the price at which shares of
Stock may be purchased under an Incentive Option shall not be less than 110% of
the Fair Market Value of the Stock on the date the Incentive Option is granted.
The price at which shares of Stock may be purchased under a Nonqualified Option
shall be such price as shall be determined by the Committee in its sole
discretion but in no event lower than the par value of the shares of Stock on
the date the Option is granted.
5.3 DURATION OF OPTIONS AND SARS. No Option or SAR shall be
exercisable after the expiration of ten (10) years from the date the Option or
SAR is granted. In the case of a 10% Stockholder, no Incentive Option shall be
exercisable after the expiration of five years from the date the Incentive
Option is granted.
5.4 AMOUNT EXERCISABLE -- INCENTIVE OPTIONS. Each Option may be
exercised from time to time, in whole or in part, in the manner and subject to
the conditions the Committee, in its sole discretion, may provide in the Option
Agreement, as long as the Option is valid and outstanding, and further provided
that no Option may be exercisable within six (6) months of the date of grant,
unless otherwise stated in the Option Agreement. To the extent that the
aggregate Fair Market Value (determined as of the time an Incentive Option is
granted) of the Stock with respect to which Incentive Options first become
exercisable by the optionee during any calendar year (under this Plan and any
other incentive stock option plan(s) of the Company or any Affiliate) exceeds
$100,000, the portion in excess of $100,000 of the Incentive Option shall be
treated as a Nonqualified Option. In making this determination, Incentive
Options shall be taken into account in the order in which they were granted.
5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Stock with respect to which the Option is to be exercised, together with:
(a) cash, certified check, bank draft, or postal or express money
order payable to the order of the Company for an amount equal to the option
price of the shares,
(b) Stock at its Fair Market Value on the date of exercise, (if
approved in advance by the Committee),
(c) an election to make a cashless exercise through a registered
broker-dealer (if approved in advance by the Committee),
(d) an election to have shares of Stock, which otherwise would be
issued on exercise, withheld in payment of the exercise price (if approved in
advance by the Committee), and/or
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(e) any other form of payment which is acceptable to the Committee,
including without limitation, payment in the form of a promissory note, and
specifying the address to which the certificates for the shares are to be
mailed.
As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Eligible Person certificates for the
number of shares with respect to which the Option has been exercised, issued in
the Eligible Person's name. If shares of Stock are used in payment, the
aggregate Fair Market Value of the shares of Stock tendered must be equal to or
less than the aggregate exercise price of the shares being purchased upon
exercise of the Option, and any difference must be paid by cash, certified
check, bank draft, or postal or express money order payable to the order of the
Company. Delivery of the shares shall be deemed effected for all purposes when
a stock transfer agent of the Company shall have deposited the certificates in
the United States mail, addressed to the Eligible Person, at the address
specified by the Eligible Person.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Eligible Person, the Eligible Person shall deliver to the Company
certificates registered in the name of the Eligible Person representing a number
of shares of Stock legally and beneficially owned by the Eligible Person, free
of all liens, claims, and encumbrances of every kind, accompanied by stock
powers duly endorsed in blank by the record holder of the shares represented by
the certificates (with signature guaranteed by a commercial bank or trust
company or by a brokerage firm having a membership on a registered national
stock exchange). The delivery of certificates upon the exercise of Options is
subject to the condition that the person exercising the Option provide the
Company with the information the Company might reasonably request pertaining to
exercise, sale or other disposition.
5.6 STOCK APPRECIATION RIGHTS. All Eligible Persons shall be eligible
to receive Stock Appreciation Rights. The Committee shall determine the SAR to
be awarded from time to time to any Eligible Person. The grant of an SAR to be
awarded from time to time shall neither entitle such person to, nor disqualify
such person, from participation in any other grant of awards by the Company,
whether under this Plan or any other plan of the Company. If granted as a stand-
alone SAR Award, the terms of the Award shall be provided in a Stock
Appreciation Rights Agreement.
5.7 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS. Stock
Appreciation Rights may, at the discretion of the Committee, be included in each
Option granted under the Plan to permit the holder of an Option to surrender
that Option, or a portion of the part which is then exercisable, and receive in
exchange, upon the conditions and limitations set by the Committee, an amount
equal to the excess of the Fair Market Value of the Stock covered by the Option,
or the portion of it that was surrendered, determined as of the date of
surrender, over the aggregate exercise price of the Stock. The payment may be
made in shares of Stock valued at Fair Market Value, in cash, or partly in cash
and partly in shares of Stock, as the Committee shall decide in its sole
discretion. Stock Appreciation Rights may be exercised only when the Fair
Market Value of the Stock covered by the Option surrendered exceeds the exercise
price of the Stock. In the event of the surrender of an Option, or a portion of
it, to exercise the Stock Appreciation Rights, the shares represented by the
Option or that part of it which is surrendered, shall not be available for
reissuance under the Plan. Each Stock Appreciation Right issued in tandem with
an Option (a) will expire not later than the expiration of the underlying
Option, (b) may be for no more than 100% of the difference between the exercise
price of the underlying Option and the Fair Market Value of a share of Stock at
the time the Stock Appreciation Right is exercised, (c) is transferable only
when the underlying Option is transferable, and under the same conditions, and
(d) may be exercised only when the underlying Option is eligible to be
exercised.
5.8 CONDITIONS OF STOCK APPRECIATION RIGHTS. All Stock Appreciation
Rights shall be subject to such terms, conditions, restrictions or limitations
as the Committee deems appropriate, including by way of illustration but not by
way of limitation, restrictions on transferability, requirement of continued
employment, individual performance, financial performance of the Company or
payment of any applicable employment or withholding taxes.
5.9 PAYMENT OF STOCK APPRECIATION RIGHTS. The amount of payment to
which the Eligible Person who reserves an SAR shall be entitled upon the
exercise of each SAR shall be equal to the amount, if any by which the Fair
Market Value of the specified shares of Stock on the exercise date exceeds the
Fair Market Value of the specified shares of Stock on the date of grant of the
SAR. The SAR shall be paid in either cash or Stock, as determined in the
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discretion of the Committee as set forth in the SAR agreement. If the payment
is in Stock, the number of shares to be paid shall be determined by dividing the
amount of such payment by the Fair Market Value of Stock on the exercise date of
such SAR.
5.10 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option or SAR agreement, Options and SAR granted to
Employees shall terminate one day less than three months after severance of
employment of the Employee from the Company and all Affiliates for any reason,
with or without cause, other than death, retirement under the then established
rules of the Company, or severance for disability. Whether authorized leave of
absence or absence on military or government service shall constitute severance
of the employment of the Employee shall be determined by the Committee at that
time.
5.11 DEATH. If, before the expiration of an Option or SAR, the Eligible
Person, whether in the employ of the Company or after he has retired or was
severed for disability, or otherwise dies, the Option or SAR shall continue
until the earlier of the Option's or SAR's expiration date or one year following
the date of his death, unless it is expressly provided otherwise in the Option
or SAR agreement. After the death of the Eligible Person, his executors,
administrators or any persons to whom his Option or SAR may be transferred by
will or by the laws of descent and distribution shall have the right, at any
time prior to the Option's or SAR's expiration or termination, whichever is
earlier, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option or SAR's agreement.
5.12 RETIREMENT. Unless it is expressly provided otherwise in the
Option Agreement, before the expiration of an Incentive Option, the Employee
shall be retired in good standing from the employ of the Company under the then
established rules of the Company, the Incentive Option shall terminate on the
earlier of the Option's expiration date or one day less than one year after his
retirement; provided, if an Incentive Option is not exercised within specified
time limits prescribed by the Code, it will become a Nonqualified Option by
operation of law. Unless it is expressly provided otherwise in the Option
Agreement, if before the expiration of a Nonqualified Option, the Employee shall
be retired in good standing from the employ of the Company under the then
established rules of the Company, the Nonqualified Option shall terminate on the
earlier of the Nonqualified Option's expiration date or one day less than one
year after his retirement. In the event of retirement, the Employee shall have
the right prior to the termination of the Nonqualified Option to exercise the
Nonqualified Option, to the extent to which he was entitled to exercise it
immediately prior to his retirement, unless it is expressly provided otherwise
in the Option Agreement. Upon retirement, an SAR shall continue to be
exercisable for the remainder of the term of the SAR agreement.
5.13 DISABILITY. If, before the expiration of an Option or SAR, the
Employee shall be severed from the employ of the Company for disability, the
Option or SAR shall terminate on the earlier of the Option's or SAR's expiration
date or one day less than one year after the date he was severed because of
disability, unless it is expressly provided otherwise in the Option or SAR
agreement. In the event that the Employee shall be severed from the employ of
the Company for disability, the Employee shall have the right prior to the
termination of the Option or SAR to exercise the Option, to the extent to which
he was entitled to exercise it immediately prior to his retirement or severance
of employment for disability, unless it is expressly provided otherwise in the
Option Agreement.
5.14 SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and
conditions of the substitute Options granted may vary from the terms and
conditions set out in this Plan to the extent the Committee, at the time of
grant, may deem appropriate to conform, in whole or in part, to the provisions
of the stock options in substitution for which they are granted.
5.15 RELOAD OPTIONS. Without in any way limiting the authority of the
Board of Directors or Committee to make or not to make grants of Options
hereunder, the Board of Directors or Committee shall have the authority (but not
an obligation) to include as part of any Option Agreement a provision entitling
the Eligible Person to a further Option (a "Reload Option") in the event the
Eligible Person exercises the Option evidenced by the Option
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Agreement, in whole or in part, by surrendering other shares of Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Reload Option (a) shall be for a number of shares equal to the number
of shares surrendered as part or all of the exercise price of such Option; (b)
shall have an expiration date which is the greater of (i) the same expiration
date of the Option the exercise of which gave rise to such Reload Option or (ii)
one year from the date of grant of the Reload Option; and (c) shall have an
exercise price which is equal to one hundred percent (100%) of the Fair Market
Value of the Stock subject to the Reload Option on the date of exercise of the
original Option. Notwithstanding the foregoing, a Reload Option which is an
Incentive Option and which is granted to a 10% Stockholder, shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the Stock subject to the Reload Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Reload Option may be an Incentive Option or a Nonqualified
Option, as the Board of Directors or Committee may designate at the time of the
grant of the original Option; provided, however, that the designation of any
Reload Option as an Incentive Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on exercisability of Incentive
Stock Options described in the Plan and in Section 422(d) of the Code. There
shall be no Reload Options on a Reload Option. Any such Reload Option shall be
subject to the availability of sufficient shares under Section 4.2 herein and
shall be subject to such other terms and conditions as the Board of Directors or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
5.16 NO RIGHTS AS STOCKHOLDER. No Eligible Person shall have any rights
as a stockholder with respect to Stock covered by his Option until the date a
stock certificate is issued for the Stock.
ARTICLE VI - RESTRICTED STOCK AWARDS
6.1 RESTRICTED STOCK AWARDS. The Committee may issue shares of Stock
to an Eligible Person subject to the terms of a Restricted Stock Agreement. The
Restricted Stock may be issued for no payment by the Eligible Person or for a
payment below the Fair Market Value on the date of grant. Restricted Stock
shall be subject to restrictions as to sale, transfer, alienation, pledge or
other encumbrance and generally will be subject to vesting over a period of time
specified in the Restricted Stock Agreement. The Committee shall determine the
period of vesting, the number of shares, the price, if any, of Stock included in
a Restricted Stock Award, and the other terms and provisions which are included
in a Restricted Stock Agreement.
6.2 RESTRICTIONS. Restricted Stock shall be subject to the terms and
conditions as determined by the Committee, including without limitation, any or
all of the following:
(a) a prohibition against the sale, transfer, alienation, pledge
or other encumbrance of the shares of Restricted Stock, such prohibition to
lapse (i) at such time or times as the Committee shall determine (whether in
annual or more frequent installments, at the time of the death, disability or
retirement of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of Restricted Stock
forfeit, or in the case of shares sold to an Eligible Person, resell back to the
Company at his cost, all or a part of such shares in the event of termination of
the Eligible Person's employment during any period in which the shares remain
subject to restrictions;
(c) a prohibition against employment of the holder of Restricted
Stock by any competitor of the Company or its Affiliates, or against such
holder's dissemination of any secret or confidential information belonging to
the Company or an Affiliate;
(d) unless stated otherwise in the Restricted Stock Agreement,
(i) if restrictions remain at the time of severance of
employment with the Company and all Affiliates, other than for reason of
disability or death, the Restricted Stock shall be forfeited; and
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(ii) if severance of employment is by reason of disability
or death, the restrictions on the shares shall lapse and the Eligible Person or
his heirs or estate shall be 100% vested in the shares subject to the Restricted
Stock Agreement.
6.3 STOCK CERTIFICATE. Shares of Restricted Stock shall be registered
in the name of the Eligible Person receiving the Restricted Stock Award and
deposited, together with a stock power endorsed in blank, with the Company. Each
such certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Stock
represented by it is restricted by and subject to the terms and
conditions (including conditions of forfeiture) contained in the
ebaseOne Corporation 1999 Stock Option Plan, and an agreement entered
into between the registered owner and the Company. A copy of the Plan
and agreement is on file in the office of the Secretary of the Company.
6.4 RIGHTS AS STOCKHOLDER. Subject to the terms and conditions of the
Plan, each Eligible Person receiving a certificate for Restricted Stock shall
have all the rights of a stockholder with respect to the shares of Stock
included in the Restricted Stock Award during any period in which such shares
are subject to forfeiture and restrictions on transfer, including without
limitation, the right to vote such shares. Dividends paid with respect to
shares of Restricted Stock in cash or property other than Stock in the Company
or rights to acquire stock in the Company shall be paid to the Eligible Person
currently. Dividends paid in Stock in the Company or rights to acquire Stock in
the Company shall be added to and become a part of the Restricted Stock.
6.5 LAPSE OF RESTRICTIONS. At the end of the time period during which
any shares of Restricted Stock are subject to forfeiture and restrictions on
sale, transfer, alienation, pledge, or other encumbrance, such shares shall vest
and will be delivered in a certificate, free of all restrictions, to the
Eligible Person or to the Eligible Person's legal representative, beneficiary or
heir; provided the certificate shall bear such legend, if any, as the Committee
determines is reasonably required by applicable law. By accepting a Stock Award
and executing a Restricted Stock Agreement, the Eligible Person agrees to remit
when due any federal and state income and employment taxes required to be
withheld.
6.6 RESTRICTION PERIOD. No Restricted Stock Award may provide for
restrictions continuing beyond ten (10) years from the date of grant.
ARTICLE VII - PERFORMANCE STOCK AWARDS
7.1 AWARD OF PERFORMANCE STOCK. The Committee may award shares of
Stock, without any payment for such shares, to designated Eligible Persons if
specified performance goals established by the Committee are satisfied. The
terms and provisions herein relating to these performance based awards are
intended to satisfy Section 162(m) of the Code and regulations issued
thereunder. The designation of an employee eligible for a specific Performance
Stock Award shall be made by the Committee in writing prior to the beginning of
the period for which the performance is measured (or within such period as
permitted by IRS regulations). The Committee shall establish the maximum number
of shares of Stock to be issued to a designated Employee if the performance goal
or goals are met. The Committee reserves the right to make downward adjustments
in the maximum amount of an Award if in its discretion unforeseen events make
such adjustment appropriate.
7.2 PERFORMANCE GOALS. Performance goals determined by the Committee
may be based on specified increases in cash flow, net profits, Stock price,
Company, segment or Affiliate sales, market share, earnings per share, return on
assets, and/or return on stockholders' equity.
7.3 ELIGIBILITY. The employees eligible for Performance Stock Awards
are the senior officers (i.e., chief executive officer, president, vice
presidents, secretary, treasurer, and similar positions) of the Company and its
Affiliates, and such other employees of the Company and its Affiliates as may be
designated by the Committee.
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7.4 CERTIFICATE OF PERFORMANCE. The Committee must certify in writing
that a performance goal has been attained prior to issuance of any certificate
for a Performance Stock Award to any Employee. If the Committee certifies the
entitlement of an Employee to the Performance Stock Award, the certificate will
be issued to the Employee as soon as administratively practicable, and subject
to other applicable provisions of the Plan, including but not limited to, all
legal requirements and tax withholding. However, payment may be made in shares
of Stock, in cash, or partly in cash and partly in shares of Stock, as the
Committee shall decide in its sole discretion. If a cash payment is made in
lieu of shares of Stock, the number of shares represented by such payment shall
not be available for subsequent issuance under this Plan.
ARTICLE VIII - ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards shall be subject to the
determination of the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made by
a majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. This Plan shall be
administered in such a manner as to permit the Options which are designated to
be Incentive Options to qualify as Incentive Options. In carrying out its
authority under this Plan, the Committee shall have full and final authority and
discretion, including but not limited to the following rights, powers and
authorities, to:
(a) determine the Eligible Persons to whom and the time or times at
which Options or Awards will be made,
(b) determine the number of shares and the purchase price of Stock
covered in each Option or Award, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each Option
and Award, which need not be identical,
(d) accelerate the time at which any outstanding Option or SAR may
be exercised, or Restricted Stock Award will vest,
(e) define the effect, if any, on an Option or Award of the death,
disability, retirement, or termination of employment of the Employee,
(f) prescribe, amend and rescind rules and regulations relating to
administration of the Plan, and
(g) make all other determinations and take all other actions deemed
necessary, appropriate, or advisable for the proper administration of this
Plan.
The actions of the Committee in exercising all of the rights, powers,
and authorities set out in this Article and all other Articles of this Plan,
when performed in good faith and in its sole judgment, shall be final,
conclusive and binding on all parties.
ARTICLE IX - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that to the extent required to qualify this Plan under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended, no
amendment that would (a) materially increase the number of shares of Stock that
may be issued under this Plan, (b) materially modify the requirements as to
eligibility for participation in this Plan, or (c) otherwise materially increase
the benefits accruing to participants under this Plan,
11
<PAGE>
shall be made without the approval of the Company's stockholders; provided
further, however, that to the extent required to maintain the status of any
Incentive Option under the Code, no amendment that would (a) change the
aggregate number of shares of Stock which may be issued under Incentive Options,
(b) change the class of employees eligible to receive Incentive Options, or (c)
decrease the Option price for Incentive Options below the Fair Market Value of
the Stock at the time it is granted, shall be made without the approval of the
Company's stockholders. Subject to the preceding sentence, the Board of
Directors shall have the power to make any changes in the Plan and in the
regulations and administrative provisions under it or in any outstanding
Incentive Option as in the opinion of counsel for the Company may be necessary
or appropriate from time to time to enable any Incentive Option granted under
this Plan to continue to qualify as an incentive stock option or such other
stock option as may be defined under the Code so as to receive preferential
federal income tax treatment.
ARTICLE X - MISCELLANEOUS
10.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside
nor shall a trust fund of any kind be established to secure the rights of any
Eligible Person under this Plan. All Eligible Persons shall at all times rely
solely upon the general credit of the Company for the payment of any benefit
which becomes payable under this Plan.
10.2 NO EMPLOYMENT OBLIGATION. The granting of any Option or Award
shall not constitute an employment contract, express or implied, nor impose upon
the Company or any Affiliate any obligation to employ or continue to employ any
Eligible Person. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option or Award has been granted to him.
10.3 FORFEITURE. Notwithstanding any other provisions of this Plan,
if the Committee finds by a majority vote after full consideration of the facts
that an Eligible Person, before or after termination of his employment with the
Company or an Affiliate for any reason (a) committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the
Company or Affiliate, or disclosed trade secrets of the Company or an Affiliate,
or (b) participated, engaged in or had a material, financial or other interest,
whether as an employee, officer, director, consultant, contractor, stockholder,
owner, or otherwise, in any commercial endeavor in the United States which is
competitive with the business of the Company or an Affiliate without the written
consent of the Company or Affiliate, the Eligible Person shall forfeit all
outstanding Options and all outstanding Awards, and including all exercised
Options and other situations pursuant to which the Company has not yet delivered
a stock certificate. Clause (b) shall not be deemed to have been violated solely
by reason of the Eligible Person's ownership of stock or securities of any
publicly owned corporation, if that ownership does not result in effective
control of the corporation.
The decision of the Committee as to the cause of an Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of an
Eligible Person's competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of the Employee
by the Company or an Affiliate in any manner.
10.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled
to deduct from other compensation payable to each Eligible Person any sums
required by federal, state, or local tax law to be withheld with respect to the
grant or exercise of an Option or SAR, lapse of restrictions on Restricted
Stock, or award of Performance Stock. In the alternative, the Company may
require the Eligible Person (or other person exercising the Option, SAR or
receiving the Stock) to pay the sum directly to the employer corporation. If the
Eligible Person (or other person exercising the Option or SAR or receiving the
Stock) is required to pay the sum directly, payment in cash or by check of such
sums for taxes shall be delivered within 10 days after the date of exercise or
lapse of restrictions. The Company shall have no obligation upon exercise of any
Option or lapse of restrictions on Stock until payment has been received, unless
withholding (or offset against a cash payment) as of or prior to the date of
exercise or lapse of restrictions is sufficient to cover all sums due with
respect to that exercise. The Company and its Affiliates shall not be obligated
to advise an Eligible Person of the existence of the tax or the amount which the
employer corporation will be required to withhold.
12
<PAGE>
10.5 WRITTEN AGREEMENT. Each Option and Award shall be embodied in a
written agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Eligible Person and by a member of the Committee
on behalf of the Committee and the Company or an executive officer of the
Company, other than the Eligible Person, on behalf of the Company. The
agreement may contain any other provisions that the Committee in its discretion
shall deem advisable which are not inconsistent with the terms of this Plan.
10.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of this Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of incurring the expenses,
including, without limitation, matters as to which he shall be finally adjudged
in any action, suit or proceeding to have been found to have been negligent in
the performance of his duty as a member of the Committee or the Board of
Directors. However, this indemnity shall not include any expenses incurred by
any member of the Committee and/or the Board of Directors in respect of matters
as to which he shall be finally adjudged in any action, suit or proceeding to
have been guilty of gross negligence or willful misconduct in the performance of
his duty as a member of the Committee and the Board of Directors. In addition,
no right of indemnification under this Plan shall be available to or enforceable
by any member of the Committee and the Board of Directors unless, within 60 days
after institution of any action, suit or proceeding, he shall have offered the
Company, in writing, the opportunity to handle and defend same at its own
expense. This right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each member of the Committee and the Board of
Directors and shall be in addition to all other rights to which a member of the
Committee and the Board of Directors may be entitled as a matter of law,
contract, or otherwise.
10.7 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.
10.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
10.9 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
10.10 OTHER OPTIONS OR AWARDS. The grant of an Option or Award shall
not confer upon the Eligible Person the right to receive any future or other
Options or Awards under this Plan, whether or not Options or Awards may be
granted to similarly situated Eligible Persons, or the right to receive future
Options or Awards upon the same terms or conditions as previously granted.
10.11 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Delaware.
13
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
1. Synoptech Solutions Group, Inc., a Nevada corporation
2. Prime Net Corporation, a Texas corporation *
* Prime Net Corporation is a wholly owned subsidiary of Synoptech Solutions
Group, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement of our report dated
October 25, 1999 relating to the consolidated financial statements of EbaseOne
Corporation and to the reference to our Firm under the caption, "Experts", in
this Registration Statement and related Prospectus.
HEIN + ASSOCIATES LLP
Houston, Texas
November 18, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 9/30/1999
AUDITED FINANCIAL STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-START> OCT-01-1999 OCT-01-1997
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 308,444 152,282
<SECURITIES> 6,000 0
<RECEIVABLES> 39,698 126,851
<ALLOWANCES> 0 0
<INVENTORY> 0 2,378
<CURRENT-ASSETS> 350,642 283,211
<PP&E> 332,557 81,131
<DEPRECIATION> 54,022 23,131
<TOTAL-ASSETS> 701,139 370,805
<CURRENT-LIABILITIES> 749,043 217,417
<BONDS> 0 0
0 0
0 0
<COMMON> 34,698 21,641
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 701,139 370,805
<SALES> 653,809 684,019
<TOTAL-REVENUES> 653,809 684,019
<CGS> 645,431 438,503
<TOTAL-COSTS> 645,431 438,503
<OTHER-EXPENSES> 2,149,269 700,192
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 47,294 17,168
<INCOME-PRETAX> (2,188,185) (471,844)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,188,185) (471,844)
<EPS-BASIC> (.08) (.03)
<EPS-DILUTED> (.08) (.03)
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