<PAGE>
As filed with the Securities and Exchange Commission on February 8, 2000
Registration No. 333-91439
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________
AMENDMENT NO. 2 TO
FORM S-1
Registration Statement
Under the Securities Act of 1933
__________________________________
EBASEONE CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 7379 13-3911740
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
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. [_]
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE BEING OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock to be Resold.......... 4,556,609 $8.00 $36,452,872 $10,134(2)
- ---------------------------------------------------------------------------------------------------------
TOTAL.............................. 4,556,609 $8.00 $36,452,872 $10,134(2)
=========================================================================================================
</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.
(2) Previously paid.
_________________________
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 February 8, 2000
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 3,993,166 SHARES OF COMMON STOCK
This prospectus relates to the resale of shares of our common stock by the
stockholders listed on page 64, which is not being underwritten. We will not
receive any proceeds from the sale of these shares.
Our common stock trades on the OTC Electronic Bulletin Board under the
symbol EBAS. On February 3, 2000, the last reported bid price of our common
stock was $7.03.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS. WE URGE YOU TO READ THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 6 ALONG WITH THE REST OF THIS PROSPECTUS BEFORE YOU
MAKE YOUR INVESTMENT DECISION.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
___________________________
The date of this prospectus is ________________ , 2000
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 13
Price Range of Common Stock............................................... 13
Dividend Policy........................................................... 14
Selected Financial Data................................................... 15
Management Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business.................................................................. 28
Management................................................................ 43
Certain Relationships and Related Transactions............................ 54
Principal Stockholders.................................................... 55
Description of Capital Stock.............................................. 57
Shares Available for Future Sale.......................................... 62
Selling Stockholders...................................................... 64
Plan of Distribution...................................................... 67
Experts................................................................... 69
Legal Matters............................................................. 69
Where You Can Find More Information....................................... 69
Financial Statements...................................................... F-1
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained in this prospectus.
To understand this offering fully, you should read the entire prospectus
carefully, including the risk factors beginning on page 6 and the financial
statements. Unless otherwise indicated, this prospectus assumes that no
outstanding options or warrants are exercised.
ebaseOne Corporation
We are an application service provider, or ASP. 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, we
believe these solutions are often too expensive for many small and medium sized
businesses.
Through our OneServ(SM) offering, we provide an integrated and
comprehensive solution of leading packaged software applications hosted in a
high quality data center all for a flat monthly fee.
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 to allow
their customers to access them through our high-speed fiber optics network.
We began offering our ASP services in November 1999. Before November 1999,
our revenue came from our software application reseller business provided by
Prime Net, our subsidiary.
We maintain a web site at www.ebaseone.com. Information contained on our
web site is not 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.
3
<PAGE>
THE OFFERING
Common stock outstanding 37,905,571 shares.
Common stock to be offered by
our selling stockholders......... 3,993,166 shares, including 1,359,713
shares underlying warrants.
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.
4
<PAGE>
SUMMARY FINANCIAL DATA
The following table contains historical and operating data of ebaseOne:
. for the three fiscal years ended September 30, which is derived from
our consolidated audited financial statements; and
. for the three month period ended December 31, 1999, which is derived
from our unaudited financial statements.
This data is in the thousands of dollars, except for per share amounts.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended September 30, December 31,
----------------------------- --------------------
1999 1998 1997 1999 1998
------ -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ 654 $ 684 $ 65 $ 236 $ 189
Operating Expenses.............. 3,966 1,139 281 3,189 344
Net Loss........................ (3,459) (472) (225) (2,967) (161)
Loss Per Share - Basic
and Diluted..................... $(.13) $(.03) $(.02) $(.08) $ (.01)
Weighted Average Shares
Outstanding Basic and Diluted... 26,967 15,660 12,608 36,442 21,642
As of September 30, As of
------------------------------- December 31,
1999 1998 1997 1999
------- ------- -------- ---------
BALANCE SHEET DATA:
Working Capital (Deficit)....... (458) 66 (15) 4,515
Total Assets.................... 701 371 97 5,340
Stockholders' Equity (Deficit).. (524) 121 14 4,613
</TABLE>
Revenues for the year ended September 30, 1999 and for the quarter ended
December 31, 1999 were derived from our non-ASP services.
5
<PAGE>
RISK FACTORS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY AS AN ASP, OUR FUTURE SUCCESS IS
UNCERTAIN.
We have a limited operating history for you to analyze or to aid you in
making an informed judgement concerning 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 limited ASP
revenue generating operations. Therefore, we can provide no assurance that we
will be able to generate revenue from our proposed ASP operations.
WE EXPECT TO CONTINUE TO HAVE LOSSES AND WE MAY NEVER BECOME PROFITABLE.
Since inception, we have experienced operating losses for each quarterly
and annual period. We cannot assure you that we will ever achieve profitability
or, if we ever achieve profitability, that it will be sustainable. For the year
ended September 30, 1999, we had net losses of $3,458,657. For the quarter
ended December 31, 1999, we had net losses of $2,966,829.
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 an early-stage company, we do not have the operating experience to
estimate what the extent of these expenditures will be at this time, but they
will increase as we expand. As a result, we expect to incur operating losses
for at least the fiscal year ending September 30, 2000. Due to our issuance of
below market securities to our management as part of their compensation, we
expect to record up to $9,500,000 of non-cash compensation charges during the
periods ending November 2001. While these charges do not result from
operations, they will be reflected as a net loss.
IF WE CANNOT RAISE MORE CAPITAL BY AUGUST 2000, WE WILL NEED TO CURTAIL
OPERATIONS OR CEASE BUSINESS. WE HAVE NO COMMITMENTS FOR MORE CAPITAL AT THIS
TIME.
To execute our business strategy, we will require more capital than we
currently have or have commitments to receive. Our failure to obtain additional
capital may result in our curtailing operations or ceasing to conduct business.
6
<PAGE>
In October and November 1999, we raised $8,966,000 through the sale of
securities, of which $3 million will be funded on the effective date of this
registration statement. This registration statement may never become effective,
and if it does not we will adjust our expenditures to account for the lack of
funding. Assuming that this registration statement becomes effective, we
estimate that we will have sufficient cash to fund operations until August 2000.
After August 2000, we will be required to seek additional capital to
continue to fund our operations. Since we currently have no credit facilities,
we will need additional equity capital to fund our operations and finance our
growth, and we may not be able to obtain it on terms acceptable to us, or at
all.
WE ONLY HAVE A FEW ASP CUSTOMERS AND WE WILL NEED TO SIGN CONTRACTS WITH MANY
ADDITIONAL CUSTOMERS IF WE INTEND TO BECOME PROFITABLE IN THE FUTURE.
We began our ASP operations in November 1999, and as of January 25, 2000,
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 may not be able to increase our customer base at a sufficient
rate to fund operations.
YOU SHOULD RELY ONLY ON THIS PROSPECTUS IN MAKING AN INVESTMENT DECISION. YOU
SHOULD NOT CONSIDER ANY OTHER STATEMENTS OR PROJECTIONS MADE BY US WITHOUT
CAREFULLY CONSIDERING THE RISKS AND INFORMATION CONTAINED IN THIS PROSPECTUS.
In two interviews in an Internet periodical and on the "Message from the
CEO" section of our web site, our chief executive officer predicted our revenues
would be $500,000 in 1999, $12 million in 2000, and $75 million in 2001. He
also predicted that we would have 200 customers by the end of 2000 and that we
would be a $1 billion company in four years.
These projections are based upon a number of estimates and assumptions and
are inherently subject to significant uncertainties and contingencies. These
projections were not prepared with a view toward compliance with published
guidelines of the SEC, the American Institute of Certified Public Accountants,
or generally accepted accounting principles. No independent accountants have
expressed an opinion or any other form of assurance on these projections.
Projections are necessarily speculative in nature, and it can be expected
that one or more of the estimates on which the projections were based will not
materialize or will vary significantly from actual results. We also have a very
limited operating history from which to derive financial projections.
Therefore, actual results during the periods covered will vary from the
financial projections, and the variations may be material and adverse. For
these reasons, you
7
<PAGE>
should only consider these projections after carefully evaluating all of the
information in this prospectus, including the risks described in this section
and throughout this prospectus.
We have received, and may continue to receive, media coverage, including
coverage that is not directly attributable to statements made by our officers
and employees. We have not confirmed, endorsed, or adopted any statements that
were not directly made by us and confirmed in this prospectus. To the extent
any statements are inconsistent with, or conflict with, the information
contained in this prospectus, or relate to information not contained in this
prospectus, they are disclaimed by us.
WE WILL DEPEND ON THIRD PARTIES TO 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. Moreover, 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, which would reduce our revenues.
Although we have not experienced any significant hardware delivery or
network failures, these failures have occurred in the technology industry. For
example, some computer models have, at times, been placed on back-order due to
component shortages or unanticipated demand in the marketplace. In addition,
although we have not been affected by a network outage, major network outages
have occurred in the past. Were such an outage to affect us, we may not be able
to deliver an adequate level of service to our customers.
OUR ABILITY TO PROVIDE ASP SERVICES DEPENDS ON STRATEGIC RELATIONSHIPS WITH
SOFTWARE VENDORS THAT WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN.
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 have and are in the process of entering into
software licensing agreements with these software vendors. All the agreements
may be terminated upon a breach of the agreement. 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 cannot continue to use the
software for any reason, we may have to discontinue services or delay their
introduction unless we can find, license, and package comparable software. In
addition, if we were able to obtain similar software products, the terms of the
agreement may not be favorable, or our clients may not accept comparable
software products as substitutes.
8
<PAGE>
Not only is our success dependent upon the continued popularity of the
product offerings of our current vendors, it is also dependent on our ability to
establish relationships with new vendors in the future. 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 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 key personnel. The loss of the
services of any of our key management could have a negative effect on our
business. If we do lose any of these people, we will be required to hire new
employees, which is time consuming and may not be possible due to the shortage
of qualified personnel in our industry. In addition, we do not maintain 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 personnel in our industry is intense, and we may not be able to
successfully attract, assimilate, or retain qualified personnel.
OUR HARDWARE MAY BE DAMAGED, EITHER PHYSICALLY OR THROUGH COMPUTER VIRUSES.
Our success largely depends on the efficient and uninterrupted operation of
our computer and communications hardware systems. Our hardware, located in a
leased facility in Houston, Texas, is vulnerable to:
. computer viruses;
. electronic break-ins; and
. physical vulnerability to damage or interruption from fire, long-term
power loss, and telecommunications failures.
These events could lead to delays, loss of data, or interruptions in
service which could subject us to liability and harm our reputation. We do not
presently have a disaster recovery plan, and do not expect to formulate and
complete a disaster recovery plan until the second quarter of our current fiscal
year.
THE SERVICES WE PROVIDE TO OUR CLIENTS ARE CRITICAL TO THEIR BUSINESS AND OUR
FAILURE TO 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;
and
9
<PAGE>
. limited credits of monthly application hosting fees for failure to
meet service level obligations.
In addition, we currently do not have any business liability insurance to
compensate for any losses, claims, or damage that may arise from our business
operations.
WE ARE EXPANDING OUR BUSINESS, WHICH WILL PLACE A SEVERE STRAIN ON OUR LIMITED
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
limited resources. We expect to hire new employees, expand our network of data
centers, and increase our infrastructure.
LACK OF DEMAND FOR APPLICATION HOSTING SERVICES, A NEW AND EVOLVING INDUSTRY,
WILL HARM OUR FINANCIAL CONDITION.
Our ability to increase revenues and achieve profitability depends on the
increased demand and 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, and we may not achieve
profitability.
OUR MARKET IS EXTREMELY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE GREATER
MARKET PRESENCE AND RESOURCES THAN WE HAVE.
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.
WE HAVE RESERVED A SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK FOR ISSUANCE
UPON THE EXERCISE OF WARRANTS AND OPTIONS. THE ISSUANCE OF THESE SHARES WILL
HAVE A DILUTIVE EFFECT ON OUR COMMON STOCK AND MAY LOWER OUR STOCK PRICE.
We have reserved a large number of shares to be issued on the exercise of
options and warrants. The majority of the options and warrants have exercise
prices that are below our
10
<PAGE>
current market price. The issuance of these shares will dilute our common stock
and may hurt our stock price. As of January 25, 2000, we have reserved
25,156,995 shares of common stock for issuance on the exercise of outstanding
warrants and options issued outside of our stock option plan. 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 January 25, 2000, 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 1,478,200 shares at
exercise prices ranging from $0.25 to $8.00 per share, which expire between
April 2009 and January 2010.
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 after February 15, 2000 if 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, and cannot be determined at this time. We may
cancel the adjustable warrants for 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. We have included 21,825 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 may be required to issue more
shares. 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. In addition, since we may need to issue an
indeterminate number of shares, this adjustable warrant may have a substantial
dilutive effect on our common stock.
FUTURE SALES OF OUR STOCK COULD CAUSE OUR STOCK PRICE TO FALL.
As of January 25, 2000, we had issued 37,905,571 shares of common stock.
In May 2000, substantially all of our shares of common stock will be freely
tradeable, subject to Rule 144, 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 STOCK PRICE IS VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT THE
PRICE YOU PAID.
The market for our securities is highly volatile. The closing price of our
common stock has fluctuated between $0.39 and $16.9375 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. The stock markets have in general,
and technology companies in particular, experienced extreme stock price
volatility. It is likely that the price of our common stock will continue to
fluctuate widely in the future.
11
<PAGE>
WE COULD BE DE-LISTED FROM THE OTC ELECTRONIC BULLETIN BOARD, WHICH MAY LOWER
THE PRICE OF OUR COMMON STOCK AND DECREASE THE VOLUME IN OUR COMMON STOCK.
We could be de-listed from the OTC Electronic Bulletin Board if we do not
become a company that files reports with the SEC 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. To comply, we will have to file a
registration statement with the SEC and have the SEC declare the registration
statement to be effective before 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 before our February
24, 2000 deadline, our common stock will no longer trade on the OTC Electronic
Bulletin Board. This will severely reduce the liquidity of our common stock.
As such, your ability to sell our common stock could be severely limited, if any
market for our common stock remains at all.
WE HAVE NET OPERATING LOSS CARRYFORWARDS THAT MAY EXPIRE BEFORE WE GET THE
OPPORTUNITY TO USE THEM.
As of September 30, 1999, we had $2,708,000 in net operating loss
carryforwards. Although these losses do not begin to expire until 2009, we may
be greatly limited in our use of these carryforwards due to IRS regulations that
limit the use of carryforwards after a change of control. We have not done an
analysis of the possible use of any carryforwards, or to determine if we have
already experienced a change of control, but you should assume that any use will
be greatly limited.
A NOTE ABOUT THE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition, or state other forward-looking information. These statements are
subject to known and unknown risks and uncertainties 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;
12
<PAGE>
. our ability to protect our intellectual property rights;
. our ability to compete with major established companies;
. 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 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 will receive the proceeds from the exercise
of the warrants discussed in this prospectus. We intend to utilize any proceeds
for general corporate purposes.
PRICE RANGE OF COMMON STOCK
Since June 21, 1999, our common stock has traded on the OTC Electronic
Bulletin Board under the symbol EBAS. Before 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 February 3, 2000, the closing price of our common stock was $7.03
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. The quotations reflect inter-dealer prices, without
retail mark up, mark down or commission, and may not represent actual
transactions.
FISCAL 2000 HIGH LOW
- ----------- ---- ---
1st Quarter $16.9375 $2.0156
FISCAL 1999 HIGH LOW
- ----------- ---- ---
1st Quarter $ 0.125 $ 0.125
2nd Quarter $ 0.50 $ 0.125
3rd Quarter $1.1875 $0.5313
4th Quarter $3.9688 $ 0.39
FISCAL 1998 HIGH LOW
- ----------- ---- ---
1st Quarter $ 4.00 $ 2.00
2nd Quarter $ 3.25 $ 2.25
3rd Quarter $ 4.00 $ 1.00
4th Quarter $0.4375 $ 0.25
13
<PAGE>
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. This policy will be reviewed by our board of
directors from time to time in light of our earnings and financial position.
14
<PAGE>
SELECTED FINANCIAL DATA
The following table displays 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;
. for each of the two fiscal years ended September 30, 1996, which was
derived from unaudited financial statements of ebaseOne; and
. for the three-month periods ended December 31, 1999 and 1998, which
was derived from unaudited financial statements of ebaseOne.
In our opinion, the unaudited financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial data for these periods. This data should be
read in conjunction with our consolidated financial statements, including the
notes that are part of the consolidated financial statement, 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>
Three Months Ended
Years Ended September 30 December 31
--------------------------------------------- ---------------
1999 1998 1997 1996 1995 1999 1998
---- ---- ---- ---- ---- ---- ----
(unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues
Product Sales........................ $ 449 $ 362 $ 15 $ 0 $ 0 $ 206 $ 136
Service Revenue...................... $ 205 $ 322 $ 50 $ 133 $ 146 $ 31 $ 53
Costs of Goods Sold--Products........ 357 221 18 0 0 109 97
Compensation--Technical Staff........ 316 218 10 38 39 162 67
General and Administrative Expenses.. 3,293 700 253 91 99 2,918 179
Net Income (Loss).................... (3,459) (472) (225) 4 (16) (2,967) (160)
Loss Per Share-Basic and Diluted..... $ (.13) $ (.03) $ (.02) $ (.08) $ (.01)
Weighted Average Shares Outstanding
-- Basic and Diluted................ 26,967 15,660 12,608 1,039 701 36,442 21,642
Balance Sheet Data:
Working Capital (Deficit)............ $ (458) $ 66 $ (15) $ 103 $ 4 $ 4,515 $ (81)
Total Assets......................... 701 371 97 189 81 5,340 267
Stockholders' Equity (Deficit)....... (524) 121 14 121 28 4,613 (40)
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We are an ASP, offering an integrated solution that provides clients the
ability to use leading business software applications through an international
high-speed network connected to the Internet. 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.
We began providing ASP services in November 1999 and as of January 25, 2000
had entered into three contracts to provide ASP services. We have incurred a
cumulative net loss since inception, and at December 31, 1999, we had an
accumulated deficit of approximately $7,123,684. We expect to incur additional
losses during the current fiscal year, due primarily to additional early-stage
costs related to:
. the continued expansion of our service lines;
. the continued expansion of our facilities and our sales, technical,
and administrative staff; and
. non-cash compensation charges related to our issuance of securities to
our management at below market prices.
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 in
our financial statements for the year ended September 30, 1999 about 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 September 1998, Synoptech Solutions
acquired substantially all of the outstanding capital stock of Prime Net.
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Prime Net specialized in providing computer-based solutions for small and
medium-sized businesses as a software application reseller. As Synoptech
Solutions has no business operations, we acquired it 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 since they conduct no
substantial operations.
We currently have no exposure to foreign currency exchange rate
fluctuations, since we 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 ASP services, and to a lesser extent from our operations related to Prime
Net's former operations.
ASP services consist of providing or hosting software and other related
services through our data center for a flat monthly fee over the term of the
underlying contract. We do not sell software licenses. Revenue from our ASP
services will be recognized on the straight-line method beginning with the first
month in which we begin providing the services required under the contract.
Historical revenues for the three years ended September 30, 1999, as well
as for the quarter ended December 31, 1999, consisted of training and
installation services relating primarily to software products sold during those
years and sales of packaged software. Packaged software sales during the years
ended September 30, 1999, 1998, and 1997 consisted primarily of sales of two
products: (1) Tivoli IT Director and (2) SalesLogix.
We are a value added reseller of the Tivoli and SalesLogix products. Other
value added resellers carry and install the Tivoli and SalesLogix products,
including value added resellers in Houston, Texas. While it would be unusual
for us to sell the Tivoli and SalesLogix products without the related
installation services, a customer could do so and use another value added
resellers for the installation. Neither product carries a significant degree of
risk or unique acceptance criteria, although the risk is higher for projects
requiring customization of the SalesLogix product. For that reason, the
SalesLogix product is not considered off-the-shelf, as defined in statement of
position 97-2, when customization is required. We have sold and installed the
SalesLogix product on 19 occasions since November 1997 and the Tivoli product on
13 occasions since August 1998. We believe we are an experienced provider of
these services.
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The Tivoli product is considered off-the-shelf because we never customize
the software. The service revenue component consists of:
. implementation planning and implementation services;
. loading of the software;
. training of customer personnel;
. running tests; and
. on rare occasions, assisting in the development and documentation of
procedures.
Installation of the software does not require building custom interfaces for the
software to be functional. All of the license fee and 50% of the service fee is
generally due and payable upon signing the contract. The remaining service fee
is generally due upon completion of the installation. Realization of the
license is not affected by customer acceptance criteria.
The SalesLogix product is considered off-the-shelf unless the project calls
for customizing the software. In those instances, the license fee and the
service revenue are recognized as revenue under the percentage of completion
method of accounting. For projects that do not require customization of the
SalesLogix product, we provide:
. implementation planning and implementation services;
. loading of software;
. training of customer personnel;
. data conversion;
. building simple interfaces;
. running tests; and
. assisting in the development and documentation of procedures.
All of the license fee and 50% of the service fee is generally due and payable
upon signing the contract. The remaining service fee is generally due upon
completion of the installation. Realization of the license is not affected by
customer acceptance criteria.
As previously indicated, we sell both software considered to be off the
shelf, as defined by statement of position 97-2, and software that is not
considered to be off the shelf. Revenue from the sale of off the shelf software
is recognized upon delivery, provided, persuasive evidence of an arrangement
exists, the fee is fixed or determinable, and collectibility is probable.
Related
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<PAGE>
services, if any, are recognized as revenue when provided. To the extent
software is sold with implementation and training services and the software is
not considered off the shelf software, then the revenue from both the sale of
the software and the related services are recognized on the percentage of
completion method of accounting.
We believe our revenue recognition policies for our ASP services and our
value added reseller products and services comply with Statement of Position
97-2, Software Revenue Recognition.
Non-Cash Compensation Charges Resulting from Below Market Securities Issued
For the fiscal year ended September 30, 1999, we incurred non-cash
compensation charges of $1,535,608. Of this amount, $1,507,962 of non-cash
compensation charge relates to below market issuance of securities to investors,
consultants, professional service providers, non-technical employees and
management, with the balance relating to issuance of below-market securities to
technical employees. For the quarter ended December 31, 1999, we incurred non-
cash compensation charges of $1,956,535. Of this amount, $1,913,254 of non-cash
compensation charge relates to below market issuance of securities to non-
technical employees and management, with the balance relating to issuance of
below-market securities to technical employees. As a result of vesting
schedules for some warrants issued to management, up to $9,500,000 of non-cash
compensation charges will be recorded as a general and administrative expense
during the periods ending September 30, 2000 and 2001.
Certain of the warrants vest upon our achieving specific performance goals,
either as a result of achieving specific revenues or common stock prices. As a
result, we cannot predict the periods in which the deferred compensation expense
relating to these management warrants will be expensed. The magnitude of these
charges will likely result in us reporting very large operating losses for
fiscal 2000 and 2001.
Capitalization of Costs and Expenses of ASP Services
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, as well as the costs related to the
customization and implementation of the software 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
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<PAGE>
related to the integration of software applications for a client on our network
will be capitalized and amortized over the 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 December 31, 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 three years ended September 30, 1999,
1998 and 1997, as well as for the quarter ended December 31, 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.
QUARTER ENDED DECEMBER 31, 1999 COMPARED TO THE QUARTER ENDED DECEMBER 31, 1998
Revenues
Total revenues for the quarter ended December 31, 1999 was $236,463,
compared to $188,582 for the quarter ended December 31, 1998. Product sales
increased from $135,578 to $205,928, or 52%. For the quarter ended December 31,
1999, service revenues decreased to $30,535 from $53,004, during the quarter
ended December 31, 1998, or 42%. The reason that product sales increased and
service revenue decreased was that a larger component of the total revenues
during this period was related to products sales versus service revenues.
Operating Expenses
Cost of goods sold-products. For the quarter ended December 31, 1999,
cost of goods sold-products increased to $108,689 from $97,450 during the
quarter ended December 31, 1998, which corresponds to increased product sales.
Our gross profit margin for products sold increased to 47% for the quarter ended
December 31, 1999 from 28% for the quarter ended December 31, 1998. We believe
this increase was due to reduced software costs and volume discounts obtained
from our vendors.
Compensation-technical staff. For the quarter ended December 31, 1999,
the compensation to technical staff increased to $161,751 from $67,327 during
the quarter ended
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<PAGE>
December 31, 1998. The increase of 140% was primarily attributable to additional
employees added to our technical staff and to non-cash compensation charges of
$43,281 during the quarter. The non-cash compensation charges arose from
securities issued to technical employees with exercise prices below quoted
market prices. Our technical staff increased primarily as a result of building
the foundation for our ASP services. During the three month period ended
December 31, 1998 and 1999, for accounting purposes, all of the compensation
incurred by our technical staff was recorded as compensation-technical staff,
regardless of whether they were performing billable services to clients or
working on developing our ASP business.
General and Administrative Expenses
For the quarter ended December 31, 1999, general and administrative
expenses increased to $2,918,696 from $179,663 during the quarter ended December
31, 1998, an increase of $2,739,033. The primary portions of the increase are
discussed below:
. A non-cash compensation charge of $1,913,254 resulting from securities
issued to consultants and management employees with exercise prices
below quoted market prices. There is no corresponding charge in the
prior period.
. A $204,153 increase in salaries, or 224%. The increase is attributable
to an increase in employees from 11 to 40 during the period.
. A $214,348 increase in legal and accounting fees, or 1,953%. The
increase is attributable to our filing of this registration statement,
auditing and accounting fees, reviewing quarterly activity, and an
increase in our general business activity.
. A $45,081 increase in recruiting fees, or 100%. The increase is
attributable to the hiring of executives and other professionals with
knowledge and experience in the high-tech industry.
. A $15,823 increase in advertising, or 337%. This increase is due to our
deployment of the ASP model and the creation of a market niche for our
product lines.
Net Loss
For the quarter ended December 31, 1999, our net loss increased to
$2,966,829 from $160,704 during the quarter ended December 31, 1998. The
increase was primarily attributable to the increase in general and
administrative expenses.
Cash Flow
The net cash used in operating activities during the three months ended
December 31,
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<PAGE>
1999 increased to $1,303,307 from $105,970 in the comparable period ended
December 31, 1998. This increase was primarily attributable to increased net
operating losses during the three months ended December 31, 1999, off-set by
issuing our securities for services.
Net cash used in investing activities was $86,982 for the three months
ended December 31, 1999 compared to $57,055 for the three months ended December
31, 1998. Such increase is primarily due to additional purchases of furniture
and equipment and advances on a note receivable.
Net cash provided by financing activities increased to $5,886,651 for the
twelve months ended December 31, 1999 compared with the $46,711 for the three
months ended December 31, 1998. Such increase primarily is the result of
proceeds from the sale of common stock.
YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1998
Revenues
Total revenues for the year ended September 30, 1999 were $653,809 as
compared with $684,019 during the year ended September 30, 1998. For the year
ended September 30, 1999, revenues on products sold increased to $448,523 from
$362,008. The increase of 24% in product sales was attributable to an increase
in the product sale portion of our total and to an increase in our sales force
and our marketing campaign. For the year ended September 30, 1999, revenues
from services decreased to $205,286 from $322,011 during the year ended
September 30, 1998. The decrease of 36% was attributable a decrease in the
service revenue portion of our total revenues and to increased sales of the
Tivoli product which has a much lower service revenue as compared to the
SalesLogix product.
Operating Expenses
Cost of goods sold-products. For the year ended September 30, 1999, cost
of goods sold-products increased to $357,171 from $220,686 during the year ended
September 30, 1998. The increase of 62% was primarily attributable to increased
product sales as well as to a larger percentage of total revenue received from
product sales. Our gross profit margins on product sale decreased to 20% for
the year ended September 30, 1999 from 39% for the year ended September 30,
1998. We believe this decrease was due primarily to less favorable vendor
pricing with respect to these product sales and to increased sales of the Tivoli
product which carries a lower gross margin.
Compensation-technical staff. For the year ended September 30, 1999, the
amount of our compensation-technical staff increased to $315,906 from $217,823
during the year ended September 30, 1998. The increase of 45% was primarily
attributable to additional employees added to our technical staff and a non-cash
compensation charge of $27,646. Our technical staff increased primarily as a
result of building the foundation for our ASP services. During the year
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<PAGE>
ended September 30, 1999 and 1998, for accounting purposes, all of the
compensation incurred by our technical staff was recorded as compensation-
technical staff, regardless of whether they were performing billable services to
clients or working on developing our ASP business.
General and Administrative Expenses
For the year ended September 30, 1999, general administrative expenses
increased to $3,293,095 from $700,192 during the year ended September 30, 1998,
an increase of $2,592,903 or 370%. The primary portions of the increase are
discussed below:
. A non-cash compensation charge of $1,507,962 resulting from securities
issued to consultants, professional service providers and management
with exercise prices below quoted market prices. There was no
corresponding charge in the prior period.
. A $521,776 increase in salaries, or 197%. The increase is attributable
to an increase in employees from 11 to 25 during the period.
. A $208,586 increase in legal and accounting fees, or 1452%. The
increase is attributable to our filing of this registration statement,
auditing and accounting fees, and an increase in our general business
activity.
. A $231,807 increase in consulting fees, or 100%. The increase is
attributable to developing our ASP business model, writing our business
plan, negotiating contracts with business partners, raising capital,
and developing contracts for customers.
. A $84,150 increase in advertising, or 331%, and a $82,000 increase in
recruiting, or 100%. These increases are based on the recent
development of our ASP business.
Net Loss
For the year ended September 30, 1999, our net loss increased to $3,458,657
from $471,844 during the year ended September 30, 1998. The increase of 632%
was primarily attributable to the increase in general and administrative
expenses.
Cash Flows
Our operating activities used net cash of $1,179,752 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, and
increasing our accounts payable and accrued liabilities.
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<PAGE>
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.
Our financing activities provided cash of $1,560,040 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 for 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 for 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
Total revenues increased to $684,019 for the year ended September 30, 1998
compared with $64,937 for the year ended September 30, 1997. For the year ended
September 30, 1998, revenues on products sold increased to $362,008 from $14,948
during the year ended September 30, 1997. The increase of 2322% was
attributable to an increase in contracts related to our software reseller
business. For the year ended September 30, 1998, revenues from services
increased to $322,011 from $49,989 during the year ended September 30, 1997.
The increase of 544% was attributable to an increase in contracts.
Operating Expenses
Cost of goods sold-products. For the year ended September 30, 1998, cost
of goods sold on our product sales increased to $220,686 from $18,153 during the
year ended September 30, 1997. The increase of 1116% was primarily attributable
to an increase in contracts related to our software reseller business. Our
gross profit margin for products sold was 39% for the year ended September 30,
1998 versus a negative gross profit of 21% for the year ended September 30,
1997. The negative gross profit percentage in 1997 was incurred in the start-up
period of our reseller business and is not indicative of normal margins.
Compensation-technical staff. For the year ended September 30, 1998,
compensation to technical staff increased to $217,823 from $10,050 during the
year ended September 30, 1997. The increase of 2067% was attributable to adding
additional technical staff to service our expanding revenue base and,
correspondingly, to increased service revenue.
General and Administrative Expenses
For the year ended September 30, 1998, general and 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 personnel to service the
increased business for the period.
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<PAGE>
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 475,169 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. As of December 31, 1999, we had working
capital of $4,515,000 and cash and cash equivalents in the amount $4,805,000.
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 the rate we obtain new customers
and the rate we hire new employees. At this time, we also cannot predict with
certainty what our monthly operating expenditure will be. Keeping these factors
in mind, 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. This period may be
shortened if we experience increased competition and higher costs associated
with hiring necessary personnel. After August 2000, we will be required to seek
additional capital to continue to fund our business operations.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, we had working capital of $4,515,423 and had
negative cash flows from operations of approximately $1,180,000. We anticipate
incurring losses from operations during the current fiscal year. As a result,
we do not expect to receive cash flow from operations during the current fiscal
year. At the present time we cannot estimate when, or if, our
25
<PAGE>
operations will generate positive cash flows from operations. Assuming this
registration statement becomes effective, and we receive the $3 million portion
of the $9 million 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 until we can generate cash
flow from operations, we will be dependent upon external sources of best-efforts
financing.
After August 2000, we will likely be dependent upon best efforts equity and
debt financing, of which we have no firm commitments or arrangements, and on the
exercise of outstanding warrants. 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. If we are unable to obtain necessary
financing from external sources before August 2000, we may need to curtail
operations or sell assets. Therefore, on a short-term basis, or during calendar
year 2000, we will require additional funding after August 2000. Since we do
not expect to generate positive cash flows from operations, this funding will
need to be external funding. On a long-term basis, or after calendar year 2000,
we will also require additional external financing.
In the $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 before redemption. We intend to redeem the warrants in
full, as soon as we are able to, and if the warrant holders decide to exercise
the warrants we will receive $3,237,490.
As of December 31, 1999, we had long-term notes payable consisting of
$280,631 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%. Of this note payable, $49,176 is due during the year ended December 31,
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.
We believe our current cash position will be sufficient to fund our obligations
through August 2000.
IMPACT OF YEAR 2000
Even though the date is now past January 1, 2000, and we have not
experienced any immediate adverse impact from the transition to the year 2000,
we cannot provide any assurance that our suppliers and customers have not been
affected in a manner that is not yet apparent. In addition, some computer
programs which were date sensitive to the year 2000 may not have been programmed
to process the year 2000 as a leap year, and any negative consequential effects
remain unknown. As a result, we will continue to monitor our year 2000
compliance and the year 2000 compliance of our suppliers and customers.
The year 2000 posed 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 problem exists for many kinds of
software, including software for mainframes, personal computers, 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.
A discussion of the various activities related to assessment and actions
resulting from those evaluations is below.
SOFTWARE APPLICATIONS HOSTED FOR CUSTOMERS.
We did not host any software applications or any hardware that were not
declared to be year 2000 compliant by their manufacturers. If, however, 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
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 compliant before we purchase the item. The costs
related to these efforts were not 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 did
independently evaluate the year 2000 compliance of the systems utilized to
supply these services. We have not received any assurance of compliance from
the providers of these services. Any failure of these third-parties to resolve
year 2000 problems with their systems could have a material adverse effect on
our business.
CONTINGENCY PLANS.
Based on these actions, we have not 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 believe it is
necessary, we may take the following actions:
. Short to medium-term use of backup equipment and software; and
. Increased work hours for our personnel.
If we are required to implement any of these contingency plans, the plans
could have a material adverse effect on our business. Based on the actions
taken to date, and the lack of any problems to date, we are reasonably certain
that we have identified and resolved 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 believe 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;
. 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 April 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 these markets, implementation of these packages
generally still requires technologically skilled personnel and frequently takes
a long period of time. In addition, we believe 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, we believe 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, or companies with $100 million to
$500 million in revenues or with 100 to 1000 employees. Over time, we intend to
migrate into the lower tier of the large business market and divisions of very
large corporations, or companies with $500 million to $1 billion in revenues or
with 1000 to 4000 employees.
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. We believe the shortage in technical professionals has resulted in the
inability of small and medium-sized businesses to compete with larger
corporations for personnel.
Our OneServ(SM) solution includes a comprehensive and flexible service
level agreement.
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We believe 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.
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. 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 through 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.
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 use 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 leases 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 believe 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 hardware and software as vendors release new
versions.
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. We are able to share costs among many customers, which
we believe allows for a much lower cost structure than traditional solutions.
OneServ(SM) is our premier ASP-based solution, consisting of a
comprehensive and integrated suite of software for small and medium-sized
businesses. The following list contains the applications that are or will be
included in OneServ(SM), and their current development status:
. Sales force automation -- We use SalesLogix software for this
application. We currently offer this application for commercial use.
. Document distribution -- We use Marimba software for this application.
We currently offer this application for commercial use.
. Customer relationship management -- We use SalesLogix software for
this application. We currently offer this application for commercial
use.
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. Financial management -- We are currently in negotiations with a
software manufacturer for this application.
. Human resource management -- We are still choosing a software
manufacturer for this application.
. E-commerce -- We use Microsoft's software for this application. We
currently offer this application for commercial use.
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 prepare the application for peak
performance;
. train the client on how to best use the application; and
. provide ongoing help desk support to the customer.
We are currently able to provide all of the above services.
We plan to license each of the individual applications in OneServ(SM) from
top name 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 through our network. We believe this will end the need of
independent software vendors or system integrators to build the technological
infrastructure required. CorServ(SM) will be a basic infrastructure service.
The following list contains the services that are or will be included in
CorServ(SM), and their current development status:
. We will provide the physical facility. We currently offer this
service for commercial use.
. We provide network connections. We currently offer this service for
commercial use.
. We provide servers, operating systems, and database software. We
currently offer this service for commercial use.
. We provide security measures, such as firewall and virus scanning.
We currently offer this service for commercial use.
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. We provide security measures, such as intrusion detection and 24 hour
monitoring. This service is currently in the planning and testing
stage, and we expect this service to become commercially available in
April 2000.
. We provide administration and management. We currently offer this
service for commercial use.
. We provide backup. We currently offer this service for commercial use.
. We provide disaster recovery. This service is currently in the
planning stage, and we expect to offer this service in April 2000.
. We provide other standard data services such as physical site
security, off site tape storage, software distribution, and automated
inventory. We currently offer these services for commercial use.
We believe 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. We believe our CorServ(SM) service will provide an
easy way for them to essentially become an ASP and reach smaller businesses
which, taken together, should represent a large new market for their products.
We began providing our CorServ(SM) service in November 1999, and as of,
January 11, 2000, 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 security, including building wide closed circuit TV;
. battery backup 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.
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Based upon our relationship with Level 3, we have access to Internet and
private leased line bandwidth through a direct connection to a high-speed data
communications capability ring that surrounds Houston, and connections to
additional smaller rings, as well as 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.
We have formed an alliance with Cisco to join the Cisco hosted application
initiative program through the execution of a memorandum of
understanding. The parties intend to operate under this memorandum of
understanding for the foreseeable future, and it is not expected that a
definitive agreement will be executed.
This alliance 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,
trade shows, and conferences. We also have access to the development lab that
Cisco has set up to certify solutions for participants in the program. We
believe that the certification process will help improve the overall quality of
services that we can deliver through networks based on Cisco equipment.
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 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 DocService technology. DocService delivers virtually any type of
document simply and easily over the Internet or private leased lines, including
simple text files as well as complex web based 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 we believe 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.
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,
. participate as an executive member of the ServiceProvider.Com partnership
program, and
. participate in the SunTone certification program.
We have begun the process of becoming certified with the SunTone brand, and
anticipate completing this process in approximately 90 days. ServiceProvider.Com
is a complete package of products and services as well as business practices
tailored to the needs of providers such as ebaseOne. The program focuses on
three primary objectives:
. revenue generation,
. operating efficiency, and
. quality of service.
SunTone certification is provided as a way to meet the quality of service
objectives in the ServiceProvider.Com 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
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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 agreed with Microsoft to participate in
the rollout of their ASP commercial licensing program. Under this agreement, 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 CorServ(SM) and OneServ(SM) commercial hosting solutions. This
program allows us to legally give access to these products to our customers in
exchange for a monthly fee, and to pay Microsoft a monthly fee based on the
total number of users accessing the products each month, rather than simply
paying them the full 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 one of the city's
largest privately owned and operated fiber optic networks. We believe 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 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 solutions in our OneServ(SM) solution. Under the terms
of the agreement, we will pay SalesLogix a monthly fee based upon the number of
OneServ(SM) 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 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 through 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 the packaged software
solutions we intend to offer. 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
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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 the network.
Our marketing strategy
For our OneServ(SM) services, we intend to support a direct field sales
organization, including both account executives and field sales engineers. As of
January 25, 2000, we have four account executives, and we intend to hire
regional sales managers and additional account executives to support the major
metropolitan areas in the United States during the current calendar 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 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 these
publishers on the benefits of this model. 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, but
instead we will offer a new opportunity to sell to corporations that would not
be able to purchase systems under the software companies existing pricing model.
We believe 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.
For 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) services. In January 2000, we hired CorServ(SM) business development
personnel covering the northcentral region of the United States out of a
Chicago, Illinois office, the southwest region of the United States out a
Dallas, Texas office. We plan to hire additional CorServ(SM) personnel to cover
additional major metropolitan areas of the United States during the current
calendar year.
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 18,000 square feet, and
which we expect to be complete by April, 2000. We have entered into lease
agreement, which begins in March 2000 and ending February 2010 for use of the
command center. 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 Internet Protocol or 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 this
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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 ungradable. 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 through 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 service
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 through a dedicated
connection.
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 through 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 through 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 through 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
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has attracted many start-ups as well as extensions of existing business from
different industries. Current and prospective competitors include:
. new pure-play ASPs or ASPs that focus solely on providing ASP
services;
. 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 because we focus primarily 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 services as well.
Internet Service Providers
Internet service providers 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. 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 Internet service providers.
We expect that we will experience increased competition from the traditional
telecommunications carriers.
At this time, we do not believe there is a dominant or a small number of
dominant companies in our market. However, our competitors are well financed
and will be able to devote more resources to sales, marketing, and technology
than we will. In addition, our competitors have better name recognition and
have received more publicity than ebaseOne. We can provide no assurance that we
will be able to compete in this market.
We believe we will compete in this highly competitive market based on the
following factors:
. Early entrant into the market. Although we are not one of the first
ASPs to enter the market, we believe that the ASP market is a
relatively new market. We believe we are among the early participants
to pursue this market.
. Infrastructure. We believe our infrastructure will allow us to better
compete in the market. We believe our association with Level 3 will
allow us quicker access to a large number of markets.
. Full range of services. We offer a full range of services, including
installation, customization, and training.
. Concentration on small to medium-sized businesses. We believe our focus
on smaller companies will allow us to better serve these customers. We
also believe that the market has not been effectively addressed by some
larger ASPs.
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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 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 these marks.
If third parties infringe or misappropriate our intellectual property or
our 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:
. these agreements will provide adequate protection for our proprietary
rights;
. our employees, consultants, advisors, or others will maintain the
confidentiality of our proprietary information; or
. our proprietary information will not 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.
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, 295TH Judicial
District. The petition was amended in September 1999 to include ebaseOne and
John Frazier Overstolz. The plaintiff alleged breach of contract, breach of
implied duties of good faith and fair dealing, breach of fiduciary duties,
fraud, conversion, and negligent misrepresentation for denying him ownership of
769,761 shares of ebaseOne common stock and an additional 19,175 shares of
common stock allegedly owed him, along with an alleged failure to issue
plaintiff a warrant to purchase 649,227 shares of common stock for nominal
value. Plaintiff is seeking a cash payment equal to 1,438,163 shares of common
stock times the highest market value of the common stock, $19.75 per share in
intra-day trading on November 15, 1999. The plaintiff chose this date as it
represents the highest one-time price of our stock. This date has not been fixed
by the district court or agreed to by the defendants. Discovery is currently
being conducted by the parties and the parties have agreed to mediation. We
intend to vigorously defend this claim.
We are aware that a wrongful termination lawsuit has been threatened by a
former employee. We believe the claim is wholly without merit and intend to
vigorously defend this claim if litigation is actually initiated.
In December 1999, we were named as defendant in a lawsuit filed by Brewer
Capital Group, LLC in the District Court of Harris County, Texas, 334TH Judicial
District. The plaintiff alleged breach of contract and tortious interference
with business. Plaintiff claims are for a contract between ebaseOne and Brewer
Capital regarding capital formation. Plaintiff claims it is owed commissions of
$356,000 and warrants to purchase ten percent of ebaseOne based on financing
opportunities it arranged. We believe the claim is wholly without merit and
intend to vigorously defend this claim.
We believe that the outcome of these two proceedings and one threat will
not have a material adverse effect on our results of operations, financial
condition, or liquidity.
EMPLOYEES
As of January 25, 2000, we employed 37 persons, on a full-time basis,
including management, sales, and office employees. No employees are covered by
a collective bargaining agreement. Management considers relations with its
employees to be satisfactory.
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INSURANCE
We believe we have sufficient general liability insurance covering over
headquarters located at 6060 Richmond, Houston, Texas 77057.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and officers and their ages and positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
John Frazier Overstolz 38 Chairman of the Board
Charles W. Skamser 42 Director, President, Chief Executive Officer, Chief
Financial Officer, and Treasurer
Michael A. Sooley 50 Senior Vice President of Worldwide Business
Development and Secretary
Scott Feuless 39 Chief Technology Officer
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. Overstolz 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. Overstolz 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. Overstolz 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. Since January 2000, Mr. Skamser has served as chief
financial officer, treasurer, and principal accounting officer. 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.
Michael A. Sooley has been the senior vice president of worldwide business
development and secretary since December 1999, and served as chief technology
officer from May 1999 until December 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 chief technology officer since December 1999, and
served as senior vice president of technology operations from August 1999 until
December 1999, after serving as vice president of technology
38
<PAGE>
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, Inc., 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 before that, Mr. Rotolo assumed
responsibility for Chiquita's Panama and Philippine operations. Before 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.
39
<PAGE>
EXECUTIVE COMPENSATION
The following table displays 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 before fiscal 1999, only information for fiscal 1999 has been
included.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards
---------------------------------------- ------------------------------------
Securities
Restricted Underlying
Name and Stock Options/ All Other
Principal Positions Year Salary ($) Bonus ($) Award ($) Warrants (#) Compensation ($)
- --------------------- ------------ ----------- ----------- --------------- ------------------ ----------------
<S> <C> <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. 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 on that date
of $2.25 per share.
The table above does not include perquisites and other personal benefits in
amounts of 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. Before that, Mr.
Overstolz served as our chief executive officer from May 1999 until August 1999.
Before that, Mr. O'Dwyer served as our chief executive officer from October 1998
until May 1999.
EMPLOYMENT AND CONSULTING AGREEMENTS
Agreement with Charles W. Skamser
In August 1999, as amended in October 1999, we entered into an employment
agreement with Mr. Skamser, ending 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. We paid Mr. Skamser a bonus of
$125,000 in January 2000.
The employment agreement provides for a bonus of up to $180,000, payable
based on objectives achieved before December 31, 2000. The objectives are to be
determined by the board of directors before January 31, 2000.
40
<PAGE>
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 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 continued 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 continued 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.
In addition, 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 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 persons acting in concert with one
another.
. A change in the ownership of ebaseOne through a single transaction or a
series of transactions so that any unrelated person or 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 before 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, 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 the 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
41
<PAGE>
terminated for any other reason, Mr. Skamser is entitled to the greater of:
. his remaining base salary at the then base salary rate for the remainder
of the employment term, or
. the base salary rate for a period of six months, and unreimbursed
expenses, any bonus earned in a prior year and not yet paid,
and the pro-rata portion of any bonus for the current year.
Agreement with John Frazier Overstolz
In August 1999, as amended in October 1999, we entered into an employment
agreement with John Frazier Overstolz, ending 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.
We paid Mr. Overstolz a bonus of $28,000 in January 2000. The employment
agreement provides for a bonus of up to $75,000, payable based on objectives
achieved before December 31, 2000. The objectives are to be determined by the
board of directors before 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. Please see 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:
. his remaining base salary at the then base salary rate for the remainder
of the employment term, or
. the base salary rate for a period of six months, and all unreimbursed
expenses, any bonus earned in a prior year and not yet paid,
and the pro-rata portion of any bonus for the current year.
Agreement with Michael A. Sooley
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 ending December 31, 2002 and provides for a
monthly base salary of $11,250 until December 31, 2000. The employment
agreement provides for a performance bonus up to 75% of his base salary,
determined by 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 continued 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
42
<PAGE>
which vest upon the earlier of the following to occur:
. 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
January 1, 2000,
. if ebaseOne obtains net revenues of $12,000,000 for the 12 months ending
December 31, 2000, as determined by its independent auditors, or
. 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. Please
see 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
greater of:
. his remaining base salary at the then base salary rate for the remainder
of the employment term, or
. the base salary rate for a period of six months, and unreimbursed
expenses, any bonus earned in a prior year and not yet paid, and the pro
rata portion of any bonus for the current year.
Agreement with Scott Feuless
In November 1999, we entered into an employment agreement with Scott
Feuless ending December 31, 2002, which provides for a monthly base salary of
$9,584 until December 31, 2000. After December 31, 2000, Mr. Feuless' base
salary will be increased at the discretion of the board of directors. The
employment agreement provides for a bonus determined by 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' continued 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
as Mr. Sooley's set of three warrants described above.
The warrants will vest immediately upon a change of control of ebaseOne. Please
see 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 greater of:
. his remaining base salary at the then base salary rate for the remainder
of the employment term, or
. the base salary rate for a period of six months, and unreimbursed
expenses, any bonus earned in 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 allows:
. stock option grants;
43
<PAGE>
. stock appreciation rights or SARs;
. restricted stock awards; and
. performance stock awards.
Our 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. Our board of directors administers our stock option
plan and determines the recipients 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 a recipient 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 according to each option
agreement.
For any person 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 of our stock on the grant date.
No incentive stock options may be granted to a person, 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. A SAR permits the recipient to surrender
that option, or a portion of the part which is 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 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 concerning the 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 the shares, to designated persons if specified performance goals
established by the board are satisfied.
As of January 25, 2000, we had issued options to purchase 1,478,200 shares,
and 4,368,700 shares were available for future grants under the stock option
plan. Of these 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.
The remaining options to purchase 1,263,700 shares of common stock were issued
to employees at exercise prices ranging from $0.25 to $8.00 per share. We have
not issued any SARs, restricted stock awards, or performance based awards.
In addition, during fiscal 1998 and 1997, we issued non-qualified options
outside of our stock option plan to purchase a total of 75,000 shares of our
common stock. In fiscal 1999, we issued non-qualified options outside of our
stock option plan to purchase a total of 25,000 shares of our common stock.
These options had exercise prices of between $2.00 and $4.00 per share, and
expire between January 2000 and March 2008. Of these non-qualified options,
options to purchase 8,500 shares of our common stock were exercised at $2.00 per
share.
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<PAGE>
The following table provides information on the warrants and options granted
to our named executive officers during the fiscal year ended September 30, 1999:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of
Securities % of Total Potential Realizable Value at
Underlying Warrant/Options Exercise Assumed Annual Rates of
Warrants / Granted to Employees Price Expiration Stock Price Appreciation for
Name Options Granted (#) in Fiscal Year ($/Sh) 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 less than 1% $ 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 less than 1% $ 2.00 4/6/09 -- $ 2,024
</TABLE>
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. These
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 exercise price of the
warrant or option will be greater than the price of our common stock before the
expiration date of the warrant or option, 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 determined the exercise price of the warrant to be at fair market
value at the time of the grant.
45
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money
Name Exercise (#) Realized ($) Options at FY-End (#) Options at FY-End ($)
- -------------------------- ------------- ------------ --------------------------- -------------------------------
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 table above includes both warrants and options. 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.
401(K) PLAN
In June 1999, we adopted a retirement savings and investment plan, or 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 on the
contributions 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 that involve intentional misconduct, fraud, or a knowing violation of
the law, or unlawful corporate distributions. These provisions will limit the
remedies available to the stockholder who is dissatisfied with a decision of the
board of directors protected by these provisions, 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 before the board's action. In these cases, the
stockholders and ebaseOne could be injured by a board's decision and have no
effective remedy.
RELATED PARTY TRANSACTIONS
As part of the 1990 organization of a predecessor of ebaseOne 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. The right to purchase 1,020,000 shares under this warrant was
assigned concurrently with its issuance. In May 1998, Mr. Overstoltz was issued
100,671 shares of common stock for services valued at $4,509.
As part of the 1990 organization of a predecessor of ebaseOne, Mr.
Pritchard was issued 788,934 shares of common stock. In May 1998 and January
1999, Mr. Pritchard paid $45,000 for 1,917,350 shares of common stock. 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.
Mr. Rotolo purchased 4,437,755 shares of common stock in October 1996 for
an aggregate of $107,450. In May 1998 and January 1999, Mr. Pritchard paid
$45,000 for 1,917,350 shares of common stock.
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
46
<PAGE>
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.
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. For 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 from May 1999 through November 1999, Mr. Sooley was issued
five, five-year warrants to purchase a total of 45,000 shares of common stock
and a warrant to purchase 14,100 shares of common stock, at exercise prices of
$.22 per share. In November 1999, Mr. Sooley was issued warrants to purchase
1,000,000 shares of common stock at exercise prices ranging from $2.37 to $3.00
per share.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table below displays, as of January 25, 2000, 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................... 13,357,210 29.5%
Charles W. Skamser....................... 5,858,000 13.4%
Michael M. Rotolo........................ 4,437,755 11.7%
Kent Forrest............................. 3,547,462 9.4%
Thomas C. Pritchard...................... 2,889,890 7.6%
Kyran O'Dwyer............................ 58,700 less than 1%
All officers and directors as a group,
(6) persons............................. 24,218,232 46.9%
</TABLE>
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 following 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 January 25, 2000, but we have not
included those shares for purposes of computing the percentage ownership of any
other person. We have assumed, unless indicated below, that the persons and
entities named in the table have sole voting and investment power for all shares
beneficially owned, subject to applicable community property laws.
48
<PAGE>
The beneficial ownership of the persons 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 January 25,
2000:
SECURITIES EXERCISABLE WITHIN 60 DAYS OF JANUARY 25, 2000
OPTIONS / WARRANTS
-------------------
John Frazier Overstolz.......................... 7,306,664
Charles W. Skamser.............................. 5,858,000
Michael M. Rotolo............................... --
Kent Forrest.................................... --
Thomas C. Pritchard............................. 340,000
Kyran O'Dwyer................................... 3,000
All officers and directors as a group........... 13,729,951
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.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue 75,000,000 shares of common stock, and
10,000,000 shares of preferred stock.
COMMON STOCK
As of January 25, 2000 there were 37,905,571 shares of common stock issued
and outstanding and:
. 24,716,186 shares are reserved for issuance on the exercise of warrants,
not including the adjustable warrant discussed below;
. 91,500 shares are reserved for issuance on the exercise of options
outside our stock option plan; and
. 1,478,200 shares are reserved for issuance on the 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. If we our required to go into
liquidation, holders of common stock are entitled to share ratably in the
distribution of assets remaining after payment of liabilities. Holders of
common stock have no cumulative voting rights, and 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 dividends as declared by the board of
directors out of funds legally available. The outstanding common stock is
validly issued 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 on 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 ebaseOne without further
action by the stockholders.
We have no present plans to issue any shares of preferred stock.
WARRANTS
As of January 25, 2000, we had issued warrants to purchase 24,716,186
shares of our common stock. Our officers and directors hold warrants to purchase
an aggregate of 20,057,100 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 warrants issued to officers and directors may be
exercised on a cash-less basis. Additional warrants grant an aggregate purchase
of 4,659,086 shares of common stock, have exercise prices ranging from $0.125 to
$2.25 per
50
<PAGE>
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 1,527,000 shares of common stock are exercisable on a cash-less
basis.
In November 1999, we issued additional warrants for our $9 million
financing. We issued warrants to purchase a total of 1,283,332 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, if 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
for 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 on exercise of
these warrants may have a severe dilutive effect. We have included 21,825
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 the shares on a new registration statement.
The following table shows the approximate number of shares of common stock
that the adjustable warrants may be converted into assuming the adjustment price
discussed above is:
. the same as our stock's market price as of February 3, 2000 or $7.03 per
share;
. 25% below our stock's market price as of February 3, 2000 or $5.27 per
share;
. 50% below our stock's market price as of February 3, 2000 or $3.52 per
share;
. 75% below our stock's market price as of February 3, 2000 or $1.76 per
share; and
. $8.63. If our common stock is at or above $8.64 per share for 20
consecutive trading days after the effective date of this registration
statement the warrants become null and void.
NUMBER OF SHARES PERCENTAGE OF SHARES
ADJUSTMENT PRICE ISSUABLE ON EXERCISE ISSUABLE ON EXERCISE
- ---------------- --------------------- ---------------------
$6.06 per share............. 0 0%
$4.55 per share............. 15,813 less than 1%
$3.03 per share............. 1,059,422 2.8%
$1.52 per share............. 4,202,178 11.1%
$8.63 per share............. 0 0%
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<PAGE>
If these warrants are partially exercised and the holders sell the shares
of common stock issued upon exercise into the market, the price of our common
stock may decrease due to the additional shares in the market. If the price of
our common stock decreases, the holders of these warrants will receive a greater
number of shares upon the exercise of their remaining warrants. In addition, if
our stock price decreases, it could encourage short sales by warrant holders or
others, which could cause our stock price to further decrease. Short sales are
sales of shares not previously owned by the seller.
DELAWARE ANTI-TAKEOVER STATUTE AND 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:
. Before this 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:
. by persons who are directors and also officers, and
. 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 offered in a tender or exchange
offer; or
. On or after the 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 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 before 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. These provisions may also have the effect of preventing changes in
the management of ebaseOne.
52
<PAGE>
TRANSFER AGENT
Liberty Transfer Company serves as the transfer agent for our common stock.
53
<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 hurt the prevailing market price and our ability to
raise equity capital in the future.
. As of January 25, 2000, we have 37,905,571 shares of common stock issued
and outstanding.
. Of these shares, upon the date of this prospectus, 10,137,180 shares
will be freely tradeable without restriction or further registration
under the Securities Act, unless the shares are held by affiliates of
ebaseOne. Affiliates of ebaseOne are people that control or are
controlled by ebaseOne. This includes our officers, directors, and large
shareholders.
. The 27,555,324 remaining shares outstanding are eligible for public sale
under 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, 1,359,713 shares underlying warrants are being registered
in this registration statement, and will be freely tradeable when issued
upon exercise of these warrants.
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 considered to be 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 and the
personal circumstances of the seller.
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 considered 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, shares may be sold under Rule 144(k)
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 us for a compensatory stock or option plan is
eligible to resell the 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
1,478,200 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 current stock option plan or any other similar plan.
54
<PAGE>
These registration statements may be filed after the effective date of this
prospectus and will automatically become effective upon filing. Therefore,
shares registered under these 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, 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 that prevent them from selling 15,741,958 of the
their shares of common stock, and 16,527,825 of the shares underlying their
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 concerning Rule 144.
55
<PAGE>
SELLING STOCKHOLDERS
On November 15, 1999 Deephaven Private Placement Trading Ltd. and other
investors purchased an aggregate of 2,083,333 shares of our common stock and
acquired warrants to purchase an aggregate of 833,332 shares of our common stock
as well as adjustable warrants to purchase shares of our common stock as more
fully described in the "Description of Capital Stock C Warrants" section of this
prospectus. All of these shares are included in this registration statement,
except for 173,610 shares of common stock, warrants to purchase 69,444 shares of
common stock, and a portion of the adjustable warrants. Each holder of the
warrants and adjustable warrants is prohibited from using them to acquire shares
of our common stock to the extent that the acquisition would result in the
holder, together with any affiliate of the 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 before any vesting date, the actual number of shares
of our common stock that will be issuable and beneficially owned upon exercise
of the 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. 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. and the other investors in the November 1999
financing from acquiring and selling more than 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 3,993,166 shares of common stock
by the selling stockholders. The table below displays information concerning
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 listed
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 31,019 31,019 0
Buddingh, Robert W. 11,000 11,000 0
Caliber Resources, Ltd. 85,228 85,228 0
</TABLE>
56
<PAGE>
<TABLE>
<S> <C> <C> <C>
Cardinal Securities, LLC 450,000 450,000 0
Vijay Alim Chandani Family Revocable 25,927 26,139 0
Trust
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
McKinnon, Michelle 42,614 42,614 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 30,300 30,300 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 99,000 99,000 0
TOTAL SHARES 4,184,408 4,206,233 0
</TABLE>
The shares above for Cardinal Securities, LLC include 450,000 shares of
common stock underlying a warrant. The persons who have voting and investment
control over the shares above for Cardinal Securities, LLC are Rob Rosenstein,
Scott Cook, and Dave Doherd.
The shares above for Marvin Black include 25,000 shares of
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common stock underlying a warrant.
The shares above for Paul Thomason include 99,000 shares of common stock
underlying a warrant.
The person who has voting and investment control over the shares above for
Caliber Resources, Ltd. is Philip Johnson.
Deephaven Private Placement Trading Ltd. is a private investment fund that
is owned by its investors and that is managed by Deephaven Capital Management
LLC, which has voting and investment control over the share above owned by
Deephaven Private Placement Trading Ltd. Deephaven Capital Management LLC is an
indirect subsidiary of Knight/Trimark Group, Inc.
The persons who have voting and investment control over the shares above
for Mazda Construction, Inc. are Feroze P. Bhandara and Shernaz F. Bhandara. The
persons who have voting and investment control over the shares above for Regency
Crossing LLC are Feroze P. Bhandara, Shernaz F. Bhandara, and Bahram Yazdani.
The persons who have voting and investment control over the shares above
for New Crescent Investors, L.L.C. are Ethan Benovitz, Mark Nordlicht, and
Daniel Saks.
58
<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 following the rules of the applicable
exchange;
. privately negotiated transactions;
. short sales or sales of shares not previously owned by the seller;
. 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 under 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, which is making a short sale when the
seller already owns the shares,
. puts, which is a contract requiring the person buying the contract to
sell shares at a specified price before a specified date, and
. calls, which is a contract giving the person buying the contract the
right to buy shares at a specified price before a specified date and
other transactions in our securities or in derivatives of our
securities.
The selling stockholders 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 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 in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission 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 considered to be underwriters within the meaning of
the Securities Act for the sales. An underwriter is a person who has purchased
shares from an issuer with a view towards distributing the shares to the public.
Any commissions received by the broker-dealers or agents and any profit on the
resale of the shares purchased by them may be considered 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 some
losses, claims, damages and liabilities, including liabilities under the
Securities Act.
59
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EXPERTS
The financial statements of ebaseOne Corporation appearing in this S-1
registration statement have been audited by Hein + Associates, LLP, independent
auditors, as disclosed in their report appearing elsewhere in this registration
statement and are included in reliance on the report given on the authority of
Hein + Associates, LLP, as experts in accounting and auditing.
LEGAL MATTERS
Brewer & Pritchard, P.C., Houston, Texas, will give an opinion that the
offered shares will be validly authorized and issued by ebaseOne and fully paid
and nonassessable. 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 for 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, 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, you should refer to the exhibits that are a part of the
registration statement for a copy of the document. We have attempted to include
all material information about the exhibits in this prospectus.
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. The SEC's web site located at www.sec.gov contains reports,
proxy and information statements, and other information about issuers that file
electronically, including ebaseOne.
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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 ebaseOne'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,
ebaseOne incurred losses of $224,652, $471,844, and $3,458,657 for the years
ended September 30, 1997, 1998 and 1999. As a result of these losses, ebaseOne'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 ebaseOne'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)
F-1
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
----------------------------------------- ----------------
1998 1999 1999
---------------- ----------------- ----------------
<S> <C> <C> <C>
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 152,282 $ 308,444 $ 4,804,806
Accounts receivable, no allowance for doubtful accounts:
Trade 126,851 39,698 74,748
Employee 1,700 2,500 -
Note receivable - - 60,000
Other current assets 2,378 - -
--------- ----------- -----------
Total current assets 283,211 350,642 4,939,554
INVESTMENT IN MARKETABLE EQUITY SECURITIES,
at market - 6,000 12,294
PROPERTY AND EQUIPMENT, net 81,131 332,557 351,334
OTHER ASSETS 6,463 11,940 37,329
--------- ----------- -----------
Total assets $ 370,805 $ 701,139 $ 5,340,511
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term borrowings $ - $ 110,000 $ -
Current portion of long-term debt 26,173 54,567 49,176
Current portion of capital lease obligation 2,058 19,319 19,319
Notes payable to stockholders 32,150 5,000 -
Trade accounts payable 132,854 372,613 101,450
Accrued liabilities 24,182 173,637 237,201
Deferred revenue - 73,907 24,083
--------- ----------- -----------
Total current liabilities 217,417 809,043 431,229
LONG-TERM DEBT, net of current portion 30,583 360,095 231,455
CAPITAL LEASE OBLIGATION, net of current portion 2,066 56,020 64,352
--------- ----------- -----------
Total liabilities 250,066 1,225,158 727,036
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
STOCKHOLDERS' EQUITY (DEFICIT):
Note receivable from stockholder - (8,000) (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; 21,642,030 shares, 34,697,704 shares and
37,625,612 shares issued and outstanding at September
30, 1998 and 1999 and December 31, 1999 21,641 34,698 37,626
Additional paid-in capital 797,296 3,602,558 11,697,939
Accumulated deficit (698,198) (4,156,855) (7,123,684)
Accumulated other comprehensive income - 3,300 9,594
--------- ----------- -----------
Total stockholders' equity (deficit) 120,739 (524,019) 4,613,475
--------- ----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ 370,805 $ 701,139 $ 5,340,511
========= =========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-2
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Years Ended September 30, December 31,
------------------------------------------------- -----------------------------
1997 1998 1999 1998 1999
------------- ------------ ------------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Product sales $ 14,948 $ 362,008 $ 448,523 $ 135,578 $ 205,928
Service revenue 49,989 322,011 205,286 53,004 30,535
----------- ----------- ----------- ----------- -----------
64,937 684,019 653,809 188,582 236,463
OPERATING EXPENSES:
Cost of goods sold - products 18,153 220,686 357,171 97,450 108,689
Compensation - technical staff:
Non-cash compensation - - 27,646 - 43,281
Other 10,050 217,823 288,260 67,327 118,470
----------- ----------- ----------- ----------- -----------
10,050 217,823 315,906 67,327 161,751
General and administrative expenses:
Non-cash compensation - - 1,507,962 - 1,913,254
Other 253,216 700,192 1,785,133 179,662 1,005,442
----------- ----------- ----------- ----------- -----------
253,216 700,192 3,293,095 179,662 2,918,696
INTEREST, NET 8,170 17,168 146,294 4,847 14,156
----------- ----------- ----------- ----------- -----------
NET LOSS $ (224,652) $ (471,844) $(3,458,657) $ (160,704) $(2,966,829)
=========== =========== =========== =========== ===========
NET LOSS PER SHARE - BASIC
AND DILUTED $(.02) $(.03) $(.13) $(.01) $(.08)
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,607,872 15,660,008 26,966,773 21,642,000 36,441,617
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-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 DECEMBER 1, 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 $ - - $ - 11,505,280 $11,506
Common stock issued for cash - - - 1,725,795 1,725
Exercise of warrants - - - 479,388 479
Net loss - - - - -
----------- ------------ ------------ ---------- -------
BALANCES, September 30, 1997 - - - 13,710,463 13,710
Common stock issued for compensation - - - 119,851 120
Common stock issued for cash - - - 781,400 781
Exercise of warrants - - - 1,284,762 1,284
Conversion of notes payable and
related accrued interest due
to stockholders - - - 441,554 442
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-
employees and cash (8,000) - - 816,000 816
Common stock issued for compensation-
services and cash - - - 1,457,139 1,457
Proceeds from sale of common stock - 120,725 121 1,363,636 1,365
Warrants issued for compensation-services - - - - -
Warrants issued for compensation-employees - - - - -
Options issued for compensation-employees - - - - -
Imputed interest on debentures
convertible at a discount to market - - - - -
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
Proceeds from sale of common stock
(unaudited) - (279,959) (280) 2,558,499 2,558
Exercise of warrants (unaudited) - - - 340,909 341
Exercise of options (unaudited) - - - 28,500 29
Warrants issued for compensation-
employees (unaudited) - - - - -
Options issued for compensation-
employees (unaudited) - - - - -
Comprehensive loss:
Net loss (unaudited) - - - - -
Unrealized gain on marketable
equity securities (unaudited) - - - - -
Comprehensive loss (unaudited) - - - - -
----------- ------------ ------------ ---------- -------
Balances, December 31, 1999 (unaudited) $(8,000) - $ - 37,625,612 $37,626
=========== ============ ============ ========== =======
<CAPTION>
Accumulated
Other
Additional Compre-
Paid In Accumulated hensive
Capital Deficit Income Total
-------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCES, October 1, 1996 $ 98,705 $ (1,702) - $ 108,509
Common stock issued for cash 103,275 - - 105,000
Exercise of warrants 24,521 - - 25,000
Net loss - (224,652) - (224,652)
----------- ----------- ------- -----------
BALANCES, September 30, 1997 226,501 (226,354) - 13,857
Common stock issued for compensation 6,107 - - 6,227
Common stock issued for cash 33,218 - - 34,000
Exercise of warrants 100,690 - - 101,974
Conversion of notes payable and
related accrued interest due
to stockholders 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 24,886 - - 25,000
Conversion of accounts payable 82,583 - - 82,864
Exercise of warrants 47,124 - - 50,000
Common stock issued for compensation-
employees and cash 789,934 - - 782,750
Common stock issued for compensation-
services and cash 144,340 - - 413,483
Proceeds from sale of common stock 411,998 - - 145,797
Warrants issued for compensation-services 35,836 - - 35,836
Warrants issued for compensation-employees 426,088 - - 426,088
Options issued for compensation-employees 110,716 - - 110,716
Imputed interest on debentures
convertible at a discount to market 99,000 - - 99,000
Comprehensive loss:
Net loss - (3,458,657) - (3,458,657)
Unrealized gain on marketable
equity securities - - 3,300 3,300
-----------
Comprehensive loss - - - (3,455,357)
----------- ----------- ------- -----------
BALANCES, September 30, 1999 3,602,558 (4,156,855) 3,300 (524,019)
Proceeds from sale of common stock
(unaudited) 5,963,722 - - 5,966,000
Exercise of warrants (unaudited) 138,153 - - 138,494
Exercise of options (unaudited) 36,971 - - 37,000
Warrants issued for compensation-
employees (unaudited) 1,625,936 - - 1,625,936
Options issued for compensation-
employees (unaudited) 330,599 - - 330,599
Comprehensive loss:
Net loss (unaudited) - (2,966,829) - (2,966,829)
Unrealized gain on marketable
equity securities (unaudited) - - 6,294 6,294
Comprehensive loss (unaudited) - - - 2,960,535
----------- ----------- ------- -----------
Balances, December 31, 1999 (unaudited) $11,697,939 $(7,123,684) $9,594 $ 4,613,475
=========== =========== ======= ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-4
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Years Ended September 30, December 31,
------------------------------------------------- -----------------------------
1997 1998 1999 1998 1999
------------ ------------- -------------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(224,652) $(471,844) $(3,458,657) $(160,704) $(2,966,829)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 17,715 23,131 54,022 13,455 22,349
Bad debt expense - - 20,178 - -
Imputed interest on debentures
convertible at a discount to market - - 99,000 - -
Common stock issued for compensation-
employees - 6,227 776,750 - -
Issuance of stock to retire accrued
interest to stockholder - 1,305 - - -
Common stock issued for compensation-
services - - 186,218 - -
Warrant issued for compensation-
employees - - 426,088 - 1,625,936
Warrant issued for compensation-
services - - 35,836 - -
Options issued for compensation-
employees - - 110,716 - 330,599
Changes in assets and liabilities:
Accounts receivable 12,683 (110,189) 66,175 41,724 (32,550)
Deferred revenue - - 73,907 - (49,824)
Trade accounts payable 16,281 96,173 283,659 34,058 (271,163)
Accrued liabilities (500) 24,182 149,455 (24,182) 63,564
Prepaid expenses - (7,673) - - -
Other assets (7,374) 6,637 (3,099) (10,321) (25,389)
--------- --------- ----------- --------- -----------
Net cash used in operating activities (185,847) (432,051) (1,179,752) (105,970) (1,303,307)
</TABLE>
See accompanying notes to these consolidated financial statements.
F-5
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
<TABLE>
<CAPTION>
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Furniture and equipment (7,184) (57,438) (221,426) (57,055) (26,982)
Advances on note receivable - - - - (60,000)
Purchase of marketable equity securities - - (2,700) - -
-------- --------- ---------- --------- ----------
Net cash used in investing activities (7,184) (57,438) (224,126) (57,055) (86,982)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on demand notes payable from
stockholders 20,000 47,400 5,000 - (5,000)
Advances on notes payable - 270,420 617,605 115,311 -
Repayments of notes payable (20,007) (240,599) (181,849) (68,103) (244,031)
Repayments of capital lease obligations - (1,723) (12,807) (497) (5,812)
Proceeds from sale of common stock 105,000 34,000 443,026 - 5,966,000
Issuance of common stock to acquire Vectron - 399,970 - - -
Issuance of common stock to acquire Norske - - 639,065 - -
Exercise of warrants 25,000 101,974 50,000 - 138,494
Exercise of options - - - - 37,000
-------- --------- ---------- --------- ----------
Net cash provided by financing
activities 129,993 611,442 1,560,040 46,711 5,886,651
-------- --------- ---------- --------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (63,038) 121,953 156,162 (116,314) 4,496,362
CASH AND CASH EQUIVALENTS, at beginning
of period 93,367 30,329 152,282 152,282 308,444
-------- --------- ---------- --------- ----------
Cash and Cash Equivalents, at end of period $ 30,329 $ 152,282 $ 308,444 $ 35,968 $4,804,806
======== ========= ========== ========= ==========
Supplemental Cash Flow Information:
Cash paid for interest $ 8,220 $ 15,863 $ 43,522 $ 4,847 $ 14,156
======== ========= ========== ========= ==========
Equipment acquired under capital leases $ - $ 5,847 $ 84,022 $ - $ 14,144
======== ========= ========== ========= ==========
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.
F-6
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization - Vectron, Inc. was incorporated under the laws of Nevada on
November 7, 1997. September 1998, Vectron acquired the majority of the
outstanding common stock of Prime Net Corporation and changed its name to
Synoptech Solutions Group, Inc. Norske Energy Corporation was incorporated
under the laws of the state of Delaware on September 15, 1997. In May 1999,
Norske acquired all of the outstanding common stock of Synoptech and changed
its name to ebaseOne Corporation. 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. ebaseOne is
currently located in Houston, Texas. See note 2 "Reverse Acquisitions."
For accounting purposes, the acquisitions have been treated as reverse
acquisitions. The historical financial statements before May 1999 are those
of Prime Net. No proforma information giving effect to these transactions
has been presented because Vectron and Norske had no operating activities at
the time of the 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 ebaseOne and all of its wholly-owned
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.
Revenue Recognition - ebaseOne sells both software considered to be off the
shelf, as defined by Statement of Position 97-2, and software that is not
considered to be off the shelf. Revenue from the sale of off the shelf
software is recognized upon delivery, provided persuasive evidence of an
arrangement exists, the fee is fixed or determinable, and collectibility is
probable. Related services, if any, are recognized as revenue when provided.
To the extent software is sold with implementation and training services and
is not considered off the shelf software, then the revenue from both the
sale of the software and the related services are recognized on the
percentage of completion method of accounting.
F-7
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
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 - ebaseOne 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
ebaseOne'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.
Long-lived Assets - ebaseOne 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.
ebaseOne 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 December 31, 1999. ebaseOne 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 ebaseOne's financial statements, in
conformity with generally accepted accounting principles, requires
ebaseOne'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.
F-8
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
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 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 years ended September 30, 1997 and
1998.
Marketable Securities - ebaseOne's marketable equity securities are
accounted for as available for sale securities. ebaseOne's marketable equity
securities are stated at fair value, with unrealized gains and losses
recognized in stockholders' equity. ebaseOne 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.
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 options and warrants were exercised.
The dilutive effect of stock options and warrants was not calculated in the
accompanying statements of operations because ebaseOne incurred a loss in
each period.
Unauited Interim Information - The accompanying financial information as of
December 31, 1999 and for the three-month periods ended December 31, 1998
and 1999 has been prepared by ebaseOne, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. The financial
statements reflect all adjustments, consisting of normal recurring accruals,
which are, in the opinion of management, necessary to fairly present such
information in accordance with generally accepted accounting
principles.
F-9
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. REVERSE ACQUISITION BY PRIME NET:
On August 18, 1998, the shareholders of Prime Net approved a merger with
Vectron. After the completion of the merger, Vectron changed its name to
Synoptech. Each outstanding share of common stock of Prime Net, par value
$.01 per share, was converted to the right to receive .4699 shares of
Synoptech, 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 Synoptech. For legal purposes,
however, Synoptech remained the surviving entity. The combined entity
retained Synoptech's capital structure, and the common stock transactions
before the merger have been restated using the .4699 exchange ratio. At the
time of the merger, Vectron had total assets of $399,970, consisting
exclusively of cash, and no liabilities.
Synoptech 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 Synoptech approved a merger with
Norske. Each outstanding share of common stock of Synoptech, 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, Synoptech is
considered the acquiring company, and this transaction has been treated as a
purchase by Synoptech of Norske. For legal purposes, Norske remained the
surviving entity. The combined entity retained Norske's capital structure,
and the common stock transactions before the second merger have been
restated using the 4.08 exchange ratio. At the time of the second merger,
Norske had total assets of $639,065, consisting exclusively of cash, and no
liabilities.
Norske assumed Synoptech's existing warrants issued in connection with
services provided and various financing transactions. The number of shares
subject to purchase under the warrant agreements was adjusted by multiplying
the number of Synoptech 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, ebaseOne had 33,220,432 shares of common
stock outstanding.
F-10
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30,
---------------------------------------- December 31,
1998 1999 1999
----------------- ---------------- ----------------
<S> <C> <C> <C>
Furniture and fixtures $ 49,042 $ 104,660 $ 110,066
Computer equipment 108,375 259,004 275,614
Equipment - 18,482 36,071
Vehicles 26,915 45,478 45,478
Leasehold improvements 6,912 53,366 54,887
--------- --------- ---------
191,244 480,990 522,116
Accumulated depreciation (110,113) (148,433) (170,782)
--------- --------- ---------
$ 81,131 $ 332,557 $ 351,334
========= ========= =========
</TABLE>
4. SHORT-TERM BORROWINGS:
Short-term borrowings consist of the following:
<TABLE>
<CAPTION>
September 30,
--------------------------------------- December 31,
1998 1999 1999
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revolving line of credit with a bank $ - $ 50,000 $ -
Note payable to a company - 60,000 -
----------- -------- ----------
$ - $110,000 $ -
=========== ======== ==========
</TABLE>
In October 1998, ebaseOne obtained a $50,000 revolving line of credit with a
bank with a maturity date of October 29, 1999, collateralized by bank
accounts at the bank, furniture and fixtures, and accounts receivable.
Interest is payable monthly at prime plus 1%. The line expired during the
three-month period ended December 31, 1999.
During July 1999, ebaseOne borrowed $60,000 from an entity, with interest at
10%. The note was paid off during the three-month period ended December 31,
1999.
F-11
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30
-------------------------------------- December 31,
1998 1999 1999
---------------- ---------------- ----------------
<S> <C> <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 ebaseOne. $ 15,600 $ 448 $ -
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. 28,774 23,107 -
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. - 292,107 280,631
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
ebaseOne's common stock at any time before October 2002. The
note was paid off in the three-month period ended December
31, 1999. - 99,000 -
-------- -------- --------
56,756 414,662 280,631
Less current maturities (26,173) (54,567) (49,176)
-------- -------- --------
Total long-term debt $ 30,583 $360,095 $231,455
======== ======== ========
</TABLE>
F-12
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT: (continued)
The following are scheduled maturities of notes payable at December 31,
1999:
<TABLE>
<CAPTION>
Years Ending
December 31, Amount
---------------- ----------------
<C> <C>
2000 $ 49,176
2001 57,281
2002 66,836
2003 78,114
2004 29,224
--------
$280,631
========
</TABLE>
6. STOCKHOLDERS' EQUITY:
Common Stock Subscribed - In September 1999, ebaseOne received $113,482 and
services totaling $29,000 for 279,959 shares of common stock. As of
September 30, 1999, the shares had not been issued and were accounted for as
common stock subscribed. The shares were issued during the three-month
period ended December 31, 1999.
Stock Issuances - ebaseOne 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.
ebaseOne 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. ebaseOne issued 119,852
shares of common stock to various individuals for services provided to
ebaseOne 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.
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 before
the merger have been recorded as an increase in common stock and additional
paid-in capital.
F-13
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. STOCKHOLDERS' EQUITY: (continued)
ebaseOne sold 1,729,815 shares of common stock to various individuals during
fiscal year 1999 for cash of $467,482. During fiscal 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. ebaseOne 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 fiscal
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 of Norske totaled approximately $639,065 as of the merger
date, and the 6,307,357 common shares of Norske outstanding before the
merger have been recorded as an increase in common stock and additional
paid-in capital.
Between October 2, 1999 and November 12, 1999, ebaseOne issued 475,168
shares of common stock at $.94 per share for total proceeds of $445,921.
On November 15, 1999 ebaseOne executed an agreement to issue 2,083,331
shares of common stock for $9,000,000, of which ebaseOne received
$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 ebaseOne with the
Securities Exchange Commission has been declared effective. 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 ebaseOne 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.
During the quarter ended December 31, 1999, ebaseOne issued 369,400 shares
of common stock upon the exercise of warrants and options. Total proceeds
were $175,494 for an average exercise price of $.48 per share.
F-14
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RELATED PARTY TRANSACTIONS:
ebaseOne 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 ebaseOne $15,250 to fund operations. This note was converted into
364,332 shares of common stock in August 1998.
ebaseOne 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. The notes were paid in full by September 30, 1999.
ebaseOne 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. This
note was paid off in the quarter ended December 31, 1999.
ebaseOne had a note payable to a stockholder of $23,107 as of September 30,
1999. This note was paid off in the quarter ended December 31, 1999.
ebaseOne'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 ebaseOne. The fair value of the warrant was estimated
to be zero using the Black-Scholes option pricing model with the following
assumptions: risk-free rate of 5%; volatility of .0001%; no assumed dividend
yield; and an expected life of 1.5 years.
8. INCOME TAXES:
The tax effect of significant temporary differences representing deferred
tax assets and liabilities at September 30, 1998 and 1999, are as follows:
<TABLE>
<CAPTION>
September 30,
-----------------------------------------
1998 1999
----------------- -----------------
<S> <C> <C>
Net operating loss carryforwards $ 179,000 $ 874,000
Valuation allowance (179,000) (874,000)
--------- ---------
Net deferred tax asset $ - $ -
========= =========
</TABLE>
F-15
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES: (continued)
The increase in the valuation allowance during fiscal 1999 of $695,000 is
the result of additional losses incurred during the year.
As of September 30, 1999, ebaseOne has net operating loss carryforwards of
approximately $2,708,000 which begin to expire in 2009. Future utilization
of the net operating loss carryforwards may be limited by changes in the
ownership of ebaseOne under section 382 of the Internal Revenue Code.
The difference between the actual income benefit of zero for fiscal years
1997, 1998 and 1999 and the expected benefit using the statutory income tax
rate of 34% results from the 100% valuation allowance on ebaseOne's net
operating loss deferred tax asset at each year end.
9. COMMITMENTS AND CONTINGENCIES:
Lease Commitments -ebaseOne 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:
<TABLE>
<CAPTION>
September 30,
-----------------------------------------
1998 1999
----------------- -----------------
<S> <C> <C>
Equipment $ 6,241 $ 90,263
Less accumulated amortization (1,144) (11,942)
------- --------
$ 5,097 $ 78,321
======= ========
</TABLE>
The future minimum lease payments under ebaseOne's capital leases at
September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Years Ending September 30,
- ----------------------------------
<S> <C>
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
========
</TABLE>
F-16
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENCIES: (continued)
ebaseOne leases office space and equipment under operating leases which
expire on various dates through 2002. Rent expense was $57,000, $118,000 and
$160,098 for the years ended September 30, 1997, 1998, and 1999, and $22,600
and $43,900 for the three-month periods ended December 31, 1998 and
1997.
Future minimum lease payments under noncancellable leases with terms in
excess of one year are as follows:
<TABLE>
<CAPTION>
Operating
Years Ending September 30, Leases
- ------------------------------------ ------------
<C> <C>
2000 $150,305
2001 140,057
2002 77,464
--------
$367,826
========
</TABLE>
Contingencies - ebaseOne 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
ebaseOne's financial condition or results of operations.
ebaseOne has agreed to repurchase hardware from a customer and refund
software costs. Management estimates the loss to be $60,000 and has accrued
that amount in the accompanying financial statements.
10. MANAGEMENT'S PLANS:
ebaseOne's losses for the years ended September 30, 1997, 1998 and 1999, and
the three-month period ended December 31, 1999 amounted to approximately
$225,000, $472,000, $3,459,000 and $2,967,000. As a result of these losses,
ebaseOne'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 ebaseOne's ability
to continue as a going concern without additional infusions of equity
capital and ultimately achieving profitable operations. ebaseOne is pursuing
other sources of financing, but there is no assurance any other source of
financing will be available.
F-17
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. MANAGEMENT'S PLANS: (continued)
ebaseOne's losses incurred during the fiscal years ended September 30, 1998
and 1999 and the three-month period ended December 31, 1999 are the result
of ebaseOne changing its core business. In October 1996, ebaseOne began
developing computer and business software solutions for small and mid-market
companies. In September 1998, ebaseOne started to evolve into an application
service provider 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 - ebaseOne's stock option 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. 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.
Stock option activity for ebaseOne's stock plan is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Total Shares Price
Under Option Per Share
----------------- ------------------
<S> <C> <C>
Balance - October 1, 1998 - $ -
Granted 741,700 .40
Canceled (275,400) .25
Exercised - -
--------
Balance - September 30, 1999 466,300 $.49
========
</TABLE>
F-18
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
As of September 30, 1999, stock options to acquire 466,300 shares of common
stock have been issued from this plan 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 $.60 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 outside the plan 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
at September 30, 1999, and the weighted average exercise price is $2.10 per
share.
Transactions with regard to these non-qualified stock options are as
follows:
<TABLE>
<CAPTION>
Weighted
Average
Total Shares Price
Under Option Per Share
----------------- ------------------
<S> <C> <C>
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
=======
</TABLE>
Warrants - In connection with the merger with Vectron, ebaseOne 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 before the expiration date
of March 31, 2001. Before 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 before the merger.
F-19
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
ebaseOne issued a warrant to acquire 8,160,000 shares of common stock to
ebaseOne'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. ebaseOne
issued a warrant to acquire 408,000 shares of common stock to ebaseOne'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. ebaseOne 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.
ebaseOne 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.
ebaseOne 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.
ebaseOne issued warrants to acquire 4,000,000 shares of common stock to
ebaseOne'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.
ebaseOne issued a warrant to acquire 1,000,000 shares of common stock to an
officer at an exercise price of $2.125 per share, vesting monthly over 24
months. The warrant expires October 2004. During the three-month period
ended December 31, 1999, this same 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.
ebaseOne issued a warrant on September 29, 1999 in connection with
convertible debt in the amount of $99,000. The warrant is exercisable into
99,000 shares of common stock at an exercise price of $.94 per share. The
fair value of ebaseOne's common stock was $2.75 on the date of issue.
Interest expense of $99,000 was recorded in ebaseOne's financial statements
to reflect the beneficial conversion feature of the convertible debt and the
beneficial exercise price of the warrant.
F-20
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
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
Average Weighted- Fair 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 $ .25 12,135,664 $ .19
$.94 99,000 2.00 .94 2.75 99,000 .94
$1.00 to $3.00 8,000,000 6.03 1.94 .47 83,333 1.00
---------- ----------
23,984,665 4.80 .81 .32 12,317,997 .20
========== ==========
</TABLE>
Warrant activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Price
Total Warrants Per Share
----------------- ------------------
<S> <C> <C>
Balance - October 1, 1997 - $ -
Granted 4,815,131 .16
Canceled - -
Exercised - -
----------
Balance - September 30, 1998 4,815,131 .16
Granted 22,160,909 .85
Canceled (115,053) .43
Exercised (2,876,322) .07
----------
Balance - September 30, 1999 23,984,665 .81
==========
</TABLE>
Compensation expense of $1,313,554 and $1,956,535 has been recognized in
fiscal 1999 and during the three-month period ended December 31, 1999 for
various options and warrants issued to employees with exercise prices below
the fair value of ebaseOne's common stock on the date of grant. Consulting
expense of $35,836 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 using the following
assumptions: risk-free rate of return of 5.5%; volatility of 257.06% to
124.61%; no assumed dividend yield; and an expected life of 1.5 years.
F-21
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND WARRANTS: (continued)
Statement of Financial Accounting Standards No. 123, entitled 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 in SFAS No. 123.
ebaseOne applies APB Opinion 25, Accounting for Stock Issued to Employees,
and related interpretations in accounting for its plans. 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 ebaseOne'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, ebaseOne's net
loss and loss per common share would have been increased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1997 1998 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net loss
As reported $(224,652) $(471,844) $(3,458,657)
Pro forma (224,652) (471,844) (4,182,458)
Net loss per common share
As reported $ (.02) $ (.03) $ (.13)
Pro forma (.02) (.03) (.16)
</TABLE>
The fair value of each option or warrant granted to employees 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 ebaseOne to one customer, International Exhibition, Inc., were
approximately $82,000, or 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 more than 10%
of revenue or trade receivables as of September 30, 1998 and 1999 or for the
years ended September 30, 1997, 1998 and 1999.
F-22
<PAGE>
EBASEONE CORPORATION
(Previously Prime Net Corporation)
Information After September 30, 1999 is Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. EMPLOYEE BENEFITS:
In July 1999, ebaseOne 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
ebaseOne are based on ebaseOne's performance and are at the discretion of
the board of directors. As of December 31, 1999, ebaseOne has made no
contributions to the plan.
F-23
<PAGE>
3,993,166 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 the 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 $ 10,000
Legal Fees and Expenses $150,000
Accounting Fees and Expenses $120,000
Miscellaneous 25,000
--------
TOTAL $315,134
========
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 aggregate purchase price of $9 million, or $4.32 per share.
In connection with the above issuance, the company
II-1
<PAGE>
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, for 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 $445,921 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 May 1998 and January 1999, the company issued a total of 1,917,350
shares of common stock to Thomas C. Pritchard for a total purchase price of
$45,000. In April 1999 and September 1999, the company issued 121,584 shares and
159,234 shares, respectively, of common stock to Brewer & Pritchard, P.C., an
accredited third party for legal services performed in fiscal 1999 valued at
$43,900. In August 1999, the company issued an aggregate of 113,636 shares of
common stock to Robert Sonfield and John Mann, both accredited investors for
legal services valued at approximately $0.22 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 April and May 1999, the company issued an aggregate of 307,097 shares of
common stock to Kyran O'Dwyer, Euroinvest, S.A., Raymond King, Mark Michael,
Emmett O'Connell, Nikolai Svirdov, Marketview Financial Group, Forte
Communications, Robert Williams, Oleg Preskin, Val Soloway, and Delta R&D
Aktiengesellschaft for services rendered valued at $30,710. 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: (a) warrants to purchase 408,000 shares
of common stock to a former officer of the company at an exercise price of $.25
per share for services rendered valued, and (b) issued 816,000 shares of common
stock to the same officer for a purchase price of $14,000, of which $8,000 was
in the form of a note payable. As there was no public market for the shares of
common stock at the time of the issuance of the above warrants to purchase
408,000 shares of common stock, no value was attributed to the issuance. In
September 1999, 100,000 of the above warrants to purchase 408,000 were
transferred to an employee of the company for services valued at $272,000.
From May 1999 to September 1999, the company issued five warrants to Mr. Sooley
to purchase an aggregate of 45,000 shares of common stock at an exercise price
of $.22 per share for services rendered from May 1999 through November 1999
valued at $36,000. In January 2000, the company issued a warrant to Mr. Sooley
to purchase an aggregate of 14,100 shares of common stock at an exercise price
of $.22 per share for services rendered from May 1999 through November 1999
valued at $82,000. In August 1999, the company issued warrants to purchase an
aggregate of 10,000,000 shares of common stock to Mr. Skamser, with prices
ranging from $0.38 to $3.00 per share for services rendered valued at
$2,204,060. In October 1999, the company issued warrants to purchase 1,000,000
shares of common stock to Mr. Overstolz at an exercise price of $2.125 per share
for services valued at $1,800,000. In November 1999, the company issued
warrants to purchase 1,750,000 shares of common stock to Messrs. Sooley and
Feuless at exercise prices ranging from $2.37 to $3.00 per share for services
rendered, valued at $9,900,000. In May 1998, the company issued 100,671 shares
of common stock to Mr. Overstolz for services valued at $4,509.
In May 1999, the company issued warrants to purchase an aggregate of
10,391,756 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. The fair market value at the time of issuance
was deemed to be $.10 per share on issuance. In May 1999, the company issued an
aggregate of 26,940,491 shares of company common stock 34 accredited investors
in exchange for capital stock of Synoptech Solutions. The fair market value at
the time of issuance was deemed to be $.10 per share on issuance. 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.
II-2
<PAGE>
From May 1999 to January 2000, the company issued options to purchase an
aggregate of 1,478,200 shares of common stock at prices ranging from $.25 to
$8.00 per share to 37 employees pursuant to the company's employee stock option
plan, including options to purchase 214,500 shares at an exercise price of $.25
per share to Mr. Feuless. 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 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 Ray King, Kyran O'Dwyer, Emmett O'Connell, Mary O'Connell, Oisen
O'Connell, Robert O'Connell, Robert E. Williams, Atle Jensen, Garnier Holdings,
Inc., Marketview Financial Group, Castle Developments, Ltd., Timothy Horan, Rhea
Hickmond Laws, Martin Wiener, Frank C. Fisher, Keith C. Hall, Charles Segal,
David Marks, Ernest L. Starling, Forte Communications, Inc., Patricia Meding,
and Investment Capital.com who invested in a $600,000 financing in the company
for a purchase price of $.17 per share. In July 1997, an aggregate of 115,000
shares of common stock were issued to Stuart Eisenberger, Untic Amstalt, Nikolai
Svirdov, and Delta R&D Aktiengesellschaft who invested in a $50,000 financing in
the company for a purchase price of $.44 per share. 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
DESCRIPTION OF EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
2.1(2) Exchange Agreement between Norske Energy Corporation and
Synoptech Solutions Group, Inc.
3.1(2) Amended and Restated Articles of Incorporation
3.2(2) By-Laws
4.1(2) Form of Specimen of common stock
5.1(1) 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(2) 1999 Stock Option Plan
10.6(2) Cooperative Marketing Agreement with Phonoscope
Communications, Ltd.
10.7(2) Securities Purchase Agreement Between ebaseOne Corp. and the
Investors Signatory Hereto Dated as of November 15, 1999
10.8(1)* Level 3 Communications, LLC Terms and Conditions for
Delivery of Service
10.9(1)* Master License Agreement with Marimba, Inc.
10.10(1)* ASP License Agreement with SalesLogix Corporation
10.11(1)* Sun Microsystems, Inc. Service Provider Agreement Master
Terms
10.12(1)* Paperchaser.com, Inc. CorServ Service Order
10.13(1) Microsoft Direct Commercial Service License Agreement
10.14(1) Memorandum of Understanding with Cisco Systems, Inc.
10.15(1) The Greenspoint Technology Center, Houston, Texas Net Lease
21.1(2) List of Subsidiaries
23.1(1) Consent of Hein + Associates, LLP
23.2(1) Consent of legal counsel (included in Exhibit 5.1)
27.1(1) Financial Data Schedule
___________________
(1) Filed herewith.
(2) Filed previously.
* We have omitted some portions of these exhibits and submitted them
separately in a confidential treatment request filed with the SEC
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
II-3
<PAGE>
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.
(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 5th day of February, 2000.
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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/S/ JOHN FRAZIER OVERSTOLZ Chairman of the Board February 5, 2000
- --------------------------
JOHN FRAZIER OVERSTOLZ
/S/ CHARLES W. SKAMSER Chief Executive Officer, Principal February 5, 2000
- -------------------------- Accounting Officer, Chief Financial
CHARLES W. SKAMSER Officer, President, and Director
/S/ MICHAEL M. ROTOLO Director February 5, 2000
- --------------------------
MICHAEL M. ROTOLO
/S/ MICHAEL A. SOOLEY Senior Vice President of Worldwide February 5, 2000
- -------------------------- Business Development and Secretary
MICHAEL A. SOOLEY
/S/ SCOTT FEULESS Chief Technology Officer February 5, 2000
- --------------------------
SCOTT FEULESS
</TABLE>
II-5
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
2.1(2) Exchange Agreement between Norske Energy Corporation and
Synoptech Solutions Group, Inc.
3.1(2) Amended and Restated Articles of Incorporation
3.2(2) By-Laws
4.1(2) Form of Specimen of common stock
5.1(1) 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(2) 1999 Stock Option Plan
10.6(2) Cooperative Marketing Agreement with Phonoscope
Communications, Ltd.
10.7(2) Securities Purchase Agreement Between ebaseOne Corp. and the
Investors Signatory Hereto Dated as of November 15, 1999
10.8(1)* Level 3 Communications, LLC Terms and Conditions for
Delivery of Service
10.9(1)* Master License Agreement with Marimba, Inc.
10.10(1)* ASP License Agreement with SalesLogix Corporation
10.11(1)* Sun Microsystems, Inc. Service Provider Agreement Master
Terms
10.12(1)* Paperchaser.com, Inc. CorServ Service Order
10.13(1) Microsoft Direct Commercial Service License Agreement
10.14(1) Memorandum of Understanding with Cisco Systems, Inc.
10.15(1) The Greenspoint Technology Center, Houston, Texas Net Lease
21.1(2) List of Subsidiaries
23.1(1) Consent of Hein + Associates, LLP
23.2(1) Consent of legal counsel (included in Exhibit 5.1)
27.1(1) Financial Data Schedule
___________________
(1) Filed herewith.
(2) Filed previously.
* We have omitted some portions of these exhibits and submitted them
separately in a confidential treatment request filed with the SEC
<PAGE>
EXHIBIT 5.1
February 7, 2000
Board of Directors
ebaseOne Corporation
6060 Richmond Ave.
Houston, Texas 77057
Gentlemen:
As counsel for ebaseOne Corporation, a Delaware corporation ("Company"), you
have requested our firm to render this opinion in connection with the
Registration Statement of the Company on Form S-1 filed under the Securities Act
of 1933, as amended ("Act"), with the Securities and Exchange Commission
relating to the registration of the resale of 4,206,233 shares of Company common
stock.
We are familiar with the registration statement and the registration
contemplated thereby. In giving this opinion, we have reviewed the registration
statement and such other documents and certificates of public officials and of
officers of the Company with respect to the accuracy of the factual matters
contained therein as we have felt necessary or appropriate in order to render
the opinions expressed herein. In making our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents presented to us
as originals, the conformity to original documents of all documents presented to
us as copies thereof, and the authenticity of the original documents from which
any such copies were made, which assumptions we have not independently verified.
Based upon all the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2. The shares offered were validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Securities and Exchange
Commission as Exhibit 5.1 to the Registration Statement, and we hereby consent
to the use in the registration statement of the reference to Brewer & Pritchard,
P.C. under the heading "Legal Matters." This opinion is conditioned upon the
registration statement being declared effective and upon compliance by the
Company with all applicable provisions of the Act and such state securities
rules, regulations and laws as may be applicable.
Very truly yours,
BREWER & PRITCHARD, P.C.
<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.
(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 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
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 1st of January. This vehicle
may be provided either as a company car or direct payment of the allowance
at the Executive's option.
2
<PAGE>
(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
(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 whit 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
3
<PAGE>
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.
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
4
<PAGE>
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.
(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
WITH A COPY TO:
Brewer & Pritchard, P.C.
1111 Bagby, Suite 2450
Houston, Texas 77002
IF TO EXECUTIVE ADDRESSED TO:
5
<PAGE>
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
6
<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 27th 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 $2.125 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
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WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 1,000,000 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that John Frazier Overstolz, his registered successors and permitted assigns
registered on the books of the Company maintained for such purposes, as the
registered holder hereof ("Holder"), for value received in consideration for
services rendered to the Company, the receipt of which is acknowledged, is
entitled to purchase from the Company the number of fully paid and non-
assessable shares of Common Stock of the Company, $.001 par value ("Shares" or
"Common Stock"), stated above at the purchase price per Share set forth in
Section 1(b) below ("Exercise Price") (the number of Shares and Exercise Price
being subject to adjustment as hereinafter provided) upon the terms and
conditions herein provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
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(b) This Warrant may be exercised at a price of $2.125 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business October 27,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading day
is not available, the closing bid price shall be used) for the five
trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
or (vii) by any combination of the foregoing.
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(d) The Shares underlying the Warrants shall vest, and the Warrants shall
become exercisable with respect to such Shares in as nearly equal as possible
monthly installments over a 24-month period, so long as Holder remains employed
by the Company. In the event Holder ceases to be an employee of the Company, for
any reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Holder to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company. In
the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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.
4. 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.
5. 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
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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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, that in the event that any certificate representing
-----------------
the Shares is issued to the Holder hereof upon exercise of this Warrant, such
Holder shall, for all purposes, be deemed to have become the holder of record of
such Shares on the date on which this Warrant Certificate, together with a duly
executed Purchase Form, was surrendered and payment of the Exercise Price was
made, irrespective of the date of delivery of such Share certificate. The rights
of the Holder of this Warrant are limited to those expressed herein and the
Holder of this Warrant, by his acceptance hereof, consents to and agrees to be
bound by and to comply with all the provisions of this Warrant Certificate,
including, without limitation, all the obligations imposed upon the Holder
hereof by Sections 2 and 5 hereof. In addition, the Holder of this Warrant
Certificate, by accepting the same, agrees that the Company may deem and treat
the person in whose name this Warrant Certificate is registered on the books of
the Company maintained for such purposes as the absolute, true and lawful owner
for all purposes whatsoever, notwithstanding any notation of ownership or other
writing thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled to
vote or receive dividends or to be deemed the holder of Shares for any purpose,
nor shall anything contained in this Warrant Certificate be construed to confer
upon any Holder of this Warrant Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
action by the Company, whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise,
receive notice of meetings or other action affecting stockholders (except for
notices provided for herein), receive dividends, subscription rights, or
otherwise, until this Warrant shall have been exercised and the Shares
purchasable upon the exercise
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thereof shall have become deliverable as provided herein; provided, however,
-----------------
that any such exercise on any date when the stock transfer books of the Company
shall be closed shall constitute the person or persons in whose name or names
the certificate or certificates for those Shares are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding day on which such stock transfer books are open, and the Warrant
surrendered shall not be deemed to have been exercised, in whole or in part as
the case may be, until the next succeeding day on which stock transfer books are
open for the purpose of determining entitlement to dividends on the Company's
common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof or of
the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
(b) The stock certificates of the Company that will evidence the shares of
Common Stock with respect to which this Warrant may be exercisable will be
imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not
been registered under either the Securities Act of 1933
("Act") or the securities laws of any state ("State Acts").
Such securities shall not be sold, pledged, hypothecated, or
otherwise transferred (whether or not for consideration) at
any time whatsoever except upon registration or upon
delivery to the Company of an opinion of its counsel
satisfactory to the Company or its counsel that registration
is not required for such transfer or the submission of such
other evidence as may be satisfactory to the Company or its
counsel to the effect
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<PAGE>
that any such transfer shall not be in violation of the Act,
State Acts or any rule or regulation promulgated
thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring adjustment
pursuant to (a), the Company shall adjust the exercise price then in effect (to
the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of Common
Stock, the exercise price in effect, immediately prior to the effective
date of such event shall be decreased to an amount which shall bear the
same relation to the exercise price in effect immediately prior to such
event as the total number of shares of Common Stock outstanding immediately
prior to such event bears to the total number of shares of Common Stock
outstanding immediately after such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior to
the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the exercise
price in effect immediately prior to such event as the total number of
shares of Common Stock outstanding immediately prior to such event bears to
the total number of shares of Common Stock outstanding immediately after
such event.
(c) Upon each adjustment of the exercise price pursuant to (b) above, the
Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the
6
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Company or, in the case of any such mutilation, upon surrender and cancellation
of this Warrant Certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth herein
shall survive the exercise of the Warrants represented hereby and the surrender
of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other communication
is required to be given or delivered under the terms of this Warrant, it shall
be in writing and delivered by hand delivery or United States registered or
certified mail, return receipt requested, postage prepaid (or similar delivery
if outside of the United States), and will be deemed to have been given or
delivered on the date such notice, purchase price or other communication is so
delivered or posted, as the case may be; and, if to the Company, it will be
addressed to the address specified in Section 1 hereof, and if to the Holder, it
will be addressed to the registered Holder at its, his or her address as it
appears on the books of the Company.
EBASEONE CORPORATION
By: //s// Charles Skamser
-----------------------------------
Charles Skamser, President
Dated: October 27, 1999
HOLDER:
------
By: //s// John Frazier Overstolz
-----------------------------------
John Frazier Overstolz
Dated: October 27, 1999
7
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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 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,
<PAGE>
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,
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
<PAGE>
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
(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
<PAGE>
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. 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, 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
<PAGE>
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
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
<PAGE>
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 27th 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>
EBASEONE CORPORATION
WARRANT AGREEMENT
-----------------
Date: August 16, 1999
Mr. Charles Skamser:
ebaseOne Corporation ("Company"), for value received, hereby agrees to
issue a stock purchase warrant entitling Charles Skamser ("Skamser" or "Warrant
holder") to purchase 4,000,000 shares of the Company's common stock ("Common
Stock"). Such warrant is evidenced by the warrant certificate in the form
attached hereto as Exhibit 1 (the instrument being hereinafter referred to as a
---------
"Warrant,"and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by Skamser as to all or
any lesser number of shares of Common Stock covered thereby, at a Exercise Price
of $.38 per share, subject to adjustment as provided in Section 5 below, for the
exercise period defined in Section 3(a) below.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to the Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Exercise Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants ("Shares"), and to
perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, the Warrant issued pursuant hereto, has been or will
be duly executed and delivered by the Company and is or will be a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
No authorization, approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such authorization,
execution, delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument,
Page 1
<PAGE>
judgment, decree, order, statute, rule or regulation to which the Company is a
party or by which it is bound.
2. Transfer.
--------
(a) Transferability of Warrants. The Warrant holder agrees that the
---------------------------
Warrants are being acquired as an investment and not with a view to distribution
thereof and that the Warrants may not be transferred, sold, assigned or
hypothecated except as provided herein. The Warrant holder further acknowledges
that the Warrants may not be transferred, sold, assigned or hypothecated unless
pursuant to a registration statement that has become effective under the
Securities Act of 1933, as amended ("Act"), setting forth the terms of such
offering and other pertinent data with respect thereto, or unless the Warrant
holder has provided the Company with an acceptable opinion from acceptable
counsel that such registration is not required. Certificates representing the
Warrants shall bear an appropriate legend.
(b) Registration of Shares. The Warrant holder agrees not to make any sale
----------------------
or other disposition of the Shares except pursuant to a registration statement
which has become effective under the Act, setting forth the terms of such
offering, the underwriting discount and commissions and any other pertinent data
with respect thereto, unless he has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is not
required. Certificates representing the Shares, which are not registered as
provided in Section 2, shall bear an appropriate legend and be subject to a
"stop-transfer"order.
(c) No Registration Rights. The Warrant holder acknowledges that the
----------------------
Company has not granted, and does not intend to grant, the Warrant holder any
registration rights with respect to the Warrants or to the Shares underlying the
Warrants.
3. Exercise of Warrants, Partial Exercise.
--------------------------------------
(a) Exercise Period. The Warrants become exercisable as the underlying
---------------
Shares vest (in the manner set forth below) and expire August 11, 2004. The
Shares underlying the Warrants shall vest, and the Warrants shall become
exercisable with respect to such Shares in as nearly equal as possible monthly
installments over a 24-month period, so long as Skamser remains employed by the
Company. In the event Skamser ceases to be an employee of the Company, for any
reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Skamser to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company. In
the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
(i) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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)
Page 2
<PAGE>
of the Securities Exchange Act of 1934 ("1934 Act")]. For purposes of this
definition, the term "Unrelated Person" shall mean and include any Person other
than 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.
(ii) 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.
(iii) 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 fifty (50%) 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.
(iv) 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.
(v) 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.
(vi) 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.
(b) Exercise in Full. Subject to Section 3(a), Warrants may be exercised
----------------
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office in Houston, Texas, Attention: John Frazier
Overstoltz, accompanied by payment as determined by 3(d) below, in the amount
obtained by multiplying the number of shares of the Common Stock represented by
the respective Warrant or Warrants by the Exercise Price per share (after giving
effect to any adjustments as provided in Section 5 below).
(c) Partial Exercise. Subject to Section 3(a), the Warrant may be
----------------
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly
Page 3
<PAGE>
executed by the Warrant holder, in the manner and at the place provided in
Section 3(b) above, accompanied by payment as determined by 3(d) below, in
amount obtained by multiplying the number of shares of the Common Stock
designated by the Warrant holder in the form of subscription attached to the
Warrant by the Exercise Price per share (after giving effect to any adjustments
as provided in Section 5 below). Upon any such partial exercise, the Company at
its expense will forthwith issue and deliver to or upon the order of the Warrant
holder a new Warrant of like tenor, in the name of the Warrant holder subject to
Section 2(a), calling in the aggregate for the purchase of the number of shares
of the Common Stock equal to the number of such shares called for on the face of
the respective Warrant (after giving effect to any adjustment herein as provided
in Section 5 below) minus the number of such shares designated by the Warrant
holder in the aforementioned form of subscription.
(d) Payment of Exercise Price. Payment of the Exercise Price may be made
-------------------------
by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer; or
(ii) surrender of the Warrants at the principal office of the Company
together with notice of election, in which event the Company shall issue Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder
(not to exceed the number of shares set forth on the cover page
of this Warrant Agreement, as adjusted pursuant to the provisions
of Section 5 of this Warrant Agreement).
Y = the number of shares of Common Stock for which the Warrant is
being exercised.
A = the Market Price of one share of Common Stock (for purposes
of this Section 2(d), the "Market Price" shall be defined as the
closing price of the Common Stock on the business day immediately
prior to the Date of Exercise of this Warrant (the "Closing Bid
Price"), as reported by Nasdaq, or if the Common Stock is not
traded on Nasdaq, the Closing Bid Price in the over-the-counter
market; provided, however, that if the Common Stock is listed on
a stock exchange, the Market Price shall be the Closing Bid Price
on such exchange; and, provided further, that if the Common Stock
is not quoted or listed by any organization, the fair value of
the Common Stock, as determined by the board of directors of the
Company, whose determination shall be conclusive, shall be used).
B = the Exercise Price of $.38.
Page 4
<PAGE>
4. Delivery of Stock Certificates on Exercise.
------------------------------------------
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Exercise Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of, and
delivered to the purchasing Warrant holder, a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
or Other Securities to which such the Warrant holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant holder
would otherwise be entitled, cash in an amount determined pursuant to Section
6(c). The term "Other Securities" refers to any stock (other than Common
Stock), other securities or assets (including cash) of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
5. Adjustment of Exercise Price and Number of Shares Purchasable.
-------------------------------------------------------------
The Exercise Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Exercise Price,
and the number and kind of Shares receivable upon exercise, in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification shall be proportionately adjusted
so that any Warrants the Warrant holder has exercised after such time shall be
entitled to receive the aggregate number and kind of Shares which, if such
Warrant had been exercised immediately prior to such record date, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this subsection (b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
Page 5
<PAGE>
(c) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Shares (calculated to the nearest thousandth) obtained by (i) multiplying the
number of Shares purchasable upon exercise of a Warrant immediately prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
6. Further Covenants of the Company.
--------------------------------
(a) Title to Stock. All shares of Common Stock delivered upon the exercise
--------------
of the Warrants shall be validly issued, fully paid and nonassessable; the
Warrant holder shall, upon such delivery, receive good and marketable title to
the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(b) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount as
determined by the Board of Directors.
7. Other Warrant holders: Holders of Shares.
----------------------------------------
The Warrants are issued upon the following terms, to all of which the
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the limitations on transfer imposed by Section
2(a) hereof, of a Warrant properly endorsed shall take such Warrant subject to
the provisions of Section 2(a) hereof and thereupon shall be authorized to
represent himself as absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted bona fide purchaser for
value; (b) any person who shall become a holder or owner of Shares shall take
such shares subject to the provisions of Section 2(b) hereof; (c) each prior
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such permitted bona fide purchaser, and each such
permitted bona fide purchaser shall acquire absolute title thereto and to all
rights presented thereby; and (d) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
Page 6
<PAGE>
8. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to the Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 16th day of August, 1999, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
EBASEONE CORPORATION
By: //s// John Frazier Overstoltz
-------------------------------------
John Frazier Overstoltz
Director and Executive Officer
The above Warrant Agreement is confirmed
as of the date set forth above.
//s// Charles Skamser
- --------------------------------------
Charles Skamser
Page 7
<PAGE>
Exhibit 1
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase
4,000,000 Shares of
Common Stock
EBASEONE CORPORATION
Incorporated Under the Laws of Delaware
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of ebaseOne Corporation (the "Corporation")
from the Corporation at the purchase price per share hereafter set forth, on
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased. This
Warrant is subject to the terms of the Warrant Agreement between the parties
thereto dated as of August 16, 1999, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: Charles Skamser Date: August 16, 1999
Exercise Price
Per Share: $.38
Expiration Date: See Section 3 of the Warrant Agreement
WITNESS the signature of the Corporation's authorized officer:
EBASEONE CORPORATION
By //s// John Frazier Overstoltz
------------------------------------
John Frazier Overstoltz
Director and Executive Officer
<PAGE>
EBASEONE CORPORATION
WARRANT AGREEMENT
-----------------
Date: August 16, 1999
Mr. Charles Skamser:
ebaseOne Corporation ("Company"), for value received, hereby agrees to
issue a stock purchase warrant entitling Charles Skamser ("Skamser" or "Warrant
holder") to purchase 2,000,000 shares of the Company's common stock ("Common
Stock"). Such warrant is evidenced by the warrant certificate in the form
attached hereto as Exhibit 1 (the instrument being hereinafter referred to as a
---------
"Warrant,"and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by Skamser as to all or
any lesser number of shares of Common Stock covered thereby, at an Exercise
Price of $1.00 per share, subject to adjustment as provided in Section 5 below,
for the exercise period defined in Section 3(a) below.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to the Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Exercise Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants ("Shares"), and to
perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, the Warrant issued pursuant hereto, has been or will
be duly executed and delivered by the Company and is or will be a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
No authorization, approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such authorization,
execution, delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument,
Page 1
<PAGE>
judgment, decree, order, statute, rule or regulation to which the Company is a
party or by which it is bound.
2. Transfer.
--------
(a) Transferability of Warrants. The Warrant holder agrees that the
---------------------------
Warrants are being acquired as an investment and not with a view to distribution
thereof and that the Warrants may not be transferred, sold, assigned or
hypothecated except as provided herein. The Warrant holder further acknowledges
that the Warrants may not be transferred, sold, assigned or hypothecated unless
pursuant to a registration statement that has become effective under the
Securities Act of 1933, as amended ("Act"), setting forth the terms of such
offering and other pertinent data with respect thereto, or unless the Warrant
holder has provided the Company with an acceptable opinion from acceptable
counsel that such registration is not required. Certificates representing the
Warrants shall bear an appropriate legend.
(b) Registration of Shares. The Warrant holder agrees not to make any
----------------------
sale or other disposition of the Shares except pursuant to a registration
statement which has become effective under the Act, setting forth the terms of
such offering, the underwriting discount and commissions and any other pertinent
data with respect thereto, unless he has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is not
required. Certificates representing the Shares, which are not registered as
provided in Section 2, shall bear an appropriate legend and be subject to a
"stop-transfer"order.
(c) No Registration Rights. The Warrant holder acknowledges that the
----------------------
Company has not granted, and does not intend to grant, the Warrant holder any
registration rights with respect to the Warrants or to the Shares underlying the
Warrants.
3. Exercise of Warrants, Partial Exercise.
--------------------------------------
(a) Exercise Period. The Warrants become exercisable as the underlying
---------------
Shares vest (in the manner set forth below) and expire August 11, 2004. The
Shares underlying the Warrants shall vest, and the Warrants shall become
exercisable with respect to such Shares in as nearly equal as possible monthly
installments over a 24-month period, so long as Skamser remains employed by the
Company. In the event Skamser ceases to be an employee of the Company, for any
reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Skamser to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company. In
the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
(i) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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)
Page 2
<PAGE>
of the Securities Exchange Act of 1934 ("1934 Act")]. For purposes of this
definition, the term "Unrelated Person" shall mean and include any Person other
than 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.
(ii) 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.
(iii) 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 fifty (50%) 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.
(iv) 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.
(v) 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.
(vi) 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.
(b) Exercise in Full. Subject to Section 3(a), Warrants may be exercised
----------------
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office in Houston, Texas, Attention: John Frazier
Overstoltz, accompanied by payment as determined by 3(d) below, in the amount
obtained by multiplying the number of shares of the Common Stock represented by
the respective Warrant or Warrants by the Exercise Price per share (after giving
effect to any adjustments as provided in Section 5 below).
Page 3
<PAGE>
(c) Partial Exercise. Subject to Section 3(a), the Warrant may be
----------------
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by the Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment as determined by 3(d) below, in amount obtained by multiplying the
number of shares of the Common Stock designated by the Warrant holder in the
form of subscription attached to the Warrant by the Exercise Price per share
(after giving effect to any adjustments as provided in Section 5 below). Upon
any such partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the Warrant holder a new Warrant of like tenor,
in the name of the Warrant holder subject to Section 2(a), calling in the
aggregate for the purchase of the number of shares of the Common Stock equal to
the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) Payment of Exercise Price. Payment of the Exercise Price may be made
-------------------------
by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer; or
(ii) surrender of the Warrants at the principal office of the
Company together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder
(not to exceed the number of shares set forth on the cover page
of this Warrant Agreement, as adjusted pursuant to the provisions
of Section 5 of this Warrant Agreement).
Y = the number of shares of Common Stock for which the Warrant is
being exercised.
A = the Market Price of one share of Common Stock (for purposes
of this Section 2(d), the "Market Price" shall be defined as the
closing price of the Common Stock on the business day immediately
prior to the Date of Exercise of this Warrant (the "Closing Bid
Price"), as reported by Nasdaq, or if the Common Stock is not
traded on Nasdaq, the Closing Bid Price in the over-the-counter
market; provided, however, that if the Common Stock is listed on
a stock exchange, the Market Price shall be the Closing Bid Price
on such exchange; and, provided further, that if the Common Stock
is not quoted or listed by any organization, the fair value of
the Common Stock, as determined by the board of directors of the
Company, whose determination shall be conclusive, shall be used).
B = the Exercise Price of $1.00.
Page 4
<PAGE>
4. Delivery of Stock Certificates on Exercise.
------------------------------------------
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Exercise Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of, and
delivered to the purchasing Warrant holder, a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
or Other Securities to which such the Warrant holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant holder
would otherwise be entitled, cash in an amount determined pursuant to Section
6(c). The term "Other Securities" refers to any stock (other than Common
Stock), other securities or assets (including cash) of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
5. Adjustment of Exercise Price and Number of Shares Purchasable.
-------------------------------------------------------------
The Exercise Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Exercise Price,
and the number and kind of Shares receivable upon exercise, in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification shall be proportionately adjusted
so that any Warrants the Warrant holder has exercised after such time shall be
entitled to receive the aggregate number and kind of Shares which, if such
Warrant had been exercised immediately prior to such record date, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this subsection (b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
Page 5
<PAGE>
(c) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Shares (calculated to the nearest thousandth) obtained by (i) multiplying the
number of Shares purchasable upon exercise of a Warrant immediately prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
6. Further Covenants of the Company.
--------------------------------
(a) Title to Stock. All shares of Common Stock delivered upon the exercise
--------------
of the Warrants shall be validly issued, fully paid and nonassessable; the
Warrant holder shall, upon such delivery, receive good and marketable title to
the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(b) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount as
determined by the Board of Directors.
7. Other Warrant Holders: Holders of Shares.
----------------------------------------
The Warrants are issued upon the following terms, to all of which the
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the limitations on transfer imposed by Section
2(a) hereof, of a Warrant properly endorsed shall take such Warrant subject to
the provisions of Section 2(a) hereof and thereupon shall be authorized to
represent himself as absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted bona fide purchaser for
value; (b) any person who shall become a holder or owner of Shares shall take
such shares subject to the provisions of Section 2(b) hereof; (c) each prior
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such permitted bona fide purchaser, and each such
permitted bona fide purchaser shall acquire absolute title thereto and to all
rights presented thereby; and (d) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
Page 6
<PAGE>
8. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to the Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 16th day of August, 1999, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
EBASEONE CORPORATION
By: //s// John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
The above Warrant Agreement is confirmed
as of the date set forth above.
//s// Charles Skamser
- ----------------------------------------
Charles Skamser
Page 7
<PAGE>
Exhibit 1
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase
2,000,000 Shares of
Common Stock
EBASEONE CORPORATION
Incorporated Under the Laws of Delaware
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of ebaseOne Corporation (the "Corporation")
from the Corporation at the purchase price per share hereafter set forth, on
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased. This
Warrant is subject to the terms of the Warrant Agreement between the parties
thereto dated as of August 16, 1999, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: Charles Skamser Date: August 16, 1999
Exercise Price
Per Share: $1.00
Expiration Date: See Section 3 of the Warrant Agreement
WITNESS the signature of the Corporation's authorized officer:
EBASEONE CORPORATION
By //s// John Frazier Overstoltz
--------------------------------
John Frazier Overstoltz
Director and Executive Officer
<PAGE>
EBASEONE CORPORATION
WARRANT AGREEMENT
-----------------
Date: August 16, 1999
Mr. Charles Skamser:
ebaseOne Corporation ("Company"), for value received, hereby agrees to
issue a stock purchase warrant entitling Charles Skamser ("Skamser" or "Warrant
holder") to purchase 1,000,000 shares of the Company's common stock ("Common
Stock"). Such warrant is evidenced by the warrant certificate in the form
attached hereto as Exhibit 1 (the instrument being hereinafter referred to as a
---------
"Warrant," and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The number of shares of Common Stock purchasable
upon exercise of the Warrants is subject to adjustment as provided in Section 5
below. The Warrants will be exercisable by Skamser as to all or any lesser
number of shares of Common Stock covered thereby, at an Exercise Price of $1.50
per share, subject to adjustment as provided in Section 5 below, for the
exercise period defined in Section 3(a) below.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to the Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Exercise Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants ("Shares"), and to
perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, the Warrant issued pursuant hereto, has been or will
be duly executed and delivered by the Company and is or will be a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
No authorization, approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such authorization,
execution, delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument,
Page 1
<PAGE>
judgment, decree, order, statute, rule or regulation to which the Company is a
party or by which it is bound.
2. Transfer.
--------
(a) Transferability of Warrants. The Warrant holder agrees that the
---------------------------
Warrants are being acquired as an investment and not with a view to distribution
thereof and that the Warrants may not be transferred, sold, assigned or
hypothecated except as provided herein. The Warrant holder further acknowledges
that the Warrants may not be transferred, sold, assigned or hypothecated unless
pursuant to a registration statement that has become effective under the
Securities Act of 1933, as amended ("Act"), setting forth the terms of such
offering and other pertinent data with respect thereto, or unless the Warrant
holder has provided the Company with an acceptable opinion from acceptable
counsel that such registration is not required. Certificates representing the
Warrants shall bear an appropriate legend.
(b) Registration of Shares. The Warrant holder agrees not to make any
----------------------
sale or other disposition of the Shares except pursuant to a registration
statement which has become effective under the Act, setting forth the terms of
such offering, the underwriting discount and commissions and any other pertinent
data with respect thereto, unless he has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is not
required. Certificates representing the Shares, which are not registered as
provided in Section 2, shall bear an appropriate legend and be subject to a
"stop-transfer"order.
(c) No Registration Rights. The Warrant holder acknowledges that the
----------------------
Company has not granted, and does not intend to grant, the Warrant holder any
registration rights with respect to the Warrants or to the Shares underlying the
Warrants.
3. Exercise of Warrants, Partial Exercise.
--------------------------------------
(a) Exercise Period. The Shares underlying the Warrants are exercisable
---------------
upon the earlier of the vesting contingencies as set forth below and expire
August 11, 2006. The Shares underlying the Warrants shall vest, and the Warrants
shall become exercisable with respect to such Shares at any time upon the
earlier of the following to occur: (i) the date on which the last sales price of
the Company's common stock as reported by the Nasdaq Stock Market, or if not
reported on the Nasdaq Stock Market, a stock exchange, or the over-the-counter
market, exceeds $5.00 per share for at least 30 consecutive trading days, or
(ii) if the Company obtains net revenues of $12,000,000 for the 12 months ending
December 31, 2000, as determined by the Company's independent auditors, or (iii)
if the Company obtains net revenues of $50,000,000 for the 12 months ending
December 31, 2001, as determined by the Company's independent auditors. In the
event the Company is a reporting company pursuant to the Securities Exchange Act
of 1934, as amended, ("1934 Act") then determination of whether the Company has
met items (ii) or (iii) shall be made upon the filing of the Company's 12 month
financial statements with the Securities and Exchange Commission. If the Company
is not reporting pursuant to the 1934 Act, the determination shall be made
within 45 days of December 31.
Page 2
<PAGE>
In the event Skamser ceases to be an employee of the Company, for any
reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Skamser to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
(i) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 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.
(ii) 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.
(iii) 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 fifty (50%) 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.
(iv) 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.
(v) 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.
Page 3
<PAGE>
(vi) 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.
(b) Exercise in Full. Subject to Section 3(a), Warrants may be exercised
----------------
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office in Houston, Texas, Attention: John Frazier
Overstoltz, accompanied by payment as determined by 3(d) below, in the amount
obtained by multiplying the number of shares of the Common Stock represented by
the respective Warrant or Warrants by the Exercise Price per share (after giving
effect to any adjustments as provided in Section 5 below).
(c) Partial Exercise. Subject to Section 3(a), the Warrant may be
----------------
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by the Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment as determined by 3(d) below, in amount obtained by multiplying the
number of shares of the Common Stock designated by the Warrant holder in the
form of subscription attached to the Warrant by the Exercise Price per share
(after giving effect to any adjustments as provided in Section 5 below). Upon
any such partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the Warrant holder a new Warrant of like tenor,
in the name of the Warrant holder subject to Section 2(a), calling in the
aggregate for the purchase of the number of shares of the Common Stock equal to
the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) Payment of Exercise Price. Payment of the Exercise Price may be made
-------------------------
by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer; or
(ii) surrender of the Warrants at the principal office of the
Company together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder
(not to exceed the number of shares set forth on the cover page
of this Warrant Agreement, as adjusted pursuant to the
provisions of Section 5 of this Warrant Agreement).
Y = the number of shares of Common Stock for which the Warrant
is being exercised.
Page 4
<PAGE>
A = the Market Price of one share of Common Stock (for purposes
of this Section 2(d), the "Market Price" shall be defined as
the closing price of the Common Stock on the business day
immediately prior to the Date of Exercise of this Warrant (the
"Closing Bid Price"), as reported by Nasdaq, or if the Common
Stock is not traded on Nasdaq, the Closing Bid Price in the
over-the-counter market; provided, however, that if the Common
Stock is listed on a stock exchange, the Market Price shall be
the Closing Bid Price on such exchange; and, provided further,
that if the Common Stock is not quoted or listed by any
organization, the fair value of the Common Stock, as determined
by the board of directors of the Company, whose determination
shall be conclusive, shall be used).
B = the Exercise Price of $1.50.
4. Delivery of Stock Certificates on Exercise.
------------------------------------------
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Exercise Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of, and
delivered to the purchasing Warrant holder, a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
or Other Securities to which such the Warrant holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant holder
would otherwise be entitled, cash in an amount determined pursuant to Section
6(c). The term "Other Securities" refers to any stock (other than Common Stock),
other securities or assets (including cash) of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 5 below or otherwise.
5. Adjustment of Exercise Price and Number of Shares Purchasable.
-------------------------------------------------------------
The Exercise Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing
Page 5
<PAGE>
corporation), then in each case the Exercise Price, and the number and kind of
Shares receivable upon exercise, in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination, or
reclassification shall be proportionately adjusted so that any Warrants the
Warrant holder has exercised after such time shall be entitled to receive the
aggregate number and kind of Shares which, if such Warrant had been exercised
immediately prior to such record date, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this subsection (b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(c) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Shares (calculated to the nearest thousandth) obtained by (i) multiplying the
number of Shares purchasable upon exercise of a Warrant immediately prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
6. Further Covenants of the Company.
--------------------------------
(a) Title to Stock. All shares of Common Stock delivered upon the
--------------
exercise of the Warrants shall be validly issued, fully paid and nonassessable;
the Warrant holder shall, upon such delivery, receive good and marketable title
to the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(b) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount as
determined by the Board of Directors.
Page 6
<PAGE>
7. Other Warrant Holders: Holders of Shares.
----------------------------------------
The Warrants are issued upon the following terms, to all of which the
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the limitations on transfer imposed by Section
2(a) hereof, of a Warrant properly endorsed shall take such Warrant subject to
the provisions of Section 2(a) hereof and thereupon shall be authorized to
represent himself as absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted bona fide purchaser for
value; (b) any person who shall become a holder or owner of Shares shall take
such shares subject to the provisions of Section 2(b) hereof; (c) each prior
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such permitted bona fide purchaser, and each such
permitted bona fide purchaser shall acquire absolute title thereto and to all
rights presented thereby; and (d) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
8. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to the Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 16th day of August, 1999, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
EBASEONE CORPORATION
By: /s/ John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
The above Warrant Agreement is confirmed
as of the date set forth above.
/s/ Charles Skamser
- -------------------------------------
Charles Skamser
Page 7
<PAGE>
Exhibit 1
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase
1,000,000 Shares of
Common Stock
EBASEONE CORPORATION
Incorporated Under the Laws of Delaware
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of ebaseOne Corporation (the "Corporation")
from the Corporation at the purchase price per share hereafter set forth, on
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased. This
Warrant is subject to the terms of the Warrant Agreement between the parties
thereto dated as of August 16, 1999, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: Charles Skamser Date: August 16, 1999
Exercise Price
Per Share: $1.50
Expiration Date: See Section 3 of the Warrant Agreement
WITNESS the signature of the Corporation's authorized officer:
EBASEONE CORPORATION
By //s// John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
<PAGE>
EBASEONE CORPORATION
WARRANT AGREEMENT
-----------------
Date: August 16, 1999
Mr. Charles Skamser:
ebaseOne Corporation ("Company"), for value received, hereby agrees to
issue a stock purchase warrant entitling Charles Skamser ("Skamser" or "Warrant
holder") to purchase 1,000,000 shares of the Company's common stock ("Common
Stock"). Such warrant is evidenced by the warrant certificate in the form
attached hereto as Exhibit 1 (the instrument being hereinafter referred to as a
---------
"Warrant,"and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by Skamser as to all or
any lesser number of shares of Common Stock covered thereby, at an Exercise
Price of $2.00 per share, subject to adjustment as provided in Section 5 below,
for the exercise period defined in Section 3(a) below.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to the Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Exercise Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants ("Shares"), and to
perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, the Warrant issued pursuant hereto, has been or will
be duly executed and delivered by the Company and is or will be a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
No authorization, approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such authorization,
execution, delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument,
Page 1
<PAGE>
judgment, decree, order, statute, rule or regulation to which the Company is a
party or by which it is bound.
2. Transfer.
--------
(a) Transferability of Warrants. The Warrant holder agrees that the
---------------------------
Warrants are being acquired as an investment and not with a view to distribution
thereof and that the Warrants may not be transferred, sold, assigned or
hypothecated except as provided herein. The Warrant holder further acknowledges
that the Warrants may not be transferred, sold, assigned or hypothecated unless
pursuant to a registration statement that has become effective under the
Securities Act of 1933, as amended ("Act"), setting forth the terms of such
offering and other pertinent data with respect thereto, or unless the Warrant
holder has provided the Company with an acceptable opinion from acceptable
counsel that such registration is not required. Certificates representing the
Warrants shall bear an appropriate legend.
(b) Registration of Shares. The Warrant holder agrees not to make any
----------------------
sale or other disposition of the Shares except pursuant to a registration
statement which has become effective under the Act, setting forth the terms of
such offering, the underwriting discount and commissions and any other pertinent
data with respect thereto, unless he has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is not
required. Certificates representing the Shares, which are not registered as
provided in Section 2, shall bear an appropriate legend and be subject to a
"stop-transfer"order.
(c) No Registration Rights. The Warrant holder acknowledges that the
----------------------
Company has not granted, and does not intend to grant, the Warrant holder any
registration rights with respect to the Warrants or to the Shares underlying the
Warrants.
3. Exercise of Warrants, Partial Exercise.
--------------------------------------
(a) Exercise Period. The Shares underlying the Warrants are exercisable
---------------
upon the earlier of the vesting contingencies as set forth below and expire
August 11, 2006. The Shares underlying the Warrants shall vest, and the
Warrants shall become exercisable with respect to such Shares at any time upon
the earlier of the following to occur: (i) the date on which the last sales
price of the Company's common stock as reported by the Nasdaq Stock Market, or
if not reported on the Nasdaq Stock Market, a stock exchange, or the over-the-
counter market, exceeds $5.00 per share for at least 30 consecutive trading
days, or (ii) if the Company obtains net revenues of $12,000,000 for the 12
months ending December 31, 2000, as determined by the Company's independent
auditors, or (iii) if the Company obtains net revenues of $50,000,000 for the 12
months ending December 31, 2001, as determined by the Company's independent
auditors. In the event the Company is a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, ("1934 Act") then determination of
whether the Company has met items (ii) or (iii) shall be made upon the filing of
the Company's 12 month financial statements with the Securities and Exchange
Commission. If the Company is not reporting pursuant to the 1934 Act, the
determination shall be made within 45 days of December 31.
Page 2
<PAGE>
In the event Skamser ceases to be an employee of the Company, for any
reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Skamser to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
(i) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 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.
(ii) 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.
(iii) 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 fifty (50%) 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.
(iv) 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.
(v) 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.
Page 3
<PAGE>
(vi) 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.
(b) Exercise in Full. Subject to Section 3(a), Warrants may be exercised
----------------
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office in Houston, Texas, Attention: John Frazier
Overstoltz, accompanied by payment as determined by 3(d) below, in the amount
obtained by multiplying the number of shares of the Common Stock represented by
the respective Warrant or Warrants by the Exercise Price per share (after giving
effect to any adjustments as provided in Section 5 below).
(c) Partial Exercise. Subject to Section 3(a), the Warrant may be
----------------
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by the Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment as determined by 3(d) below, in amount obtained by multiplying the
number of shares of the Common Stock designated by the Warrant holder in the
form of subscription attached to the Warrant by the Exercise Price per share
(after giving effect to any adjustments as provided in Section 5 below). Upon
any such partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the Warrant holder a new Warrant of like tenor,
in the name of the Warrant holder subject to Section 2(a), calling in the
aggregate for the purchase of the number of shares of the Common Stock equal to
the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) Payment of Exercise Price. Payment of the Exercise Price may be made
-------------------------
by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer; or
(ii) surrender of the Warrants at the principal office of the Company
together with notice of election, in which event the Company shall issue Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder
(not to exceed the number of shares set forth on the cover page
of this Warrant Agreement, as adjusted pursuant to the
provisions of Section 5 of this Warrant Agreement).
Y = the number of shares of Common Stock for which the Warrant
is being exercised.
Page 4
<PAGE>
A = the Market Price of one share of Common Stock (for purposes
of this Section 2(d), the "Market Price" shall be defined as the
closing price of the Common Stock on the business day
immediately prior to the Date of Exercise of this Warrant (the
"Closing Bid Price"), as reported by Nasdaq, or if the Common
Stock is not traded on Nasdaq, the Closing Bid Price in the
over-the-counter market; provided, however, that if the Common
Stock is listed on a stock exchange, the Market Price shall be
the Closing Bid Price on such exchange; and, provided further,
that if the Common Stock is not quoted or listed by any
organization, the fair value of the Common Stock, as determined
by the board of directors of the Company, whose determination
shall be conclusive, shall be used).
B = the Exercise Price of $2.00.
4. Delivery of Stock Certificates on Exercise.
------------------------------------------
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Exercise Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of, and
delivered to the purchasing Warrant holder, a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
or Other Securities to which such the Warrant holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant holder
would otherwise be entitled, cash in an amount determined pursuant to Section
6(c). The term "Other Securities" refers to any stock (other than Common
Stock), other securities or assets (including cash) of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
5. Adjustment of Exercise Price and Number of Shares Purchasable.
-------------------------------------------------------------
The Exercise Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Exercise Price,
and the number and kind of Shares receivable upon
Page 5
<PAGE>
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that any Warrants the Warrant holder has exercised
after such time shall be entitled to receive the aggregate number and kind of
Shares which, if such Warrant had been exercised immediately prior to such
record date, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this subsection (b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(c) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Shares (calculated to the nearest thousandth) obtained by (i) multiplying the
number of Shares purchasable upon exercise of a Warrant immediately prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
6. Further Covenants of the Company.
--------------------------------
(a) Title to Stock. All shares of Common Stock delivered upon the
--------------
exercise of the Warrants shall be validly issued, fully paid and nonassessable;
the Warrant holder shall, upon such delivery, receive good and marketable title
to the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(b) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount as
determined by the Board of Directors.
7. Other Warrant Holders: Holders of Shares.
----------------------------------------
The Warrants are issued upon the following terms, to all of which the
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the
Page 6
<PAGE>
limitations on transfer imposed by Section 2(a) hereof, of a Warrant properly
endorsed shall take such Warrant subject to the provisions of Section 2(a)
hereof and thereupon shall be authorized to represent himself as absolute owner
thereof and, subject to the restrictions contained in this Warrant Agreement,
shall be empowered to transfer absolute title by endorsement and delivery
thereof to a permitted bona fide purchaser for value; (b) any person who shall
become a holder or owner of Shares shall take such shares subject to the
provisions of Section 2(b) hereof; (c) each prior taker or owner waives and
renounces all of his equities or rights in such Warrant in favor of each such
permitted bona fide purchaser, and each such permitted bona fide purchaser shall
acquire absolute title thereto and to all rights presented thereby; and (d)
until such time as the respective Warrant is transferred on the books of the
Company, the Company may treat the registered holder thereof as the absolute
owner thereof for all purposes, notwithstanding any notice to the contrary.
8. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to the Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 16th day of August, 1999, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
EBASEONE CORPORATION
By: /s/ John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
The above Warrant Agreement is confirmed
as of the date set forth above.
/s/ Charles Skamser
- --------------------------------
Charles Skamser
Page 7
<PAGE>
Exhibit 1
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase
1,000,000 Shares of
Common Stock
EBASEONE CORPORATION
Incorporated Under the Laws of Delaware
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of ebaseOne Corporation (the "Corporation")
from the Corporation at the purchase price per share hereafter set forth, on
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased. This
Warrant is subject to the terms of the Warrant Agreement between the parties
thereto dated as of August 16, 1999, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: Charles Skamser Date: August 16, 1999
Exercise Price
Per Share: $2.00
Expiration Date: See Section 3 of the Warrant Agreement
WITNESS the signature of the Corporation's authorized officer:
EBASEONE CORPORATION
By /s/ John Frazier Overstoltz
------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
<PAGE>
EBASEONE CORPORATION
WARRANT AGREEMENT
-----------------
Date: August 16, 1999
Mr. Charles Skamser:
ebaseOne Corporation ("Company"), for value received, hereby agrees to
issue a stock purchase warrant entitling Charles Skamser ("Skamser" or "Warrant
holder") to purchase 1,000,000 shares of the Company's common stock ("Common
Stock"). Such warrant is evidenced by the warrant certificate in the form
attached hereto as Exhibit 1 (the instrument being hereinafter referred to as a
---------
"Warrant,"and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by Skamser as to all or
any lesser number of shares of Common Stock covered thereby, at an Exercise
Price of $2.50 per share, subject to adjustment as provided in Section 5 below,
for the exercise period defined in Section 3(a) below.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to the Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Exercise Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants ("Shares"), and to
perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, the Warrant issued pursuant hereto, has been or will
be duly executed and delivered by the Company and is or will be a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
No authorization, approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such authorization,
execution, delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument,
Page 1
<PAGE>
judgment, decree, order, statute, rule or regulation to which the Company is a
party or by which it is bound.
2. Transfer.
--------
(a) Transferability of Warrants. The Warrant holder agrees that the
---------------------------
Warrants are being acquired as an investment and not with a view to distribution
thereof and that the Warrants may not be transferred, sold, assigned or
hypothecated except as provided herein. The Warrant holder further acknowledges
that the Warrants may not be transferred, sold, assigned or hypothecated unless
pursuant to a registration statement that has become effective under the
Securities Act of 1933, as amended ("Act"), setting forth the terms of such
offering and other pertinent data with respect thereto, or unless the Warrant
holder has provided the Company with an acceptable opinion from acceptable
counsel that such registration is not required. Certificates representing the
Warrants shall bear an appropriate legend.
(b) Registration of Shares. The Warrant holder agrees not to make any
----------------------
sale or other disposition of the Shares except pursuant to a registration
statement which has become effective under the Act, setting forth the terms of
such offering, the underwriting discount and commissions and any other pertinent
data with respect thereto, unless he has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is not
required. Certificates representing the Shares, which are not registered as
provided in Section 2, shall bear an appropriate legend and be subject to a
"stop-transfer"order.
(c) No Registration Rights. The Warrant holder acknowledges that the
----------------------
Company has not granted, and does not intend to grant, the Warrant holder any
registration rights with respect to the Warrants or to the Shares underlying the
Warrants.
3. Exercise of Warrants, Partial Exercise.
--------------------------------------
(a) Exercise Period. The Shares underlying the Warrants are exercisable
---------------
upon the earlier of the vesting contingencies as set forth below and expire
August 11, 2006. The Shares underlying the Warrants shall vest, and the
Warrants shall become exercisable with respect to such Shares at any time upon
the earlier of the following to occur: (i) the date on which the last sales
price of the Company's common stock as reported by the Nasdaq Stock Market, or
if not reported on the Nasdaq Stock Market, a stock exchange, or the over-the-
counter market, exceeds $5.00 per share for at least 30 consecutive trading
days, or (ii) if the Company obtains net revenues of $12,000,000 for the 12
months ending December 31, 2000, as determined by the Company's independent
auditors, or (iii) if the Company obtains net revenues of $50,000,000 for the 12
months ending December 31, 2001, as determined by the Company's independent
auditors. In the event the Company is a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, ("1934 Act") then determination of
whether the Company has met items (ii) or (iii) shall be made upon the filing of
the Company's 12 month financial statements with the Securities and Exchange
Commission. If the Company is not reporting pursuant to the 1934 Act, the
determination shall be made within 45 days of December 31.
Page 2
<PAGE>
In the event Skamser ceases to be an employee of the Company, for any
reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Skamser to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
(i) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 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.
(ii) 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.
(iii) 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 fifty (50%) 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.
(iv) 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.
(v) 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.
Page 3
<PAGE>
(vi) 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.
(b) Exercise in Full. Subject to Section 3(a), Warrants may be exercised
----------------
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office in Houston, Texas, Attention: John Frazier
Overstoltz, accompanied by payment as determined by 3(d) below, in the amount
obtained by multiplying the number of shares of the Common Stock represented by
the respective Warrant or Warrants by the Exercise Price per share (after giving
effect to any adjustments as provided in Section 5 below).
(c) Partial Exercise. Subject to Section 3(a), the Warrant may be
----------------
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by the Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment as determined by 3(d) below, in amount obtained by multiplying the
number of shares of the Common Stock designated by the Warrant holder in the
form of subscription attached to the Warrant by the Exercise Price per share
(after giving effect to any adjustments as provided in Section 5 below). Upon
any such partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the Warrant holder a new Warrant of like tenor,
in the name of the Warrant holder subject to Section 2(a), calling in the
aggregate for the purchase of the number of shares of the Common Stock equal to
the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) Payment of Exercise Price. Payment of the Exercise Price may be made
-------------------------
by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer; or
(ii) surrender of the Warrants at the principal office of the Company
together with notice of election, in which event the Company shall issue Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder
(not to exceed the number of shares set forth on the cover page
of this Warrant Agreement, as adjusted pursuant to the
provisions of Section 5 of this Warrant Agreement).
Y = the number of shares of Common Stock for which the Warrant
is being exercised.
Page 4
<PAGE>
A = the Market Price of one share of Common Stock (for purposes
of this Section 2(d), the "Market Price" shall be defined as the
closing price of the Common Stock on the business day
immediately prior to the Date of Exercise of this Warrant (the
"Closing Bid Price"), as reported by Nasdaq, or if the Common
Stock is not traded on Nasdaq, the Closing Bid Price in the
over-the-counter market; provided, however, that if the Common
Stock is listed on a stock exchange, the Market Price shall be
the Closing Bid Price on such exchange; and, provided further,
that if the Common Stock is not quoted or listed by any
organization, the fair value of the Common Stock, as determined
by the board of directors of the Company, whose determination
shall be conclusive, shall be used).
B = the Exercise Price of $2.50.
4. Delivery of Stock Certificates on Exercise.
------------------------------------------
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Exercise Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of, and
delivered to the purchasing Warrant holder, a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
or Other Securities to which such the Warrant holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant holder
would otherwise be entitled, cash in an amount determined pursuant to Section
6(c). The term "Other Securities" refers to any stock (other than Common
Stock), other securities or assets (including cash) of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
5. Adjustment of Exercise Price and Number of Shares Purchasable.
-------------------------------------------------------------
The Exercise Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Exercise Price,
and the number and kind of Shares receivable upon
Page 5
<PAGE>
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that any Warrants the Warrant holder has exercised
after such time shall be entitled to receive the aggregate number and kind of
Shares which, if such Warrant had been exercised immediately prior to such
record date, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this subsection (b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(c) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Shares (calculated to the nearest thousandth) obtained by (i) multiplying the
number of Shares purchasable upon exercise of a Warrant immediately prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
6. Further Covenants of the Company.
--------------------------------
(a) Title to Stock. All shares of Common Stock delivered upon the
--------------
exercise of the Warrants shall be validly issued, fully paid and nonassessable;
the Warrant holder shall, upon such delivery, receive good and marketable title
to the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(b) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount as
determined by the Board of Directors.
7. Other Warrant Holders: Holders of Shares.
----------------------------------------
The Warrants are issued upon the following terms, to all of which the
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the
Page 6
<PAGE>
limitations on transfer imposed by Section 2(a) hereof, of a Warrant properly
endorsed shall take such Warrant subject to the provisions of Section 2(a)
hereof and thereupon shall be authorized to represent himself as absolute owner
thereof and, subject to the restrictions contained in this Warrant Agreement,
shall be empowered to transfer absolute title by endorsement and delivery
thereof to a permitted bona fide purchaser for value; (b) any person who shall
become a holder or owner of Shares shall take such shares subject to the
provisions of Section 2(b) hereof; (c) each prior taker or owner waives and
renounces all of his equities or rights in such Warrant in favor of each such
permitted bona fide purchaser, and each such permitted bona fide purchaser shall
acquire absolute title thereto and to all rights presented thereby; and (d)
until such time as the respective Warrant is transferred on the books of the
Company, the Company may treat the registered holder thereof as the absolute
owner thereof for all purposes, notwithstanding any notice to the contrary.
8. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to the Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 16th day of August, 1999, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
EBASEONE CORPORATION
By: /s/ John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
The above Warrant Agreement is confirmed
as of the date set forth above.
/s/ Charles Skamser
- -----------------------------------
Charles Skamser
Page 7
<PAGE>
Exhibit 1
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase
1,000,000 Shares of
Common Stock
EBASEONE CORPORATION
Incorporated Under the Laws of Delaware
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of ebaseOne Corporation (the "Corporation")
from the Corporation at the purchase price per share hereafter set forth, on
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased. This
Warrant is subject to the terms of the Warrant Agreement between the parties
thereto dated as of August 16, 1999, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: Charles Skamser Date: August 16, 1999
Exercise Price
Per Share: $2.50
Expiration Date: See Section 3 of the Warrant Agreement
WITNESS the signature of the Corporation's authorized officer:
EBASEONE CORPORATION
By /s/ John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
<PAGE>
EBASEONE CORPORATION
WARRANT AGREEMENT
-----------------
Date: August 16, 1999
Mr. Charles Skamser:
ebaseOne Corporation ("Company"), for value received, hereby agrees to
issue a stock purchase warrant entitling Charles Skamser ("Skamser" or "Warrant
holder") to purchase 1,000,000 shares of the Company's common stock ("Common
Stock"). Such warrant is evidenced by the warrant certificate in the form
attached hereto as Exhibit 1 (the instrument being hereinafter referred to as a
---------
"Warrant,"and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by Skamser as to all or
any lesser number of shares of Common Stock covered thereby, at an Exercise
Price of $3.00 per share, subject to adjustment as provided in Section 5 below,
for the exercise period defined in Section 3(a) below.
1. Representations and Warranties.
------------------------------
The Company represents and warrants to the Warrant holder as follows:
(a) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Exercise Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants ("Shares"), and to
perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, the Warrant issued pursuant hereto, has been or will
be duly executed and delivered by the Company and is or will be a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
No authorization, approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such authorization,
execution, delivery, performance, issue or sale.
(b) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Certificate of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument,
Page 1
<PAGE>
judgment, decree, order, statute, rule or regulation to which the Company is a
party or by which it is bound.
2. Transfer.
--------
(a) Transferability of Warrants. The Warrant holder agrees that the
---------------------------
Warrants are being acquired as an investment and not with a view to distribution
thereof and that the Warrants may not be transferred, sold, assigned or
hypothecated except as provided herein. The Warrant holder further acknowledges
that the Warrants may not be transferred, sold, assigned or hypothecated unless
pursuant to a registration statement that has become effective under the
Securities Act of 1933, as amended ("Act"), setting forth the terms of such
offering and other pertinent data with respect thereto, or unless the Warrant
holder has provided the Company with an acceptable opinion from acceptable
counsel that such registration is not required. Certificates representing the
Warrants shall bear an appropriate legend.
(b) Registration of Shares. The Warrant holder agrees not to make any
----------------------
sale or other disposition of the Shares except pursuant to a registration
statement which has become effective under the Act, setting forth the terms of
such offering, the underwriting discount and commissions and any other pertinent
data with respect thereto, unless he has provided the Company with an acceptable
opinion of counsel acceptable to the Company that such registration is not
required. Certificates representing the Shares, which are not registered as
provided in Section 2, shall bear an appropriate legend and be subject to a
"stop-transfer"order.
(c) No Registration Rights. The Warrant holder acknowledges that the
----------------------
Company has not granted, and does not intend to grant, the Warrant holder any
registration rights with respect to the Warrants or to the Shares underlying the
Warrants.
3. Exercise of Warrants, Partial Exercise.
--------------------------------------
(a) Exercise Period. The Shares underlying the Warrants are exercisable
---------------
upon the earlier of the vesting contingencies as set forth below and expire
August 11, 2006. The Shares underlying the Warrants shall vest, and the
Warrants shall become exercisable with respect to such Shares at any time upon
the earlier of the following to occur: (i) the date on which the last sales
price of the Company's common stock as reported by the Nasdaq Stock Market, or
if not reported on the Nasdaq Stock Market, a stock exchange, or the over-the-
counter market, exceeds $5.00 per share for at least 30 consecutive trading
days, or (ii) if the Company obtains net revenues of $12,000,000 for the 12
months ending December 31, 2000, as determined by the Company's independent
auditors, or (iii) if the Company obtains net revenues of $50,000,000 for the 12
months ending December 31, 2001, as determined by the Company's independent
auditors. In the event the Company is a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, ("1934 Act") then determination of
whether the Company has met items (ii) or (iii) shall be made upon the filing of
the Company's 12 month financial statements with the Securities and Exchange
Commission. If the Company is not reporting pursuant to the 1934 Act, the
determination shall be made within 45 days of December 31.
Page 2
<PAGE>
In the event Skamser ceases to be an employee of the Company, for any
reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Skamser to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
(i) A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 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.
(ii) 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.
(iii) 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 fifty (50%) 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.
(iv) 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.
(v) 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.
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(vi) 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.
(b) Exercise in Full. Subject to Section 3(a), Warrants may be exercised
----------------
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office in Houston, Texas, Attention: John Frazier
Overstoltz, accompanied by payment as determined by 3(d) below, in the amount
obtained by multiplying the number of shares of the Common Stock represented by
the respective Warrant or Warrants by the Exercise Price per share (after giving
effect to any adjustments as provided in Section 5 below).
(c) Partial Exercise. Subject to Section 3(a), the Warrant may be
----------------
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by the Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment as determined by 3(d) below, in amount obtained by multiplying the
number of shares of the Common Stock designated by the Warrant holder in the
form of subscription attached to the Warrant by the Exercise Price per share
(after giving effect to any adjustments as provided in Section 5 below). Upon
any such partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the Warrant holder a new Warrant of like tenor,
in the name of the Warrant holder subject to Section 2(a), calling in the
aggregate for the purchase of the number of shares of the Common Stock equal to
the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) Payment of Exercise Price. Payment of the Exercise Price may be made
-------------------------
by any of the following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashier's check or wire transfer; or
(ii) surrender of the Warrants at the principal office of the Company
together with notice of election, in which event the Company shall issue Holder
a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to
Holder (not to exceed the number of shares set forth on the
cover page of this Warrant Agreement, as adjusted pursuant
to the provisions of Section 5 of this Warrant Agreement).
Y = the number of shares of Common Stock for which the
Warrant is being exercised.
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A = the Market Price of one share of Common Stock (for
purposes of this Section 2(d), the "Market Price" shall be
defined as the closing price of the Common Stock on the
business day immediately prior to the Date of Exercise of
this Warrant (the "Closing Bid Price"), as reported by
Nasdaq, or if the Common Stock is not traded on Nasdaq, the
Closing Bid Price in the over-the-counter market; provided,
however, that if the Common Stock is listed on a stock
exchange, the Market Price shall be the Closing Bid Price on
such exchange; and, provided further, that if the Common
Stock is not quoted or listed by any organization, the fair
value of the Common Stock, as determined by the board of
directors of the Company, whose determination shall be
conclusive, shall be used).
B = the Exercise Price of $3.00.
4. Delivery of Stock Certificates on Exercise.
------------------------------------------
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Exercise Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of, and
delivered to the purchasing Warrant holder, a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
or Other Securities to which such the Warrant holder shall be entitled upon such
exercise, plus in lieu of any fractional share to which such Warrant holder
would otherwise be entitled, cash in an amount determined pursuant to Section
6(e). The term "Other Securities" refers to any stock (other than Common
Stock), other securities or assets (including cash) of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
5. Adjustment of Exercise Price and Number of Shares Purchasable.
-------------------------------------------------------------
The Exercise Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Exercise Price,
and the number and kind of Shares receivable upon
Page 5
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exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that any Warrants the Warrant holder has exercised
after such time shall be entitled to receive the aggregate number and kind of
Shares which, if such Warrant had been exercised immediately prior to such
record date, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this subsection (b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(c) Upon each adjustment of the Exercise Price as a result of the
calculations made in subsection (a) of this Section 5, the Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Shares (calculated to the nearest thousandth) obtained by (i) multiplying the
number of Shares purchasable upon exercise of a Warrant immediately prior to
adjustment of the number of Shares by the Exercise Price in effect prior to
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
6. Further Covenants of the Company.
--------------------------------
(a) Title to Stock. All shares of Common Stock delivered upon the
--------------
exercise of the Warrants shall be validly issued, fully paid and nonassessable;
the Warrant holder shall, upon such delivery, receive good and marketable title
to the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(b) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Fractional Shares. No fractional Shares are to be issued upon the
-----------------
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount as
determined by the Board of Directors.
7. Other Warrant Holders: Holders of Shares.
----------------------------------------
The Warrants are issued upon the following terms, to all of which the
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the
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<PAGE>
limitations on transfer imposed by Section 2(a) hereof, of a Warrant properly
endorsed shall take such Warrant subject to the provisions of Section 2(a)
hereof and thereupon shall be authorized to represent himself as absolute owner
thereof and, subject to the restrictions contained in this Warrant Agreement,
shall be empowered to transfer absolute title by endorsement and delivery
thereof to a permitted bona fide purchaser for value; (b) any person who shall
become a holder or owner of Shares shall take such shares subject to the
provisions of Section 2(b) hereof; (c) each prior taker or owner waives and
renounces all of his equities or rights in such Warrant in favor of each such
permitted bona fide purchaser, and each such permitted bona fide purchaser shall
acquire absolute title thereto and to all rights presented thereby; and (d)
until such time as the respective Warrant is transferred on the books of the
Company, the Company may treat the registered holder thereof as the absolute
owner thereof for all purposes, notwithstanding any notice to the contrary.
8. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to the Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 16th day of August, 1999, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
EBASEONE CORPORATION
By: /s/ John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
The above Warrant Agreement is confirmed
as of the date set forth above.
/s/ Charles Skamser
- -------------------------------------
Charles Skamser
Page 7
<PAGE>
Exhibit 1
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
Warrant No. ____ To Purchase
1,000,000 Shares of
Common Stock
EBASEONE CORPORATION
Incorporated Under the Laws of Delaware
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of ebaseOne Corporation (the "Corporation")
from the Corporation at the purchase price per share hereafter set forth, on
delivery of this Warrant to the Corporation with the exercise form duly executed
and payment of the purchase price (in cash or by certified or bank cashier's
check payable to the order of the Corporation) for each share purchased. This
Warrant is subject to the terms of the Warrant Agreement between the parties
thereto dated as of August 16, 1999, the terms of which are hereby incorporated
herein. Reference is hereby made to such Warrant Agreement for a further
statement of the rights of the holder of this Warrant.
Registered Owner: Charles Skamser Date: August 16, 1999
Exercise Price
Per Share: $3.00
Expiration Date: See Section 3 of the Warrant Agreement
WITNESS the signature of the Corporation's authorized officer:
EBASEONE CORPORATION
By /s/ John Frazier Overstoltz
-------------------------------------------
John Frazier Overstoltz
Director and Executive Officer
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 18th 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 to
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<PAGE>
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.
(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;
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<PAGE>
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. 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 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, subject to
conditions in paragraph 8.
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<PAGE>
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.
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.
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<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.
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<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:
Michael A. Sooley
107 S. Meadowmist Circle
The Woodlands, Texas 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
----------------------------------
Director and Chief Executive Officer
EXECUTIVE
By: //S//Michael A. Sooley
----------------------------------
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Michael A. Sooley, his registered successors and permitted assigns
registered on the books of the Company maintained for such purposes, as the
registered holder hereof ("Holder"), for value received in consideration for
services rendered to the Company, the receipt of which is acknowledged, is
entitled to purchase from the Company the number of fully paid and non-
assessable shares of Common Stock of the Company, $.001 par value ("Shares" or
"Common Stock"), stated above at the purchase price per Share set forth in
Section 1(b) below ("Exercise Price") (the number of Shares and Exercise Price
being subject to adjustment as hereinafter provided) upon the terms and
conditions herein provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation
and surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $2.37 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
or (v) by any combination of the foregoing.
<PAGE>
(d) The Shares underlying the Warrants shall vest, and the Warrants shall
become exercisable with respect to such Shares in as nearly equal as possible
monthly installments over a 24-month period, so long as Holder remains employed
by the Company. In the event Holder ceases to be an employee of the Company, for
any reason, all unvested Shares underlying the Warrants shall immediately be
canceled, and the Warrants will entitle Holder to purchase only those Shares
that have vested prior to the date he ceased to be employed by the Company. In
the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities
Exchange Act of 1934 ("1934 Act")]. For purposes of this definition, the
term "Unrelated Person" shall mean and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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.
4. 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.
3
<PAGE>
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the Company maintained for such purposes as the
absolute, true and lawful owner for all purposes whatsoever, notwithstanding any
notation of ownership or other writing thereon, and the Company shall not be
affected by any notice to the contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action
4
<PAGE>
affecting stockholders (except for notices provided for herein), receive
dividends, subscription rights, or otherwise, until this Warrant shall have been
exercised and the Shares purchasable upon the exercise thereof shall have become
deliverable as provided herein; provided, however, that any such exercise on any
-----------------
date when the stock transfer books of the Company shall be closed shall
constitute the person or persons in whose name or names the certificate or
certificates for those Shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open, and the Warrant surrendered shall
not be deemed to have been exercised, in whole or in part as the case may be,
until the next succeeding day on which stock transfer books are open for the
purpose of determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not been
registered under either the Securities Act of 1933 ("Act") or the
securities laws of any state ("State Acts"). Such securities shall
not be sold, pledged, hypothecated, or otherwise transferred (whether
or not for consideration) at any time whatsoever except upon
registration or upon delivery to the Company of an opinion of its
counsel satisfactory to the Company or its counsel that
5
<PAGE>
registration is not required for such transfer or the submission of
such other evidence as may be satisfactory to the Company or its
counsel to the effect that any such transfer shall not be in violation
of the Act, State Acts or any rule or regulation promulgated
thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split,
stock dividend, subdivision, or other similar distribution of shares
of Common Stock, the exercise price in effect, immediately prior to
the effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
6
<PAGE>
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: //s// Charles Skamser
--------------------------------------
Charles Skamser, President
Dated: November, ____ 1999
HOLDER:
------
By: //s// Michael A. Sooley
--------------------------------------
Michael A. Sooley
Dated: November 22, 1999
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Michael A. Sooley, his registered successors and permitted assigns
registered on the books of the Company maintained for such purposes, as the
registered holder hereof ("Holder"), for value received in consideration for
services rendered to the Company, the receipt of which is acknowledged, is
entitled to purchase from the Company the number of fully paid and non-
assessable shares of Common Stock of the Company, $.001 par value ("Shares" or
"Common Stock"), stated above at the purchase price per Share set forth in
Section 1(b) below ("Exercise Price") (the number of Shares and Exercise Price
being subject to adjustment as hereinafter provided) upon the terms and
conditions herein provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation
and surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $2.50 per share and become
exercisable as the underlying Shares vest (in the manner as set forth in (d)
below). The Warrant shall expire upon the close of business November 22, 2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading day
is not available, the closing bid price shall be used) for the five
trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
or (v) by any combination of the foregoing.
2
<PAGE>
(d) The Shares underlying the Warrants are exercisable upon the earlier of
the vesting contingencies as set forth below. The Shares underlying the Warrants
shall vest, and the Warrants shall become exercisable with respect to such
Shares at any time upon the earlier of the following to occur: (i) the date on
which the last sales price of the Company's common stock as reported by the
Nasdaq Stock Market, or if not reported on the Nasdaq Stock Market, a stock
exchange, or the over-the-counter market, exceeds $10.00 per share for at least
30 consecutive trading days commencing on July 1, 2000, or (ii) if the Company
obtains net revenues of $12,000,000 for the 12 months ending December 31, 2000,
as determined by the Company's independent auditors, or (iii) if the Company
obtains net revenues of $50,000,000 for the 12 months ending December 31, 2001,
as determined by the Company's independent auditors. In the event the Company is
a reporting company pursuant to the Securities Exchange Act of 1934, as amended,
("1934 Act") then determination of whether the Company has met items (ii) or
(iii) shall be made upon the filing of the Company's 12 month financial
statements with the Securities and Exchange Commission. If the Company is not
reporting pursuant to the 1934 Act, the determination shall be made within 45
days of December 31.
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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
3
<PAGE>
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.
4. 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.
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the
4
<PAGE>
Company maintained for such purposes as the absolute, true and lawful owner for
all purposes whatsoever, notwithstanding any notation of ownership or other
writing thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action affecting stockholders
(except for notices provided for herein), receive dividends, subscription
rights, or otherwise, until this Warrant shall have been exercised and the
Shares purchasable upon the exercise thereof shall have become deliverable as
provided herein; provided, however, that any such exercise on any date when the
-----------------
stock transfer books of the Company shall be closed shall constitute the person
or persons in whose name or names the certificate or certificates for those
Shares are to be issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which such stock
transfer books are open, and the Warrant surrendered shall not be deemed to have
been exercised, in whole or in part as the case may be, until the next
succeeding day on which stock transfer books are open for the purpose of
determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
5
<PAGE>
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not been
registered under either the Securities Act of 1933 ("Act") or the
securities laws of any state ("State Acts"). Such securities shall not
be sold, pledged, hypothecated, or otherwise transferred (whether or
not for consideration) at any time whatsoever except upon registration
or upon delivery to the Company of an opinion of its counsel
satisfactory to the Company or its counsel that registration is not
required for such transfer or the submission of such other evidence as
may be satisfactory to the Company or its counsel to the effect that
any such transfer shall not be in violation of the Act, State Acts or
any rule or regulation promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split,
stock dividend, subdivision, or other similar distribution of shares
of Common Stock, the exercise price in effect, immediately prior to
the effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
6
<PAGE>
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: /s/ Charles Skamser
--------------------------------------
Charles Skamser, President
Dated: November, ____ 1999
HOLDER:
------
By: /s/ Michael A. Sooley
--------------------------------------
Michael A. Sooley
Dated: November 22, 1999
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Michael A. Sooley, his registered successors and permitted assigns
registered on the books of the Company maintained for such purposes, as the
registered holder hereof ("Holder"), for value received in consideration for
services rendered to the Company, the receipt of which is acknowledged, is
entitled to purchase from the Company the number of fully paid and non-
assessable shares of Common Stock of the Company, $.001 par value ("Shares" or
"Common Stock"), stated above at the purchase price per Share set forth in
Section 1(b) below ("Exercise Price") (the number of Shares and Exercise Price
being subject to adjustment as hereinafter provided) upon the terms and
conditions herein provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $2.75 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
<PAGE>
or (v) by any combination of the foregoing.
(d) The Shares underlying the Warrants are exercisable upon the
earlier of the vesting contingencies as set forth below. The Shares underlying
the Warrants shall vest, and the Warrants shall become exercisable with respect
to such Shares at any time upon the earlier of the following to occur: (i) the
date on which the last sales price of the Company's common stock as reported by
the Nasdaq Stock Market, or if not reported on the Nasdaq Stock Market, a stock
exchange, or the over-the-counter market, exceeds $10.00 per share for at least
30 consecutive trading days commencing on July 1, 2000, or (ii) if the Company
obtains net revenues of $12,000,000 for the 12 months ending December 31, 2000,
as determined by the Company's independent auditors, or (iii) if the Company
obtains net revenues of $50,000,000 for the 12 months ending December 31, 2001,
as determined by the Company's independent auditors. In the event the Company is
a reporting company pursuant to the Securities Exchange Act of 1934, as amended,
("1934 Act") then determination of whether the Company has met items (ii) or
(iii) shall be made upon the filing of the Company's 12 month financial
statements with the Securities and Exchange Commission. If the Company is not
reporting pursuant to the 1934 Act, the determination shall be made within 45
days of December 31.
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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
3
<PAGE>
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.
4. 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.
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the
4
<PAGE>
Company maintained for such purposes as the absolute, true and lawful owner for
all purposes whatsoever, notwithstanding any notation of ownership or other
writing thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action affecting stockholders
(except for notices provided for herein), receive dividends, subscription
rights, or otherwise, until this Warrant shall have been exercised and the
Shares purchasable upon the exercise thereof shall have become deliverable as
provided herein; provided, however, that any such exercise on any date when the
-----------------
stock transfer books of the Company shall be closed shall constitute the person
or persons in whose name or names the certificate or certificates for those
Shares are to be issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which such stock
transfer books are open, and the Warrant surrendered shall not be deemed to have
been exercised, in whole or in part as the case may be, until the next
succeeding day on which stock transfer books are open for the purpose of
determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
5
<PAGE>
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not been
registered under either the Securities Act of 1933 ("Act") or the
securities laws of any state ("State Acts"). Such securities shall
not be sold, pledged, hypothecated, or otherwise transferred (whether
or not for consideration) at any time whatsoever except upon
registration or upon delivery to the Company of an opinion of its
counsel satisfactory to the Company or its counsel that registration
is not required for such transfer or the submission of such other
evidence as may be satisfactory to the Company or its counsel to the
effect that any such transfer shall not be in violation of the Act,
State Acts or any rule or regulation promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of
Common Stock, the exercise price in effect, immediately prior to the
effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
6
<PAGE>
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: /s/ Charles Skamser
------------------------------------
Charles Skamser, President
Dated: November, ____ 1999
HOLDER:
------
By: /s/ Michael A. Sooley
-----------------------------------
Michael A. Sooley
Dated: November 22, 1999
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Michael A. Sooley, his registered successors and permitted assigns
registered on the books of the Company maintained for such purposes, as the
registered holder hereof ("Holder"), for value received in consideration for
services rendered to the Company, the receipt of which is acknowledged, is
entitled to purchase from the Company the number of fully paid and non-
assessable shares of Common Stock of the Company, $.001 par value ("Shares" or
"Common Stock"), stated above at the purchase price per Share set forth in
Section 1(b) below ("Exercise Price") (the number of Shares and Exercise Price
being subject to adjustment as hereinafter provided) upon the terms and
conditions herein provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $3.00 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
<PAGE>
or (v) by any combination of the foregoing.
(d) The Shares underlying the Warrants are exercisable upon the earlier of
the vesting contingencies as set forth below. The Shares underlying the Warrants
shall vest, and the Warrants shall become exercisable with respect to such
Shares at any time upon the earlier of the following to occur: (i) the date on
which the last sales price of the Company's common stock as reported by the
Nasdaq Stock Market, or if not reported on the Nasdaq Stock Market, a stock
exchange, or the over-the-counter market, exceeds $10.00 per share for at least
30 consecutive trading days commencing on July 1, 2000, or (ii) if the Company
obtains net revenues of $12,000,000 for the 12 months ending December 31, 2000,
as determined by the Company's independent auditors, or (iii) if the Company
obtains net revenues of $50,000,000 for the 12 months ending December 31, 2001,
as determined by the Company's independent auditors. In the event the Company is
a reporting company pursuant to the Securities Exchange Act of 1934, as amended,
("1934 Act") then determination of whether the Company has met items (ii) or
(iii) shall be made upon the filing of the Company's 12 month financial
statements with the Securities and Exchange Commission. If the Company is not
reporting pursuant to the 1934 Act, the determination shall be made within 45
days of December 31.
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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
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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.
4. 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.
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the
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<PAGE>
Company maintained for such purposes as the absolute, true and lawful owner for
all purposes whatsoever, notwithstanding any notation of ownership or other
writing thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action affecting stockholders
(except for notices provided for herein), receive dividends, subscription
rights, or otherwise, until this Warrant shall have been exercised and the
Shares purchasable upon the exercise thereof shall have become deliverable as
provided herein; provided, however, that any such exercise on any date when the
-----------------
stock transfer books of the Company shall be closed shall constitute the person
or persons in whose name or names the certificate or certificates for those
Shares are to be issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which such stock
transfer books are open, and the Warrant surrendered shall not be deemed to have
been exercised, in whole or in part as the case may be, until the next
succeeding day on which stock transfer books are open for the purpose of
determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
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<PAGE>
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not been
registered under either the Securities Act of 1933 ("Act") or the
securities laws of any state ("State Acts"). Such securities shall
not be sold, pledged, hypothecated, or otherwise transferred (whether
or not for consideration) at any time whatsoever except upon
registration or upon delivery to the Company of an opinion of its
counsel satisfactory to the Company or its counsel that registration
is not required for such transfer or the submission of such other
evidence as may be satisfactory to the Company or its counsel to the
effect that any such transfer shall not be in violation of the Act,
State Acts or any rule or regulation promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of
Common Stock, the exercise price in effect, immediately prior to the
effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
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<PAGE>
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: /s/ Charles Skamser
----------------------------------
Charles Skamser, President
Dated: November, ____ 1999
HOLDER:
------
By: /s/ Michael A. Sooley
---------------------------------
Michael A. Sooley
Dated: November 22, 1999
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<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 18th 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 to
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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
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
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<PAGE>
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 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
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.
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<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.
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<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, Texas 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>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 187,500 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Scott Feuless, his registered successors and permitted assigns registered
on the books of the Company maintained for such purposes, as the registered
holder hereof ("Holder"), for value received in consideration for services
rendered to the Company, the receipt of which is acknowledged, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, $.001 par value ("Shares" or "Common Stock"),
stated above at the purchase price per Share set forth in Section 1(b) below
("Exercise Price") (the number of Shares and Exercise Price being subject to
adjustment as hereinafter provided) upon the terms and conditions herein
provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $2.37 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
or (v) by any combination of the foregoing.
<PAGE>
(d) The Shares underlying the Warrants shall vest, and the Warrants
shall become exercisable with respect to such Shares in as nearly equal as
possible monthly installments over a 24-month period, so long as Holder remains
employed by the Company. In the event Holder ceases to be an employee of the
Company, for any reason, all unvested Shares underlying the Warrants shall
immediately be canceled, and the Warrants will entitle Holder to purchase only
those Shares that have vested prior to the date he ceased to be employed by the
Company. In the event of a "change of control" as defined below, all of the
Shares underlying the Warrants shall vest and become immediately exercisable. A
change of control shall mean and include the following transactions or
situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities
Exchange Act of 1934 ("1934 Act")]. For purposes of this definition, the
term "Unrelated Person" shall mean and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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.
4. 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.
3
<PAGE>
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the Company maintained for such purposes as the
absolute, true and lawful owner for all purposes whatsoever, notwithstanding any
notation of ownership or other writing thereon, and the Company shall not be
affected by any notice to the contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action
4
<PAGE>
affecting stockholders (except for notices provided for herein), receive
dividends, subscription rights, or otherwise, until this Warrant shall have been
exercised and the Shares purchasable upon the exercise thereof shall have become
deliverable as provided herein; provided, however, that any such exercise on any
-----------------
date when the stock transfer books of the Company shall be closed shall
constitute the person or persons in whose name or names the certificate or
certificates for those Shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open, and the Warrant surrendered shall
not be deemed to have been exercised, in whole or in part as the case may be,
until the next succeeding day on which stock transfer books are open for the
purpose of determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not
been registered under either the Securities Act of 1933
("Act") or the securities laws of any state ("State Acts").
Such securities shall not be sold, pledged, hypothecated, or
otherwise transferred (whether or not for consideration) at
any time whatsoever except upon registration or upon
delivery to the Company of an opinion of its counsel
satisfactory to the Company or its counsel that
5
<PAGE>
registration is not required for such transfer or the
submission of such other evidence as may be satisfactory to
the Company or its counsel to the effect that any such
transfer shall not be in violation of the Act, State Acts or
any rule or regulation promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of
Common Stock, the exercise price in effect, immediately prior to the
effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
6
<PAGE>
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: /s/ Charles Skamser
-------------------------------
Charles Skamser, President
Dated: November 22, 1999
HOLDER:
------
By: /s/ Scott Feuless
-------------------------------
Scott Feuless
Dated: November 22, 1999
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 187,500 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Scott Feuless, his registered successors and permitted assigns registered
on the books of the Company maintained for such purposes, as the registered
holder hereof ("Holder"), for value received in consideration for services
rendered to the Company, the receipt of which is acknowledged, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, $.001 par value ("Shares" or "Common Stock"),
stated above at the purchase price per Share set forth in Section 1(b) below
("Exercise Price") (the number of Shares and Exercise Price being subject to
adjustment as hereinafter provided) upon the terms and conditions herein
provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $2.50 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
or (v) by any combination of the foregoing.
2
<PAGE>
(d) The Shares underlying the Warrants are exercisable upon the
earlier of the vesting contingencies as set forth below. The Shares underlying
the Warrants shall vest, and the Warrants shall become exercisable with respect
to such Shares at any time upon the earlier of the following to occur: (i) the
date on which the last sales price of the Company's common stock as reported by
the Nasdaq Stock Market, or if not reported on the Nasdaq Stock Market, a stock
exchange, or the over-the-counter market, exceeds $10.00 per share for at least
30 consecutive trading days commencing on July 1, 2000, or (ii) if the Company
obtains net revenues of $12,000,000 for the 12 months ending December 31, 2000,
as determined by the Company's independent auditors, or (iii) if the Company
obtains net revenues of $50,000,000 for the 12 months ending December 31, 2001,
as determined by the Company's independent auditors. In the event the Company is
a reporting company pursuant to the Securities Exchange Act of 1934, as amended,
("1934 Act") then determination of whether the Company has met items (ii) or
(iii) shall be made upon the filing of the Company's 12 month financial
statements with the Securities and Exchange Commission. If the Company is not
reporting pursuant to the 1934 Act, the determination shall be made within 45
days of December 31.
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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.
3
<PAGE>
4. 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.
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the Company maintained for such purposes as the
absolute, true and lawful owner for all purposes whatsoever, notwithstanding any
notation of ownership or other writing thereon, and the Company shall not be
affected by any notice to the contrary.
4
<PAGE>
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action affecting stockholders
(except for notices provided for herein), receive dividends, subscription
rights, or otherwise, until this Warrant shall have been exercised and the
Shares purchasable upon the exercise thereof shall have become deliverable as
provided herein; provided, however, that any such exercise on any date when the
-----------------
stock transfer books of the Company shall be closed shall constitute the person
or persons in whose name or names the certificate or certificates for those
Shares are to be issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which such stock
transfer books are open, and the Warrant surrendered shall not be deemed to have
been exercised, in whole or in part as the case may be, until the next
succeeding day on which stock transfer books are open for the purpose of
determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
5
<PAGE>
"The securities represented by this certificate have not
been registered under either the Securities Act of 1933
("Act") or the securities laws of any state ("State Acts").
Such securities shall not be sold, pledged, hypothecated, or
otherwise transferred (whether or not for consideration) at
any time whatsoever except upon registration or upon
delivery to the Company of an opinion of its counsel
satisfactory to the Company or its counsel that registration
is not required for such transfer or the submission of such
other evidence as may be satisfactory to the Company or its
counsel to the effect that any such transfer shall not be in
violation of the Act, State Acts or any rule or regulation
promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of
Common Stock, the exercise price in effect, immediately prior to the
effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the
6
<PAGE>
nearest hundredth) obtained by (i) multiplying the number of shares of Common
Stock issuable upon exercise of the Warrant prior to adjustment of the number of
shares of Common Stock by the exercise price in effect prior to adjustment of
the exercise price and (ii) dividing the product so obtained by the exercise
price in effect after such adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: //s// Charles Skamser
-----------------------------------
Charles Skamser, President
Dated: November 22, 1999
HOLDER:
------
By: //s// Scott Feuless
-----------------------------------
Scott Feuless
Dated: November 22, 1999
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 187,500 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Scott Feuless, his registered successors and permitted assigns registered
on the books of the Company maintained for such purposes, as the registered
holder hereof ("Holder"), for value received in consideration for services
rendered to the Company, the receipt of which is acknowledged, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, $.001 par value ("Shares" or "Common Stock"),
stated above at the purchase price per Share set forth in Section 1(b) below
("Exercise Price") (the number of Shares and Exercise Price being subject to
adjustment as hereinafter provided) upon the terms and conditions herein
provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $2.75 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
<PAGE>
or (v) by any combination of the foregoing.
(d) The Shares underlying the Warrants are exercisable upon the
earlier of the vesting contingencies as set forth below. The Shares underlying
the Warrants shall vest, and the Warrants shall become exercisable with respect
to such Shares at any time upon the earlier of the following to occur: (i) the
date on which the last sales price of the Company's common stock as reported by
the Nasdaq Stock Market, or if not reported on the Nasdaq Stock Market, a stock
exchange, or the over-the-counter market, exceeds $10.00 per share for at least
30 consecutive trading days commencing on July 1, 2000, or (ii) if the Company
obtains net revenues of $12,000,000 for the 12 months ending December 31, 2000,
as determined by the Company's independent auditors, or (iii) if the Company
obtains net revenues of $50,000,000 for the 12 months ending December 31, 2001,
as determined by the Company's independent auditors. In the event the Company is
a reporting company pursuant to the Securities Exchange Act of 1934, as amended,
("1934 Act") then determination of whether the Company has met items (ii) or
(iii) shall be made upon the filing of the Company's 12 month financial
statements with the Securities and Exchange Commission. If the Company is not
reporting pursuant to the 1934 Act, the determination shall be made within 45
days of December 31.
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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
3
<PAGE>
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.
4. 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.
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the
4
<PAGE>
Company maintained for such purposes as the absolute, true and lawful owner for
all purposes whatsoever, notwithstanding any notation of ownership or other
writing thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action affecting stockholders
(except for notices provided for herein), receive dividends, subscription
rights, or otherwise, until this Warrant shall have been exercised and the
Shares purchasable upon the exercise thereof shall have become deliverable as
provided herein; provided, however, that any such exercise on any date when the
-----------------
stock transfer books of the Company shall be closed shall constitute the person
or persons in whose name or names the certificate or certificates for those
Shares are to be issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which such stock
transfer books are open, and the Warrant surrendered shall not be deemed to have
been exercised, in whole or in part as the case may be, until the next
succeeding day on which stock transfer books are open for the purpose of
determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
5
<PAGE>
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not
been registered under either the Securities Act of 1933
("Act") or the securities laws of any state ("State Acts").
Such securities shall not be sold, pledged, hypothecated, or
otherwise transferred (whether or not for consideration) at
any time whatsoever except upon registration or upon
delivery to the Company of an opinion of its counsel
satisfactory to the Company or its counsel that registration
is not required for such transfer or the submission of such
other evidence as may be satisfactory to the Company or its
counsel to the effect that any such transfer shall not be in
violation of the Act, State Acts or any rule or regulation
promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of
Common Stock, the exercise price in effect, immediately prior to the
effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
6
<PAGE>
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: //s// Charles Skamser
--------------------------------
Charles Skamser, President
Dated: November 22, 1999
HOLDER:
------
By: //s// Scott Feuless
--------------------------------
Scott Feuless
Dated: November 22, 1999
7
<PAGE>
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 ("ACT")
OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
WARRANT TO PURCHASE 187,500 SHARES OF COMMON STOCK
EBASEONE CORPORATION
(a Delaware corporation)
6060 Richmond, Suite 190
Houston, Texas 77057
Not Transferable or Exercisable Except
upon Conditions Herein Specified
EBASEONE CORPORATION, a Delaware corporation ("Company"), hereby certifies
that Scott Feuless, his registered successors and permitted assigns registered
on the books of the Company maintained for such purposes, as the registered
holder hereof ("Holder"), for value received in consideration for services
rendered to the Company, the receipt of which is acknowledged, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, $.001 par value ("Shares" or "Common Stock"),
stated above at the purchase price per Share set forth in Section 1(b) below
("Exercise Price") (the number of Shares and Exercise Price being subject to
adjustment as hereinafter provided) upon the terms and conditions herein
provided.
1. Exercise of Warrants.
--------------------
(a) Subject to subsection (b) of this Section 1, upon presentation
and surrender of this Warrant Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company, or at such other place as the
Company may designate by notice to the Holder hereof, together with a certified
or bank cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Warrant may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Warrant Certificate or
Warrant Certificates of like tenor entitling the Holder to purchase the number
of Shares as to which this Warrant has not been exercised.
<PAGE>
(b) This Warrant may be exercised at a price of $3.00 per share and
become exercisable as the underlying Shares vest (in the manner as set forth in
(d) below). The Warrant shall expire upon the close of business November 22,
2004.
(c) The Warrant Price shall be payable at the time of exercise. The
Warrant Price may be paid in cash (by check) or by: (i) surrender of shares of
Common Stock of the Company already owned by the Executive, having a Market
Price (as defined below) equal to the exercise price of the Warrant; (ii)
provided that a public market for the Company's stock exists, through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the
Holder irrevocably elects to exercise the Warrant and to sell a portion of the
Shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the exercise price
directly to the Company; (iii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Holder and an NASD Dealer
whereby the Holder irrevocably elects to exercise the Warrant and to pledge the
Shares so purchased to the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (iv) upon surrender of the
Warrant at the principal office of the Company together with notice of election,
in which event the Company shall issue Holder a number of Shares computed using
the following formula:
X = Y (A-B)/A
where: X = the number of Shares to be issued to Holder (not to exceed the
number of Shares set forth on the cover page of this Warrant
Agreement, as adjusted pursuant to the provisions of Section 6 of this
Warrant Agreement).
Y = the number of Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1(c)),
the "Market Price" shall be defined as the average closing price of
the common stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for the
five trading days prior to the Date of Exercise of this Warrant (the
"Average Closing Bid Price"), as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), or if the
common stock is not traded on NASDAQ, the Average Closing Bid Price in
the over-the-counter market; provided, however, that if the common
stock is listed on a stock exchange, the Market Price shall be the
Average Closing Bid Price on such exchange; and, provided further,
that if the common stock is not quoted or listed by any organization,
the fair value of the common stock, as determined by the Board of
Directors of the Company, whose determination shall be conclusive,
shall be used).
B = the Exercise Price.
<PAGE>
or (v) by any combination of the foregoing.
(d) The Shares underlying the Warrants are exercisable upon the
earlier of the vesting contingencies as set forth below. The Shares underlying
the Warrants shall vest, and the Warrants shall become exercisable with respect
to such Shares at any time upon the earlier of the following to occur: (i) the
date on which the last sales price of the Company's common stock as reported by
the Nasdaq Stock Market, or if not reported on the Nasdaq Stock Market, a stock
exchange, or the over-the-counter market, exceeds $10.00 per share for at least
30 consecutive trading days commencing on July 1, 2000, or (ii) if the Company
obtains net revenues of $12,000,000 for the 12 months ending December 31, 2000,
as determined by the Company's independent auditors, or (iii) if the Company
obtains net revenues of $50,000,000 for the 12 months ending December 31, 2001,
as determined by the Company's independent auditors. In the event the Company is
a reporting company pursuant to the Securities Exchange Act of 1934, as amended,
("1934 Act") then determination of whether the Company has met items (ii) or
(iii) shall be made upon the filing of the Company's 12 month financial
statements with the Securities and Exchange Commission. If the Company is not
reporting pursuant to the 1934 Act, the determination shall be made within 45
days of December 31.
In the event of a "change of control" as defined below, all of the Shares
underlying the Warrants shall vest and become immediately exercisable. A change
of control shall mean and include the following transactions or situations:
1. A sale, transfer, or other disposition by the Company through a
single transaction or a series of transactions of securities of the Company
representing fifty (50%) 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 Securities Exchange Act of 1934 ("1934
Act")]. For purposes of this definition, the term "Unrelated Person" shall mean
and include any Person other than 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.
2. 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.
3. 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 fifty (50%) 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
3
<PAGE>
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.
4. 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.
5. 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.
6. 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. Exchange and Transfer of Warrant.
--------------------------------
At any time prior to the exercise hereof, upon presentation and
surrender to the Company, this Warrant (a) may be exchanged, alone or with other
Warrants of like tenor registered in the name of the Holder, for another Warrant
or other Warrants of like tenor in the name of such Holder exercisable for the
same aggregate number of Shares as the Warrant or Warrants surrendered, but (b)
may not be sold, transferred, hypothecated, or assigned, in whole or in part,
without the prior written consent of the Company.
3. Rights and Obligations of Warrant Holder.
----------------------------------------
(a) The Holder of this Warrant Certificate shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the event that any certificate
-----------------
representing the Shares is issued to the Holder hereof upon exercise of this
Warrant, such Holder shall, for all purposes, be deemed to have become the
holder of record of such Shares on the date on which this Warrant Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
Exercise Price was made, irrespective of the date of delivery of such Share
certificate. The rights of the Holder of this Warrant are limited to those
expressed herein and the Holder of this Warrant, by his acceptance hereof,
consents to and agrees to be bound by and to comply with all the provisions of
this Warrant Certificate, including, without limitation, all the obligations
imposed upon the Holder hereof by Sections 2 and 5 hereof. In addition, the
Holder of this Warrant Certificate, by accepting the same, agrees that the
Company may deem and treat the person in whose name this Warrant Certificate is
registered on the books of the
4
<PAGE>
Company maintained for such purposes as the absolute, true and lawful owner for
all purposes whatsoever, notwithstanding any notation of ownership or other
writing thereon, and the Company shall not be affected by any notice to the
contrary.
(b) No Holder of this Warrant Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Warrant Certificate be construed
to confer upon any Holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any action by the Company, whether upon any recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise, receive notice of meetings or other action affecting stockholders
(except for notices provided for herein), receive dividends, subscription
rights, or otherwise, until this Warrant shall have been exercised and the
Shares purchasable upon the exercise thereof shall have become deliverable as
provided herein; provided, however, that any such exercise on any date when the
-----------------
stock transfer books of the Company shall be closed shall constitute the person
or persons in whose name or names the certificate or certificates for those
Shares are to be issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which such stock
transfer books are open, and the Warrant surrendered shall not be deemed to have
been exercised, in whole or in part as the case may be, until the next
succeeding day on which stock transfer books are open for the purpose of
determining entitlement to dividends on the Company's common stock.
4. Shares Underlying Warrants.
--------------------------
The Company covenants and agrees that all Shares delivered upon exercise of
this Warrant shall, upon delivery and payment therefor, be duly and validly
authorized and issued, fully paid and non-assessable, and free from all stamp
taxes, liens and charges with respect to the purchase thereof. In addition, the
Company agrees at all times to reserve and keep available an authorized number
of Shares sufficient to permit the exercise in full of this Warrant.
5. Disposition of Warrants or Shares.
---------------------------------
(a) The Holder of this Warrant Certificate and any transferee hereof
or of the Shares issuable upon the exercise of the Warrant Certificate, by their
acceptance hereof, hereby understand and agree that the Warrant, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 ("Act") or applicable state securities laws ("State
Acts") and shall not be sold, pledged, hypothecated, or otherwise transferred
(whether or not for consideration) except upon the issuance to the Company of an
opinion of counsel favorable to the Company or its counsel or submission to the
Company of such evidence as may be satisfactory to the Company or its counsel,
in each such case, to the effect that any such transfer shall not be in
violation of the Act or the State Acts. It shall be a condition to the transfer
of this Warrant that any transferee of this Warrant deliver to the Company his
written agreement to accept and be bound by all of the terms and conditions of
this Warrant Certificate. The Holder acknowledges that the Company has not
granted any registration rights hereunder.
5
<PAGE>
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Warrant may be exercisable
will be imprinted with a conspicuous legend in substantially the following form:
"The securities represented by this certificate have not
been registered under either the Securities Act of 1933
("Act") or the securities laws of any state ("State Acts").
Such securities shall not be sold, pledged, hypothecated, or
otherwise transferred (whether or not for consideration) at
any time whatsoever except upon registration or upon
delivery to the Company of an opinion of its counsel
satisfactory to the Company or its counsel that registration
is not required for such transfer or the submission of such
other evidence as may be satisfactory to the Company or its
counsel to the effect that any such transfer shall not be in
violation of the Act, State Acts or any rule or regulation
promulgated thereunder."
6. Adjustments.
-----------
The number of Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the events
enumerated below:
(a) If at any time after the date of this Warrant and so long as this
Warrant is outstanding, there is a stock split, stock dividend, subdivision, or
similar distribution with respect to the Common Stock, or a combination of the
Common Stock, then, in such event, the exercise price shall be adjusted in
accordance with (b) below.
(b) Immediately upon the effective date of any event requiring
adjustment pursuant to (a), the Company shall adjust the exercise price then in
effect (to the nearest whole cent) as follows:
i) in the event such adjustment is caused by stock split, stock
dividend, subdivision, or other similar distribution of shares of
Common Stock, the exercise price in effect, immediately prior to the
effective date of such event shall be decreased to an amount which
shall bear the same relation to the exercise price in effect
immediately prior to such event as the total number of shares of
Common Stock outstanding immediately prior to such event bears to the
total number of shares of Common Stock outstanding immediately after
such event;
ii) in the event such adjustment is caused by a combination of
shares of Common Stock, the exercise price in effect immediately prior
to the close of business on the effective date of such event shall be
increased to an amount which shall bear the same relation to the
exercise price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock outstanding
immediately after such event.
6
<PAGE>
(c) Upon each adjustment of the exercise price pursuant to (b) above,
the Warrant outstanding prior to such adjustment in the exercise price shall
thereafter evidence the right to purchase, at the adjusted exercise price, that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
by (i) multiplying the number of shares of Common Stock issuable upon exercise
of the Warrant prior to adjustment of the number of shares of Common Stock by
the exercise price in effect prior to adjustment of the exercise price and (ii)
dividing the product so obtained by the exercise price in effect after such
adjustment of the exercise price.
7. Loss or Destruction.
-------------------
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant Certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement or
bond satisfactory in form, substance and amount to the Company or, in the case
of any such mutilation, upon surrender and cancellation of this Warrant
Certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
8. Survival.
--------
The various rights and obligations of the Holder hereof as set forth
herein shall survive the exercise of the Warrants represented hereby and the
surrender of this Warrant Certificate.
9. Notices.
-------
Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Warrant, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid (or
similar delivery if outside of the United States), and will be deemed to have
been given or delivered on the date such notice, purchase price or other
communication is so delivered or posted, as the case may be; and, if to the
Company, it will be addressed to the address specified in Section 1 hereof, and
if to the Holder, it will be addressed to the registered Holder at its, his or
her address as it appears on the books of the Company.
EBASEONE CORPORATION
By: //s// Charles Skamser
--------------------------------------------
Charles Skamser, President
Dated: November 22, 1999
HOLDER:
------
By: //s// Scott Feuless
--------------------------------------------
Scott Feuless
Dated: November 22, 1999
7
<PAGE>
Level (3)
EXHIBIT 10.8
** indicates information which has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request. Asterisks appear on pages 18 and 19 of this Exhibit.
Terms and Conditions
for Delivery of Service
These Terms and Conditions for Delivery of Service (the "Terms and Conditions")
shall be applicable to Customer Orders executed by Customer for Services
delivered by Level 3 Communications, LLC ("Level 3"), and shall be incorporated
into each Customer Order. These Terms and Conditions are applicable to sales of
Services originating or terminating in the United States.
DEFINITIONS
- -----------
Confidential Information: Licensed Software, and all source code, source
documentation, inventions, know-how, and ideas, updates and any documentation
and information related to the Licensed Software, and any non-public information
regarding the business of a party provided to either party by the other party
where such information is marked or otherwise communicated as being
"proprietary" or "confidential" or the like, or where such information is, by
its nature, confidential.
Customer: The person, firm or corporation so named on the Customer Order.
Customer Order. A request for Level 3 Service submitted by the Customer in the
format devised by Level 3 and accepted by Level 3.
Firm Order Commitment: A written communication from Level 3 to Customer within
which Level 3 commits to deliver some or all of the Services requested in a
Customer Order.
Licensed Software: Computer software, in object code format only, the use of
which is required for use of Service ordered by Customer hereunder.
Premises: The location(s) occupied by Customer or its end users specified in the
Customer Order to (or from) which Service will be delivered.
Revenue Commitment: A commitment which, if made by Customer in a Customer Order
or in any other form specified and accepted by Level 3, obligates Customer to
order and pay for a minimum volume of Services during an agreed term.
Service: Any communications (or related) service offered by Level 3 pursuant to
a Customer Order.
SECTION 1. CUSTOMER ORDERS
- --------------------------
1.1 Submission of Customer Orders. Customer may submit to Level 3 Customer
-----------------------------
Order forms requesting the version of Service. Each Customer Order form shall be
submitted on a form designated by Level 3. Level 3 shall confirm the accuracy of
information on the Customer Order form and the availability of the Services
requested. Level 3's delivery of a Firm Order Commitment respecting such
Services shall constitute Level 3's acceptance of the Customer Order for such
Services. The Customer Order form and attachments shall set forth the Service,
the locations for delivery of same, the prices to be charged for same and any
applicable term and/or Revenue Commitment.
1.2 Undertaking of Level 3. If Level 3 issues a Firm Order Commitment
----------------------
respecting Services, Level 3 will furnish such Services in accordance with these
Terms and Conditions and any Customer Orders executed by Customer. All title to
equipment or materials used to deliver the Services (except as otherwise
expressly agreed) shall be and remain with Level 3.
SECTION 2. BILLING AND PAYMENT
- ------------------------------
2.1 Payment and Rendering of Bills. Level 3 shall bill all charges incurred by
------------------------------
and credits due to Customer on, a monthly basis (unless otherwise agreed in
writing by Level 3 and Customer). Level 3 shall bill in advance charges for all
Services to be provided during the ensuing month except for charges which are
dependent upon usage of Service (which charges shall be billed in arrears).
Adjustments for the quantities of Service established or discontinued in any
billing period will be prorated to the number of days based on a 30-day month.
Level 3 will, upon request and if available, furnish such detailed information
as may reasonably be required for verification of the bill.
2.2 Payment of Bills. All bills are due upon receipt thereof by Customer, and
----------------
become past due thirty (30) days thereafter. The unpaid balance of any past due
bills shall bear interest at a rate of 1.5% per month (prorated on a daily
basis), or the highest rate allowed by law, whichever is less. Interest will be
applied for the number of days from the date the bill became past due to and
including the date that payment is received by Level 3.
2.3 Taxes and Fees. Except for taxes based on Level 3's net income and except
--------------
with respect to ad valorem personal and real property taxes imposed on Level 3's
property, Customer shall be responsible for payment of all sales, use, gross
receipts, excise, access, bypass, franchise or other local, state and federal
taxes, fees, charges, or surcharges, however designated, imposed on or based
upon the provision, sale or use of the Services delivered by Level 3 (including,
but not limited to, taxes and fees lawfully
Page 1 of 17
<PAGE>
assessed by nations outside of the United States). Any taxes shall be separately
stated on Customer's bill. Any state or federal tax, fee, charge, or surcharge
shall be payable only for Services that are subject to such imposition.
2.4 Regulatory and Legal Changes. In the event of any change in applicable law
----------------------------
or regulation that materially increases the cost of delivery of Service, Level 3
and Customer shall negotiate regarding the rates charged to Customer to reflect
such increase in cost and, in the event that the parties are unable to reach
agreement respecting new rates within thirty (30) days after Level 3's delivery
of written notice requesting renegotiation, then (a) Level 3 may pass such
increased costs through to Customer, and (b) Customer may terminate the affected
Customer Order upon no less than sixty (60) days' prior written notice without
payment of any applicable termination charge.
2.5 Disputed Bills. In the event that Customer disputes any portion of the
--------------
charges contained in a bill, Customer must pay the undisputed portion of the
invoice in full and submit a documented claim for the disputed amount. All
claims must be submitted to Level 3 within sixty (60) days of receipt of billing
for those Services. If Customer does not submit a claim within such period and
in the manner stated above, Customer waives all rights to dispute such charges.
2.6 Credit Approval and Deposits. Customer shall provide Level 3 with credit
----------------------------
information as requested in advance of the Commencement of delivery of Service
under any Customer Order. Delivery of Service is subject to credit approval.
Level 3 may require any Customer to make a deposit as a condition to Level 3's
acceptance of any Customer Order submitted by Customer, or as a condition to
Level 3's continuation of Service under any Customer Order (but only when
Customer's consumption of Service materially exceeds Customer's anticipated use
or when, in Level 3's reasonable discretion, such deposit is required in order
to secure Customer's continued payment obligation), which deposit shall be held
by Level 3 as security for payment of charges. A deposit may not exceed the
actual or estimated rates and charges for the Service for a two (2) month
period. At such time as the provision of Service to Customer is terminated, the
amount of the deposit will be credited to Customer's account and any credit
balance which may remain will be refunded.
2.7 Fraudulent Use of Services. Customer shall be solely responsible for all
--------------------------
charges incurred respecting the Services, even if such charges were incurred
through or as a result of fraudulent or unauthorized use of the Services, unless
Level 3 has actual knowledge of such fraudulent or unauthorized use and fails to
inform Customer thereof or otherwise limit or preclude such use. Nothing in this
Section 2.7, however, will be construed to obligate Level 3 to detect or report
unauthorized or fraudulent use of Services.
SECTION 3. CANCELLATION OF CUSTOMER ORDERS
- ------------------------------------------
3.1 Cancellation of Customer Order by Level 3.
-----------------------------------------
A. For nonpayment: Level 3 may, upon fourteen (14) days' written notice,
discontinue Service without incurring any liability when there is an unpaid
balance for Service that is past due.
B. For any violation of law or of any of the provisions governing the
furnishing of Service: Any Customer Order shall be subject to cancellation,
without notice, for any violation of any law, rule, regulation or policy of any
government authority having jurisdiction over Service or by reason of any order
or decision of a court or other government authority having jurisdiction which
prohibits Level 3 from furnishing such Service.
C. For other causes: Any Customer Order shall be subject to cancellation, upon
fourteen (14) days' prior written notice, in the event of a breach of a Customer
Order, fraudulent use of the Service, or fraud or misrepresentation in any
submission of information required in a Customer Order or any other information
submitted to Level 3.
D. For any Customer filing of bankruptcy or reorganization or failing to
discharge an involuntary petition therefor within sixty (60) days after filing:
Level 3 may immediately discontinue or suspend delivery of Service without
incurring any liability.
E. For consumption of Services that materially exceeds Customer's credit
limit: Level 3 may, upon fourteen (14) days prior written notice and provided
Customer has not provided additional security for payment which is sufficient in
Level 3's reasonable discretion, discontinue or suspend delivery of Service
without incurring any liability.
3.2 Effect of Cancellation. Upon Level 3's discontinuance of Service to
----------------------
Customer under any of the foregoing subparagraphs, Level 3 may, in addition to
all other remedies that may be available to Level 3 at law or in equity or under
any other provision of a Customer Order, assess and collect from Customer any
termination charge set forth herein (to the extent applicable).
3.3 Resumption of Service. If Service has been discontinued by Level 3, and
---------------------
Customer requests that Service be restored, Level 3 shall have the sole and
absolute discretion to restore such Service only after satisfaction of such
conditions as Level 3 determines to be required for its protection. Nonrecurring
charges apply to restoration of Service.
SECTION 4. DELIVERY OF SERVICES
- -------------------------------
4.1 Level 3 Access to Premises. Customer shall allow Level 3 continuous and
--------------------------
reasonable access to the Premises to the extent reasonably determined by Level 3
to be appropriate to the installation, inspection and maintenance of equipment,
facilities and systems relating to the Service. Level 3 shall notify Customer
two (2) business days in advance of any regularly scheduled maintenance that
will require access to the Premises.
4.2 Level 3 Facilities. Level 3 will use reasonable efforts to maintain the
------------------
facilities and equipment required to deliver Service. Customers shall not and
shall not permit others to rearrange, disconnect, remove, attempt to repair, or
Page 2 of 17
<PAGE>
otherwise tamper with any of the facilities or equipment installed by Level 3,
except upon the written consent of Level 3 equipment provided or installed at
the Premises by Level 3 for use in connection with the Service shall not be used
for any purpose other than that for which Level 3 provided it. In the event that
Customer or a third party attempts to operate or maintain any Level 3-owned
equipment without first obtaining Level 3's written approval, in addition to any
other remedies of Level 3 for a breach by Customer of Customer's obligations
hereunder, Customer shall pay Level 3 for any damage to Level 3-owned equipment
caused thereby. Customer shall be responsible for the payment of service charges
in the event that maintenance or inspection of the equipment is required as a
result of Customer's breach of this Section. Level 3 shall, in the event that
such expenses are incurred, deliver to Customer a written invoice therefor. In
no event shall Level 3 be liable to Customer or any other person for
interruption of Service or for any other loss, cost or damage caused or related
to improper use or maintenance of Level 3-owned equipment.
4.3 Title and Power. Title to all facilities (except as otherwise agreed),
---------------
including terminal equipment, shall remain with Level 3. The electric power
consumed by such equipment on the Premises shall be provided by and maintained
at the expense of Customer.
4.4 Customer-Provided Equipment. Level 3 shall not be responsible for the
---------------------------
operation or maintenance of any Customer-provided communications equipment.
Level 3 may install certain Customer provided communications equipment upon
installation of Service; unless otherwise agreed by Level 3 in writing, Level 3
shall not thereafter be responsible for the operation or maintenance of such
equipment. Level 3 shall not be responsible for the transmission or reception of
signals by Customer-provided equipment or for the quality of, or defects in,
such transmission.
4.5 Removal of Equipment. Customer agrees to allow Level 3 to remove all Level
--------------------
3-owned equipment from the Premises:
A. after termination, interruption or suspension of the Service in connection
with which the equipment was used; and
B. for repair, replacement or otherwise as Level 3 may determine is necessary or
desirable.
At the time of such removal, such equipment shall be in the same condition as
when delivered to Customer or installed in the Premises, normal wear and tear
only excepted. Customer shall reimburse Level 3 for the depreciated cost of any
equipment which is not in such condition.
4.6 Service Subject to Availability. The furnishing of Service under these
-------------------------------
Terms and Conditions is subject to the availability on a continuing basis of all
the necessary facilities limited to the capacity of Level 3's facilities, as
well as facilities Level 3 may obtain from other carriers to furnish service
from time to time as required at the sole discretion of Level 3. Nothing in
these Terms and Conditions shall be construed to obligate Customer to submit, or
Level 3 to accept, Customer Orders.
4.7 No Liability for Failure to Transmit Messages. Level 3 does not undertake
---------------------------------------------
to transmit messages, but offers the use of its Service when available, and, as
more fully set forth elsewhere in these Terms and Conditions and any applicable
Customer Orders, shall not be liable for errors in transmission or for failure
to establish connections.
4.8 Service Level Agreements. All warranties respecting the Service, and the
------------------------
remedies applicable to a failure of Level 3 to meet such warranties, shall be
set forth in Service Level Agreements applicable to the particular Service,
which Service Level Agreements (when and if issued by Level 3) shall be deemed
attached hereto and by this reference incorporated herein.
SECTION 5. OBLIGATIONS AND LIABILITY LIMITATION
- -----------------------------------------------
5.1 Obligations of the Customer. Customer shall be responsible for:
---------------------------
A. The payment of all charges applicable to the Service (including charges
incurred as a result of fraud or unauthorized use of the Service).
B. Damage or loss of Level 3's facilities or equipment installed on the Premises
(unless caused by the negligence or willful misconduct of the employees or
agents of Level 3);
C. Providing the level of power, heating and air conditioning necessary to
maintain the proper environment on the Premises for the provision of Service;
D. Providing a safe place to work and complying with all laws and regulations
regarding the working conditions on the Premises;
E. Granting Level 3 or its employees access to the Premise for the purpose of
maintaining Level 3's facilities in accordance herewith;
F. Keeping Level 3's equipment and facilities located on Premises free and dear
of any liens or encumbrances.
5.2 Liability. The liability of Level 3 for damages arising out of the
---------
furnishing of Service, including but not limited to mistakes, omissions,
interruptions, delays, tortious conduct or errors, or other defects,
representations, use of Service or arising out of the failure to furnish
Service, whether caused by acts of commission or omission, shall be limited to
the extension of credit allowances due under any Service Level Agreement. The
extension of such credit allowances or refunds shall be the sole remedy of
Customer and the sole liability of Level 3. Neither party shall be liable for
any indirect, incidental, special, consequential, exemplary or punitive damages
(including but not limited to damages for lost profits or lost revenues),
whether or not caused by the acts or omissions or negligence of its employees or
agents, and regardless of whether such party has been informed of the
possibility or likelihood of such damages.
5.3 Disclaimer of Warranties. LEVEL 3 MAKES NO WARRANTIES OR REPRESENTATIONS,
------------------------
EXPRESS OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW,
Page 3 of 17
<PAGE>
STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR USE, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN OR IN ANY APPLICABLE
SERVICE LEVEL AGREEMENT.
SECTION 6. SOFTWARE TERMS
- -------------------------
6.1 License. If and to the extent that Customer requires the use of Licensed
-------
Software in order to use the Service supplied under any Customer Order, then
Customer shall have a nonexclusive, nontransferable license to use such Licensed
Software only and solely to the extent required to permit delivery of the
Service. Customer shall in no event be entitled to claim title to or any
ownership interest in any Licensed Software (or any derivations or improvements
thereto), and Customer shall execute any documentation reasonably required by
Level 3 to memorialize Level 3's existing and continued ownership of Licensed
Software.
6.2 Restrictions. Customer agrees that it shall not:
------------
A. copy the Licensed Software except as allowed and permitted by the express
written consent of Level 3;
B. reverse engineer, decompile or disassemble the Licensed Software;
C. sell, lease, license or sublicense the Licensed Software; or
D. create, write or develop any derivative software or any other software
program based on the Licensed Software or any Confidential Information of Level
3.
SECTION 7. CONFIDENTIAL INFORMATION
- -----------------------------------
7.1 Disclosure and Use. The Confidential Information disclosed by either party
------------------
constitutes the confidential and proprietary information of the disclosing party
and the receiving party shall retain same in strict confidence and not disclose
to any third party (except as authorized by these Terms and Conditions) without
the disclosing party's express written consent. Each party agrees to treat ail
Confidential Information of the other in the same manner as it treats its own
proprietary information, but in no case will the degree of care be less than
reasonable care.
7.2 Restricted Use. Each party agrees:
--------------
A. to use Confidential Information only for the purposes of performance of any
Customer Order or as otherwise expressly permitted by these Terms and
Conditions;
B. not to make copies of Confidential Information or any part thereof except for
purposes consistent with these Terms and Conditions; and
C. to reproduce and maintain on any copies of any Confidential Information such
proprietary legends or notices (whether of disclosing party or a third party) as
are contained on the original or as the disclosing party may otherwise
reasonably request.
7.3 Exceptions. Notwithstanding the foregoing, each party's confidentiality
----------
obligations hereunder shall not apply to information which:
A. is already known to the receiving party;
B. becomes publicly available without fault of the receiving party,
C. is rightfully obtained by the receiving party from a third party without
restriction as to disclosure, or is approved for release by written
authorization of the disclosing party,
D. is developed independently by the receiving party without use of the
disclosing party's Confidential Information;
E. is required to be disclosed by law.
7.4 Publicity. This agreement shall not be construed as granting to either
---------
party any right to use any of the other party's or its affiliates' trademarks,
service marks or trade names or otherwise refer to the other party in any
marketing, promotional or advertising materials or activities. Without limiting
the generality of the forgoing, neither party shall issue any publication or
press release relating to, or otherwise disclose the existence of, any
contractual relationship between Level 3 and Customer, except as may be required
by law.
7.5 Remedies. Notwithstanding any other section of these Terms and Conditions,
--------
the non-breaching party shall be entitled to seek equitable relief to protect
its interests, including but not limited to preliminary and permanent injunctive
relief. Nothing stated herein shall be construed to limit any other remedies
available to the parties.
7.6 Survival. The obligations of confidentiality and limitation of use shall
--------
survive the termination of any applicable Customer Order.
SECTIONS 8. GENERAL TERMS
- -------------------------
8.1 Force Majeure. Except with respect to payment obligations, neither party
-------------
shall be liable, nor shall any credit allowance or other remedy be extended, for
any failure of performance or equipment due to causes beyond such party's
reasonable control, including but not limited to: acts of God, fire, flood or
other catastrophes; any law, order, regulation, direction, action, or request of
any governmental entity or agency, or any civil or military authority; national
emergencies, insurrections, riots, wars; unavailability of rights-of-way or
materials; or strikes, lock-outs, work stoppages, or other labor difficulties.
In the event Level 3, for reasons set forth in this paragraph 8.1, is unable to
deliver Service pursuant to any Customer Order for 90 consecutive days, then
Customer may terminate the affected Customer Order without termination
liability.
8.2 Assignment or Transfer. Customer may not transfer or assign the use of
----------------------
Service without the express prior written consent of Level 3, and then only when
such transfer or assignment can be accomplished without interruption of the use
or location of Service. These Terms and Conditions shall apply to all such
permitted transferees or assignees. Customer shall, unless otherwise expressly
agreed by Level 3 in writing, remain liable for the payment of all charges due
Page 4 of 17
<PAGE>
under each Customer Order.
8.3 Notices. Any notice Level 3 may give to Customer or Customer shall give to
-------
Level 3 shall be deemed properly given when delivered, if delivered in person,
or when sent via facsimile, overnight courier, electronic mail or when deposited
with the U.S. Postal Service, (a) with respect to Customer, the address listed
on each Customer Order, or (b) with respect to Level 3, to: Contracts
Administration, Level 3 Communications, LLC, 1450 Infinite Drive, Louisville, CO
80027. Customer shall notify Level 3 of any changes to its addresses listed on
any Customer Order.
8.4 Indemnification by Customer. Customer shall indemnify, defend and hold
---------------------------
Level 3 harmless from claims, loss, damage, expense (including attorney's fees
and court costs), or liability (including liability for patent infringement)
arising from (1) any claims made against Level 3 by any end user in connection
with the delivery or consumption of Service, (2) use of facilities furnished by
Level 3 in a manner inconsistent with the terms hereof or in a manner that Level
3 did not contemplate and over which Level 3 exercises no control and (3) all
other claims, loss, damage, expense (including attorneys fees and court costs),
or liability arising out of any commission or omission by Customer in connection
with the Service.
8.5 Indemnification by Level 3. Level 3 shall indemnify, defend and hold
--------------------------
Customer harmless from claims, loss, damage, expense (including attorney's fees
and court costs), or liability (including liability for patent infringement)
arising from all claims, loss, damage, expense (including attorneys fees and
court costs), or liability for property damage or personal injury to the extent
that such claims arise out of or are caused by Level 3's negligence or willful
misconduct.
8.6 Application of Tariffs. Level 3 may elect or be required by law to file
----------------------
with the appropriate regulatory agency tariffs respecting the delivery of
certain Service. In the event and to the extent that such tariffs have been or
are filed respecting Service ordered by Customer, then (to the extent such
provisions are not inconsistent with the terms of a Customer Order) the terms
set forth in the applicable tariff shall govern Level 3's delivery of, and
Customer's consumption or use of, such Service.
8.7 Contents of Communications. Level 3 shall have no liability or
--------------------------
responsibility for the content of any communications transmitted via the Service
by Customer or any other party, and Customer shall hold Level 3 harmless from
any and all claims (including claims by governmental entities seeking to impose
penal sanctions) related to such content.
8.8 Entire Understanding. These Terms and Conditions, regarding any Customer
--------------------
Orders executed hereunder (and any tariff applicable to the delivery of
Service), constitutes the entire understanding of the parties related to the
subject matter hereof. In the event of a conflict between these Terms and
Conditions and any Customer Order executed hereunder, the Customer Order shall
control. These Terms and Conditions shall be governed and construed in
accordance with the laws of the state of Colorado.
8.9 No Waiver. No failure by either party to enforce any rights hereunder shall
---------
constitute a waiver of such right.
Page 5 of 17
<PAGE>
Terms and Conditions
Private Line Service
The following Terms and Conditions shall be applicable to metropolitan (local),
city to city (within the United States) and international (from the United
States to another country) private line, non-switchable circuits (the "Private
Line Services") ordered by Customer under any Customer Order.
1. Any state or federal tariffs applicable to the Private Line Services to be
delivered under any Customer Order are incorporated into the terms thereof.
2. The nonrecurring charges and monthly recurring rates for the Private Line
Services provided by Level 3 to Customer shall be set forth in each Customer
Order.
3. Customer hereby agrees to pay for the Private Line Services for the period
of time specified in each Customer Order, which period shall commence with the
initiation of delivery of such Services. The rates and other charges set forth
in each Customer Order are established in reliance on the term commitment made
therein. In the event that Customer terminates Services ordered in any Customer
Order or in the event that the delivery of Services terminated due to a failure
of Customer to satisfy the requirements set forth herein or in the Terms and
conditions prior to the end of the agreed term, Customer shall (unless Customer
has made a Revenue Commitment) pay a termination charge equal to the termination
or other charges paid or to be paid by Level 3 for services purchased from other
sources used to deliver the Private Line Services to Customer, plus the
percentage of the monthly recurring charges for the terminated Private Line
Services calculated as follows:
A. 100% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 1-12 of the agreed term; plus
B. 75% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 13-24 of the agreed term; plus N/A
C. 50% of the monthly recurring charge that would have been incurred for the
Private Line Service for months 25 through the end of the agreed term. N/A
Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Private Line
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
Page 6 of 17
<PAGE>
Standard Service Level Agreement (SLA)
--------------------------------------
International / US National Private Line
International/National Private Line service will be backed by a Standard Service
Level Agreement that has two components: a Service Delivery SLA and a Network
Performance SLA.
NOTE: The total number of credits per month for both Service Delivery is limited
to four days.
Service Delivery SLA
- --------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
??^ Standard Service Delivery Intervals
- ------------------------------------------------------------------------------------------------------------------------------------
Nx64K, DS1, E1* DS3 OC3/OC12
- ------------------------------------------------------------------------------------------------------------------------------------
US NPLS IPL US NPLS IPL US NPLS IPL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
On-Net 20 working 20 working 30 working 30 working 40 working 30
days days days days days
- ------------------------------------------------------------------------------------------------------------------------------------
Off-Net building within 30 working 60 working 45 working 60 working 60 working ICB
SSA days days days days days
(either end)
- ------------------------------------------------------------------------------------------------------------------------------------
Off-net building outside 30 working 60 working 45 working 60 working 70 working ICB
SSA (within 50 miles) days days days days days
(either end)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
??^ Standard Service Delivery Intervals
- ------------------------------------------------------------------------------------------------------------------------------------
DS1 DS3 OC3
- ------------------------------------------------------------------------------------------------------------------------------------
One side of the circuit 30 working days 45 working days 60 working days (70
is served by an off-net days would apply if
city POP the customer location
served by the gateway
city is outside of the
SSA)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Off-net building must have DS3 local service availability in order to support
-E1 delivery is available in NYC only and is dependant
upon local availability of E1 delivery
* Single toll-free number to reach Level 3 Customer Service for all customer
issues, including technical, billing, and product inquiries.
* Mean Time to Respond - Within 30 minutes
* 2 hour calendar month Average Time To Repair (MTTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:
. Any customer inquiry to the Level 3 Customer Service Center that results in a
Time to Respond of greater than 30 minutes will result in a one day service
credit when the customer notifies Level 3 of the failure.
. MTTR is calculated as a monthly average. All reported customer trouble
tickets will be totaled over the month, then the average time to close each
ticket will be calculated. If the MTTR is greater than 2 hours, the customer
will receive a one day service credit.
. Credits will only be applied to events where the Customer reports a failure
to the Level 3 Customer Care organization. Customers must report any Service
Delivery failures within five business days of the event.
Page 7 of 17
<PAGE>
NetWork Performance SLA
- -----------------------
. 99.99% Service Availability
----------------------------
. Target Bit Error Rate/1/
-----------------------
<TABLE>
<S> <C>
End-to-end link (Level 3 on-net) Less than 1 x 10/-11/ at T1 Rate (equivalent rate for DSO 1 x 10/-4/)
End-to-end link (Non-Level 3 access) Less than 1 x 10/-7/ (Dependent on local supplier)
. Target Severely Errored Seconds/2/
---------------------------------
End-to-end link (Level 3 fiber access) Less than 0.008%
End-to-end link (Non-Level 3 access) Less than 0.013% (Dependent on local supplier)
</TABLE>
. Availability refers to customer's access point to the Level 3 Backbone
Network, including their Level 3 provided local access circuit.
. Availability does not include regularly scheduled or emergency maintenance
events, or customer caused outages or disruptions.
. Customers may report service unavailability events of longer than 15
consecutive minutes to Level 3 customer service within 48 hours of the
event. If the event is confirmed by Level 3 customer service, the customer
will receive a pro-rated service credit that equals the time of the
unavailability.
NOTES:
. All measurements are based on monthly averages.
. These guarantees only apply to the Level 3 Network (including the Local
Access to the customer). They do not apply to off-net city circuits which do
not transit the Level 3 Backbone Network (or the portion the circuit which
does not transit the Level 3 Backbone).
. This SLA does not apply to periods of regularly scheduled or emergency
maintenance that Level 3 performs on its network or associated hardware and
software.
. Credits will only be applied to events where the Customer reports a network
performance failure to the Level 3 Customer Care organization.
. Customers must report any Network Performance failures (unavailability or
delay) within 48 hours (two business days) of the service affecting event in
order to receive a credit. Customers must report any Service Delivery
failures within five business days of the event.
_____________
1 Bit Error Rate Figure excludes periods of more than 10 seconds having error
rates equal to, or worse than 1x10/-3/
2 Severely Errored Seconds have bit error rates, to, or worse than 1X1O/-3/
Page 8 of 17
<PAGE>
Terms and Conditions
Telephony Colocation
The following Terms and Conditions shall be applicable to Customer's use of
space within Level 3 facilities used for the purpose of colocating
telecommunications equipment (the "Space") ordered by Customer under any
Customer Order.
1. Upon execution and performance of Customer's obligations under a Customer
Order for use of Space, Customer shall be granted the right to occupy the Space
identified therein. Customer may submit multiple Customer Orders requesting use
of different Space, each of which shall be governed by the terms hereof.
2. Customer shall be permitted to use the Space only for placement and
maintenance of communications equipment which shall be interconnected to the
network services offered by Level 3. Customer may use the Space to cross connect
to the facilities of other communications carriers if and only if Level 3 cannot
or will not provide such services to Customer on commercially reasonable terms.
The nonrecurring and monthly recurring charges for the Space and any Services
ordered by Customer shall be set forth in each Customer Order.
3. During the term for use of the Space set forth in each Customer Order,
Customer shall commit to use, order and pay for Level 3 network communications
services (not exceeding monthly recurring fees charged for the use of the space)
with monthly recurring charges of at least $2,000.00 for each cabinet of Space
ordered by Customer. Customer shall achieve the minimum service level no later
than six (6) months after submission and acceptance of each Customer Order.
Level 3 may terminate use of the Space in the event that Customer does not
satisfy this minimum service commitment.
4. Level 3 shall perform such janitorial services, environmental systems
maintenance, power plant maintenance and other actions as are reasonably
required to maintain the facility in which the Space is located in good
condition which is suitable for the placement of communications equipment.
Customer shall maintain the Space in orderly and safe condition, and shall
return the Space to Level 3 at the conclusion of the term set forth in the
Customer Order in the same condition (reasonable wear and tear excepted) as when
such Space was delivered to Customer. EXCEPT AS EXPRESSLY STATED HEREIN OR IN
ANY CUSTOMER ORDER, THE SPACE SHALL BE DELIVERED AND ACCEPTED "AS IS" BY
CUSTOMER, AND NO REPRESENTATION HAS BEEN MADE BY LEVEL 3 AS TO THE FITNESS OF
THE SPACE FOR CUSTOMER'S INTENDED PURPOSE.
5. The term of use of the Space shall begin on the later to ?? of the date
requested by Customer or the date that Level 3 completes the build-out of the
Space. Customers use of the Space beyond the initial term shall be on a
month-to-month basis, unless Customer and Level 3 have agreed in writing to a
renewal of the right to use such Space.
6. Level 3 shall use reasonable efforts to complete the build-out and make the
Space available to Customer on or before the date requested by Customer. In the
event that Level 3 fails to complete the build-out within sixty (60) days of the
date requested by Customer, then Customer may terminate its rights to use such
Space and receive a refund of any fees paid for the use or build-out of such
Space.
7. Customer shall abide by any posted or otherwise communicated rules relating
to use of, access to, or security measures respecting the Space. In the event
that unauthorized parties gain access to the Space through access cards, keys or
other access devices provided to Customer, Customer shall be responsible for any
damages incurred as a result thereof. Customer shall be responsible for the cost
of replacing any security devices lost or stolen after delivery thereof to
Customer. In addition, Level 3 shall have the right to terminate Customer's use
of the Space in the event that: (a) Level 3's rights to use the facility within
which the Space is located terminates or expires for any reason; (b) Customer
has violated the terms hereof or any Customer Order submitted hereunder; (c)
Customer makes any material alterations to the Space without first obtaining the
written consent of Level 3; (d) Customer allows personnel or contractors to
enter the Space who have not been approved by Level 3 in advance; or (e)
Customer violates any posted or otherwise communicated rules relating to use of
or access to the Space. Level 3 shall use reasonable efforts to notify Customer
of any events that may result in termination of the use of the Space.
8. Customer shall pay all monthly recurring fees, cross-connect fees, power
charges and nonrecurring fees specified in each Customer Order for the agreed
term thereof. In the event that Customer terminates a Customer Order for Space
or in the event that the Customer Order is terminated due to a failure of
Customer to satisfy the requirements set forth herein or in the Customer Order
prior to the end of the agreed term, Customer shall pay a termination charge
equal to the costs incurred by Level 3 in returning the Space to a condition
suitable for use by other parties, plus the percentage of the monthly recurring
fees for the terminated Space calculated as follows:
A. 100% of the monthly recurring fees that would have been charged for the
Space for months 1-12 of the agreed term; plus
B. 75% of the monthly recurring fees that would have been charged for the
Space for months 13-24 of the agreed term; plus
Page 9 of 17
<PAGE>
C. 50% of the monthly recurring fees that would have ??^ charged for the
Space for months 25 through the end ??^ agreed term.
9. Level 3 reserves the right to change the location or configuration of the
Space, provided, however, that Level 3 shall not arbitrarily or discriminatorily
require such changes. Level 3 and Customer shall work in good faith to minimize
any disruption in Customer's services that may be caused by such changes in
location or configuration of the Space.
10. Prior to occupancy and during the term of use of any Space, Customer shall
procure and maintain the following minimum insurance coverage: (a) Workers'
Compensation in compliance with all applicable statutes of appropriate
jurisdiction. Employer's Liability with limits of $500,000 each accident; (b)
Commercial General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of Customers
personal property located in the Space. Customer's Commercial General Liability
policy shall be endorsed to show Level 3 (and any underlying property owner, as
requested by Level 3) as an additional insured. All policies shall provide that
Customer's insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating that Customer
has obtained the required insurance coverages prior to occupancy of the Space.
Such certificates shall contain a statement that the insurance coverage shall
not be materially changed or cancelled without at least thirty (30) days' prior
written notice to Level 3. Customer shall require any contractor entering the
Space on its behalf to procure and maintain the same types, amounts and coverage
extensions as required of Customer above.
11. The liability of Level 3 for damages arising out of the furnishing of
Space, including but not limited to mistakes, omissions, interruptions, delays,
tortious conduct or errors, or other defects arising out of the failure to
furnish Space, whether caused by acts of commission or omission, shall be
limited to a prorated refund of the charges paid by Customer for the use of the
Space hereunder. The extension of such refunds shall be the sole remedy of
Customer and the sole liability of Level 3.
Page 10 of 17
<PAGE>
TERMS AND CONDITIONS
IP COLOCATION N/A
The following Terms and Conditions shall be applicable to Customer's use of
space within Level 3 facilities used for the purpose of colocating equipment
used for connection to the internet (the "Space") ordered by Customer under any
Customer Order.
1. Upon execution and performance of Customer's obligations under a Customer
Order for use of Space, Customer shall be granted the right to occupy the Space
identified therein. Customer further agrees to purchase certain communications
services ("Services") identified in Customer Orders for such Services submitted
by Customer hereunder. Customer may submit multiple Customer Orders requesting
use of different Space, each of which shall be governed by the terms hereof.
Services ordered by Customer shall at all times be used by Customer in
compliance with Level 3's then-current Acceptable Use Policy and Privacy Policy,
as amended by Level 3 from time to time and which are available through Level
3's web site.
2. Customer shall be permitted to use the Space only for placement and
maintenance of computer and/or communications equipment which shall be
interconnected to the Services provided by Level 3. Customer may use the Service
to cross connect to the facilities of other Communications carriers if and only
if Level 3 cannot or will not provide such services to Customer on commercially
reasonable terms. The nonrecurring and monthly recurring charges for the Space
and the Services shall be each Customer Order.
3. During the term for use of the Space set forth in each Customer Order,
Customer shall commit to use, order and pay for the following amounts of
bandwidth provided by Level 3: (a) for Customers using cabinets, at least 1 Mbps
of bandwidth for each partial cabinet and at least 2 Mbps of bandwidth for each
full cabinet of Space ordered by Customer; and (b) for Customers using private
rooms, at least 1 Mbps of bandwidth for each 10 square feet of Space ordered by
Customer. Customer shall achieve the minimum service level immediately after
submission and acceptance of each Customer Order. Level 3 may terminate use of
the Space in the event that Customer does not satisfy this minimum service
commitment.
4. Level 3 shall perform such janitorial services, environmental systems
maintenance, power plant maintenance and other actions as are reasonably
required to maintain the facility in which the Space is located in good
condition which is suitable for the placement of communications equipment. In
addition, Customer may 'r and pay for Level 3 to perform certain limited rote
hands") maintenance services on Customer's equipment within the space, which
shall be performed in accordance with Customer's directions. "Remote hands"
maintenance services includes power cycling equipment. Level 3 shall in no event
be responsible for the repair, configuration or tuning of equipment, or for
installation of Customer's equipment (although Level 3 will provide reasonable
assistance to Customer in such installation). Customer shall maintain the Space
in orderly and safe condition, and shall return the Space to Level 3 at the
conclusion of the term set forth in the Customer Order in the same condition
(reasonable wear and tear excepted) as when such Space was delivered to
Customer. EXCEPT AS EXPRESSLY STATED HEREIN OR IN ANY CUSTOMER ORDER, THE SPACE
SHALL BE DELIVERED AND ACCEPTED "AS IS" BY CUSTOMER, AND NO REPRESENTATION HAS
BEEN MADE BY LEVEL 3 AS TO THE FITNESS OF THE SPACE FOR CUSTOMER'S INTENDED
PURPOSE.
5. The term of use of the Space shall begin on the later to occur of the date
requested by Customer or the date that Level 3 completes the build-out of the
Space. Customer's use of the Space beyond the initial term shall be on a month-
to-month basis, unless Customer and Level 3 have agreed in writing to a renewal
of the right to use such Space. Customer hereby agrees to pay for the Space and
Services for the period of time specified in each Customer Order, which period
shall commence when both completion of the build-out of the Space and initiation
of delivery of such Services has occurred. The rates and other charges set forth
in each Customer Order are established in reliance on the term commitment made
therein. In the event that Customer terminates a Customer Order for Space or in
the event that the Customer Order is terminated due to a failure of Customer to
satisfy the requirements set forth herein or in the Customer Order prior to the
end of the agreed term, Customer shall pay a termination charge equal to the
costs incurred by Level 3 in returning the Space to a condition suitable for use
by other parties, plus the percentage of the monthly recurring fees for the
terminated Space calculated as follows:
a. 100% of the monthly recurring fees that would have been charged for the
Space for months 1-12 of the agreed term; plus
b. 75% of the monthly recurring fees that would have been charged for the
Space for months 13-24 of the agreed term; plus
c. 50% of the monthly recurring fees that would have been charged for the
Space for months 25 through the end of the agreed term.
6. Level 3 shall use reasonable efforts to complete the build-out and make the
Space available to Customer on or before the date requested by Customer. In the
event that Level 3 fails to complete the build-out within sixty (60) days
Page 11 of 17
<PAGE>
of the date requested by Customer, then Customer may ??inate its rights to use
such Space and receive a refund ??y fees paid for the use or build-out of such
Space.
7. Customer shall abide by any posted or otherwise communicated rules relating
to use of, access to, or security measures respecting the Space. In the event
that unauthorized parties gain access to the Space through access cards, keys or
other access devices provided to Customer. Customer shall be responsible for any
damages incurred as a result thereof. Customer shall be responsible for the cost
of replacing any security devices lost or stolen after delivery thereof to
Customer. In addition, Level 3 shall have the right to terminate Customer's use
of the Space or the Services in the event that: (a) Level 3's rights to use the
facility within which the Space is located terminates or expires for any reason;
(b) Customer has violated the terms hereof or of any Customer Order submitted
hereunder; (c) Customer makes any material alterations to the Space without
first obtaining the written consent of Level 3; (d) Customer allows personnel or
contractors to enter the Space who have not been approved by Level 3 in advance;
or (e) Customer violates any posted or otherwise communicated rules relating to
use of or access to the Space. Level 3 shall use reasonable efforts to notify
Customer of any events that may result in termination of the use of the Space or
delivery ??ervices.
8. Level 3 reserves the right to change the location or configuration of the
Space, provided, however, that Level 3 shall not arbitrarily or discriminatorily
require such changes. Level 3 and Customer shall work in good faith to minimize
any disruption in Customer's services that may be caused by such changes in
location or configuration of the Space.
9. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.
10. Prior to occupancy and during the term of use of any Space, Customer shall
procure and maintain the following minimum insurance coverage: (a) Workers'
Compensation in compliance with all applicable statutes of appropriate
jurisdiction. Employer's Liability with limits of $500,000 each accident; (b)
Commercial General Liability with combined single limits of $1,000,000 each
occurrence; and (c) "All Risk" Property insurance covering all of Customers
personal property located in the Space. Customer's Commercial General Liability
policy shall be endorsed to show Level 3 (and any underlying property owner, as
requested by Level 3) as an additional insured. All policies shall provide that
Customer's insurers waive all rights of subrogation against Level 3. Customer
shall furnish Level 3 with certificates of insurance demonstrating that Customer
has obtained the required insurance coverages prior to occupancy of the Space.
Such certificates shall contain a statement that the insurance coverage shall
not be materially changed or cancelled without at least thirty (30) days prior
written notice to Level 3. Customer shall require any contractor entering the
Space on its behalf to procure and maintain the same types, amounts and coverage
extensions as required of Customer above.
11. The liability of Level 3 for damages arising out of the furnishing of
Services or the Space, including but not limited to mistakes, omissions,
interruptions, delays, tortious conduct or errors, or other defects arising out
of the failure to furnish Services or Space, whether caused by acts of
commission or omission, shall be limited to a prorated refund of the charges
paid by Customer for the use of the Space hereunder. The extension of such
refunds shall be the sole remedy of Customer and the sole liability of Level 3.
Page 12 of 17
<PAGE>
Terms and Conditions
Internet Access - Dedicated and Dial Up
The following Terms and Conditions shall be applicable to dedicated and dial-up
Internet Access Service (the "Internet Access Services") ordered by Customer
under any Customer Order.
1. Any state or federal tariffs applicable to the Internet Access Services to
be delivered under any Customer Order are incorporated into the terms thereof.
The Internet Access Services shall at all times be used in compliance with Level
3's then-current Acceptable Use Policy and Privacy Policy, as amended by Level 3
from time to time and which are available through Level 3's web site.
2. The nonrecurring charges and monthly recurring rates for the Internet
Access Services provided by Level 3 to Customer shall be set forth in each
Customer Order.
3. Customer hereby agrees to pay for the Internet Access Services for the
period of time specified in each Customer Order, which period shall commence
with the initiation of delivery of such Internet Access Services. The rates and
other charges set forth in each Customer Order are established in reliance on
the term and/or volume commitment made therein. In the event that Customer
terminates Internet Access Services ordered in any Customer Order or in the
event that the delivery of Internet Access Services is terminated due to a
failure of Customer to satisfy the requirements set forth herein or in the
Customer Order prior to the end of the agreed term, Customer shall (unless
Customer has made a Revenue Commitment) pay a termination charge equal to the
termination or other charges paid or to be paid by Level 3 for services
purchased from other sources used to deliver the Internet Access Services to
Customer, plus the percentage of the monthly recurring charges for the
terminated Internet Access Services calculated as follows:
a. 100% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 1-12 of the agreed term; plus
b. 75% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 13-24 of the agreed term; plus
c. 50% of the monthly recurring charge that would have been incurred for the
Internet Access Service for months 25 through the end of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Internet Access
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
4. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.
5. This Section 5 shall apply only to Customers who order Dial-Up Internet
Access Services. The Dial-Up Internet Access Services shall be used only by an
officer, director, employee or agent ("Employee") of Customer. Customer shall
assure that each Employee accessing the Dial-Up Internet Access Service abides
by these Terms and Conditions. Prior to any Employee accessing Dial-Up Internet
Access Services, such Employee will be required to accurately complete an on-
line registration process. During this registration process, each Employee will
be required to identify himself/herself through some means satisfactory to Level
3. Pursuant to the registration process, by clicking an "ACCEPT" icon, each
Employee will (i) agree to accurately complete the registration; (ii) agree to
abide by all of the provisions, terms, limitations, conditions and restrictions
of these Terms and Conditions; and (iii) agree to use the Dial-Up Internet
Access Services in accordance with any requirements set forth in the online
registration process and for the legitimate business purposes of Customer only.
Each Employee will also receive a password which such Employee will agree to
keep in strict confidence and which will be required whenever accessing the
Dial-Up Internet Access Services.
Page 13 of 17
<PAGE>
Standard Service Level Agreement (SLA)
--------------------------------------
Release 1
---------
Internet Dedicated Access
Dedicated Internet Access service will be backed by a Standard Service Level
Agreement that has two components: a Service Delivery SLA and a Network
Performance SLA.
NOTE: The total number of credits per month for both Service Delivery and
Network Performance is limited to four days.
Service Delivery SLA
- --------------------
. 30 Calendar Day Installation Guarantee for Customers buying Dedicated
Internet Access in speeds from 64 Kbps - 1.544 Kbps within the Standard
Service Area..
. 45 Calendar Day Installation Guarantee for Customers buying Dedicated
Internet Access in speeds from 3 Mbps - 45 Mbps within the Standard Service
Area.
. Single toll-free number to reach Level 3 Customer Service for all customer
issues, including technical, billing, and product inquiries.
. Time to Respond - Within 30 minutes
. 2 hour calendar month Average Time To Repair (ATTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:
. Any customer inquiry to the Level 3 Customer Service Center that results in
a Time to Respond of 30 minutes will result in a one day service credit
when the customer notifies Level 3 of the failure.
. ATTR is calculated as a monthly average. All reported customer trouble
tickets will be totaled over the month, then the average time to close each
ticket will be calculated. If the ATTR is greater than 2 hours, the
customer will receive a one day service credit.
. Credits will only be applied to events where the Customer reports a failure
to the Level 3 Customer Care organization. Customers must report any
Service Delivery failures within five business days of the event.
Network Performance SLA
- -----------------------
. Service Availability
--------------------
. Availability refers to customer's access point to the Level 3 Internet
network, including their Level 3 provided local access circuit, and
the customer's port.
. Unavailability Events are defined as any outage of the Level 3
provided local access circuit and the customer's port of longer than
15 consecutive minutes.
. The Availability Guarantee does not extend to the performance of
Internet networks controlled
Page 14 of 17
<PAGE>
by other companies, or traffic exchange points (including NAPs and MAEs)
which are controlled by other companies.
. Availability does not include regularly scheduled or emergency maintenance
events, or customer caused outages or disruptions.
. Customers may report service unavailability events of longer than 15
consecutive minutes to Level 3 customer service within 48 hours of the
event. If the event is confirmed by Level 3 customer service, the customer
will receive a pro-rated service credit that equals the time of the
unavailability.
40 ms One-Way Delay Guarantee
. The Delay guarantee refers to the average delay parameters among the Level
3 Gateway sites in the United States. It does not extend to the customer's
local access circuit, transit or peering connections, or to circuits to
the traffic exchange points, including NAPs and MAEs.
. Delay is measured as the average delay, over a calendar month, of traffic
between all major Gateways on the Level 3 U.S. Internet network.
. Level 3 will publicly report the Average Monthly Delay measurement for the
Level 3 U.S. Internet Network at the end of every month.
. If the customer reports that Level 3 has failed to meet the Delay
guarantee, and this is confirmed by Level 3 customer service, the customer
will be issued one day service credit.
NOTES
. All measurements are based on monthly averages.
. These guarantees only apply to the Level 3 Internet Network. They do not
apply to NAP or transit connections, or to any traffic once it leaves the
Level 3 network.
. This SLA does not apply to periods of regularly scheduled or emergency
maintenance that Level 3 performs on its network or associated hardware and
software.
. Credits will only be applied to events where the Customer reports a network
performance failure to the Level 3 Customer Care organization.
. Customers must report any Network Performance failures (unavailability or
delay) within 48 hours (two business days) of the service affecting event
in order to receive a credit. Customers must report any Service Delivery
failures within five business days of the event.
Page 15 of 17
<PAGE>
Terms and Conditions
Managed Modem -- Dedicated, Quickstart and Transit Services
The following Terms and Conditions shall be applicable to services required to
allow access to "Dedicated Services," "Dedicated Service with QuickStart" and
"Transit Services" as offered by Level 3 (the "Managed Modem Services")ordered
by Customer under any Customer Order.
1. Any state or federal tariffs applicable to the Managed Modem Services to be
delivered under any Customer Order are incorporated into the terms thereof. The
Managed Modem Services shall at all times be used in compliance with Level 3's
then-current Acceptable Use Policy and Privacy Policy, as amended by Level 3
from time to time and which are available through Level 3's web site.
2. In the event Customer orders "Dedicated Service," end user traffic will be
routed through and aggregated in Level 3's facility, sent to the Customer's
Premises via a dedicated circuit, and then routed to its final destination by
Customer. In the event that Customer orders "Transit Services," End User traffic
will be routed to Level 3's facility and then routed to its final destination by
Level 3 via the Internet. Dedicated Service with "QuickStart" will initially be
provisioned to the Customer in the same fashion as Transit Services, until such
time as Level 3 has provisioned the dedicated circuit to send end user traffic
from Level 3's facility to the Customer's Premises. QuickStart will then be
integrated to standard Dedicated Service. Customers ordering Dedicated Services
will be required to make a portion of the Premises available to Level 3 for the
placement of equipment necessary to provide such Dedicated Services. For
Dedicated Service, all Customer CPE as well as the private line necessary to
support this service will be ordered, installed and managed by Level 3. Any
telephone numbers assigned to Customer for the purpose of providing Managed
Modem Services hereunder shall be property of Customer; PROVIDED, however, that
Level 3 shall be obligated to release such numbers to Customer upon expiration
or termination hereof if and only if Customer is then in compliance with all of
the terms contained herein or in the Standard Terms and Conditions.
3. The nonrecurring charges and monthly recurring rates for the Managed Modem
Services provided by Level 3 to Customer shall be set forth in each Customer
Order. Level 3 will dedicate the specified number of ports to Customer in the
Level 3 facilities as identified in each Customer Order. Customer may be
responsible for additional monthly charges if Customer's use of the Managed
Modem Services requires and utilizes more ports than the number committed to and
ordered by Customer.
4. Customer hereby agrees to pay for the Services for the period of time
specified in each Customer Order, which period shall commence with the
initiation of delivery of such Managed Modem Services. The rates and other
charges set forth in each Customer Order are established in reliance on the term
commitment made therein. In the event that Customer terminates Managed Modem
Services ordered in any Customer Order or in the event that the delivery of
Managed Modem Services is terminated due to a failure of Customer to satisfy the
requirements set forth herein or in the Customer Order prior to the end of the
agreed term, Customer shall (unless Customer has made a Revenue Commitment) pay
a termination charge equal to the termination or other charges paid or to be
paid by Level 3 for services purchased from other sources used to deliver the
Managed Modem Services to Customer, plus the percentage of the monthly recurring
charges for the terminated Managed Modem Services calculated as follows:
a. 100% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 1-12 of the agreed term; plus
b. 75% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 13-24 of the agreed term; plus
c. 50% of the monthly recurring charge that would have been incurred for the
Managed Modem Service for months 25 through the end of the agreed term.
Customer may, in the event that a Revenue Commitment is made and is then being
satisfied by Customer, terminate, rearrange or reconfigure the Managed Modem
Services ordered under a Customer Order without payment of the termination
charge specified above; PROVIDED, HOWEVER, that Customer shall be responsible
for payment of Level 3's then-current standard nonrecurring charges for such
termination, rearrangement or reconfiguration.
5. Level 3 provides only access to the Internet; Level 3 does not operate or
control the information, services, opinions or other content of the Internet.
Customer agrees that it shall make no claim whatsoever against Level 3 relating
to the content of the Internet or respecting any information, product, service
or software ordered through or provided by virtue of the Internet.
Page 16 of 17
<PAGE>
Standard Service Level Agreement (SLA)
--------------------------------------
Release 1
---------
Managed Modem
Managed Modem service will be backed by a Service Delivery SLA.
NOTE: The total number of credits per month is limited to four days.
Service Delivery SLA
- ---------------------
. 30 Calendar Day Installation Guarantee for Customers buying Managed Modem
service in speeds from 64 Kbps - 1.544 Kbps within the Standard Service
Area.
. 45 Calendar Day Installation Guarantee for Customers buying Managed Modem
service in speeds from 3 Mbps - 45 Mbps within the Standard Service Area.
. Single toll-free number to reach Level 3 Customer Service for all customer
issues, including technical, billing, and product inquiries.
. Time to Respond - Within 30 minutes
. 2 hour calendar month Average Time To Repair (ATTR)
If Level 3 fails to meet any of the guarantees above, Level 3 will review all
reported failures at the end of the month, and calculate the applicable credits:
. Any customer inquiry to the Level 3 Customer Service Center that results in
a Time to Respond of more than 30 minutes will result in a one day service
credit when the customer notifies Level 3 of the failure.
. ATTR is calculated as a monthly average. All reported customer trouble
tickets will be totaled over the month, then the average time to close each
ticket will be calculated. If the ATTR is greater than 2 hours, the
customer will receive a one day service credit.
. Credits will only be applied to events where the Customer reports a failure
to the Level 3 Customer Care organization. Customers must report any
Service Delivery failures within five business days of the event.
Page 17 of 17
<PAGE>
CUSTOMER ORDER SUMMARY
[LEVEL (3)
Order Date: 21-Jun-99 COMMUNICATIONS LOGO]
Quote ID: 000002322
CUSTOMER INFORMATION: BILLING INFORMATION:
Site ID: 8007 Site ID: 8007
Name: EBASE One Corporation Name: EBASE One Corporation
Address: 5060 Richmond Ave Address: 5060 Richmond Ave
City: Houston City: Houston
State: TX State: TX
Zip: 77057-6208 Zip: 77057-6208
Contact: Scott Feuless
Phone: (713) 975-8700
Fax: (713) 781-5535
PRODUCT DESCRIPTION AND CHARGES:
<TABLE>
<CAPTION>
Monthly Recurring Non-Recurring
SO# Product Quantity Amount Amount Order Type
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10000 Telephony Colocation 1 ** ** New
Total: 1 ** **
</TABLE>
CUSTOMER COMMITMENT:
Volume: ** Term: 3 Year Ramp Up (Months): 6
CUSTOMER APPROVAL:
This Customer Order is governed by Level 3 Communication LLC's Terms and
Conditions for Delivery of Service (which are available for Customer's review
either upon request or on Level 3's web site), which are hereby incorporated
into this Customer Order. Neither party shall be liable for any indirect,
incidental, special, consequential, exemplary or punitive damages (including but
not limited to damages for lost profits or lost revenues), whether or not caused
by the acts or omissions or negligence of its employees or agents, and
regardless of whether such party has been informed of the possibility or
likelihood of such damages. Relevant Service Detail forms are attached hereto
setting forth specific information regarding the Services ordered by Customer.
Authorized Customer Signature: /s/ Robert Horn 19-Aug-99
------------------------
Authorized Customer Name: Robert Horn Title: CFO
------------------------ ------------------
18
<PAGE>
CUSTOMER ORDER SUMMARY
[LEVEL (3)
Order Date: 13-Jul-99 COMMUNICATIONS LOGO]
Quote ID: 000005725
CUSTOMER INFORMATION: BILLING INFORMATION:
Site ID: 8007 Site ID:
Name: EBASE One Corporation Name:
Address: 5060 Richmond Ave Address:
City: Houston City:
State: TX State:
Zip: 77057-6208 Zip:
Contact: Scott Feuless
Phone: (713) 975-8700
Fax: (713) 781-5535
PRODUCT DESCRIPTION AND CHARGES:
<TABLE>
<CAPTION>
Monthly Recurring Non-Recurring
SO# Product Quantity Amount Amount Order Type
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10000 Telephony Colocation 1 ** ** New
10001 Telephony Colocation 1 ** ** New
10002 Telephony Colocation 1 ** ** New
Total: 3 ** **
</TABLE>
CUSTOMER COMMITMENT:
Volume: ** Term: 1 Year Ramp Up (Months): 0
CUSTOMER APPROVAL:
This Customer Order is governed by Level 3 Communication LLC's Terms and
Conditions for Delivery of Service (which are available for Customer's review
either upon request or on Level 3's web site), which are hereby incorporated
into this Customer Order. Neither party shall be liable for any indirect,
incidental, special, consequential, exemplary or punitive damages (including but
not limited to damages for lost profits or lost revenues), whether or not caused
by the acts or omissions or negligence of its employees or agents, and
regardless of whether such party has been informed of the possibility or
likelihood of such damages. Relevant Service Detail forms are attached hereto
setting forth specific information regarding the Services ordered by Customer.
Authorized Customer Signature: /s/ John Frazier
------------------------
Authorized Customer Name: John Frazier Title: CEO
------------------------ ------------------
19
<PAGE>
EXHIBIT 10.9
** indicates information which has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
Asterisks appear on page 2, 3, 9, and 12.
- --------------------------------------------
Licensee Name: ebaseOne
- --------------------------------------------
Agreement No.: EBAS-MXH-082099
- --------------------------------------------
Effective Date: September 10, 1999
- --------------------------------------------
marimba(R)
Master License Agreement
This Master License Agreement ("Agreement") by and between Licensee (as
identified below) and Marimba, Inc., located at 440 Clyde Avenue, Mountain View,
California 94043 ("Marimba") applies to the Marimba software products and
services specified below or later ordered under this Agreement and is effective
as of the date set forth above (the "Effective Date").
Licensee Information
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
Licensee: ebaseOne Corporation Contact: Scott Feuless, VP of Technical Operations
- ----------------------------------------------------------------------------------------------------
Address: 6060 Richmond Avenue, Phone: 713-975-8700
Houston, Texas 77057-6205
- ----------------------------------------------------------------------------------------------------
E-Mail: [email protected] Fax: 713-781-5535
- ----------------------------------------------------------------------------------------------------
</TABLE>
Product and Fee Information
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Product: Quantity: Price User and Configuration
Restrictions:
<S> <C> <C> <C>
CASTANET INFRASTRUCTURE SUITE - As needed on a Monthly Application See Section 2
APPLICATION ACCESS LICENSES fee per use basis. Access License Fees
[CIS-AAL-4.0-U] (see Attachment A). Name of Single Application:
Components:
-Castanet Tuner
-Castanet Transmitter Primary Function:
-Transmitter Administrator
-Channel Copier
-License Installer
-Certificate Manager
-Castanet Gateway
-Castanet Proxy
CASTANET INVENTORY SUITE - As needed on a Monthly Inventory See Section 2
INVENTORY ACCESS LICENSE fee per use basis. Access License Fees
[CIIS-4.0-U] (see Attachment A).
Components:
-Inventory Manager
-Inventory Service
CASTANET SUBSCRIPTION SUITE As needed on a Monthly Application See Section 2
[CSS-4.0-U] fee for per basis. Access License Fees
Components: (see Attachment A).
-Subscription Manager
-Subscription Service
MARIMBA DOCSERVICE ACCESS As needed on a Monthly DocService See Section 2
LICENSE fee per use basis. Access License Fees
[MDSAL-1.0-U] (see Attachment A).
Components:
- Marimba DocService application
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASTANET INFRASTRUCTURE SUITE As needed on a Monthly Server Access See Section 2
SERVER ACCESS LICENSES fee per use basis. License Fees (see
(CIS-SAL-4.0-U) Attachment A).
Components:
-Castanet Tuner
-Castanet Transmitter
-Transmitter Administrator
-Channel Copier
-License Installer
-Certificate Manager
-Castanet Gateway
-Castanet Proxy
CASTANET MANAGEMENT SUITE 1 ** See Section 2
(CMS-4.0-U)
Components:
-Transmitter Administrator Pro
-7uner Packager
-Channel Copier
-Transmitter Reporter
-Browser Integration Module
-Tuner Administrator
CASTANET PRODUCTION SUITE 1 ** See Section 2
[CPS-4.0-U]
Components:
-Publisher
-Castanet Application Packager
ASP ATTACHMENT 1 ** See Section 2 and ASP Attachment
(CRL-4.0-U]
Components:
-Tuner Branding Wizard
-Custom Redistribution License
- ------------------------------------------------------------------------------------------------------------------------
Support and Maintenance, Implementation
Services and Training:
Backline Silver Service [SILVER-U] For the Term (and Included in Monthly
any renewal terms) Access License Fees.
Implementation Services [CON-IMP-U] 10 days **
Architectural Implementation Services 2 days **
[CON-ARC-U]
Training Days (TNG-U] 6 days **
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Payment Terms:
Implementation and Architectural Services fees: net 30 days from commencement of
either Implementation Services or Architectural Services.
Training Days fees: net 30 days from commencement of Training.
Monthly Access License Fees: as set forth in Attachment A.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Total Total Fees:
Implementation and Architectural Services fees: **
Training Days fees: **
Month Access License Fees: as set forth in Attachment A.
- --------------------------------------------------------------------------------
This Agreement includes and incorporates herein by reference the attached
- -------------------------------------------------------------------------
Standard Terms and Conditions and all Attachments, and contains, among other
- ----------------------------------------------------------------------------
things, warranty disclaimers liability limitations and use limitations For
- -----------------------------------------------------------------------
additional purchases, use an executed Marimba order form which references this
Agreement. Any different or additional terms of any related Licensee purchase
order, confirmation, or similar form shall have no force or effect. Acceptance
of a partial shipment shall constitute acceptance of the entire order. Accepted
and agreed to by the authorized representative of each party:
LICENSEE: MARIMA:
/s/ [ILLEGIBLE]^^ /s/ [ILLEGIBLE]^^
- -------------------------- ---------------------------
Name: [ILLEGIBLE] Name: Steve Williams
Title: Vice President or Technology Title: Vice President,
Operators Worlwide Sales
Date: 9/13/99 Date:
Notice Information: Notice Information:
See Licensee Information above 440 Clyde Avenue
Mountain View, CA 94043
Att: Legal Department
3
<PAGE>
marimba
Standard Terms and Conditions
1. Definitions.
Access License: any type of Castanet Infrastructure Suite Access License.
- --------------
Administrator: any Employee with access to or the right to use any component of
- -------------
an Administrative Suite.
Administrative Suite: a Castanet Management, Production and/or Subscription
- --------------------
Suite.
Client: an Endpoint which is a client computer.
- ------
Deployment and/or Deployed: means, with respect to a Licensee Client, that such
- --------------------------
Licensee Client or any software deployed by or through such Licensee Client is
in use or available for use by a Subscriber at any time during a given month.
Documentation: any technical specification documentation provided by Marimba
- -------------
with the Software. Unless otherwise noted, the Software and Documentation are
referred to collectively herein as "Software".
Employee: any employee of Licensee or an individual independent contractor using
- --------
the Software on Licensee's premises in the course of performing services on
behalf of Licensee and for whom Licensee remains responsible.
Endpoint: any computer or other device executing a Castanet Tuner or other
- --------
software capable of operating with or receiving updates from a Castanet
Infrastructure Suite.
Licensed Endpoint: any Endpoint for which Licensee has purchased a Castanet
- -----------------
Infrastructure Suite Access License.
Major Release: a Software release identified by an increase in the number to the
- -------------
left of the decimal point.
Minor Release: a Software release identified by an increase in the number to the
- -------------
right of the decimal point.
Server: an Endpoint which is a server computer.
- ------
Single Application: one (1) Castanet channel containing data or an application
- -------------------
with one (1) specific purpose or related set of functionality. By way of example
only, a word-processor and a spreadsheet program would not constitute a Single
Application even if both were run as a single Castanet channel or were
incorporated into the same general suite of applications. The name of each
Single Application and its primary function must be designated by Licensee in
the Product and Fee Information box or applicable Marimba order form.
Software: the Marimba software products in object code form specified in the
- --------
Product and Fee Information box above or in a subsequent order under this
Agreement.
Subscriber: means any person with the right to use any computer on which a copy
- ----------
of the Licensee Client is installed or any computer which is otherwise capable
of executing any software deployed with the Software.
Tuner: a Castanet Tuner (the client component of the Castanet Infrastructure
- -----
Suite) configured by Licensee for deployment on Licensed Endpoints.
2. Grant of License. Subject to the terms of this Agreement, Marimba grants
Licensee a non-transferable, non-sublicensable, non-exclusive license to use the
Software, but only in accordance with (i) the Documentation and (ii) the terms
and restrictions set forth herein.
2.1 CASTANET(R) INFRASTRUCTURE SUITE:
a. Scope of Use: Each Castanet Infrastructure Suite may only be used to
operate with Endpoints for which Licensee has purchased an Access License. Types
of Access Licenses:
Application Access License (AAL): Right to use the Castanet Infrastructure Suite
- --------------------------------
to deploy and manage a Single Application for use by one (1) user on one (1)
Client.
Server Access License (SAL): Right to use the Castanet Infrastructure Suite to
- ---------------------------
deploy and manage multiple applications on one (1) Server. A Server licensed
with an SAL may not utilize the Software to deploy or manage applications on
other Endpoints for which Licensee has not purchased an Access License.
b. Installation and Copies: Licensee may copy and install on Licensee's
computers for use only by Licensee's employees as many copies of the components
of the Castanet Infrastructure Suite as is necessary to support Licensed
Endpoints. Licensee may not resell, sublicense or distribute to any third-party
any component of the Castanet Infrastructure Suite, except for distribution of a
Tuner in accordance with the Custom Redistribution License.
2.2 CASTANET(R) INVENTORY SUITE
a. Scope of Use: Each copy of the Castanet Inventory Suite may only be used to
scan or otherwise operate with Licensed Endpoints for which Licensee has also
purchased a Castanet Inventory Access License. A "Castanet Inventory Access
License" is the right to use the Castanet Inventory Suite to scan one (1)
Licensed Endpoint.
b. Installation and Copies: Licensee may copy and install on Licensee's
computers as many copies of the components of the Inventory Suite as is
necessary to support its licensed usage. Licensee may not resell, sublicense or
distribute to any third-party any component of the Inventory Suite, except for
distribution of the Inventory Service as part of a Tuner in accordance with a
Custom Redistribution License.
MARIMBA(R) DOCSERVICE(TM)
a. Scope of Use: Each copy of the Marimba DocService application may only be
used to operate with Licensed Endpoints for which Licensee has purchased a
Marimba DocService Access License. A Marimba DocService Access License is the
right to use the Marimba DocService application for use by one (1) user on one
(1) Licensed Endpoint.
b. Licensee may copy and install on Licensee's computers as many copies of the
Marimba DocService application as is necessary to support its licensed usage.
Licensee may not resell, sublicense or distribute to any third-party any
component of the Marimba DocService application, except for distribution of the
Marimba DocService application as part of a Tuner in accordance with a Custom
Redistribution License.
4
<PAGE>
2.4 CASTANET(R) ADMINISTRATIVE SUITES
a. Scope of Use: Each Castanet Administrative Suite may only be used by one
(1) Administrator at any given time and by no more than three (3) Administrators
in total.
b. Installation and Copies: Licensee may copy and install on one (1) Licensee
computer one (1) copy of each Administrative Suite as set forth in the Product
and Fee Information box above. Licensee may make a reasonable number of copies
of each Suite solely for back-up purposes in accordance with Licensee's standard
back-up procedures. Licensee may not resell, sublicense or distribute to any
third-party any portion or component of a Suite, except for distribution of the
Subscription Service as part of a Tuner in accordance with a Custom
Redistribution License.
2.5 ASP ATTACHMENT (INCLUDING CUSTOM REDISTRIBUTION LICENSE): License rights
are as set forth in Attachment A.
2.6 EVALUATION SOFTWARE: Any Marimba software provided to Licensee on an
evaluation or beta test basis during the term of this Agreement ("Evaluation
Software") may be used by Licensee solely for internal evaluation purposes for a
period of time not to exceed thirty (30) days from receipt (unless such period
is extended by Marimba in writing). Notwithstanding anything else in this
Agreement, Marimba shall have no warranty, support, maintenance or other
obligation or liability of any type with respect to Evaluation Software and
Evaluation Software shall be subject to all other restrictions on Software
herein. Licensee shall treat all Evaluation Software as confidential and
proprietary information of Marimba and shall return to Marimba or destroy any
copies of Evaluation Software upon expiration of the evaluation period.
3. Restrictions. Licensee must reproduce the copyright notice and any other
notices that appear on the original Software on any copies and related media.
Licensee shall not (and shall not allow any third party to): (i) decompile,
disassemble, or otherwise reverse engineer or attempt to reconstruct or discover
any source code, underlying ideas, algorithms, file formats or programming or
interoperability interfaces of the Software by any means whatsoever (except to
the extent that applicable law prohibits reverse engineering restrictions), (ii)
remove any product identification, copyright or other notices, (iii) lease,
lend, or use the Software for timesharing, service bureau, hosting or like
purposes, (iv) modify, or, except to the extent expressly authorized in Section
2, incorporate into or with other software or create a derivative work of any
part of the Software, or (v) publicly disseminate performance information or
analysis (including, without limitation, benchmarks) from any source relating to
the Software. Notwithstanding anything else, Marimba and its suppliers retain
all title to, and, except as expressly and unambiguously licensed herein, all
rights to the Software, all copies thereof and all related documentation and
materials.
Licensee acknowledges that the Software is not intended for use in connection
with any high risk or strict liability activity (including, without limitation,
air or space travel, power plant operation, or life support or emergency medical
operations) and that Marimba makes no warranty and shall have no liability in
connection with any use of the Software in such situations.
4. Payment. Licensee shall pay the fees set forth in the Product and Fee
Information box and any subsequent order form within thirty (30) days of the
applicable purchase date unless otherwise specified. Licensee shall be
responsible for all taxes, withholdings, duties and levies arising from the
Agreement (excluding taxes based on the net income of Marimba). All payments
shall be made in U.S. dollars in the U.S. Any late payments shall be subject to
a service charge equal to 1.5% of the amount due (calculated on a monthly basis)
or the maximum amount allowed by law, whichever is less.
5. Term of Agreement. This Agreement is effective as of the Effective Date and
terminates three (3) years thereafter (the "Term"). Thereafter, this Agreement
may be renewed at the election of Licensee for up to two (2) additional one (1)
year terms on the same terms and conditions set forth herein. Licensee will
provide Marimba with a notice of Licensee's election to renew the Agreement no
later than sixty (60) days prior to the expiration of the then-current term. If
Licensee does not timely notify Marimba that Licensee elects to renew, this
Agreement will terminate at the conclusion of the then-current term. Either
party may terminate this Agreement if the other party fails to cure any material
breach of this Agreement within thirty (30) days after written notice of such
breach. Upon termination, Licensee shall immediately cease all use of the
Software and return or destroy all copies of the Software and all portions
thereof and so certify to Marimba. Sections under the headings "Restrictions",
"Payment", "Term of Agreement", "Limitation of Remedies and Damages",
"Encryption and Authentication", "Privacy", "Export Restrictions", "Government
End-Users", "Confidential Information", "General" and the disclaimer of
warranties in Section 6.4 shall survive any termination or expiration of this
Agreement. Termination is not an exclusive remedy and all other remedies will be
available whether or not this Agreement is terminated.
6. Limited Warranty and Disclaimer.
6.1 Marimba warrants to Licensee that for a period of thirty (30) days from the
Effective Date, the Software, if operated as directed, will substantially
achieve the functionality described in the Documentation. Marimba does not
warrant, however, that Licensee's use of the Software will be uninterrupted or
that the operation of the Software will be error-free or secure. Marimba's sole
liability (and Licensee's exclusive remedy) for any breach of this warranty
shall be, in Marimba's sole discretion, to use commercially reasonable efforts
to provide Licensee with an error-correction or work-around which allows the
Software to substantially achieve the same functionality described in the
Documentation, or if such remedies are impracticable, to refund the license fee
paid for the Software. Marimba shall have no obligation with respect to a
warranty claim unless notified of such claim within the warranty period.
6.2 Marimba represents and warrants that the Software is Year 2000 Compliant.
"Year 2000 Compliant" means that the then-current version of the Software, when
used in accordance with the Documentation: (i) is capable of performing date and
time calculations between the year 1999 and the year 2000 and through leap years
where required and (ii) represents all date data explicitly and unambiguously at
5
<PAGE>
input, internal manipulation, and file output by using a full four-digit year
when appropriate. This warranty applies to the Software on a stand-alone basis
and does not apply to Software that is: (i) combined or operated with any other
software or hardware, to the extent such combination causes the Software not to
be Year 2000 Compliant; (ii) is modified or altered by Licensee or any third
party; or (iii) otherwise operated other than in accordance with the
Documentation and this Agreement. This Year 2000 Compliant warranty shall expire
on the anniversary of the Effective Date in 2001 and remedies for a breach of
this Section 6.2 shall be limited to the remedies set forth in Section 6.1.
6.3 This warranty shall not apply to the Software if modified by any party other
than Marimba or if used in conjunction with hardware or software not specified
in the Documentation. Marimba makes no warranties with respect to any separate
third party code provided with the Software, including any Java virtual machine.
6.4 THIS IS A LIMITED WARRANTY, AND IT IS THE ONLY WARRANTY MADE BY MARIMBA.
NEITHER MARIMBA NOR ITS SUPPLIERS MAKES ANY OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF OR RELATING TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT OF THIRD
PARTIES' RIGHTS. LICENSEE MAY HAVE OTHER STATUTORY RIGHTS. HOWEVER, TO THE FULL
EXTENT PERMITTED BY LAW, THE DURATION OF STATUTORILY REQUIRED WARRANTIES, IF
ANY, SHALL BE LIMITED TO THE LIMITED WARRANTY PERIOD.
NO DEALER, AGENT, OR EMPLOYEE OF MARIMBA IS AUTHORIZED TO MAKE ANY
MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO THIS LIMITED WARRANTY.
7. Services.
7.1 Support and Maintenance.
7.1.1 Bronze Service. For such period as Licensee has paid the applicable
annual support and maintenance fee, Marimba will provide Licensee with backline
"Bronze Service" consisting of the following: (i) telephone and/or email support
regarding use and deployment of the Software from 6:00 a.m. to 5:00 p.m. Pacific
Time on Monday through Friday (excluding Marimba holidays) ("Hotline Support")
to up to two (2) designated employees of Licensee ("Designated Licensee
Contacts") and (ii) generally commercially released code corrections, patches
and updates (Major and Minor Releases) of the same Software product (excluding
any new or different products) ("Maintenance"). Hotline Support is provided for
the current release of the Software and the previous sequential release for a
period of twelve (12) months from the date of the current release; Maintenance
is provided for the current release of the Software and for production system
down problems for the release prior to the current release (ii) for a period of
six (6) months in the event the current release is a Minor Release or (i) for a
period of twelve (12) months in the event the current release is a Major
Release. Hotline Support excludes any general questions regarding JAVA or any
other computer language. Support for the SDK shall not include engineering level
support for Integration of the UpdateNow Run Time Code (which service is
available separately at Marimba's standard rates for Implementation Services).
7.1.2 Silver and Gold Service. Payment for Silver Service entitles Licensee
to Bronze Service plus Hotline Support on a twenty-four (24) hours per day,
seven (7) days per week basis ("7X24 Support"). Payment for Gold Service
entitles Licensee to Silver Service plus: (i) a designated Marimba support
engineer point of contact for Licensee (a "Technical Account Manager"), (ii) a
two (2) day on-site visit by the Technical Account Manager (U.S. only; travel
and related expenses are obligation of Licensee) to become familiar with
Licensee's systems and personnel, (iii) monthly Licensee support status reports
and (iv) access to Marimba's early release program (subject to the terms of such
program). Licensee shall be entitled to any additional Designated Licensee
Contacts or Technical Account Managers for which it has paid the applicable fee
to Marimba. Licensee must contract for the same level of support and maintenance
for all Software licensed by Licensee. 7X24 Support during nonstandard Hotline
Support hours shall be limited to support for production down systems only.
7.1.3 Renewals. Marimba's obligation to provide the above-described
support and maintenance and Licensee's obligation to pay the then-current
applicable annual support and maintenance fee shall renew automatically upon
each anniversary of the Effective Date (or such other consolidated Software
purchase date agreed to by the parties in writing), unless either Licensee or
Marimba has given the other party prior written notice of cancellation. If
Licensee elects not to renew support and maintenance for successive terms,
Licensee may reenroll only upon payment of the applicable annual fee plus the
pro rata portion of the annual fee covering the period of time from the date
service lapsed to the date service was renewed. Notwithstanding any lapse, the
original anniversary date for service renewal continues unchanged.
7.2 Training. Each Training Day shall entitle one (1) employee of
Licensee to attend one (1) day of a standard Marimba product training session
held at an authorized Marimba Training Center, training classes have minimum day
number requirements per attendee. Any Training Days not used by Licensee within
one-hundred twenty (120) days of purchase shall expire and become void.
7.3 Implementation Services. Marimba (or an agent acting on its behalf) shall
provide the number of person-days of professional implementation support
services ("Implementation Services") set forth in the Product and Fee
Information box, above. Marimba warrants that the Implementation Services shall
be performed in a professional and workmanlike manner. The parties acknowledge
that the scope of the Implementation Services provided hereunder consists solely
of delivery of: (i) Software installation and deployment assistance and/or (ii)
additional related Marimba copyrighted software or code. Implementation Services
designated as "Architectural" services shall also include assistance with
respect to planning and designing the implementation of the Software. Licensee
shall have a license right to use anything delivered as part of the
Implementation Services subject to the terms of its license to use the Software,
but Marimba shall retain all right, title and
6
<PAGE>
interest in and to any such work product, code or Software and any derivative,
enhancement or modification thereof created by Marimba (or its agents). The date
and time for all Implementation Services shall be as mutually reasonably agreed
upon by the parties; provided, however, that any days not used by Licensee
within one-hundred twenty (120) days of the purchase date shall expire and
become void. Licensee shall be responsible for reasonable travel and related
expenses. Licensee may purchase additional Implementation Service days at
Marimba's standard rates for such services. A "person-day" of Implementation
Services consists of an eight-hour day, overtime shall be available only in
minimum one-half day increments.
a. Limitation of Remedies and Damages.
EXCEPT FOR DEATH OR PERSONAL INJURY, NEITHER MARIMBA NOR ITS SUPPLIERS SHALL BE
LIABLE TO LICENSEE (WHETHER UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR ANY
OTHER LEGAL OR EQUITABLE THEORY): (I) FOR ANY AMOUNTS IN EXCESS OF THE FEES PAID
TO MARIMBA BY LICENSEE FOR THE SOFTWARE OR (11) FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS, EVEN IF MARIMBA HAS BEEN MADE AWARE OF
THE POSSIBILITY OF SUCH DAMAGES. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATIONS AND
EXCLUSIONS MAY NOT APPLY TO YOU (LICENSEE). MARIMBA SHALL NOT BE LIABLE FOR
INTERRUPTION OF USE OR LOSS OR CORRUPTION OF DATA OR FAILURE OF THE SOFTWARE TO
PROVIDE SECURITY.
EXCEPT ANY INDEMNIFICATION CLAIM OR CLAIM ARISING UNDER THE HEADINGS
"RESTRICTIONS", "PRIVACY", "EXPORT RESTRICTIONS" AND "CONFIDENTIAL INFORMATION",
LICENSEE SHALL NOT BE LIABLE UNDER THIS AGREEMENT FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS.
9. Indemnification. Marimba shall indemnify and hold harmless Licensee against
any amounts awarded in a settlement or by a final court decision (and reasonable
attorneys' fees in connection therewith) arising from any claim of infringement
of a valid U.S. patent, U.S. copyright, or U.S. trademark or of misappropriation
of a trade secret in the U.S. asserted against Licensee by a third party based
upon Licensee's authorized use of the Software, provided that Marimba shall have
received from Licensee: (i) prompt notice of such claim (but in any event notice
in sufficient time for Marimba to respond without prejudice); (ii) the exclusive
right to control and direct the investigation, defense, and/or settlement of
such claim; and (iii) all reasonable necessary cooperation and assistance of
Licensee. In the event an infringement is determined or deemed likely to occur
by Marimba, or if required by settlement, Marimba may: (a) substitute for the
Software substantially similar programs and documentation, (b) procure for
Licensee the right to continue using the Software or (c) terminate the Agreement
upon thirty(30) days advance written notice and refund the license fee paid for
the Software less depreciation as calculated on a three-year straight-line basis
commencing with the Effective Date. This Section 9 sets forth Licensee's sole
and exclusive remedy with respect to any claim of intellectual property
infringement. The foregoing indemnification obligation of Marimba does not
apply: (1) if the Software is modified by any party other than Marimba, but
solely to the extent the alleged infringement is caused by such modification;
(2) the Software is combined with other non-Marimba products, processes or
materials, but solely to the extent the alleged infringement is caused by such
combination; (3) where the allegedly infringing activity continues after Marimba
has notified Licensee thereof or after Marimba has provided Licensee
modifications that would have avoided the alleged infringement; or (4) to any
third-party code contained within the Software.
10. Encryption and Authentication. The security mechanisms implemented by the
Software have inherent limitations, and Licensee must determine that the
Software sufficiently meets its requirements. Licensee must obtain a signed
digital certificate from a certificate authority in order to enable the
Software's encryption or authentication features and Licensee is responsible for
familiarizing itself with the limitations and restrictions of such certificates.
Licensee is responsible for maintaining the security of the environment in which
the Software is used and the integrity of the private key file used with the
Software.
11. Privacy. The Software contains features which may allow Licensee to collect
data from, control and/or monitor computers running Tuners or other components
of the Software deployed by Licensee without notice to or knowledge by end-
users. Licensee is solely responsible for, and assumes all liability with
respect to, all such activity, including, without limitation, notifying such
users and complying with all data collection, privacy and other regulations,
laws, industry standards and rights of others applicable to any such activity.
Licensee shall indemnify and hold Marimba harmless from and against any damages,
claims, losses, settlements, attorneys' fees and other expenses related to any
such activities or any claims in connection therewith.
12. Export Restrictions.
12.1 Licensee acknowledges that the Software contains encryption technology
which is subject to export restrictions by the United States government and
import restrictions by certain foreign governments. Licensee shall not and shall
not allow any third-party to remove or export from the United States or allow
the export or re-export of any part of the Software or any direct product
thereof: (i) into (or to a national or resident of) Cuba, Iran, Iraq, Libya,
North Korea, Sudan or Syria, (ii) to anyone on the U.S. Commerce Department's
Table of Denial Orders or U.S. Treasury Department's list of Specially
Designated Nationals or (iii) otherwise in violation of any restrictions, laws
or regulations of any United States or foreign agency or authority. Licensee
agrees to the foregoing and warrants that it is not located in, under the
control of, or a national or resident of any such prohibited country or on any
such prohibited party list. The Software is restricted from being used for the
design or development of nuclear, chemical, or biological weapons or missile
technology without the prior permission of the United States government.
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12.2 If the Software is identified as a not-for-export product, then, unless
Licensee has an exemption from the United States government, the following
applies: EXCEPT FOR EXPORT TO CANADA FOR USE IN CANADA, THE SOFTWARE AND ANY
UNDERLYING TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES OR TO ANY
FOREIGN ENTITY OR "FOREIGN PERSON" AS DEFINED BY U.S. GOVERNMENT REGULATIONS,
INCLUDING WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL
PERMANENT RESIDENT OF THE UNITED STATES.
13. Government End-Users. As defined in Federal Acquisition Regulations (FAR)
section 2.101 (or otherwise), the Software and accompanying documentation
licensed in this Agreement are deemed to be "commercial items" and "commercial
computer software" and "commercial computer software documentation." Consistent
with DFAR section 227.7202 and FAR section 12.212, any use, modification,
reproduction, release, performance, display, or disclosure of such commercial
software or commercial software documentation by the U.S. Government shall be
governed solely by the terms of this Agreement and shall be prohibited except to
the extent expressly permitted by the terms of this Agreement.
14. Confidential Information. Each party agrees that all code, inventions,
algorithms, know-how and ideas it obtains from the disclosing party and all
other business, technical and financial information it obtains from the
disclosing party are the confidential property of the disclosing party
("Confidential Information"), provided that it is identified as confidential at
the time of disclosure; any software, documentation or technical information
provided by Marimba (or its agents) shall be deemed Confidential Information of
Marimba without any marking or further designation. Except as expressly and
unambiguously allowed herein, the receiving party will hold in confidence and
not use or disclose any Confidential Information and shall similarly bind its
employees in writing. The receiving party's nondisclosure obligation shall not
apply to information which: (i) the receiving party can document was already
known to it before it received the Confidential Information; (ii) is or has
become public knowledge through no fault of the receiving party; (iii) is
rightfully obtained by the receiving party from a third party without breach of
any confidentiality obligation; (iv) is independently developed by employees of
the receiving party who had no access to such information; or (v) is required to
be disclosed pursuant to a regulation, law or court order (but only to the
minimum extent required to comply with such regulation or order).
15. Co-Marketing.
15.1 Joint Press Release. Licensee agrees to issue a joint press release ("Press
Release") on a mutually agreed upon date or the first business day following the
ninetieth (90th) day from the Effective Date, whichever is earlier. Each party
will have the right to approve the Press Release in advance, but such approval
will not be unreasonably delayed or withheld.
15.2 Customer Success Story. Licensee agrees to be the subject of a Customer
Success Story written by Marimba which will discuss Licensee's software
application(s) and use of the Software and its impact on Licensee's business.
Licensee will be able to approve all material in advance, but such approval will
not be unreasonably delayed or withheld. The Customer Success Story will be
delivered on a mutually agreed upon date not to exceed thirty (30) days from the
roll-out of the first software application deployed by Licensee with the
Software.
15.3 Customer Reference: Licensee agrees to be used as a customer reference for
Marimba customer prospects' inquiries as well as press inquiries. It is
understood that this will be a controlled effort and will be managed to ensure
minimum impact on Licensee. The objective would center on Licensee discussing
its software application(s) in reference to the Software in addition to the
positive experiences and support provided in the working relationship with
Marimba.
15.4 Customer Acknowledgement. Licensee agrees that Marimba may disclose
Licensee as a customer of Marimba.
16. General. Neither this Agreement nor any license hereunder is assignable or
transferable by Licensee without the prior written consent of Marimba; any
attempt to do so shall be void. Marimba may assign or transfer this Agreement in
whole or in part. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any partial exercise of any right or power
hereunder preclude further exercise. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be unenforceable or invalid,
that provision shall be limited to the minimum extent necessary so that this
Agreement shall otherwise remain in effect. This Agreement shall be governed by
the laws of the State of California and the United States without regard to
conflicts of laws provisions thereof, and without regard to the United Nations
Convention on the International Sale of Goods. The prevailing party in any
action to enforce this Agreement will be entitled to recover its attorneys' fees
and costs in connection with such action. Unless waived by Marimba in its sole
discretion, the jurisdiction and venue for actions related to the subject matter
hereof shall be the California state and United States federal courts located in
Santa Clara County, California. Any notice or report hereunder shall be in
writing to the notice address set forth above and shall be deemed given, upon
receipt, if by personal delivery or if sent by certified or registered U.S. mail
(return receipt requested), or one day after it is sent if by next day delivery
by a major commercial delivery service. Any waivers or amendments shall be
effective only if made in writing and signed by the parties. This Agreement is
the complete and exclusive statement of the mutual understanding of the parties
and supersedes and cancels all previous written and oral agreements and
communications relating to the subject matter of this Agreement. On Marimba's
written request Licensee shall funish Marimba with a signed certification
certifying that the Software is being used pursuant to the terms of this
Agreement including any copy and user limitations. With prior reasonable notice,
Marimba may audit the copies of the Software in use by Licensee provided such
audit is during regular business hours; Licensee is responsible for such audit
costs only in the event the audit reveals a discrepancy, of five percent (5%) or
greater, on the part of Licensee.
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Attachment A
------------
Application Service Provider Attachment
1. License Fees. Licensee shall pay Marimba the following license fees in
connection with usage of the Software:
<TABLE>
-------------------------------------------------------------------------------------------
<S> <C>
Monthly Application Access License Fee ** per Subscriber, per Single Application
-------------------------------------------------------------------------------------------
Monthly Inventory Access License Fee ** per Licensee Client
-------------------------------------------------------------------------------------------
Monthly DocService Access License Fee ** per Subscriber, per Licensee Client
-------------------------------------------------------------------------------------------
Monthly Server Access License Fee ** per server
-------------------------------------------------------------------------------------------
</TABLE>
A. Monthly Fees.
(i) Monthly Application Access License Fee: Licensee shall pay Marimba
--------------------------------------
the monthly Application Access License fee set forth above for each Single
Application on each Licensee Client in Deployment during any part of such month.
A separate Application Access License is required for each Subscriber with
access to each Single Application. The Application Access License fees shall
also apply to any productive use by Licensee of any Licensee Client (or other
component of the Software) for internal purposes other than directly supporting
Subscribers.
(ii) Monthly Inventory Access License Fee: Licensee shall pay Marimba the
------------------------------------
Monthly Inventory Access License fee set forth above for each Inventory Service
component on each Licensee Client in Deployment during any part of such month. A
separate Inventory Access License is required for each Licensee Client. The
Inventory Access License fees shall also apply to any productive use by Licensee
of the Inventory Service on any Licensee Client (or other component of the
Software) for internal purposes other than directly supporting Subscribers.
(iii) Monthly DocService Access License Fee: Licensee shall pay Marimba the
-------------------------------------
Monthly DocService Access License fee set forth above for each copy of
DocService on each Licensee Client in Deployment during any part of such month.
A separate DocService Access License is required for each Licensee Client. The
DocService Access License fees shall also apply to any productive use by
Licensee of DocService on any Licensee Client (or other component of the
Software) for internal purposes other than directly supporting Subscribers.
(iv) Monthly Server Access License Fee: Licensee shall pay Marimba the
---------------------------------
Monthly Server Access License fee set forth above for each Licensee Server
receiving applications or other data using any portion of the Castanet
Infrastructure Suite during any part of such month.
B. Minimum Monthly Fee Payments. Commencing on December 1, 1999 and
continuing monthly until expiration of the Agreement (including renewal terms,
if any), Licensee shall pay Marimba a non-refundable monthly license fee in
accordance with the table below (the "Minimum Monthly License Fee"). The Minimum
Monthly License Fee for each month may be applied against any license fees due
during such month, but in no event shall any unused portion of such fee be
refunded or otherwise credited to Licensee for any future month:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Months Minimum Monthly License Fee Amount
---------------------------------------------------------------------------
<S> <C>
1-6 $ **
---------------------------------------------------------------------------
7-12 $ **
---------------------------------------------------------------------------
13-18 $ **
---------------------------------------------------------------------------
19-24 $ **
---------------------------------------------------------------------------
25-36 $ **
(and each month thereafter for the du-
ration of each renewal term, if any)
---------------------------------------------------------------------------
</TABLE>
2. Payment and Reporting: Licensee shall provide Marimba with a monthly report
within fifteen (15) days of the end of each calendar month setting forth with
respect to such month: (i) the total number of Licensee Clients in Deployment,
(ii) the number of related required Application Access Licenses, (iii) the name
of each Single Application, (iv) the number of Inventory Access Licenses, (v)
the number of DocService Access Licenses, (vi) the number of Server Access
Licenses, and (vii) a calculation of all fees due to Marimba. Licensee will pay
an amount equal to the greater of: (a) the Minimum Monthly License Fee or (b)
the total monthly license fees calculated in accordance with the fee structure
in Section 1 (License Fees). Payment of the amount due shall accompany the
report and shall be due concurrently with the report. The monthly report shall
be in the form attached hereto as Attachment B and delivered both via U.S. Mail
to the Controller at Marimba and via email to report(R) marimba.com. Licensee
shall also provide Marimba with a non-binding annual forecast each November
setting forth an-
9
<PAGE>
ticipated sales for the subsequent year, the forecast may be changed by Licensee
at any time and in no event shall the forecast be used as the basis for any fee
or charge.
3. Custom Redistribution License Grants. Subject to all of the terms and
conditions of the Agreement and this CRL, Marimba hereby grants Licensee the
following non-exclusive, non-sublicensable rights:
A. Creation of a Licensee Client. Each Administrator(s) licensed to use a
Castanet Management Suite may use the Tuner Branding Wizard to customize in
object code form only the user interface of one or more Tuners for use in
accordance with the terms of this Agreement and the Documentation (as
customized, a "Licensee Client"). License may include the Subscription Service
and/or Inventory Service (if licensed) in each Licensee Client. Each Licensee
Client may be used or distributed to receive a Castanet channel (or series of
channels) from Licensee which add significant and substantial value and
functionality to the Software. Licensee acknowledges that Marimba and its
suppliers own all right, title and interest in and to the Tuner (including its
user interface) and the Tuner Branding Wizard and that nothing hereunder shall
be deemed to grant or convey any ownership right therein to Licensee or any
third-party.
B. Internal Use of a Licensee Client. Licensee may permit any employee of
Licensee to use a Licensee Client on any Licensed Endpoint.
C. Distribution of Licensee Client to Third-Parties. Subject to the
additional restrictions set forth in Section 4 of this CRL, Licensee may
distribute the Licensee Client in object code form directly to third-parties,
but only (a) to Licensed Endpoints and (b) for use solely to receive Castanet
channels provided by Licensee in the ordinary course of Licensee's business of
providing applications on a fee per usage basis to end-user customers.
D. Duplication of a Licensee Client. Licensee may duplicate the Licensee
Client as necessary to support the use and distribution permitted hereunder.
4. Third Party Distribution Requirements. No Licensee Client may be
distributed to a third-party except in accordance with the provisions of this
Section 4.
A. End User License. No distribution of any Licensee Client shall be made
to any third-party except pursuant to an enforceable end-user license agreement
equally as protective of Marimba and its suppliers as the Marimba Castanet Tuner
End User License Agreement (Tuner EULA), a copy of which is contained within the
Tuner. Licensee agrees not to remove the Tuner EULA from any copy of the
Licensee Client it distributes unless Licensee has replaced the Tuner EULA with,
or separately entered into, a written license agreement in conformance with the
requirements of this Section 4.A. Licensee shall use reasonable commercial
efforts to notify Marimba of any uncured breach of any end-user license for a
Licensee Client of which it becomes aware and to enforce or assist Marimba in
the enforcement of such end-use license terms.
B. Export Control Requirements. Licensee acknowledges that the Tuner
contained within the Licensee Client contains encryption technology, export of
which is restricted by U.S. and certain foreign laws. Licensee shall comply with
the export restrictions set forth under the heading "Export Restrictions" in the
Agreement in connection with distribution of any Licensee Client.
C. Indemnification. Licensee will indemnify and hold harmless Marimba
from any and all third-party claims, liabilities, damages or expenses (including
reasonable attorneys' fees) arising on account of Licensee's modification or
customization of the Tuner or distribution or marketing of a Licensee Client,
provided that Licensee shall have received from Marimba: (i) prompt notice of
such claim (but in any event notice in sufficient time for Licensee to respond
without prejudice); (ii) the exclusive right to control and direct the
investigation, defense, and/or settlement of such claim; and (iii) all
reasonable necessary cooperation and assistance of Marimba.
D. User Interface Requirements. The user interface of the Licensee Client
must be customized only as permitted by the Tuner Branding Wizard and as set
forth at: http:/www.marimba.com/contracts/branding.pdf. Except as permitted by
the Tuner Branding Wizard, Licensee shall not use any Marimba trade name or
trademark without prior written consent of Marimba. Licensee will comply with
Marimba's then-current quality control trademark guidelines and will not contest
the use by Marimba or its licensees of any trademark or application or
registration therefor for a Marimba product, whether during or after the term of
this Agreement. Marimba shall have the right to suspend Licensee's use of the
trade name and trademarks upon thirty (30) days advance written notice for
failure to comply with Marimba's guidelines (unless Licensee cures such failure
within such notice period).
E. Registration and Review. At least ten (10) days prior to first
distribution to any third-party, Licensee shall, at no charge provide Marimba
with one (1) fully enabled copy of the Licensee Client (or UI of the Licensee
Client) for use by Marimba solely for license and branding compliance
verification purposes. Licensee shall provide the Licensee Client to Marimba
10
<PAGE>
by an email to report(R)marimba.com which identifies Licensee and the Master
License Agreement under which this CRL was obtained and sets forth instruction
for obtaining the Licensee Client.
F. Support. Licensee shall be responsible for all end-user support for
the Licensee Client.
11
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Attachment B
------------
Monthly Report Form
-------------------
"Note: Marimba may revise this form upon thirty (30) days advance written notice
to Licensee.
Customer Name: ___________________________
Agreement Number: ________________________
Contact Information: _____________________
Date: ____________________________________
A. Minimum Monthly License Fee:
---------------------------
Month Number _________
(Starting date to calculate month number: December 1, 1999)
B. Months License Fees:
-------------------
Quantity Unit Price Extended Price
-------- ---------- --------------
Licensee Clients ______ ** **
Application Access Licenses ______ $** ______________
Inventory Access Licenses ______ $** ______________
DocService Access Licenses ______ $** ______________
Server Access Licenses ______ $** ______________
Total Monthly License Fees $_____________(B)
C. Amount Due: $_____________
----------
(If A is less than B, total amount due = A, otherwise total amount due = B)
Payment is due within 15 days. Remit to:
Marimba, Inc.
Attn: Accounting
440 Clyde Avenue
Mountain View, CA 94043
D. Describe each application in Deployment during any part of this month
---------------------------------------------------------------------
The undersigned represents and warrants that the foregoing is true, complete and
correct.
____________________________________ _____________
Authorized Signature Date
12
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EXHIBIT 10.10
**indicates information which has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
Asterisks appear on pages 1 and 2 of Schedule A.
ASP LICENSE AGREEMENT
This ASP License Agreement (the "Agreement") is made and entered into as of the
last date set forth below (the "Effective Date") between SalesLogix Corporation,
a Delaware corporation ("SLGX"), located at 8800 North Gainey Center Drive,
Suite 200, Scottsdale Arizona, 85258, USA, and ebaseOne Corporation, a Delaware
Corporation, located at 6060 Richmond Suite 190, Houston, Texas 77057, ("HOST").
RECITALS
WHEREAS, SLGX owns or has the right to grant licenses to certain sales
information front office software applications;
WHEREAS, HOST has established ASP offerings which it makes available to end user
customers through hosted computer systems; and
WHEREAS, SLGX and HOST wish to enter into an agreement where SLGX shall license
HOST to include SLGX software applications within HOST's ASP offerings;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties, SLGX and HOST hereby agree as
follows:
1. Definitions
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Anniversary Date means October 12/th/ of each year commencing in year 2000.
Customer means an end user who is a party to a Customer Agreement, and who
cannot re-sell, lease, market, license, sublicense or otherwise distribute the
Software or Services to another party.
Customer Agreement means an agreement between HOST and a Customer under which
HOST agrees to host the Software on one or more Hosted Systems for remote access
and use by the Customer pursuant.
Documentation means the standard online documentation, manuals and other printed
materials delivered by SLGX to HOST which relate to the Software.
Hosted Systems means the computer hardware, networking equipment and associated
system software on which the Software is installed for remote Use by a Customer
in connection with HOST's provision of Services. All Hosted Systems shall be
owned or leased by HOST, and shall remain under the control of HOST throughout
the Term.
Remote Client means a full working version of the Software that both resides on
a single Customer personal computer ("PC") with a local database and allows the
Customer to synchronize with and access the Software (and the remote databases
contained in the Software) residing on the Hosted Systems.
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Services means Software-related services offered by HOST to a Customer,
including Software hosting, training, maintenance, technical support and similar
services.
Software means the SLGX computer software products described on Schedule A, as
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such schedule may be amended by the parties from time to time, including
Documentation and any updated version of such products provided by SLGX to HOST.
Support shall mean those maintenance and technical support services provided by
SLGX to HOST as described in detail on Schedule B.
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Term shall mean the term of this Agreement (including any extensions and
renewals) as defined in Section 10.
Use shall mean the loading, utilization, storage or display of the Software to
process a Customer's information and serve Customer's computing needs.
User shall mean an individual who is permitted to have access to and use the
Software pursuant to the terms of a Customer Agreement, and shall mean
specifically a named or specified (by password, license number or other user
identification) individual authorized by Customer to use the Software,
regardless of whether the individual is actively using the Software at any given
time. The maximum number of Users that may use or access the Software shall be
specified in the Customer Agreement. Users may include the employees of Customer
or third parties; provided that such third party is limited to use of the
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Programs (i) only as configured and deployed by Customer, and (ii) solely in
connection with Customer's internal business. Customer may cause a User logon
to be permanently reassigned if the original individual identified as the User
leaves the employ of Customer, or otherwise ceases to need access to the
Software.
Web Client shall mean a thin version of the Software in DHTML format that
resides on a Hosted System and which may be accessed by a Customer through the
internet.
Workgroup Client shall mean a full version of the Software that resides on a
Hosted System and which may be accessed by a Customer through a Microsoft
terminal server or Citrix metaframe.
2. License
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2.1 Grant of Licenses. Subject to the terms and conditions of this
Agreement, SLGX hereby grants for the duration of the Term, and HOST hereby
accepts, a non-transferable, non-exclusive license (without the right to
sublicense except as provided in Section 2.7) to install, Use, execute, display
and host the Software in object code format on an unlimited number of Hosted
Systems in the United States and Canada (and in other countries to which SLGX
consents in writing), to lease use of such Software to Customers pursuant to
Customer Agreements, to distribute copies of Remote Client to Customers who
purchase leases to Remote Client, and to provide Services to Customers.
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2.2 Territory; Non-Exclusivity. The licenses under Section 2.1 shall be
worldwide with respect to the location of Customers, and shall permit the
installation of Remote Client in any territory, subject to export law
restrictions. HOST acknowledges that its appointment as an ASP for the Software
shall be entirely non-exclusive; SLGX may increase or decrease the number of
authorized ASPs in the vicinity of HOST's locations at any time without notice
to HOST.
2.3 Private-Labeling. SLGX grants HOST a non-exclusive, nontransferable
right and license to offer the Software and Services under the following HOST
product name and logo: ebaseOne(TM), provided, however, that all SLGX
proprietary notifications are included and SLGX's authorship is emphasized with
either the tag line "Powered by SalesLogix," or similar branding mutually agreed
to by the parties.
2.4 Copying Rights. HOST may make a reasonable number of copies of the
Software and Documentation for purposes of installing and maintaining the
Software on Hosted Systems, providing copies of Remote Client to Customers, and
providing Services to Customers, provided in each case that HOST complies with
the requirements of Section 9.3.
2.5 License Restrictions and Limitations. HOST shall lease the Software
to a Customer on a per User basis pursuant to a Customer Agreement that: (i)
specifies the number of permitted Users; (ii) provides that the lease must be
pursuant to one of the configurations described on Schedule A; (iii) contain
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substantially the same provisions and protections that HOST uses to lease its
own software products of comparable value; and (iv) incorporate and attach the
SLGX shrinkwrap license attached as Schedule C, as it may be reasonably amended
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by SLGX from time to time, or such other license form or statement as the
parties may stipulate to in writing from time to time (the "EULA").
2.6 Lease Procedure. Upon executing a Customer Agreement, HOST shall
register the following information with SLGX's Automatic Licensing System ("AL-
System"): the Customer' exact corporate name, address, the commencement date of
the Software lease, the number of permitted Users, primary contact information
for the Customer (including such contact's e-mail information), and the initial
lease terms for the relevant Users. HOST shall also follow the same procedure
to: (i) record any amendment of a Customer Agreement that increases or
decreases (consistent with Section 2.5) the prospective number of Users; (ii)
renew or extend the lease term for a User; (iii) register the cancellation of a
logon to allow a substituted User (consistent with Section 1.11); or (iv) record
the permanent expiration of any User lease. Upon the initial registration of a
Customer (and upon the recording of any transaction resulting in an increase of
Users), the AL-System shall automatically issue to HOST the necessary number of
User logons and license numbers to enable the Customer's designated Users to
access and Use the Software. HOST agrees that it will: (i) only disclose to a
Customer only those logons and license numbers that have been specifically
assigned to the Customer's Users by the AL-System; (ii) not make any other use
or disclosure of the logons and license numbers provided by the AL-System; (iii)
not seek to circumvent or bypass any logon, license number or any other security
or copy protection feature contained in the Software; (iv) adopt and implement
reasonable policies to inform and instruct its relevant employees and agents of
the restrictions imposed by this Section; and (v) immediately inform SLGX in
writing of any attempt or threat by any person to
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crack or circumvent any SLGX or HOST security or copy protection measure
relating to the Software.
2.7 HOST Affiliates. HOST shall not sublicense its rights under this
Section 2 to a subsidiary, affiliate, VAR, OEM or other sub-distributor (each, a
"HOST Affiliate"), or any class of HOST Affiliates, without the prior written
consent of SLGX, which consent shall not be withheld unreasonably. In the event
SLGX consents to such a sublicense, HOST acknowledges and agrees that it shall:
(i) cause the HOST Affiliate to comply with all material terms and restrictions
applicable to HOST under this Agreement; and (ii) remain directly and wholly
responsible to SLGX for (and to the same extent as if HOST had itself caused)
all losses, claims and damages that SLGX incurs as a result of the HOST
Affiliate's disclosure or distribution of HOST Confidential Information or
breach of any other obligations applicable to HOST under this Agreement.
3. Prices and Payments for Software Leases
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3.1 License Fees. For each lease of Software to a Customer, HOST agrees
to pay SLGX the license fees set forth in Schedule A (the "License Fees"), which
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shall be calculated on a per User per month basis. The License Fees set forth
on Schedule A have been calculated based on the SLGX list prices now in effect
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for full licenses to the Software. Approximately 90 days prior to each
Anniversary Date the parties shall meet and confer to determine whether the
license fees set forth in Schedule A should be reduced for new Customer
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Agreements effective on the Anniversary Date to reflect any interim reductions
in the SLGX list prices for full licenses to the Software. Any such agreement
to change Schedule A shall be reduced to writing and signed by the parties as a
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prospective amendment to Schedule A.
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3.2 Minimum Guaranteed Cumulative Fees. Notwithstanding Section 3.1, HOST
hereby commits to pay SLGX, over the Term, the minimum, cumulative non-
refundable License Fees set forth in Schedule A (the "Guaranteed Cumulative
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Fees"). HOST shall make additional payments to SLGX, to the extent necessary as
of the end of a calendar quarter, so that the total License Fees paid to SLGX
through the relevant quarter will equal at least the Guaranteed Cumulative Fees
obligation as of such date. All additional payments made pursuant to this
Section 3.2 shall be regarded as the payment of "License Fees" under this
Section 3 and will be credited in full against HOST's License Fee obligations
under Section 3.1. If either party's exercise of a termination or non-renewal
right granted under Section 10 shall cause the Agreement to terminate effective
on a date other than the last date of a calendar quarter, the Guaranteed
Cumulative Fees applicable to the end of such quarter shall be recalculated and
reduced in direct proportion to the amount by which the quarter was shortened.
3.3 Quarterly Invoice Reports; Calculation of License Fees. By the last
date of each calendar quarter, SLGX, using information registered on the AL-
System by HOST, shall calculate the License Fees due under this Agreement for
the quarter just ending (the "Reported Quarter") and shall prepare and deliver a
License Fee invoice report (the "Quarterly Invoice Report") to HOST. The
Quarterly Invoice Report shall describe the number of Users per month for whom
HOST leased the Software during the Reported Quarter. Where a User lease
commenced other than on the first of a calendar month, the quarterly report
shall use an
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appropriate fraction in calculating License Fees for the partial month. Also,
where a User lease first commenced in the last ten calendar days of a Reported
Quarter, SLGX shall defer invoicing the License Fees due for the relevant
one-to-ten days until the Quarterly Invoice Report for the next Reported
Quarter. Each Quarterly Invoice Report shall calculate and compare License Fees
calculated for the Reported Quarter under Section 3.1, License Fees (including
additional payments previously required under Section 3.2) paid to date, and the
Guaranteed Cumulative Fees applicable to the end of the Reported Quarter, and
shall then report the amount of License Fees due from HOST for the Reported
Quarter.
3.4 Payment Terms. HOST shall pay the License Fees set forth in the
Quarterly Invoice Report within 30 days of receipt of the Quarterly Invoice
Report. All other fees and payments due from one party to another under this
Agreement shall also be paid within 30 days of invoice. All amounts not paid
within 30 days of the relevant invoice shall bear interest at the lesser of 1.5%
per month or the highest contract rate allowed by law, from the date due until
paid. All License Fees and any other payments hereunder shall be paid in U.S.
Dollars.
3.5 Customer Prices. HOST shall remain solely responsible for determining
its own retail prices to Customer for Software leases and Services.
3.6 Taxes. HOST shall remain responsible for payment of any and all
applicable taxes, excises, duties or charges (other than taxes relating to
SLGX's net income) which may arise by virtue of the transactions contemplated by
this Agreement.
4. Support Obligations
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4.1 HOST Support of Customers. HOST will provide technical and
maintenance support to Customers and to any authorized HOST Affiliates. SLGX
will provide direct support only to HOST, as described below.
4.2 SLGX Support of HOST. During the Term, and for so long thereafter as
HOST continues to lease the Software to Customers and pay License Fees as
provided in Section 10, SLGX shall provide HOST with the Support described in
Schedule B. In connection with providing Support, SLGX will use its reasonable
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efforts to make the Software perform substantially in accordance with the
Documentation. However, HOST acknowledges that inevitably some errors may exist
in the Products, and the presence of such errors shall not be a breach of this
Section. HOST specifically acknowledges that this Agreement will involve one of
the first Uses of the Software to date through a remote access hosting structure
and that the parties may, in the first several months following the Effective
Date, encounter unanticipated problems or support issues relating to running the
Software in a large scale hosting environment.
4.3 Support of Hosted Systems. HOST shall be solely responsible, at its
own expense, for the acquisition, installation, operation and maintenance of the
Hosted Systems, including any hardware and third party software (other than
third party software products embedded in the Software) necessary or useful for
hosting or Use of the Software. HOST shall identify and promptly inform SLGX of
any design or programming errors or omissions in the
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Software of which it becomes aware and consult with SLGX regarding necessary
corrections and or modification.
5. Start-Up Obligations
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5.1 Delivery of Master Disks. Upon execution of this Agreement and the
Non-disclosure agreement, SLGX shall promptly deliver to HOST master disks
containing the Software in object code format.
5.2 Training. SLGX shall provide HOST with the "Start-Up" training on the
terms and conditions described in Schedule A. HOST shall develop an internal
training course for its employees regarding the Use and support of the Software,
which will be consistent with SLGX's then-current training policies for the
Software.
6. Continuing Obligations
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6.1 Product Managers. Each party shall appoint at least one appropriately
qualified full-time product manager, whose sole responsibility shall be to
define and market the Services and monitor its party's performance under this
Agreement.
6.2 Joint Promotions. During the Term, HOST and SLGX will jointly promote
and market their respective products and service offerings, including but not
limited to providing for mutual customer reference sites, mutual brand awareness
promotions, joint sales efforts, presentations and/or demonstrations, all as
agreed to between the parties from time to time.
6.3 Safety and Security. HOST shall at all times maintain and enforce at
the site of all Hosted Systems safety and security procedures that are at least:
(a) equal to industry standards for such locations; (b) as rigorous as those
procedures which are in effect for other similar locations then owned or
controlled by HOST; and (c) compliant with any reasonable safety and security
requirements requested by SLGX during the Term.
6.4 Customer License Enforcement. HOST shall use its best efforts to
assist SLGX in the protection of SLGX's legal rights and to enforce the EULA.
HOST shall cooperate fully with SLGX in any action by SLGX in the event of an
actual or threatened violation of SLGX's proprietary rights by a Customer.
6.5 Marketing Practices. Each party shall (a) perform its obligations in
a manner that will preserve the reputation and promote the goodwill, name, and
interests of the other party and its products and service offerings; (b) avoid
deceptive, misleading, or unethical practices that are or might be detrimental
to the other party, its products or service offerings, or the public, including
but not limited to disparagement of the other party or its products or service
offerings; (c) make no false or misleading representation with respect to the
other party's products or service offerings; (d) not publish or use any
misleading or deceptive advertising material; and (e) make no representations
with respect to the other party's products or service offerings that are
inconsistent with the literature distributed by the other party, including all
warranties and disclaimers contained in such literature.
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7. Warranties; Limitations on Liability
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7.1 SLGX Limited Warranties. SLGX represents and warrants to HOST that
SLGX has sufficient right, title and interest in and to the Software to enter
into this Agreement; and that all Software distributed to HOST is and shall be
free and clear of all liens.
7.2 Limitation of Warranties. THE FOREGOING WARRANTIES ARE IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, REGARDING THE SOFTWARE AND
DOCUMENTATION PROVIDED BY SLGX INCLUDING WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
7.3 Limitation on SLGX Liability. EXCEPT IN THE EVENT OF MISUSE OR
APPROPRIATION OF HOST'S CONFIDENTIAL INFORMATION OR INTELLECTUAL PROPERTY, AND
EXCEPT FOR ITS INFRINGEMENT INDEMNIFICATION OBLIGATIONS, SLGX'S CUMULATIVE
LIABILITY UNDER THIS AGREEMENT, INCLUDING ANY CAUSE OF ACTION IN CONTRACT, TORT
OR STRICT LIABILITY, SHALL BE LIMITED TO THE LICENSE FEES PAID BY HOST DURING
THE 12 MONTHS PRIOR TO SUCH EVENT.
7.4 No Consequential Damages. EXCEPT IN THE EVENT OF ONE PARTY'S MISUSE
OR APPROPRIATION OF ANOTHER PARTY'S CONFIDENTIAL INFORMATION OR INTELLECTUAL
PROPERTY, AND EXCEPT FOR THE PARTIES' RESPECTIVE INFRINGEMENT INDEMNIFICATION
OBLIGATIONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT,
CONSEQUENTIAL, PUNITIVE OR INCIDENTAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE
LIKE) ARISING OUT OF THIS AGREEMENT EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
7.5 HOST Actions. SLGX shall have no obligation to Customers arising from
any warranty given by HOST, HOST Affiliates, or their agents or employees.
8. Indemnification
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8.1 SLGX Indemnification. SLGX agrees, for as long as the Software is
leased by Customers from HOST, at SLGX's expense to defend or settle and hold
harmless HOST from, any third party claim that the leasing of the Software (but
not including any other goods, Services or other parts of the Hosted Systems
provided by HOST) infringes any patent, copyright, trade secret, trademark, or
proprietary right existing under the laws of the United States or Canada or any
state or territory thereof. The indemnification obligation in this Section
shall be effective only if HOST is not in default of its License Fee payment
obligations to SLGX. To reduce or mitigate damages, SLGX may at its own expense
procure the right for HOST to continue leasing and distributing the Software or
replace it with a non-infringing product with substantially equivalent
functionality. If SLGX supplies a non-infringing update or version of the
Software, HOST shall promptly supply the same to its Customers and install the
same on it
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Hosted Systems. SLGX's indemnification obligations under this Section shall not
apply to an infringement claim that occurs because of and would not have
occurred but for: (i) modifications made to the Software by a party other than
SLGX; (ii) HOST or a Customer's failure to implement a Software enhancement as
required by SLGX; or (iii) use of the Software in combination with programs,
equipment or devices not of SLGX origin or design.
8.2 HOST Indemnification. HOST agrees, for as long as the Software is
leased by Customers from HOST, at HOST's expense to defend or settle and hold
harmless SLGX from, any third party claim: (i) that HOST's provision of Hosted
Systems, goods or Services (other than the Software in the form provided by
SLGX) infringes any patent, copyright, trade secret, trademark, or proprietary
right existing under the laws of the United States or Canada or any state or
territory thereof; or (ii) otherwise resulting from any improper acts or
omissions by HOST relating to its provision of Services, or any
misrepresentations by HOST or its employees or agents relating to the Software.
8.3 Exclusive Remedies. SECTIONS 8.1 AND 8.2 CONSTITUTE THE PARTIES'
RESPECTIVE ENTIRE LIABILITY AND EXCLUSIVE REMEDIES FOR THIRD PARTY CLAIMS
RELATING TO THE SOFTWARE AND HOST GOODS AND SERVICES.
8.4 Procedure. Each party seeking indemnification under this Section 8
(the "Indemnified Party") shall give the other party (the "Indemnifying Party")
prompt written notice of the relevant claim, and shall cooperate with the
Indemnifying Party in the defense of any such claim as reasonably requested by
the Indemnifying Party. The Indemnifying Party shall control the defense of the
claim, however, the Indemnified Party, at its own costs and expense, may
participate in the defense of the claim and be represented by its own counsel.
9. Confidentiality; Proprietary Rights; Trademarks
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9.1 Confidential Information. Each party acknowledges that it may receive
or have access to information that is confidential to the other ("Confidential
Information"). Each party's Confidential Information shall include, but not be
limited to, its software programs and related documentation, formulas, methods,
know-how, processes, designs, new products, developmental work, marketing
requirements, marketing plans, customer names, prospective customer names, and
all information clearly identified by it in writing at the time of disclosure as
confidential. Confidential Information also includes all information received
from third parties that either party is obligated to treat as confidential and
oral information that is identified by either party as confidential. A party's
Confidential Information shall not include information that (i) is or becomes a
part of the public domain through no act or omission of the other party; (ii)
was in the other party's lawful possession prior to the disclosure and had not
been obtained by the other party either directly or indirectly from the
disclosing party; (iii) is lawfully disclosed to the other party by a third
party without restriction on disclosure; (iv) is independently developed by the
other party without use of or reference to the other party's Confidential
Information; or (v) the other party is required to disclose by law or valid
order of a court or other governmental authority; provided, however, that the
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other party shall first have given notice to the owning party and shall have
made a reasonable effort to obtain a protective order requiring that the
Confidential Information so disclosed be used only for the purposes for which
the order was
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issued. The parties agree, unless required by law, not to make each other's
Confidential Information available in any form to any third party or to use each
other's Confidential Information for any purpose, other than in connection with
the performance of this Agreement. Each party agrees to take all reasonable
steps to ensure that the other party's Confidential Information is not disclosed
or distributed by its employees or agents in breach of this Agreement. The
parties agree to hold each other's Confidential Information in confidence during
the Term and for a period of three (3) years thereafter; provided, however, that
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with respect to software code and other highly sensitive confidential
information clearly identified as such at the time of disclosure by either
party, the nondisclosure obligations set forth herein shall continue
indefinitely. This Section 9.1 constitutes the entire understanding of the
parties and supersedes all prior or contemporaneous agreements, representations
or negotiations, whether oral or written, with respect to Confidential
Information.
9.2 Customer Information. HOST agrees that any sales leads concerning
potential Customers provided to it by SLGX shall be deemed Confidential
Information and used by HOST solely for the purposes of this Agreement, except
as SLGX may otherwise consent in writing. SLGX agrees that any information
concerning Customers provided to the AL-System by HOST under Section 2.6 shall
be deemed Confidential Information and used by SLGX solely for the purposes of
this Agreement, except as HOST may otherwise consent in writing.
9.3 Proprietary Rights. Without limiting the application of Section 9.1,
HOST acknowledges that title in and ownership of the Software and Documentation,
as well as SLGX Trademarks and all intellectual property rights therein, shall
remain at all times vested in SLGX and its licensors. HOST acknowledges that
the Software contains valuable trade secrets and Confidential information of
SLGX and is protected by domestic and international patent and copyright laws
and other forms of proprietary rights. HOST agrees not to copy or otherwise
reproduce (except as permitted herein), or to modify, adapt, translate, reverse
engineer, decompile, disassemble or create derivative works based on, the
Software or the Documentation. HOST agrees to reproduce (and not remove) on all
copies of the Software and Documentation any patent, copyright, trademark, trade
secret or other proprietary notices included by SLGX.
9.4 Trademarks. SLGX grants HOST the right to use any SLGX trademarks,
trade names, logos and service marks that describe the Software (as now existing
or hereafter developed (the "SLGX Marks")), but only for the purpose of leasing
and marketing the Software, and on the condition that HOST: (i) uses the
appropriate SLGX Marks for the corresponding Software; (ii) includes in such use
appropriate registration and other information to identify the SLGX Marks as
belonging to "SalesLogix Corporation"; (iii) takes reasonable steps to modify
all objectionable uses of the SLGX Marks; and (iv) complies with the then
current written SLGX policies relating to SLGX Marks as they may be delivered by
SLGX to HOST from time to time. HOST grants SLGX the right to use any HOST
trademarks, trade names, logos and service marks that describe HOST's offering
of the Software and related Services (as now existing or hereafter developed
(the "HOST Marks")), but only for the purpose of advertising and marketing such
offerings, and on the condition that SLGX: (i) uses the appropriate HOST Marks
for the corresponding HOST offering or Services; (ii) includes in such use
appropriate registration and other information to identify the HOST Marks as
belonging to ebaseOne Corporation (iii) takes reasonable steps to modify all
objectionable uses of the HOST Marks; and (iv) complies with the
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then current written HOST policies relating to HOST Marks as they may be
delivered by HOST to SLGX from time to time. Except as expressly stated in this
Section 9, nothing in this Agreement or elsewhere shall give either party any
rights to the trademarks, logos, trade names and service marks of the other.
10. Term and Termination
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10.1 Initial Term and Renewal. Unless earlier terminated pursuant to this
Section 10, the term of this Agreement shall commence on the Effective Date and
expire on the Anniversary Date occurring in 200_, following which the Agreement
shall automatically renew and the term be extended for successive one year
periods unless either party provides the other with written notice, at least 60
days prior to the relevant Anniversary Date, of its election not to renew.
10.2 Termination for Breach. If either party shall breach a material
obligation under this Agreement, the other party may give written notice of its
intention to terminate this Agreement, describing in reasonable detail the
breach. If the party charged with breach fails to cure the breach within 30
days following such notice, or if such breach (other than one to pay money) is
not capable of cure within 30 days and the party charged with breach fails to
commence cure procedures within such 30 day period and diligently prosecute such
procedures until the breach is cured, which cure shall be completed no later
than 90 days following the notice, then the noticing party may, while such
failure continues and in addition to all other remedies available at law or in
equity, terminate this Agreement upon written notice.
10.3 Effect of Expiration or Termination. Upon any expiration or
termination of this Agreement: (i) HOST shall immediately pay all amounts then
due to SLGX and shall discontinue marketing of the Software and the related
Services to new Customers; and (ii) each party shall cease use of the other
parties' Marks in connection with advertising and marketing activities. In
addition, the following provisions shall apply:
10.3.1 Expiration or Termination Other Than Because of HOST Uncured
Breach. If the Agreement expires or is terminated for any reason other
than an uncured breach by HOST, then notwithstanding any provision of this
Agreement to the contrary: (i) the expiration or termination shall not
affect the rights of Customers to continue to lease the Software (including
the right to obtain lease extensions or add new Users) pursuant to existing
Customer Agreements; and (ii) the Agreement, including but not limited to
License Fee and Support obligations and the right of HOST to retain and use
copies of the Software and related support and training materials delivered
for the purpose of providing support and maintenance to Customers, shall
continue in full force and effect with respect to existing Customers until
lease of Software under all Customer Agreements has terminated. After the
last Customer Agreement has terminated, HOST shall return or destroy, at
SLGX's option, all remaining copies of the Software and other materials
containing SLGX confidential information. Notwithstanding the provisions
of this Section 10.3.1, should HOST commit an additional uncured breach of
the Agreement following the initial expiration or termination, Section
10.4.2 shall become operative upon the expiration of the relevant cure
period.
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10.3.2 Termination Because of HOST Uncured Breach. If the Agreement
is terminated because of an uncured breach by HOST, then SLGX shall have
its choice of the following: (A) proceeding under the approach set forth
in Section 10.3.1; or (B) proceeding as follows: (i) the expiration or
termination shall terminate the rights of Customers to continue to lease
the Software from HOST effective upon the end of the 90 day period
commencing with the effective date of termination of this Agreement - the
"Transition Period" -- and a Customer may not obtain lease extensions or
add new Users during such Transition Period; (ii) the Agreement, including
but not limited to License Fee and Support obligations and the right of
HOST to retain and use copies of the Software and related support and
training materials delivered for the purpose of providing support and
maintenance of such Customers, shall continue in full force and effect with
respect to existing Customers, but only through the end of the Transition
Period or implementation of a transition solution as described in the next
subsection (iii), whichever is earlier; (iii) During the Transition Period,
the parties will attempt to arrive at a "transition solution" that will
allow the existing Customers to continue to use the Software, including but
not limited to use of the Software through the services of another ASP or
through non-hosted use by the Customer on its own computer systems, and
HOST shall cooperate fully with SLGX in effecting the orderly transfer of
the Software, database information and related materials to one or more
third parties in connection with implementing the transition solution, as
directed by SLGX; (iv) following the earlier of the termination of the
Transition Period or the implementation of a transition solution, HOST
shall return or destroy, at SLGX's option, all remaining copies of the
Software and other materials containing SLGX confidential information.
10.4 Survival of Certain Provisions. All relevant Sections of this
Agreement (except Section 3.2's application of Guaranteed Cumulative Fees) shall
survive expiration or termination of this Agreement for the specific purposes
described in Section 10.3. In addition, Sections 3.1, 3.3, 3.4, 3.6, 4.2, 4.3,
6.4, 6.5, 6.6, 7.2, 7.3, 7.4, 7.5, 8, 9, 10, 11 and 12 shall survive expiration
or termination of this Agreement including post-termination transition periods
described in Section 10.3. Neither expiration nor termination shall relieve
either party of the obligation to pay License Fees or other amounts due, or
which may become due following expiration or termination, to the other.
10.5 Cumulative Remedies. Termination of this Agreement or exercise of
any other rights described in this Section shall be in addition to and not in
lieu of any other legal or equitable remedies available to the parties.
11. Audit Rights
------------
11.1 Records. At all times during the Term, and for three (3) years
thereafter, each party shall keep written books and records documenting the
pertinent aspects of its performance hereunder for the prior three years,
including without limitation, billing and payment records, data used for
calculations of License Fees, description of Services for each Customer,
security and access records, maintenance records and travel and expense records
(collectively, "Records"), according to Generally Accepted Accounting
Principles. At a maximum of once
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every six (6) months during the Term, each party agrees to provide copies of
such Records to the other promptly following the receipt of a reasonable request
therefor.
11.2 Audits. At a maximum of once every six (6) months during the Term,
and upon reasonable notice from SLGX, HOST shall provide, and shall cause its
employees and agents to provide, SLGX auditors and inspectors, as SLGX may from
time to time designate, with access to the sites containing the Hosted Systems
and all Records during HOST's normal business hours for the purpose of
performing audits or inspections of the Services (including without limitation
data processing, security procedures, disaster recovery, maintenance and
support, and the systems and physical environments in or in which the Services
are performed). SLGX shall bear its own expenses and costs in performing any
such audit. HOST shall provide such auditors and inspectors any assistance as
they may reasonably require. Any information disclosed by HOST to such auditors
and inspectors shall be protected by the confidentiality provisions set forth in
Section 9.
12. General Provisions
------------------
12.1 Publicity. Except as permitted under Section 9.4 or as otherwise
required by law or regulation, neither party shall use the other party's name or
Marks or refer to the other party directly or indirectly in any media release,
public announcement, or public disclosure relating to this Agreement or its
subject matter, without obtaining the prior written consent from the other party
for each such use or release.
12.2 Compliance With Export Laws. HOST shall not export, ship, transmit
or re-export the Software of Documentation in violation of any applicable law or
regulation including, without limitations, the Export Administration Regulations
issued by the United States Department of Commerce.
12.3 Relationship of Parties. This Agreement does not make either party
the employee, agent or local representative of the other for any purpose
whatsoever. Neither party is granted any right or authority to assume or to
create any obligation or responsibility, expressed or implied, on behalf of or
in the name of the other party. In fulfilling its obligations pursuant to this
Agreement, each party shall be acting as an independent contractor.
12.4 Entire Agreement. This Agreement states the entire agreement between
the parties on the subject matter hereof and supersedes all prior negotiations,
understandings and agreements between the parties concerning the subject matter.
No amendment or modification of this Agreement shall be made except by a writing
signed by both parties.
12.5 No Waiver. The failure of either party to exercise any right or the
waiver by either party of any breach, shall not prevent a subsequent exercise of
such right or be deemed a waiver of any subsequent breach of the same of any
other term of the Agreement.
12.6 Notice. Any notice required or permitted to be sent hereunder shall
be in writing and shall be sent in a manner requiring a signed receipt, such as
Federal Express, courier delivery, or if mailed, registered or certified mail,
return receipt requested. Notice is effective
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upon receipt. Notice shall be addressed as set forth below or to such other
person or address as a party may designate: (1) if to SLGX to if to SalesLogix
Corporation, 8800 North Gainey Center Drive, Suite 200, Scottsdale, AZ 85258
USA, Attn: Jim Valenzuela; and (2) if to HOST to ebaseOne Corporation, 6060
Richmond, Suite 190, Houston, Texas 77057, Attn: John Frazier.
12.7 Partial Invalidity. Should any provision of this Agreement be held
to be void, invalid, or inoperative, the remaining provisions of this Agreement
shall not be affected and shall continue in effect as though such provisions
were deleted.
12.8 Force Majeure. Neither party shall be deemed in default of this
Agreement to the extent that performance of its obligations (other than an
obligation to pay money) is delayed or prevented by reason of any act of God,
fire, natural disaster, accident, act of government, shortages of materials or
supplies, or any other cause beyond the control of such party ("Force Majeure"),
provided that such party gives the other party written notice thereof promptly
and, in any event, within fifteen (15) days of discovery thereof and uses its
best efforts to cure the delay.
12.9 Assignment. This Agreement may not be assigned by HOST, nor any duty
hereunder delegated by HOST, without the prior written consent of SLGX.
12.10 Injunctive Relief. The parties recognize that a remedy at law for a
breach of the provisions of this Agreement relating to Confidential Information,
or use of a party's Marks, copyrights and other intellectual property rights,
will not be adequate for protection, and accordingly each party shall have the
right to obtain, in addition to any other relief and remedies available to it,
injunctive relief to enforce the provisions of this Agreement.
12.11 Governing Law. This Agreement shall be governed and interpreted in
accordance with the substantive law of the State of Arizona, without regard to
choice of law principles.
12.12 Dispute Resolution. Except as a result of a violation of Section 9
(Confidentiality, Proprietary Rights; Trademarks) or Section 8
(Indemnification), the parties expressly agree to submit any dispute between
them arising out of or relating to this Agreement or their relationship under
this Agreement ("Dispute") to negotiation, mediation and binding arbitration,
pursuant to the terms and procedures set forth in Schedule D, which shall be
----------
deemed incorporated by reference into this Agreement.
12.13 Counterparts. The Agreement may be executed in any number of
counterparts with the same effect as if all parties had signed the same
document. All counterparts shall be construed together and shall constitute one
Agreement.
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EXECUTED BY THE PARTIES AS PROVIDED BELOW:
Effective Date: October 12, 1999
SLGX: HOST:
SalesLogix Corporation ebaseOne Corporation
By: /s/ [ILLEGIBLE]^^ By: /s/ [ILLEGIBLE]^^
------------------------- -------------------------
Title: [ILLEGIBLE]^^ President & Chief Executive Officer
----------------------
Date: 10/14/99 Date: October 12, 1999
-----------------------
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Schedule A
A. Software
Software licensed under this Agreement includes the following: SalesLogix Sales
Information System ("SIS"), current version __, consisting of SIS-Remote Client,
Workgroup Client and Web Client versions in the configuration mixes described in
Section B below.
B. License Fees
- -------------------------------------------------------------------------------
Software Product License Fees Per Month Per One User
---------------- -----------------------------------
- -------------------------------------------------------------------------------
Months 1-24* Months 25 36* Months 37-
forward*
- -------------------------------------------------------------------------------
SIS-Remote Client Plus
----
Workgroup Client Plus ** ** $**
----
Web Client
- --------------------------------------------------------------------------------
* As used, "Months" refers to the number of months the Customer has leased the
Software in connection with the original set of Users. Thus, if Customer signs a
36-month Customer Agreement for 50 Users and then, six months later, adds 10
Users, HOST will be charged for the 10 added Users, on a going forward basis,
the same as if those 10 Users were part of the original set of Users (i.e, the
price reductions for months 25-36 will kick in for all 60 Users at the same
time, even though Customer has only made 18 months worth of payments for the 10
added Users).
C. Minimum Guaranteed Cumulative Fees
HOST hereby commits to pay SLGX, over the Term, the following minimum,
cumulative non-refundable License Fees as of the calendar quarter and dates
described below (the "Guaranteed Cumulative Fees"):
1999: Effective Date - December 31: $____________
2000: January 1 - March 31: $____________
April 1 - June 30: $____________
July 1 - September 30: $____________
October 1 - December 31: $____________
2001: January 1 - March 31: $____________
April 1 - June 30: $____________
July 1 - September 30: $____________
October 1 - December 31: $____________
2002: each quarter onward: continue to add $_______ to
prior quarter cumulative
D. Training
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During the first 90 days following the Effective Date, SLGX shall provide HOST
with the following Start-Up certification training. Training shall occur in
Scottsdale and SLGX will, at its own cost and expense, assign a minimum of one
trainer for this program and provide the training facilities. Up to a maximum of
two HOST employees may attend each training session. Following Start-Up
training, HOST may purchase additional training from SLGX for a service fee of
$** per training course, plus travel and living expenses (in accordance with
HOST's standard reimbursement policies) if the additional training sessions will
be held outside Scottsdale.
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Schedule B
This Schedule describes the terms and conditions relating to Support that SLGX
will provide to HOST for as long as HOST leases Software to Customers under the
Agreement. The Support services described in this Schedule do not expand on or
change the Software warranty provisions set forth in the Agreement. For each
Hosted System, HOST shall designate in writing to SLGX no more than three
"System Managers" who will be the primary contact persons for SLGX's provision
of Support as described below.
A. Maintenance Support
SLGX shall provide HOST with the following maintenance Support for the Software:
1. SLGX Updates and Upgrades: From time to time SLGX may develop
permanent fixes or solutions to known problems or bugs in the Software and
incorporate them into a formal "Update" to the Software, or may release to its
current licensees a major revision to the Software which adds new and different
functions or capabilities to the Software ("Upgrade"). SLGX will provide HOST,
at the same time it provides its Business Partners, with any Updates, Upgrades
and related Documentation, both at no additional charge to HOST.
2. Additional Maintenance Support: SLGX shall provide HOST with the
following additional ASP maintenance Support: (i) any support benefits made
available to other SLGX ASPs; (ii) receipt of all SLGX channel communications
concerning Software product issues, including planned Updates, Upgrades, other
releases, ets.; and (iii) access to online password enabled status updates on
Support issues, service requests, problem reports and enhancement requests.
B. Base Technical Support
SLGX shall provide HOST with technical Support as described below:
1. Telephone and Electronic Mail Assistance: HOST's System Managers will
be given the telephone number for SLGX's support line and will be entitled to
contact the support line during normal operating hours (between 8:00 a.m. and
5:00 p.m. U.S. Mountain Standard Time) on regular business days, excluding SLGX
holidays, to consult with SLGX technical analysts concerning problem resolution,
bug reporting, documentation clarification, and general technical guidance. HOST
may also contact SLGX through electronic mail. SLGX will assist the System
Managers in utilizing the Software and in identifying and providing workarounds,
if possible, for standard component product problems. Assistance may include
communicating via modem from SLGX's facilities or through an electronic bulletin
board.
2. Web Site Support: Online support is available 24 hours a day, offering
HOST the ability to resolve its own problems with access to SLGX's most
current information. HOST will need to enter its designated user name and key
number to gain access to the technical support areas on SLGX's web site. SLGX's
technical support areas allow the HOST to: (i) search an up-to-date knowledge
base of technical support information, technical tips and featured functions;
(ii) access answers to FAQs; (iii) send e-mail inquiries to SLGX (current
response
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time is between 3-5 days); and (iv) access a BBS monitored by SLGX technical
representatives which serves as an interactive user forum for users to exchange
ideas and solutions, list current hot topics, post inquiries to SLGX technical
analysts, and share experiences.
3. Software Problem Reporting: HOST may submit to SLGX requests
identifying potential problems in the Software. Requests should be in writing
and directed to SLGX by mail, courier, e-mail or by FAX. SLGX retains the right
to determine the final disposition of all requests, and will inform HOST of the
disposition of each request. If SLGX decides in its sole judgment to act upon a
request, it will do so by providing an Update.
4. Correction of Errors: SLGX will use reasonable efforts to provide an
avoidance procedure for and a correction of each material defect in the
Software that causes the Software not to conform in all material respects with
the SLGX Documentation.
5. Designated System Managers. HOST's designated System Managers shall be
responsible for maintaining the integrity of the hardware and software
comprising the Hosted Systems. Requests for telephone assistance or for on-site
assistance may come only from designated System Managers. In the event HOST
needs to replace a System Manager HOST shall notify SLGX via e-mail of the
change in System Manager prior to the new System Manager contacting SLGX.
6. Remote Support. To the extent feasible, technical Support shall be
provided using remote data links from SLGX to the site where the relevant Hosted
Systems are located.
7. Exclusions. SLGX shall have no Support obligations with respect to any
hardware or software product other than the Software ("Nonqualified Products").
If SLGX provides Support services for a problem caused by a Nonqualified
Product, or if SLGX's service efforts are increased as a result of a
Nonqualified Product, SLGX may charge time and materials for such extra services
at its then current published rates for custom software services. If, in SLGX's
opinion, performance of Technical Support services is or will be made more
difficult or impaired because of Nonqualified Products, SLGX shall so notify
HOST, and HOST will immediately remove the Nonqualified Product at its own risk
and expense during any efforts to render Technical Support services under this
Agreement. HOST shall remain solely responsible for the compatibility and
functioning of Nonqualified Products with the Software.
8. HOST Responsibilities. In connection with the provision of technical
Support, HOST shall have the following responsibilities: (1) maintain Hosted
Systems and associated peripheral equipment in good working order in accordance
with the manufacturers' specifications, and insure that any problems reported to
SLGX are not due to hardware or operating system malfunction; (2) supply SLGX
with access to and use of all information and facilities determined to be
necessary by SLGX to render the technical Support described in this Schedule;
(3) perform any tests or procedures recommended by SLGX for the purpose of
identifying and/or resolving any problems; (4) maintain a procedure external to
the Software for reconstruction of lost or altered files, data, or programs; (5)
at all times follow routine operator procedures as specified in the
Documentation; and (6) ensure that the Hosted Systems are isolated from any
process links or anything else that could cause harm before requesting or
2
<PAGE>
receiving remote support assistance.
C. Additional ASP Technical Support
SLGX shall provide HOST with the following additional ASP technical Support
services:
1. Quarterly Inspections. On a quarterly basis, as requested by HOST, an
SLGX technical representative specializing in hosting issues will visit a
U.S.-based Hosted System site to discuss with HOST representatives: (i)
Software/hardware configuration issues; (ii) and Hosted System assessments,
including recommendations and updates for hosting the Software.
2. Premium Technical Support. HOST's System Managers shall have access to
unlimited technical support provided by a defined group of SLGX ASP Support
Engineers in accordance with SLGX's standard Technical Support policies.
3. Priority Support Response. HOST's System Managers shall be given
priority status on all incoming Support calls.
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Schedule C
SLGX EULA for use with ASP Leases:
Sales Information System(TM)
MULTI-USER LICENSE AGREEMENT - FOR USE WITH ASP LEASES OF SOFTWARE
IMPORTANT - READ CAREFULLY: This Multi-User License and Warranty Agreement (the
"Agreement") is a legal agreement between you and SalesLogix Corporation for the
software product identified above (the "Software"), which includes computer
software and associated media and printed materials (the printed materials are
hereafter referred to as the "Documentation"). By downloading, installing,
copying or otherwise using or leasing the Software, you agree to be bound by the
terms of this Agreement. The Software is the property of SalesLogix and its
licensors and is protected by copyright law. While SalesLogix continues to own
the Software, you will have certain rights to use the Software after your
acceptance of this Agreement. Except as may be modified by a separate printed or
signed license agreement which accompanies the Software, your rights and
obligations with respect to the use of the Software are as follows.
1. GRANT OF LICENSE. SalesLogix grants to you, and you accept by
downloading, installing or using or leasing the software or opening a sealed
media package, a non-exclusive license to use the Software and the Documentation
on the following terms.
. Software. Your rights to install and/or access and use the Software will be
determined by whether you have purchased rights to access and use the
Remote Client, Web Client and Workgroup Client versions of the Software, or
have only purchased the rights to access and use the Web Client version of
the Software.
. Remote Client Software. Remote Client Software. Remote Client means a full
working version of the Software that resides on your personal computer with
a local database and allows you to synchronize with and access the Software
(and the remote databases contained in the Software) residing on a hosted
server system (consisting of computer hardware, networking equipment and
associated system software ("Hosted System")) maintained by your
application service provider ("ASP"). If you have purchased lease licenses
to the Remote Client version of the Software you may install the Remote
Client on the number of personal computers for which you have purchased
licenses, and for each license purchased you may make one copy of the
software solely for back-up purposes.
. Workgroup Client Software. Workgroup Client means a full working version of
the Software that resides on a Hosted System maintained by your ASP and
which may be accessed by you through a Microsoft Terminal Server or Citrix
Metaframe connection via direct dial or via the Internet. If you have
purchased lease licenses to the Workgroup Client version of the Software
you may access and use such Software pursuant to the terms of this license
and your separate agreement with your ASP.
. Web Client Software. Web Client shall mean a thin version of the Software
in DHTML format that resides on a Hosted System maintained by your ASP and
which may be accessed by you through the internet. If you have purchased
lease licenses to the Web Client version of the Software you may access and
use such Software pursuant to the terms of this license and your separate
agreement with your ASP.
. License Numbers. Upon executing an agreement with your ASP for the
Software, you may receive a set of license numbers which, when entered on
the Software, will allow you to access the Software to the extent of the
number and types of Software licenses for which you have purchased lease
licenses. You agree not to disclose these key numbers to third parties or
attempt to make any use of the key numbers to expand the number of users
who may access the Software in excess of the lease licenses purchased by
you.
. Restrictions. You may not: use, copy, or transfer copies of the Software
except as provided for in this Agreement; reverse engineer, modify,
decompile or disassemble the Software: or rent, lease, sublicense or assign
the Software or any copy thereof, including any related Documentation
except only to the extent expressly permitted by law. If notwithstanding
the foregoing applicable law grants you the right to decompile the Software
to the extent necessary to obtain information to achieve interoperability
with an independently created computer program, you may exercise such right
if SalesLogix shall fail, upon your prior written request, to provide the
relevant interoperability information within a reasonable amount of time.
2. LIMITED MEDIA WARRANTY. SalesLogix warrants the diskettes, if any, on
which the Software is
1
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furnished to you shall be free from defects in material and workmanship under
normal use for a period of sixty (60) days (the "warranty period") from the date
of the Software's delivery to you. Any replacement Software will be warranted
for the remainder of the original warranty period or thirty (30) days, whichever
is longer.
3. LIMITATIONS OF REMEDIES. The remedy described in Section 2 shall be your
sole and exclusive remedy from SalesLogix for errors in the Software and EXCEPT
FOR THE LIMITED WARRANTY DESCRIBED IN SECTION 2. SALESLOGIX DISCLAIMS ALL OTHER
WARRANTIES CONCERNING THE SOFTWARE, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL SALESLOGIX
OR ITS SUPPLIERS BE LIABLE TO YOU FOR ANY CONSEQUENTIAL, INCIDENTAL, DIRECT,
INDIRECT, SPECIAL, PUNITIVE, OR OTHER DAMAGES WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, OR OTHER PECUNIARY LOSS) ARISING OUT OF THIS AGREEMENT OR
THE USE OF OR INABILITY TO USE THE SOFTWARE, EVEN IF SALESLOGIX HAD BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
4. EXPORT CONTROL.You may not export, ship, transmit or reexport the Software
or Documentation in violation of any applicable law or regulation including,
without limitations, the Export Administration Regulations issued by the United
States Department of Commerce.
5. UNITED STATES GOVERNMENT RESTRICTED RIGHTS. The Software and Documentation
are provided with restricted rights. If you are purchasing this product for use
by the United States government or any of its agencies, you need to enter into a
separate restricted rights agreement with Saleslogix. Use, duplication or
disclosure by the United States government is subject to restricted rights as
set forth in subparagraph (c)(1)(ii) of The Rights in Technical Data and
Computer Software clause of DFARS at 252.227-7013 and in the Federal Acquisition
Regulations, 48 C.F.R. (S)(S) sections 12.212 and 52.227-19.
6. GOVERNING LAW. The validity, construction and performance of this Agreement
and legal relations between the parties to this Agreement shall be governed and
construed in accordance with the laws of the State of Arizona. United States of
America, excluding that body of law applicable to conflicts of law and excluding
the United Nations Convention on Contracts for the International Sale of Goods,
if applicable.
7. ASP AGREEMENT; TERMINATION RIGHTS. This Agreement sets forth only the
Agreement between you and SalesLogix. Your Agreement with your ASP will provide
for additional terms and conditions which govern your lease of the Software
described in this Agreement. SalesLogix or your ASP may terminate your licenses
under this Agreement or your separate ASP Agreement if you fail to comply with
the terms and conditions of this Agreement or if your rights to use the Software
expire pursuant to the terms of your agreement with your ASP. Upon such
expiration or termination, you agree to destroy all your copies of the Software.
Should you have any questions concerning this Agreement, write to SalesLogix
Corporation, 8800 North Gainey Center Drive, Suite 200, Scottsdale, Arizona
85258, U.S.A.
SalesLogix Multi-User License Agreement - for use with ASP Leases
Revision Date: July 1, 1999
2
<PAGE>
Schedule D
Dispute Resolution Procedures:
The parties hereto deem it to be in their respective best interests to
settle any dispute as expeditiously and economically as possible. Therefore, the
parties expressly agree to submit any dispute between them arising out of or
relating to this Agreement ("Dispute") to mediation as set forth below. The
dispute resolution proceedings shall be conducted in Phoenix, Arizona, in the
English language. The parties agree to use the following procedure in good faith
to resolve any Dispute:
A. A meeting shall be held among the parties within ten (10) days after any
party gives written notice of the Dispute to each other party ( the "Dispute
Notice") attended by a representative of each party having decision-making
authority regarding the Dispute (subject to board of directors or equivalent
approval, if required), to attempt in good faith to negotiate a resolution of
the Dispute.
B. If, within twenty (20) days after the Dispute Notice, the parties have not
succeeded in negotiating a written resolution of the Dispute, upon written
request by any party to each other party all parties will promptly negotiate in
good faith to jointly appoint a mutually acceptable neutral person not
affiliated with any of the parties (the "Neutral"). If all parties so agree in
writing, a panel of two or more individuals (such panel also being referred to
as the "Neutral") may be selected by the parties. The parties shall seek
assistance in such regard from the American Arbitration Association (the "AAA")
if they have been unable to agree upon such appointment within thirty (30) days
after the Dispute Notice. The fees and costs of the Neutral and of any such
assistance shall be shared equally among the parties.
C. In consultation with the Neutral, the parties will negotiate in good faith
to select or devise a nonbinding alternative dispute resolution procedure
("Mediation") by which they will attempt to resolve the Dispute, and a time and
place for the Mediation to be held, with the Neutral (at the written request of
any party to each other party) making the decision as to the procedure if the
parties have been unable to agree on any of such matters in writing within
ten (10) days after selection of the Neutral.
D. The parties agree to participate in good faith in the Mediation to its
conclusion; provided, however, that no party shall be obligated to continue to
participate in the Mediation if the parties have not resolved the Dispute in
writing within ninety (90) days after the Dispute Notice and any party shall
have terminated the Mediation by delivery of written notice of termination to
each other party following expiration of said 90-day period. Following any such
termination notice after selection of the Neutral, and if any party so requests
in writing to the Neutral (with a copy to each other party), then the Neutral
shall make a recommended resolution of the Dispute in writing to each party,
which recommendation shall not be binding upon the parties; provided, however,
that the parties shall give good faith consideration to the settlement of the
Dispute on the basis of such recommendation, and if the parties are unable to
resolve the Dispute on the basis of such recommendation, then either party may
seek to resolve the Dispute through other means, including litigation. In the
event of litigation or arbitration, the party seeking further
1
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resolution shall pay the reasonable attorneys' fees, costs and other expenses
(including expert witness fees) of the other party incurred in connection with
the pursuit of (and defense against) such litigation arbitration, if the result
thereof is less favorable to the party pursuing the litigation or arbitration
than the recommendation of the Neutral.
E. Notwithstanding anything herein to the contrary, nothing in these
procedures shall preclude any party from seeking interim or provisional relief,
in the form of a temporary restraining order, preliminary injunction or other
interim equitable relief concerning the Dispute (or to prevent or enjoin any
unauthorized use, disclosure, misappropriation or infringement of intellectual
property or other confidential information), either prior to or during the
Mediation, and in any court of competent jurisdiction, if necessary to protect
the interests of such party. Further, this paragraph shall be specifically
enforceable.
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EXHIBIT 10.11
** indicates information which has been omitted and filed seperately with the
Securities and Exchange Commission pursuant to a confidential treatment request.
Asterisks appear on page 1 of 10
Service Provider Agreement #________________________
SP-0036
SMI SERVICE PROVIDER AGREEMENT MASTER TERMS
THIS SMI SERVICE PROVIDER AGREEMENT ("Agreement") comprising of these Master
Terms ("Master Terms") and any modules or Exhibits, is made as of the ___ day of
"NOV 1 1999" between SUN MICROSYSTEMS, INC., a Delaware corporation with its
address at 901 San Antonio Road, Palo Alto, CA 94303, USA ("Sun"), and ebaseOne
("Contracting Party") with its address at 6060 Richmond Ave. Houston, TX 77057
BACKGROUND:
A. Sun sells computer hardware and licenses software, as well as support,
consulting and educational services;
B. Service Provider wishes to license software and purchase certain
hardware and other information technology products and certain
support, consulting and educational services from Sun;
C. Sun and Service Provider comprise a number of separate operating
divisions and Affiliated Companies (as defined below) and Sun and
Service Provider recognize the benefits of having a single contract
structure for the sale and purchase of Products (as defined below) and
provision of Services (as defined below) identified in any commercial
price list of Sun or its Affiliated Companies; and
D. The parties have agreed to a common set of terms as set out below
("Master Terms") and to such Exhibits as may from time to time be
attached.
The parties agree as follows:
1.0 DEFINITIONS:
1.1. Service Provider means the Contracting Party and all subsidiaries of
Contracting Party which meet the following criteria:
a) subsidiary is located in the United States;
b) Contracting Party owns an interest of more than fifty percent (50%)
or has management control (as defined by the ability to control the
Board of Directors or its equivalent);
c) subsidiary complies with the terms of this Agreement; and
d) subsidiary has substantially the same name as the Contracting Party
or is identified to Sun in writing.
1.2. EQUIPMENT means the hardware components (may also be referred to as
hardware) of Products and includes the media on which Software is loaded.
1.3. SUN PRODUCTS(S) or PRODUCTS(S) means the Equipment sold to Service
Provider and/or the Software licensed to Service Provider under this
Agreement.
1.4. SERVICE(S) means the consulting, educational and support services
provided to Service Provider under this Agreement.
1.5. SOFTWARE means the software program components of Products in machine-
readable or source code form and related documentation.
2.0 BINDING AGREEMENT
2.1 These Master Terms will apply to and bind any Service Provider that
purchases Products or Services or licenses hereunder and each of Sun's
operating divisions and Affiliated Companies which executes an Exhibit
to this Agreement. For the purposes of this Agreement, an "Affiliated
Company" means any entity of which Sun owns more than 50%. Unless
otherwise specified in such Exhibit, the execution of an Exhibit by a
Sun division shall bind each Affiliated Company Worldwide with respect
to activity related to such division.
2.2 Separate contracts may be negotiated by each party's operating
divisions or Affiliated Companies, to address different types of
transactions undertaken between them, it being understood that the
parties will use, without change, as many of these Master Terms as are
reasonable in the circumstances.
2.3 This Agreement between Service Provider and Sun consists of these
Master Terms and any Modules and/or Exhibits which are attached hereto
or which reference these Master Terms. The Master Terms describe the
general terms by which Service Provider may purchase Products and
Services from Sun and Sun delivers Products and Services to Service
Provider. The specific terms related to the purchase of Equipment,
Software and/or Services are described in the appropriate Product or
Service Module and/or Exhibits (collectively referred to as
"Modules"). Modules may be added or deleted from time to time by
agreement of the parties, but Service Provider is only authorized to
purchase Products or Services to the extent that one or more
applicable Modules is executed and in force.
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3.0 ORDER OF PRECEDENCE
The provisions of any Exhibit will take precedence over any of these Master
Terms, to the extent that they are inconsistent.
4.0 TERM AND TERMINATION
This Agreement commences the later of the effective date set forth below or
the effective date of the first attached Module and will continue until the
expiration or termination of all attached Modules. Either party may
terminate the Agreement or any individual Module immediately, in its
discretion, by written notice: (a) upon material breach by the other party,
if the breach cannot be remedied; or (b) if the other party fails to cure
any material remediable breach within 30 days of receipt of written notice
of the breach. Rights and obligations under this Agreement and/or any
Module which by their nature should survive, will remain in effect after
termination or expiration of this Agreement.
5.0 PAYMENT TERMS
Prices and fees for Products and Services are exclusive of all shipping and
insurance charges, and do not include sales tax, value added tax or any
other tax based upon the value of Products and/or Services. Service
Provider is responsible for payment of all such charges and taxes. Service
Provider agrees to pay Sun any sums when due pursuant to the applicable
Exhibit attached hereto. Interest will accrue from the date on which
payment is due at the lesser of 15% per annum or the maximum rate permitted
by applicable law. Service Provider grants Sun a purchase money security
interest in Products which have not been paid for, including all
improvements, modifications, or replacements and proceeds thereof. Service
Provider further grants Sun the right to execute all documents necessary to
perfect this security interest. If Service Provider's Schedules for
provision of Service reference a special discount based on a volume, multi-
year service, or other commitment, and Service Provider fails for any
reason to meet that commitment, Service Provider agrees to pay for
discounts received by Service Provider which are not earned by Service
Provider. Discounts given to Service Provider may not be applicable for new
Products supported by Sun.
6.0 CONFIDENTIAL INFORMATION
If either party desires that information provided to the other party under
an Agreement be held in confidence, that party will, prior to or at the
time of disclosure, identify the information in writing as confidential or
proprietary. The recipient may not disclose such confidential or
proprietary information, may use it only for the purposes specifically
contemplated in this Agreement, and must treat it with the same degree of
care as it does its own similar information, but with no less than
reasonable care. These obligations do not apply to information which: a) is
or becomes known by recipient without an obligation to maintain its
confidentiality, b) is or becomes generally known to the public through no
act or omission of recipient, or c) is independently developed by recipient
without use of confidential or proprietary information. This section will
not affect any other confidential disclosure agreement between the parties.
7.0 LIMITED WARRANTIES
7.1 Sun warrants Products and Services as specified in each Exhibit.
7.2.a) Sun further warrants that specified versions of Products
identified on Sun's external Web site (url:
www.sun.com/y2000/cpl.html) as being Year 2000 compliant ("Listed
Products") will not produce errors in the Processing of date data
related to the year change from December 31, 1999 to January 1,
2000. Date representation, including leap years, will be accurate
when Listed Products are used in accordance with their
accompanying documentation, provided that all hardware and
software products used in combination with Listed Products
properly exchange date data with them.
7.2.b) Versions of Products identified on Sun's external Web site as not
yet compliant, but which are scheduled to be made compliant, will
become Listed Products when remedial replacement parts, patches,
software updates or subsequent releases ("Y2K Fixes") are
issued and properly installed. Y2K Fixes for such Products will
be issued no later than June 30, 1999.
7.2.c) Other Products are not covered by these warranties.
7.2.d) To the extent that Sun installs Y2K Fixes or performs other
Services under this Agreement for Service Provider, Sun
respectively warrants that:
(i) upon installation of the Y2K Fixes, Products will become
Listed Products; and
(ii) Services performed on Listed Products will not result in
them ceasing to be Listed Products.
7.2.e) Service Provider's sole and exclusive remedy for Sun's breach of
these warranties will be for Sun: (i) to use commercially
reasonable efforts to provide Service Provider promptly with
equivalent Year 2000 compliant products; or (ii) if (i) is
commercially unreasonable, to refund to Service Provider its net
book value for non-compliant Listed Products.
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7.3 UNLESS SPECIFIED IN THIS AGREEMENT, OR IN ANY EXHIBIT, ALL
EXPRESS OR IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT, ARE DISCLAIMED, EXCEPT TO
THE EXTENT THAT SUCH DISCLAIMERS ARE HELD TO BE LEGALLY INVALID.
8.0 IMPORT AND EXPORT LAWS
All Products, Services and technical data delivered under this Agreement
are subject to U.S export control laws and may be subject to export or
import regulations in other countries. Service Provider agrees to comply
strictly with all such laws and regulations and acknowledges that it has
the responsibility to obtain such licences to export, re-export or import
as may be required after delivery to Service Provider.
9.0 AIRCRAFT PRODUCT AND NUCLEAR APPLICATIONS
Service Provider acknowledges that Products are not designed or intended
for use in on-line control of aircraft, air traffic, aircraft navigation
or aircraft communications; or in the design, construction, operation
or maintenance of any nuclear facility. Sun disclaims any express or
implied warranty of fitness for such uses.
10.0 INTELLECTUAL PROPERTY CLAIMS
Sun will defend or settle at its option and expense any legal proceeding
brought against Service Provider, to the extent that it is based on a claim
that Products (or the use of the replacement parts, enhancements,
maintenance releases, and patches ("Materials") provided to Service
Provider by Sun) directly infringe a copyright or a U.S. patent, and will
pay all damages and costs awarded by a court of final appeal attributable
to such claim, provided that Service Provider: (i) gives written notice of
the claim promptly to Sun; (ii) gives Sun sole control of the defense and
settlement of the claim; (iii) provides to Sun all available information
and assistance; and (iv) has not compromised or settled such claim. If any
Products or Materials are found to infringe, or in Sun's opinion are likely
to be found to infringe, Sun may elect to: (i) obtain for Service Provider
the right to use such Products and/or Materials; (ii) replace or modify
such Products and/or Materials so that they become non-infringing; or if
neither of these alternatives is reasonably available, (iii) remove such
Products and/or Materials and refund Service Provider's net book value for
these Products and/or Materials. Sun has no obligation under this Section
10 for any claim which results from: (i) use of Products and/or Materials
in combination with any equipment, software or data not provided by Sun;
(ii) Sun's compliance with designs or specifications of Service Provider,
(iii) modification of Products and/or Materials; or (iv) use of an
allegedly infringing version of any Products and/or Materials, if the
alleged infringement could be avoided by the use of a different version
made available to Service Provider. THIS SECTION STATES THE ENTIRE
LIABILITY OF SUN AND EXCLUSIVELY REMEDIES OF SERVICE PROVIDER FOR CLAIMS OF
INFRINGEMENT.
11.0 LIMITATION OF LIABILITY
11.1 Except for obligations under Section 10 (Intellectual Property
Claims), or breach of any applicable license grant, and to the extent not
prohibited by applicable law, each party's aggregate liability to the other
for claims relating to this Agreement, whether for breach or in tort, will
be limited to the amount paid to Sun for Products, Services, or Materials
which are the subject matter of the claims. Liability for damages will be
limited and excluded even if any exclusive remedy provided for in this
Agreement fails of its essential purpose.
11.2 Neither party will be liable for any indirect, punitive,
special, incidental or consequential damage in connection with or arising
out of this Agreement (including loss of business, revenue, profits, use,
data or other economic advantage) however it arises, whether for breach or
in tort, even if that party has been previously advised of the possibility
of such damage.
12.0 FORCE MAJEURE
A party is not liable under this Agreement for non-performance caused by
events or conditions beyond that party's control, if the party makes
reasonable efforts to perform. This provision does not relieve either party
of its obligation to make payments then owing.
13.0 WAIVER OR DELAY
Any express waiver or failure to exercise promptly any right under this
Agreement will not create a continuing waiver or any expectation of non-
enforcement.
14.0 ASSIGNMENT
Neither party may assign or otherwise transfer any of its rights or
obligations under an Agreement, without the prior written consent of the
other party, except that Sun may assign its right to payment, assign an
Agreement to an Affiliated Company, subcontract the delivery of Services or
Products, or any of these. If Sun elects to subcontract Services or Product
delivery, Sun will remain primarily responsible for the delivery of
Services or Products.
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Service Provider Agreement # BP-0036
---------
15.0 NOTICES
All written notices required by this Agreement must be delivered in person
or by means evidenced by a delivery receipt and will be effective upon
receipt.
16.0 SEVERABILITY
If any provision of this Agreement is held invalid by any law or regulation
of any government or by any court or arbitrator, such invalidity will not
affect the enforceability of any other provisions.
17.0 CONTROLLING LANGUAGE
The English version of this Agreement controls, regardless of whether a
translation into any other language is made.
18.0 SURVIVAL
Rights and obligations under this Agreement which by their nature should
survive, will remain in effect after termination or expiration hereof.
19.0 GOVERNING LAW
Disputes which cannot be settled amicably will be governed by the laws of
the State of California and applicable U.S. Federal law. Choice of law
rules of any jurisdiction and the United Nations Convention on Contracts
for the International Sale of Goods will not apply.
20.0 ENTIRE AGREEMENT
20.1 This Agreement is the parties' entire agreement relating to its
subject matter. It supersedes all prior or contemporaneous oral
or written communications, proposals, conditions, representations
and warranties and prevails over any conflicting or additional
terms of any quote, order, acknowledgment, or other communication
between the parties relating to its subject matter during the
term of this Agreement
20.2 No modification to this Agreement will be binding, unless in
writing and signed by an authorized representative of each party.
- -------------------------------------------------------------------------------
TO SIGNIFY THEIR AGREEMENT TO THESE TERMS, THE PARTIES HAVE CAUSED THIS
AGREEMENT TO BE SIGNED BY THEIR AUTHORIZED REPRESENTATIVES. THE EFFECTIVE DATE
OF THIS AGREEMENT IS
8/24/99
- ---------------------
SUN MICROSYSTEMS, INC, Service provider
By: /s/ [ILLEGIBLE]^^ By: /s/ Charles W. Skamser
----------------------- ---------------------------
Name: [ILLEGIBLE]^^ Name: Charles W. Skamser
---------------------- --------------------------
Title: [ILLEGIBLE]^^ Title: President & CEO
--------------------- --------------------------
Date: 11/1/99 Date: 8-24-99
--------------------- --------------------------
- -------------------------------------------------------------------------------
<PAGE>
Exhibit No. SP-0036
SUN MICROSYSTEMS, INC.
AMERICAS' EXECUTIVE SERVICE PROVIDER ("SP") PROGRAM EXHIBIT
This Exhibit is effective on Nov 11, 1999 ("Effective Date") by and between
SUN MICROSYSTEMS, INC. ("Sun"), having a place of business at 901 San Antonio
Road, Palo Alto, California 94303 and ebaseOne ("SP") having a place of business
at 6060 Richmond Ave Houston, TX 77057. This is an Exhibit to the SMI Service
Provider Agreement Master Terms between the parties dated Nov -1 1999
1.1 SCOPE
This Exhibit governs SP's authorization to purchase certain Sun Products
directly from Sun, and perform SP Services to SP's customers other than
governmental entities, departments, agencies and offices. Throughout the term of
this Exhibit, SP's primary business must be to provide facilities and/or
infrastructure for delivery of SP Services, including Web based applications and
IP services to Enterprise customers, consumers or other Service Providers. "SP
Services" are set forth in Attachment A. Authorized Sun Products and buying
locations are set out in Attachment B. In connection with the provision of SP
Services, SP will use Sun Products internally for purposes of providing the SP
Services. SP may not purchase Sun Products pursuant to this Exhibit unless those
Products are necessary for the provision of specified SP Services to SP's
customers or for SP's internal use. Unless SP is accepted into the "SunTone
Elite Program" and a Reseller Addendum is executed by Sun and SP, SP may not
resell Sun Product. If SP resells or transfers new or unused Sun Products to
third parties, this Exhibit will be terminated for material breach.
1.2 BUSINESS PLAN
SP must submit a Business Plan to, and which will be reviewed by, Sun. The
Business Plan will be attached to Attachment B. SP has represented to Sun that
the Business Plan accurately reflects the manner in which SP intends 1) to
utilize Product in conjunction with its SP services, 2) to market and support
Sun Products and 3) market SP's relationship with Sun. Either party may initiate
a review of the accuracy of SP's Business Plan upon thirty (30) days' Notice,
provided that Sun shall initiate no more than one review per calendar quarter.
1.3 ATTACHMENTS
The Attachments to this Exhibit may be modified only upon the mutual written
consent of the parties. The current version of each Attachments is attached to
this Exhibit and becomes a part hereof.
1.4 PRICES AND DISCOUNTS
SP's net price for Products or spare parts purchased and licensed under this
Exhibit shall be the price set forth in Sun's U.S. End User Price List at the
time SP's order is accepted, less a discount of ** on Category A Products, ** on
Category B Products and ** on Category H Products. Such discounts will not apply
to those Products which are listed as "non-discountable" in the appropriate
price list, nor may they be applied to exceed any listed maximum discount. Such
discounts will apply towards purchases of discountable spare parts, but such
discounts will not apply to purchases of training, installation (except where
included in the purchase price of the Products), consulting, repairs,
maintenance work or similar services and source code license fees. Each year,
within thirty (30) days of the anniversary of the Effective Date of this
Exhibit, Sun will determine SP's discount for the following year based on SP's
(i) verifiable purchases of Products from Sun and Sun authorized resellers
during the current term then ending and, (ii) Sun's then-current discount
policies. Price lists and discounts are subject to change at any time.
1.5 SP DEVELOPMENT FUND ("SPDF"). This section governs SP accrual, use, and
reimbursement of SPDF.
a) SP will receive SPDF at a rate equal to * of its net purchase of Sun
Products from Sun directly.
b) Disbursement and use of SPDF shall be as follows:
** Sun technology, training, services
** Marketing Initiatives
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c) Any additional policies and procedures governing the SP's reporting,
use and reimbursement of SPDF will be set forth on the SP web site,
when it becomes available.
d) SP agrees to pay any and all such applicable taxes as set forth in
Section 1.19.
e) To be eligible for reimbursement, all expenditures must be in the
United States.
f) All claims for reimbursement must be received by the designated co-op
agency within 6 months from the accrual date. Any funds not claimed
during this time period will be forfeited to Sun. SP shall be advised
of unused funds at least thirty (30) days prior to the forfeiture
date.
g) Sun shall not be responsible in any way for the acts, errors, or
omissions of the designated co-op agency.
h) Failure to comply with any foregoing obligations will constitute a
material breach of this Exhibit.
1.6 COMPETENCY TRAINING
SP may enroll in Sun's Certification Training Program established for Sun
Service Providers as those classes are established from time-to-time and
set forth on the SP Web site: _____________________________.
1.7 SP's OBLIGATIONS
a) SP shall provide monthly productivity status reports ("PSR") as
directed by Sun on the SP web site. If SP does not provide Sun with
PSR's as set forth on the SP web site, Sun may cancel SP's Business
Development Fund accruals and may terminate this Exhibit.
b) Indemnity. Each party shall indemnify and hold the other harmless from
and against all third party claims for personal injury or death, as
may arise from the negligent performance or non-performance of its
obligations under this Exhibit.
c) Fair Representation. SP shall display, demonstrate and represent Sun
Products fairly and shall make no representations concerning Sun or
its Sun Products which are false, misleading, or inconsistent with
those representations set forth in promotional materials, literature
and manuals published and supplied by Sun. SP shall comply with all
applicable laws and regulations in performing under this Exhibit.
d) SUN SPARC Only. SP shall not sell, lease, or otherwise deal in any
product based on SPARC Architecture, unless such product (i) is a Sun
Product or (ii) is a "laptop system". A product is a "laptop" system
if it is (i) transportable, (ii) battery operated, (iii) under sixteen
(16) pounds total weight including case, and (iv) packaged without a
CRT. SP is not prohibited by this Exhibit from selling any product
that does not contain the SPARC Architecture.
1.8 TERM AND TERMINATION
A. Term. This Exhibit shall commence on the Effective Date and shall
remain in force until the date established according to the following
schedule:
Effective Date: Expiration Date:
(of each following year)
March 1 - May 31 May 31
June 1 - August 31 August 31
September 1 - November 30 November 30
December 1 - February 28 February 28
It shall be automatically renewed on a yearly basis thereafter, unless
at least thirty (30) days prior to any year's Expiration Date, Sun or
SP tenders Notice of intention not to renew.
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B. Termination.
a) This Exhibit and/or any Exhibit hereto may be terminated by
either party, (i) without cause, for any reason, on ninety (90)
days' Notice to the other party (ii) immediately, by Notice, upon
material breach by the other party, if such breach cannot be
remedied; (iii) by Notice, if the other party fails to cure any
material remediable breach of this Exhibit within thirty (30)
days of receipt of Notice of such breach, or (iv) immediately, by
Notice, upon the second commission of a previously remedied
material breach.
a) Sun may terminate this Exhibit immediately, by Notice in the
event of (i) the direct or indirect taking over or assumption of
control of SP or of substantially all of its assets by any
government, governmental agency or other third party; (ii) Sun
discovers that SP has made a material misrepresentation or
omission in its SP Application; and (iii) SP makes an authorized
resale.
C. Effect of Termination.
a) Upon any termination or expiration of this Exhibit, SP shall no
longer be authorized to purchase Sun Products. In the event of
termination for cause, all outstanding orders are subject to
cancellation or acceptance by Sun. Sun may repurchase and require
SP to sell to Sun any unused Sun Products in SP's inventory at
net invoice price.
b) Rights and obligations under this Exhibit which by their nature
should survive, will remain in effect after termination or
expiration hereof. Neither party shall be liable to the other for
damages of any kind, on account of the termination or expiration
of this Exhibit in accordance with its terms and conditions.
1.9 NO EXPORT
SP agrees that it will not export Products outside the United States unless SP
has been accepted into Sun's Passport Program and has executed a Passport
Exhibit to this Exhibit. SP recognizes that (i) under the Passport Program, the
prices it pays and the discounts it receives may be different from those stated
in this Exhibit, and that purchases made outside the U.S. will be subject to
local terms and condition, and (ii) Sun Enterprise Services will not be
obligated to provide Support Program Modules for services for Products exported
hereunder.
1.10 TRADEMARKS LOGOS AND PRODUCT DESIGNS
"Sun Trademarks" means all names, marks, logos, designs, trade dress and other
brand designations used by Sun in connection with Products. SP may refer to
Products by the associated Sun Trademarks, provided that such reference is not
misleading and complies with the then-current Sun Trademark and Logo Policies.
SP shall not remove, alter or add to any Sun Trademarks, nor shall it co-logo
Product. SP is granted no right, title or license to, or interest in, any Sun
Trademarks. SP acknowledges Sun's rights in Sun Trademarks and agrees that any
use of Sun Trademarks by SP shall inure to the sole benefit of Sun. SP agrees
not to (i) challenge Sun's ownership or use of, (ii) register, or (iii) infringe
any Sun Trademarks, nor shall SP incorporate any Sun Trademarks into SP's
trademarks, service marks, company names, internet addresses, domain names, or
any other similar designations. If SP acquires any rights in any Sun Trademarks
by operation of law or otherwise, it will immediately at no expense to Sun
assign such rights to Sun along with any associated goodwill, applications,
and/or registrations.
SP may use the Service Provider program logo only, (i) as shown in the artwork
provided by Sun; (ii) in pre-sale marketing materials and advertising, but not
on goods, packaging, product labels, documentation or other materials
distributed with Products; (iii) in a manner no more prominent than SP's
corporate name and logo; and (iv) otherwise in accordance with the then current
Sun Trademark and Logo Policies.
1.11 ORDERS AND DELIVERY
SP may submit written Product orders to Sun at any time. However, acceptance of
SP's Product orders will only be effective upon issuance of Sun's order
acknowledgement form. Any subsidiary of SP which is at least 50% owned by SP and
which desires to be an ordering location must agree to bound by the terms of
this Exhibit in writing and must be listed as an ordering location in Attachment
B to this Exhibit. Additional ordering locations may be added by written
request. Sun will use reasonable efforts to meet the delivery date(s) identified
on the acknowledgment form. Unless otherwise specified on SP's order, Sun may
make partial deliveries and invoice each delivery. Such deliveries will not
relieve SP of its obligation to accept other parts of its order. Title to
Equipment, and risk of loss of or damage to Products, will pass to SP upon
shipment by Sun, Ex Works Sun's product delivery center. Products
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<PAGE>
will be deemed accepted upon receipt by SP. Sun's product offerings are
continually evolving. Accordingly, Sun reserves the right to make product
substitutions and modifications that do not cause a material adverse effect in
overall product performance. Although Sun will endeavor to ship Products as
scheduled, Sun reserves the right, should it be necessary for any reason, to
allocate production to its SPs in a commercially reasonable manner.
1.12 RESCHEDULING, RECONFIGURATION, AND CANCELLATION CHARGES
SP may reschedule, reconfigure, refuse or cancel the whole or part of any
Product order once, at no charge, provided the written request to do so is
received by Sun at least sixty (60) days prior to the scheduled delivery date
and, in the case of rescheduling or reconfiguration, the requested delivery date
is within sixty (60) days of the original delivery date. If an order for a
Product is rescheduled, reconfigured, refused, or cancelled at SP's request on
any other basis, or if Sun reschedules the Product order because SP fails to
meet an obligation under this Exhibit, Sun may charge SP a restocking fee equal
to ten percent (10%) of the list price of the rescheduled, refused, reconfigured
or cancelled portion of the order.
1.13 PRODUCT UPGRADES
The list price of Product upgrades is based upon the return to Sun of specified
parts from system(s) being upgraded, as identified in the Sun U.S. End User
Price List. If Sun does not receive the specified parts within thirty (30) days
of upgrade delivery to SP, Sun will invoice SP for the non-returned parts, SP
agrees to pay Sun for such non-returned parts the difference between the list
price of the purchased upgrade(s) and the list price of the upgraded system(s)
if purchased new.
1.14 RESALE OF EQUIPMENT:
a) INITIAL INTERNAL USE ONLY: Equipment purchased by Customer,
at the discounts provided under this Exhibit, is for the
internal use of Customer only, and may not be resold for a
period of twelve (12) months from the date of delivery, and
may not be resold as "new" at any time. In the event that
Customer resells Equipment in violation of this provision,
and in addition to any other remedies available to Sun,
Customer agrees to pay to Sun, upon written demand, a sum
equal to the difference between the then current Sun U.S.
End User Computer Systems list price and the price actually
paid for the resold Equipment.
b) FUTURE RESALE CONDITIONS: In the event that Customer resells
Equipment in used condition at least twelve (12) months
after the date of delivery, Customer may transfer the
associated operating system Software license to the
purchaser of Equipment, provided Customer (i) executes and
has the purchaser of Equipment execute the Licensed Software
Transfer Notification/Exhibit (the "Transfer Exhibit")
attached to this Exhibit as Exhibit C and; (ii) returns an
executed copy of the Transfer Exhibit to Sun at the address
therein specified.
1.15 PRODUCT WARRANTY
Product warranties may vary depending on the type of Sun Products purchased.
Applicable terms and conditions are as set out in the then-current Sun U.S. End
User Price List. Software provided with Product is warranted to conform to
published specifications for a period of ninety (90) days from the date of
delivery. Sun does not warrant that; (i) operation of any such Software will be
uninterrupted or error free; or (ii) functions contained in such Software will
operate in combinations which may be selected for use by the licensee or meet
the licensee's requirements. These warranties entend only to SP as an original
purchaser. Sun reserves the right to change these warranties at any time upon
notice and without liability to SP or third parites.
a) Limitation of Liability under Warranty: SP's exclusive
remedy and Sun's entire liability under these warranties
will be: (i) with respect to Equipment, repair or at Sun's
option, replacement; and (ii) with respect to Software,
using reasonable efforts to correct such Software as soon as
practicable after SP has notified Sun of such Software's
nonconformance. If such repair, replacement or correction is
not reasonably achievable, Sun will refund the purchase
price/license fee. Unless SP has executed an on-site service
Exhibit, repair or replacement will be undertaken at a
service location authorized by Sun.
b) No Warranty: No warranty will apply to: (i) any and all
Software customization, such Software is provided "AS IS",
and "WITH ALL FAULTS", or (ii) any Product that is modified
without Sun's written consent or which has been misused,
altered, repaired or used with Equipment or software not
supplied or expressly approved by Sun.
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1.16 BINARY CODE LICENSE
a) Grant and Restrictions: SP is granted a non-exclusive and non-
transferable license ("License") for the use of Software provided with
Product in machine-readable form and accompanying documentation, by
the number of users for which the applicable fee has been paid.
Software is copy-righted and title to all copies is retained by Sun,
its licensors or both. SP will not make copies of Software or
accompanying documentation, other than a single copy of Software for
archival purposes and, if applicable, SP may, for its internal use
only, print the number of copies of on-line documentation for which
the applicable fee has been paid, in which event all proprietary
rights notices on Software will be reproduced and applied. Except as
specifically authorized below, SP will not modify, decompile,
disassemble, decrypt, extract, or otherwise reverse engineer Software.
b) License to Develop: In the event that SP desires to develop software
programs which incorporate portions of Software ("Developed
Programs"), the following provisions apply, to the extent applicable:
Developed Programs are to have an application programming interface
that is the same as that of Software; fonts within such Software will
remain associated with their toolkit or server; Developed Programs may
be used and distributed, but only on computer equipment licensed to
utilize Solaris operating system software, unless an additional
Developer's License Exhibit has been executed by Sun and SP; SP is not
licensed to develop printing applications or print, unless SP has
secured a valid printing license; incorporation of portions of Motif
in Developed Programs may require reporting of copies of Developed
Programs to Sun; and SP agrees to indemnify, hold harmless and defend
Sun from and against any losses, expenses, claims or suits, including
attorney's fees, which arise or result from distribution or use of
Developed Programs, to the extent that such claims or suits arise from
the development performed by SP.
c) Confidential Information: Software is confidential and proprietary
information of Sun, is licensors, or both. SP agrees to take adequate
steps to protect Software from unauthorized disclosure or use.
d) U.S. Government Restrictions: If SP is acquiring Software or
accompanying documentation on behalf of the U.S. Government, it will
be subject to "Restricted Rights", as that term is defined in the
Federal Acquisition Regulations ("FARs") in paragraph 52.227-19(c)(2),
or its equivalent paragraph in the DOD Supplement to the FARs or its
successor provisions.
e) Termination: The License is effective until terminated. SP may
terminate the License at any time by destroying Software and
accompanying documentation and all copies thereof. The License will
terminate immediately upon Notice from Sun if SP fails to comply with
the terms of this License Section or the Confidential Information
obligations set forth above. Upon termination, SP will destroy all
copies of Software and accompanying documentation.
1.17 OTHER GENERAL TERMS
a) Injunctive Relief. It is understood and agreed upon that,
notwithstanding any other provisions of this Exhibit, breach of this
Exhibit by a party may cause irreparable damage for which recovery of
money would be inadequate and that either party shall be entitled to
timely injunctive relief to protect such party's rights under this
Exhibit in addition to any and all remedies at law.
b) Return Of Information. Upon the expiration or termination of this
Exhibit, each party will, upon the written request of the other party,
return or destroy (at the option of the party receiving the request)
all Confidential Information, documents, manuals and other material
specified by the other party.
c) Headings. The paragraph headings appearing in this Exhibit are
inserted only as a matter of convenience and in no way define, limit,
construe, or describe the scope or extent of such paragraph or in any
way affect this Exhibit.
d) Acknowledgment. The parties hereto each acknowledges that the
provisions of this Exhibit were negotiated to reflect an informed,
voluntary allocation between them of all risks (both known and
unknown) associated with the transactions contemplated hereunder. The
limitations and disclaimers related to warranties and liabilities
contained in this Exhibit are intended to limit the circumstances and
extent of liability. The provisions of such sections (and this
Section) will be
Page 5 of 10
<PAGE>
enforceable independent and severable from any other enforceable or
unenforceable provision of this Exhibit.
e) Reference Customer. Sun will be entitled to use SP as a reference customer
and to refer to SP in any materials in which Sun's clients and customers
are mentioned, subject in each case to SPs prior approval. Either party may
use the other's name and logos and related other trade marks, trade names
and service marks in connection with any such materials with prior written
approval of the other party.
F. Exhibits. The attached Exhibits may be modified only upon the manual
written consent of the parties. The current version of each Exhibit is
hereby incorporated by reference.
- ------------------------------------------------------------------------------
TO SIGNIFY THEIR AGREEMENT TO THESE TERMS, THE PARTIES HAVE CAUSED THIS
EXHIBIT TO BE SIGNED BY THEIR AUTHORIZED REPRESENTATIVES. THE EFFECTIVE DATE OF
THIS EXHIBIT IS 8/24/99.
-------
SUN MICROSYSTEMS INC. Service Provider
By: /s/ [ILLEGIBLE]^^ By: /s/ Charles W. Skamser
-------------------------- --------------------------
Name: [ILLEGIBLE]^^ Name: Charles W. Skamser
----------------------- ------------------------
Title: [ILLEGIBLE]^^ Title: President & CEO
----------------------- -----------------------
Date: 11/1/99 Date: 8-24-99
----------------------- ------------------------
- --------------------------------------------------------------------------------
Page 6 of 10
<PAGE>
ATTACHMENT A
SP Services:
ebaseONE services will be made up of a primary offering called OneServ and a
secondary CorServ is the Company's premier ASP-based solution. CorServ will be
basic data center services available by the very fact that the Company will own
and operate a state-if-the-art shared computer center. CorServ services will
include web hosting, security, hosting of applications for independent software
vendors (ISVs), backup services and other standard data services
Page 7 of 10
<PAGE>
ATTACHMENT B
1.0 Authorized Sun Prod
All Sun Microsystem's products listed in the U.S. End User Price List.
2.0 Authorized Buying Locations
ebaseONE Corporation
6060 Richmond Avenue
Houston, TX USA 77053
Contact: Scott Feuless
Vice President, Technology Operations
3.0 Business Plan
Page 8 of 10
<PAGE>
ATTACHMENT C
LICENSED SOFTWARE TRANSFER NOTIFICATION/Exhibit
-----------------------------------------------
TO: Sun Microsystems, Inc.
Attn: Contracts Department, M/S UPAL01-455
901 San Antonio Road
Palo Alto, CA 95134
TRANSFER NOTIFICATION:
In connection with the sale of used Sun workstations ("Equipment") Licensee
undertakes to notify Sun Microsystems, Inc., of the transfer of certain
Licensed Software in conjunction with such sale, to the party herein named
below under "Transfer Exhibit" ("Transferee"). Licensee warrants that
Licensee has not retained any copies of the Licensed Software transferred
in conjunction with the sale of used Equipment to Transferee and hereby
relinquishes all rights in the Licensed Software previously granted by Sun.
Licensed Software Transferred: Used Equipment Sold
Licensed Software:
Equipment Serial Number
a. a.
------------------------------- ---------------------------
b. b.
------------------------------- ---------------------------
c. c.
------------------------------- ---------------------------
d. d.
------------------------------- ---------------------------
Signed:____________________________
Name:______________________________
Title:_____________________________
Company:___________________________
Address:___________________________
___________________________
Date:______________________________
Page 9 of 10
<PAGE>
TRANSFER Exhibit:
ATTACHMENT C
(CONTINUED)
-----------
Transferee herein acknowledges receipt of the Licensed Software in
conjunction with the purchase of the Equipment as herein set forth above.
Transferee further agrees to the terms and conditions governing the
transfer and use of the Licensed Software as contained in Sun's Binary Code
License, attached hereto. The term "LICENSEE" as contained in the Binary
Code License shall be deemed to apply to Transferee.
Signed:_____________________________
Name:_______________________________
Title:______________________________
Company:____________________________
Address:____________________________
____________________________
Date:_______________________________
Page 10 of 10
<PAGE>
EXHIBIT 10.12
**INDICATES INFORMATION WHICH HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
ASTERISKS APPEAR ON PAGE 4 OF THIS EXHIBIT.
SERVICE ORDER CORSERV
- --------------------------------------------------------------------------------
This Service Order ("Order") is subject to the terms and conditions agreed
between ebaseOne and Client in the Application Services Provision Agreement, and
all Amendments, Exhibits, and related Service Orders between Client and ebaseOne
(collectively "ASPA"). This Order constitutes an amendment to the ASPA under
which ebaseOne will provide Services to Client in exchange for the consideration
detailed below. All capitalized definitions retain the meaning ascribed to them
in the ASPA, unless specifically set forth in this Order. This Order is
effective from the last date accompanying the signatures below. The date on
which Services are first available to Client ("Service Start Date") serves as
the date all Terms are calculated from.
1.0 DESCRIPTION OF SERVICES
- --------------------------------------------------------------------------------
ebaseOne will provide the following specific services to Client:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TITLE DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Connectivity Non dedicated internet connectivity 512kbs, Citrix, Firewall
- -------------------------------------------------------------------------------------------------------------------
Hosting 1 HP NT server w/512MB RAM, 18GB RAID-1 storage
- -------------------------------------------------------------------------------------------------------------------
Support OneCare
- -------------------------------------------------------------------------------------------------------------------
SLAOne Service commitments without credits
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
2.0 TERM
- --------------------------------------------------------------------------------
This Order shall remain in effect for two (2) years from the Service Start Date
("Order Initial Term") and, unless terminated in accordance with the ASPA, shall
automatically be renewed thereafter on each anniversary of the Service Start
Date for subsequent periods of one (1) year ("Order Renewal Term") (unless
specifically designated, the "Order Initial Term" and the "Order Renewal
Term(s)" are collectively referred to as the "Order Term"). No later than ninety
(90) days prior to the expiration of any Order Term, either party shall give
written notice to the other if it will not renew the Order. After provision of
such notice, the Services will discontinue and this Order will be complete
effective on the expiration of the current Term.
3.0 METHODS
- --------------------------------------------------------------------------------
ebaseOne will use industry standard practices to provide the Services. While
Client will determine the Services, and the level at which the Services are
provided, all decisions on how to provide the Services are at the sole
discretion of ebaseOne.
4.0 SERVICE HOURS
- --------------------------------------------------------------------------------
There are two types of Service Hours defined for this Order, Application
Availability Hours, and Support Hours. Application Availability Hours define
the time of day during which ebaseOne makes the Services available to
1
<PAGE>
Client. Support Hours define the time during which telephone support is
available from ebaseOne to Client points of contact.
Service Hours generally available from ebaseOne for the Services defined above
are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ONECARE(TM) * ONECARE PLUS(TM) * ONECARE PLATINUM(TM) *
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Availability Hours 7am - 7 pm 7am - 7pm 24 hrs/day
365 days/year 7 days/week 7 days/week
- ------------------------------------------------------------------------------------------------------------------------
Support Hours 7am - 7pm 7am - 7pm 24 hrs/day
Monday through Friday 7 days/week 7 days/week
Excluding ebaseOne observed
Holidays
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*All planned Downtime under the OneCare(TM) and OneCare Plus(TM) plans is
scheduled outside of the daily Application Availability Service Hours. Planned
Downtime under the OneCare Platinum plans is scheduled sometime during the
Application Availability Service Hours in such a way as to minimize the impact
on Client operations.
Service Hours defined for this Order are: ONECARE(TM)
Client may, upon provision of sixty (60) days notice to ebaseOne, increase the
Service Hours to a higher level. The price for support will be increased to the
higher level effective from the first day of the new Service Hours.
5.0 SERVICE LEVELS
- --------------------------------------------------------------------------------
ebaseOne commits to maintaining Service Levels in two primary areas:
Availability and Performance. Each primary area is measured using standard
ebaseOne metrics in place at the time of measurement. A variety of factors,
including Client's Application, access method, redundancy, and maintenance of
the CA-C all impact ebaseOne's Service Level commitments.
ebaseOne will apply ebaseOne standard metrics to the Services, and set
acceptable Availability and Performance levels of Service. The Service Levels
established will be the standard by which Availability and Performance are
measured. Any substantial change in the CA-C or CA-E may cause the baseline
measurements to become unreliable. Such changes include, without limitation,
operating system revisions in the CA-C or CA-E, installation of applications in
the CA-C unrelated to the Services, addition of more computers to the CA-C, or
Application revisions. Upon such change, and at the written request of ebaseOne
or Client, ebaseOne will create a new Service Level baseline ("re-baseline") for
the revised environment within a mutually agreed timeframe. Upon completion of
re-baselining, the new baseline will replace the previous baseline for further
measurements.
6.0 UPGRADE FREQUENCY
- --------------------------------------------------------------------------------
An Upgrade is defined as a modification or replacement of Software, Hardware or
Networks designed to add functionality, increase performance, and/or resolve
problems. ebaseOne and Client agree to Upgrade the Services as necessary to
provide a stable, effective, economical environment. If ebaseOne makes the
determination to implement the Upgrade, ebaseOne will work with Client to
install the Upgrade in a reasonable, timely fashion. Client agrees to be guided
by ebaseOne's determination as regards Upgrades, and provide all cooperation
reasonably necessary to install the Upgrade.
7.0 RESPONSIBILITIES
- --------------------------------------------------------------------------------
7.1 EBASEONE
1. ebaseOne will make best efforts to provide the Services in a professional
and workmanlike fashion.
2. ebaseOne will notify Client's Manager of planned Downtime within the CA-E no
less than 48 hours in advance.
7.2 CLIENT
2
<PAGE>
1. Client will manage and maintain all Hardware, Software, Networks and other
services within the CA-C necessary for the provision of Services by
ebaseOne.
2. Client will establish policies for End User training, Trouble reporting,
Internet access, and other areas as necessary to ensure appropriate use of
the Services.
3. Client will work in good faith with ebaseOne to provide information and
assistance as necessary to maintain the Services and resolve Trouble.
4. Client will maintain on-site staff to provide computer, network or server
support and management within the CA-C.
5. Client will maintain security of systems and networks within the CA-C in
accordance with standard industry practice.
6. Client will make workspace, telephone, data, and environmental resources
available to the staff and sub-contractors of ebaseOne as reasonably
necessary for those individuals to perform work while on the Client's site.
7. Client will provide any required help desk services directly to End-Users
regarding usage of the Applications and/or Services.
7.3 SHARED
1. Both Parties agree to appoint qualified staff to the position of Manager as
necessary to meet their obligations under this Order.
2. Both Parties accept that failures by other parties outside both the CA-C and
CA-E may result in Trouble beyond the control of either Party.
8.0 CONTROL AREAS
- --------------------------------------------------------------------------------
8.1 For the purpose of this Service Order, the Control Area for ebaseOne
("CA-E") is defined as:
The ebaseOne Enterprise Application Center (EAC).
8.2 For the purpose of this Service Order, the Control Area for The Client
("CA-C") is defined as:
The Client's site, computers and local network, and the site computers and
the local computers of the client's customers.
9.0 INCENTIVES/REMEDIES
- --------------------------------------------------------------------------------
9.1 SLAONE
"Availability Trouble" is defined as any instance where the Services are NOT
available for 15 consecutive minutes or more due to Trouble arising within the
CA-E. Problems of any duration will not have Remedy Credits. ebaseOne will,
however, make best efforts to resolve the problem.
9.2 SLAONE PLUS
"Availability Trouble" is defined as any instance where the Services are NOT
available for 15 consecutive minutes or more due to Trouble arising within the
CA-E. A Problem of 15 to 60 consecutive minutes in duration will have a ONE
HOUR Remedy Credit per affected End User. A Problem with a duration greater
than 60 consecutive minutes will have a ONE DAY Remedy Credit per affected End
User.
A Client can receive a maximum of FIVE (5) Days of Remedy Credits per affected
End User in any single Billing Period.
9.3 SLAONE PLATINUM
"Availability Trouble" is defined as any instance where the Services are NOT
available for 5 consecutive minutes or more due to Trouble arising within the
CA-E. A Problem of 5 to 60 consecutive minutes in duration will have a ONE HOUR
Remedy Credit per affected End User. A Problem with a duration greater than 60
consecutive minutes will have a ONE DAY Remedy Credit per affected End User.
OneSafe redundancy and a redundant connection to the EAC is required to
implement the SLAOne Platinum option.
A Client can receive a maximum of FIVE (5) Days of Remedy Credits per affected
End User in any single Billing Period.
3
<PAGE>
9.4 SOLE AND EXCLUSIVE REMEDY
THE ABOVE STATED REMEDIES ARE THE SOLE AND EXCLUSIVE REMEDY TO CLIENT FOR ANY
FAILURE BY EBASEONE TO PROVIDE SERVICES AS AGREED IN THE ASPA.
10.0 Cost
- -------------------------------------------------------------------------------
Client agrees to pay ebaseOne the following amounts in accordance with the ASPA.
10.1 MONTHLY COSTS $** FOR 5 USERS MAXIMUM, $** PER ADDITIONAL USER
10.2 ANNUAL COSTS **
10.3 FIXED/PROJECT COSTS N/A
10.4 COST INCREASES
On the anniversary of any Term (based on the Service Start Date), ebaseOne may
increase the Monthly Costs. Such increase will be subject to the following
terms:
(a) ebaseOne will provide Client with sixty (60) days advance notice of such
increase; and,
(b) the increase will not exceed **% of the rate currently paid by Client; and,
(c) the increased cost will not exceed then current ebaseOne List Prices (if
applicable) for the Services.
11.0 EXECUTION
- -------------------------------------------------------------------------------
By signatures below, the individuals represent and warrant that they are an
officer authorized to bind the stated principle in the amount(s) indicated
above.
<TABLE>
<CAPTION>
EBASEONE CORPORATION ("EBASEONE") PAPERCHASER.COM, INC. ("CLIENT")
<S> <C>
By: //s// John Czapko By: //s// Lee Solomon
- -------------------------------------------- ---------------------------------
(Signature) (Signature)
John Czapko Lee Solomon
- -------------------------------------------- ---------------------------------
Name (Type or Print) Name (Type or Print)
Vice President, Commercial Hosting Services President/CEO
- -------------------------------------------- ---------------------------------
Title Title
1/14/00 1/13/00
- -------------------------------------------- ---------------------------------
Date Date
</TABLE>
4
<PAGE>
EXHIBIT 10.13
Microsoft will complete:
Direct Commercial Agreement Number 40000896
Microsoft Direct Commercial Service License Agreement
This Microsoft Direct Commercial Service License Agreement (this
"Agreement") is by and between the Commercial Service Provider which has
executed this Agreement below ("Company") and Microsoft Corporation, a
Washington corporation ("Microsoft").
Overview - Microsoft Direct Commercial Service licensing is a program
--------
that allows a Commercial Service Provider to copy, and obtain Licenses to use,
Microsoft software products for Commercial Services. A Commercial Service
Provider is responsible for obtaining the necessary media for each Commercial
Use Product it wishes to copy and use. Media may be obtained directly from
Microsoft World Wide Fulfillment or through any reseller as full package
product. A Commercial Service Provider is then permitted to make one or more
copies of each such product pursuant to the terms contained in this Agreement,
subject to an obligation to order one or more Licenses from Microsoft for each
copy. For each License ordered, the Commercial Service Provider will pay
Microsoft the fees outlined in the Microsoft Direct Commercial Price List in
effect at the time the relevant order is submitted to Microsoft. A Commercial
Service Provider is permitted to acquire Licenses for Commercial Services only
and may not acquire Licenses under this Agreement for its internal use or for
the internal use of its Affiliates.
1. Definitions. Unless otherwise defined, all capitalized terms used in this
Agreement shall have the meanings provided below:
"Agreement" shall mean this Direct Commercial Service License Agreement and
any Addenda attached hereto.
"Affiliate" shall mean a company or legal entity which owns or controls, is
owned or controlled by, or is under common ownership or control with, the
Company or Microsoft as applicable.
"Commercial Service Provider" shall mean an individual or entity that
provides Commercial Services to a Third Party. Examples of Commercial
Services are set forth below.
"Commercial Services" shall mean software services provided to Third
Parties such that the Third Party does not have to acquire the Licenses
itself. Commercial Services does not include services provided to Company's
Affiliates for their own internal use. Examples of Commercial Services
include (but are not limited to):
. Services provided as part of an Internet access service for Third
Parties, such as providing online services or Internet access for
consumers or businesses;
. Hosting communications services for Third parties, such as virtual
private network, voice over IP, video conferences, etc.;
. Hosting an E-Commerce, Internet, Intranet and/or Extranet web site(s)
on behalf of a Third Party through either shared or dedicated servers;
. Hosting application services on behalf of a Third Party by providing
file and print, database, messaging or E-Commerce capabilities;
. Hosting software applications on behalf of a Third Party which includes
asset management, software distribution and management, network
management and performance tuning, etc.; and
. Hosting Independent Software Vendor applications where Third Parties'
applications are built on top of Microsoft technology.
"Commercial Use Products" shall mean the Microsoft software products which
Microsoft makes available for Commercial Services to Commercial Service
Providers and which may be reproduced pursuant to this Agreement. The
Direct Commercial Price List will contain the entire list of available
Commercial Use Products. Microsoft may change the list of available
Commercial Use Products at any time, and from time to time, to add or
remove products.
"Commercial Use License Agreement" or "CULA" shall mean the document which
contains the specific terms and conditions pursuant to which use of a
particular Commercial Use Product is subject. This document will be
provided to
Page 1 of 10
<PAGE>
Company by Microsoft or made available to Company by publication on the
World Wide Web at a site identified by Microsoft to Company or made
available to Company by some other means prior to the placement of any
orders.
"Effective Date" shall mean the date his Agreement is signed by Microsoft.
"License" shall mean a right granted by Microsoft to use or access a copy
of a Commercial Use Product (e.g., a Commercial Service Server License)
subject to this Agreement, the CULA(s) for such Commercial Use Product and
the Product List.
"Product List" shall mean the Direct Commercial Service Licensing Product
list, or any subsequent version thereof, which is made available to the
Company by or on behalf of Microsoft from time to time and identifies
specific terms and conditions (in addition to those provided in the CULA(s)
and this Agreement) for particular Commercial Use Products.
"Third Party" shall mean an individual, company or legal entity ("person")
other than (i) an Affiliate, (ii) persons employed by the Company (as an
employee, contractor or in any other capacity), (iii) persons providing
goods or services to the Company (for example, a supplier) or (iv) persons
providing goods or services on behalf of the Company (for example a
distributor or reseller).
2. Ordering of Licenses.
a. Purchase Order and Third Party Information. The Company shall submit
to Microsoft an order for a License for each copy (or access right) of
a Commercial Use Product it has made (or provided) during the
immediately preceding calendar month. Each order shall specify the
country of usage of each copy made (or access right provided) and shall
provide other information relative to Licenses acquired on behalf of
Third Parties. In addition, the order shall contain information on
newly formed contracts between Company and Third Parties for Commercial
Services utilizing Microsoft Commercial Use Products. This order shall
be in the form attached as Addendum A, as such form may be modified by
Microsoft from time to time. The order must be delivered to Microsoft,
on a calendar monthly basis, no later than the 15/th/ day of the month,
whether or not any copies were made or access rights provided in the
preceding month. A Company's failure to submit an order within the
required time frame shall be grounds for termination of this Agreement,
and use rights shall expire for any copies made by the Company pursuant
to this Agreement for which the Company has not ordered and paid. Upon
receipt of Company's order(s) pursuant to this Section 2.a., Microsoft
will issue an invoice indicating the number and type of Licenses to
Commercial Use Products acquired by the Company and reported to
Microsoft during a specified month. Such invoice, together with
proof/record of payment, shall constitute the confirmation for such
Licenses. Any information provided to Microsoft pursuant to this order
shall be used solely for revenue calculation, internal revenue
allocation, and billing purposes and shall not be used to directly
target or otherwise contact Third Party customers of Company without
Company's prior approval.
b. Pricing. The fees for Licenses shall be set by Microsoft from time to
time and shall be set forth on a Direct Commercial Price List which
shall be issued by Microsoft on a monthly basis. Microsoft shall
determine the method of delivery of such Direct Commercial Price List
to Company. Notwithstanding changes to the Direct Commercial Price
List, if Company has contracted with a Third Party customer to provide
Commercial Services and has acquired Licenses for Commercial Use
Products for the benefit of such Third Party customer, Microsoft shall
not increase the fees for the Licenses acquired for the benefit of such
Third Party customer during (i) the period of the existing contract
between Company and such Third Party customer or (ii) twenty-four (24)
months, whichever is shorter.
c. Payment Terms. All amounts are due and owing net thirty (30) days
after date of invoice from Microsoft. All payments not received by
Microsoft from Company within the required time frame may be assessed a
finance charge of two percent (2%) of the invoice amount per month or
the legal maximum, whichever is less. Payment by the Company to
Microsoft is not contingent on payment by a Third Party customer to the
Company. All payments to Microsoft by Company shall be in the form of
bank wire transfer or electronic funds transfer through an Automated
Clearing House ("ACH") with electronic remittance detail attached.
Page 2 of 10
<PAGE>
Payment shall be remitted to:
Wire Transfers*:
----------------
Microsoft Services #844510
Attn: Special Agreement Payments
Account #3750825354
ABA #11100001-2
Nations Bank of Texas NA
Dallas, TX
* Remittance detail must be sent by: Fax: (425) 936-7329, Attention:
Special Agreement Payments
Email: [email protected]
d. Fulfillment. Company may obtain the media for Commercial Use Products
from Microsoft World Wide Fulfillment ("WWF") or from any reseller of
full package product. All orders through WWF will require prepayment; no
credit terms will be extended. Contact information for WWF will be
provided at the time this Agreement is executed by Microsoft or as
determined by Microsoft from time to time.
3. License Grants.
a. License to Make and Use Copies. Subject to its obligation to order and
pay for the appropriate number of Licenses is a timely fashion as set
forth in Section 2.a. above, at any time during the term hereof, the
Company may make and use copies of, and provide access to, the
Commercial Use Products. Any such copy may be made only from legally
acquired media as outlined in Section 2.d. above. All copies of
Commercial Use Products made pursuant to this Section must be true and
complete copies, and must include all copyright and trademark notices.
b. Use Terms. Each copy made, or access right provided, pursuant to the
right granted in Section 3.a. above may be used only to provide
Commercial Services to Third Parties subject to and strictly in
accordance with the license grants, terms, conditions, limitations and
restrictions contained in this Agreement and the provisions of the then
most recently released version of the applicable CULA and Product List.
Microsoft may amend any CULA and/or the Product List at any time, and
from time to time; provided, however, that no such change will ever
retroactively alter the terms under which Company may use a copy of a
Commercial Use Product previously licensed to Company. If the
requirements of the preceding sentence have been complied with, the
revised CULA(s) and/or Product List shall take the place of the existing
version(s) as of the effective date identified in the notice, and each
copy of a Commercial Use Product made on or after that date shall be
subject to the terms thereof, as amended. By signing this Agreement,
Company acknowledges that it and its Affiliates have access to the World
Wide Web.
c. Printed Materials. Company may not copy any Microsoft guides, manuals
or other printed materials describing or explaining any of the
Commercial Use Products. The Company may acquire copies of any such
guides, manuals or other printed materials from WWF or from a Microsoft
approved fulfillment source in quantities that do not exceed, with
respect to a Commercial Use Product, the number of Licenses of such
Commercial Use Product the Company has acquired.
4. Evaluation and Testing License. Microsoft hereby grants to Company a
License for up to sixty (60) days after the Effective Date to evaluate and
test the Commercial Use Products on the terms and conditions set forth
below and for no other purpose. Copies of Commercial Use Products for this
purpose shall be obtained as set forth above in Section 2.d. No License fee
shall be due and payable for such evaluation and testing License.
a. License Grant. Company may reproduce, install and use an unlimited
number of copies of the Commercial Use Products within its own
facilities solely to evaluate the Commercial Use Products, subject to
the rights and limitations of Section 4.b. below. The Commercial Use
Products may be connected at any point in time to an unlimited number
of workstations or computers operating on one or more internal Company
networks.
b. Other Rights and Limitations. Company may not reverse engineer,
decompile, or disassemble the Commercial Use Products, except and only
to the extent that such activity is expressly permitted by applicable
law notwithstanding this limitation. Company may not otherwise rent,
lease, or transfer the Commercial Use Products. Microsoft reserves all
rights not expressly granted herein.
Page 3 of 10
<PAGE>
c. NO WARRANTIES. FOR PURPOSES OF THE EVALUATION AND TESTING LICENSE,
THE COMMERCIAL USE PRODUCTS AND ANY RELATED DOCUMENTATION ARE PROVIDED
"AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT. THE
ENTIRE RISK ARISING OUT OF USE OR PERFORMANCE OF THE COMMERCIAL USE
PRODUCTS REMAINS WITH COMPANY.
d. NO LIABILITY FOR DAMAGES. IN NO EVENT SHALL MICROSOFT OR ITS SUPPLIERS
BE LIABLE FOR ANY DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOSS OF BUSINESS PROFIT, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THE
USE OF OR INABILITY TO USE THE COMMERCIAL USE PRODUCTS, EVEN IF
MICROSOFT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
5. Facilitating Compliance.
a. Notice to Users. The Company shall use reasonable efforts to make its
employees, agents and other individuals using the Commercial Use
Products under this Agreement aware that the Commercial Use Products
(i) are licensed by Microsoft, (ii) may only be used subject to the
terms and conditions contained in this Agreement and the applicable
CULA(s) and Product List, and (iii) may not be copied, transferred or
otherwise used in violation of such terms and conditions.
b. Audit. During the term of this Agreement and for two (2) years
thereafter. Company agrees to keep all usual and proper records
relating to its reproduction and use of the Commercial Use Products.
Notwithstanding the provisions of any particular CULA(s) and the
Product List, in order to verify Company's compliance with the terms of
this Agreement, during the term of this Agreement and for two (2) years
thereafter, Microsoft may cause (i) an audit to be made of Company's
books and records and/or (ii) an inspection to be made of Company's
facilities and procedure. Any audit and/or inspection shall be
conducted during regular business hours at Company's facilities, with
at least three (3) days' notice, and in such a manner as not to
interfere unreasonably with the operations of the Company. Any audit
shall be conducted by an independent certified public accountant
selected by Microsoft (other than on a contingent fee basis). Company
agrees to provide Microsoft's designated audit or inspection team
access to the relevant Company records and facilities. In any event,
the Company shall promptly acquire sufficient Licenses to permit all
usage disclosed by any such audit. In addition, if any such audit
discloses material unlicensed use of Commercial Use Products, Company
shall pay to Microsoft an amount equal to: (i) the reasonable expenses
incurred in conducting such audit; plus (ii) an additional License fee
of twenty percent (20%) of the estimated retail price established by
Microsoft of the Licenses required to be acquired pursuant to the
preceding sentence. For purposes of this section, "material unlicensed
use of Commercial Use Products" shall exist if, upon audit, it is
determined that, with respect to any Commercial Use Product the Company
has Licenses for fewer than ninety-five percent (95%) of the copies
disclosed by the audit. Microsoft shall use the information obtained or
observed in the audit solely for the purposes of (x) determining
whether the Company has sufficient Licenses for the Commercial Use
Products it is using and has otherwise complied with the terms of this
Agreement, (y) enforcing its rights under this Agreement and any
applicable laws, and (z) determining if customer has accurately
reported Third Party contract information to Microsoft. Microsoft will
hold all such information in confidence.
6. Support. This Agreement does not include technical or integration support
by Microsoft to Company or Company's Third Party customers. Company is
strongly encouraged to sign a Microsoft Consulting Services Agreement to
address the technical requirements needed to provide Commercial Services
using Microsoft technology. Company agrees to provide commercially
reasonable telephone support to Third Party customers and, in connection
therewith, is required to obtain technical support by means of a separate
agreement with Microsoft, a Microsoft Affiliate, a Microsoft Authorized
Support Center, or a Microsoft Solution Provider. Nothing in this provision
shall be deemed to obligate Microsoft or a Microsoft Affiliate to provide
such technical support. Company must indicate its intentions with regard to
technical support on the Company Information section provided beneath the
parties' respective signatures below.
7. Term; Termination.
a. Term. Company may obtain Licenses for Commercial Use Products under the
terms of this Agreement following the Effective Date through June 30,
2001 (the "Term") unless this Agreement is otherwise terminated as
provided below. Notwithstanding the Term, if this Agreement has not
been terminated by Microsoft as a result of Company's breach and if
Company has contracted with a Third Party customer to provide
Commercial Services, Microsoft shall
Page 4 of 10
<PAGE>
extend to Company the right to continue offering the Licenses required
to support such Third Party customer for the existing contract period
between Company and its Third Party customer or twenty-four (24)
months, whichever is shorter.
b. Termination. Either party may terminate this Agreement for cause, as
a result of a breach by the other party of any of the terms and
conditions of this Agreement, upon thirty (30) days' prior written
notice advising the breaching party of the nature of the breach,
provided that such breach is not thereafter cured within such thirty
(30) day period. Notwithstanding the foregoing, a breach by Company of
Section 3.b., 8 or 9.c. of this Agreement or a breach in a material
respect of any provision of the CULA(s) and/or Product List shall
constitute grounds for immediate termination of this Agreement, upon
written notice and without an opportunity to cure.
c. Obligations on Termination or Expiration. Except as provided in
Section 7.a., termination or expiration of this Agreement shall
automatically terminate the rights of Company under it, including the
right to make and use additional copies of Commercial Use Products
pursuant to the terms of this Agreement. Upon termination or expiration
of this Agreement, Company shall immediately submit an order for any
Licenses based on actual usage to the date of such termination or
expiration which have not been previously ordered and which by the
terms of the CULA(s) and/or Product List are required to be ordered
after the month of actual usage, such as Commercial Service Access
Licenses. Licenses ordered by Company and for which Company has paid
prior to the termination or expiration of this Agreement shall
continue, and expire if appropriate, according to their terms
notwithstanding the termination or expiration of this Agreement.
Notwithstanding the foregoing, upon termination of this Agreement as
a result of the Company's breach (and not as a result of any other
termination or expiration), Company shall deliver to Microsoft, or at
Microsoft's direction, destroy (and have all Third Party customers
destroy, if applicable), all units of Commercial Use Products for which
Licenses were acquired pursuant to this Agreement. There shall be no
refund of amounts paid for Commercial Use Products which have been so
returned or destroyed.
8. Prohibition on Assignment. Except as provided in Section 9.c., this
Agreement, and any rights or obligations hereunder, shall not be assigned,
sublicensed or otherwise transferred by Company, whether by contract,
merger, operation of law, or otherwise, without the prior written approval
of Microsoft. Microsoft may transfer its respective rights and obligations
hereunder to any Affiliate without the prior written approval of Company;
provided that Microsoft shall remain liable, in accordance with this
Agreement, for all Licenses it has provided or was obligated to have
provided prior to the date of transfer. Any prohibited assignment is null
and void.
9. Miscellaneous.
a. Entire Agreement. This Agreement, including any Addenda attached
hereto and the CULA(s), the Product List and the Direct Commercial
Price List in effect from time to time and Licenses obtained hereunder,
once accepted by Microsoft as evidenced by Microsoft's signature and
the issuance of a Direct Commercial License Agreement Number,
constitutes the entire agreement between Microsoft and the Company
concerning the subject matter hereof and merges all prior and
contemporaneous communications with respect to such subject matter. The
terms and conditions of these documents shall control over any
provisions in any purchase order. To the extent that there is any
direct inconsistency between the terms contained in this Agreement and
the CULA(s) and/or Product List, the terms of this Agreement shall
control. Similarly, to the extent that there is any direct
inconsistency between the terms contained in the Product List and the
CULA, the terms of the Product List shall control. For the avoidance of
doubt, in the event that a subject or a particular use is addressed in
a provision in the CULA or the Product List and not in the Agreement,
such provision in the CULA or Product List, as applicable, shall
control. Except for the Direct Commercial Price List, CULA(s) and
Product List, any representations, promises or conditions in connection
with this Agreement not in writing signed by all affected parties shall
not be binding. This Agreement, other than the Direct Commercial Price
List, CULA(s) and Product List, may only be changed by a written
instrument signed by both parties. The CULA(s) and Product List may be
amended by Microsoft as provided in Section 3.b. above and the Direct
Commercial Price List may be amended by Microsoft as provided in
Section 2.b. above.
b. Notices. All notices, authorizations and requests in connection with
this Agreement shall be deemed given on the day they are (i) deposited
in the mail, postage prepaid, certified or registered, return receipt
requested; or (ii) sent by air express courier (e.g., DHL, Federal
Express, Airborne), charges prepaid, confirmation requested; and
addressed as provided beneath the parties' respective signatures below.
c. Sublicense, Transfer or Assignment of Licenses.
Page 5 of 10
<PAGE>
i. Applicability. The rights set forth in this Section 9.c. apply only
with respect to Licenses which are perpetual; that is, acquired by means of
a one-time License fee as opposed to a monthly or other periodic License
fee.
ii. To Affiliates. Subject to the requirements identified in Section
9.c.v. below, Company may sublicense, transfer or assign Licenses acquired
under this Agreement to an Affiliate, but not to any person or entity other
than an Affiliate. The Company shall be responsible for all acts and
omissions of the Affiliates to which it sublicenses, transfers or assigns
Licenses. The Company shall require any Affiliate to whom Company has
sublicensed, transferred or assigned Licenses to notify the local Microsoft
subsidiary in the country where such Affiliate will be using the Commercial
Use Products that such sublicense, transfer or assignment has occurred, or
begun to occur.
iii. Pursuant to A Merger, Consolidation or Divestiture. Subject to the
requirements identified in Section 9.c.v. below, the Company (with respect
to its validly-acquired Licenses) or any Affiliate to which the Company has
sublicensed, transferred or assigned validly-acquired Licenses pursuant to
the preceding paragraph, may transfer such Licenses to any Third Party
pursuant to a merger, consolidation or other corporate/organizational
divestiture or acquisition, without the written consent of Microsoft.
iv. With Consent. Except as provided in Sections 9.c.ii. and iii. above,
Company may not sublicense, transfer or assign any Licenses without the
prior written consent of Microsoft, and any such sublicense, transfer or
assignment shall be null and void.
v. Limitations and Requirements. Company may not sublicense, transfer
or assign a License to any party unless (x) it transfers all of the licensed
Commercial Use Product (including all component parts, the media and printed
materials, any upgrades, the invoice from Microsoft evidencing the rights
being transferred, the proof/record of payment and, if applicable, the
Certificate of Authenticity); (y) the recipient agrees in writing to the
terms of the applicable CULA(s) and Product List and of Sections 5 and 9 of
this Agreement (in which event such recipient shall be bound by all
limitations and restrictions to the same extent as if it was the "Company");
and (z) the recipient certifies that it will use such Commercial Use
Products for Commercial Services and not for internal use. If the Company
sublicenses, transfers or assigns its rights in one or more Licenses
identified on any invoice to one or more of its Affiliates, then it shall
provide a copy of such invoice and proof/record of payment, to each such
Affiliate, identifying the number and type of Licenses which have been
sublicensed, transferred or assigned. If the Commercial Use Product is an
upgrade, any sublicense, transfer or assignment must include all prior
versions of the Commercial Use Product. A Company or Affiliate may not
sublicense, transfer or assign Licenses on a short-term basis.
d. Taxes.
i. The amounts to be paid by Company to Microsoft herein do not include
any foreign, U.S. federal, state, local, municipal or other governmental
taxes, duties, levies, fees, excises or tariffs, arising as a result of or
in connection with the transactions contemplated under this Agreement
including, without limitation, any state or local sales or use taxes or any
value added tax or business transfer tax now or hereafter imposed on the
provision of goods and services to Company by Microsoft under this
Agreement, regardless of whether the same are separately stated by
Microsoft. All such taxes (and any penalties, interest, or other additions
to any such taxes), with the exception of taxes imposed on Microsoft's net
income or with respect to Microsoft's property ownership, shall be the
financial responsibility of Company. Company agrees to indemnify, defend and
hold Microsoft harmless from any such taxes or claims, causes of action,
costs (including, without limitation, reasonable attorneys' fees) and any
other liabilities of any nature whatsoever related to such taxes.
ii. Company will pay all applicable value added, sales and use taxes and
other taxes levied on it by a duly constituted and authorized taxing
authority on the software or other products provided under this Agreement or
any transaction related thereto in each country in which the services and/or
property are being provided or in which the transactions contemplated
hereunder are otherwise subject to tax, regardless of the method of
delivery. Any taxes that (i) are owed by Company as a result of entering
into this Agreement and the payment of the fees hereunder, (ii) are required
or permitted to be collected from Company by Microsoft under applicable law,
and (iii) are based upon the amounts payable under this Agreement (such
taxes described in (i), (ii), and (iii) above the "Collected Taxes'), shall
be remitted by Company to Microsoft, whereupon, upon request, Microsoft
shall provide to Company tax receipts or other evidence indicating that such
Collected Taxes have been collected by Microsoft and remitted to the
Page 6 of 10
<PAGE>
appropriate taxing authority. Company may provide to Microsoft an exemption
certificate acceptable to Microsoft and to the relevant taxing authority
(including without limitation a resale certificate) in which case, after the
date upon which such certificate is received in proper form, Microsoft shall
not collect the taxes covered by such certificate.
iii. Notwithstanding any provision herein to the contrary, Customer
agrees that each payment to be made to Microsoft hereunder shall be free of
all withholding taxes imposed by any jurisdiction, and if any such
withholding is required, Customer shall pay an additional amount such that
after deduction of all amounts required to be withheld, the net amount of
the payment will equal, on an after tax basis, the amount of the payment
that would be due absent such withholding.
iv. This tax section shall govern the treatment of all taxes arising as
a result of, or in connection with, this Agreement notwithstanding any other
section of this Agreement.
e. Governing Law. This Agreement shall be construed and controlled by the laws
of the State of Washington.
f. Survival. Provisions of Sections 2c., 3.b., 4.b., c. and d., 5., 7.a. and c.
and 9 of this Agreement, the applicable CULA(s) and Product List for any
fully-paid up Licenses, and warranty, limitation on liability and
indemnification provisions in the CULA(s) and Product List for Licenses
acquired pursuant to this Agreement, shall survive the termination or
expiration of this Agreement.
g. Attorneys Fees. If either party employs attorneys to enforce any rights
arising out of or relating to this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs and other
expenses.
h. Confidentiality. The terms and conditions of this Agreement are
confidential. Neither party shall disclose such terms and conditions, nor
the substance of any discussions that led to them, to any Third Party other
than an Affiliate or agent, or financial or legal advisors who have a need
to know such information and who have been instructed that all such
information is to be handled in strict confidence.
Page 7 of 10
<PAGE>
The undersigned Company represents and warrants that it will be providing
Commercial Services as defined above and therefore qualifies as a Commercial
Service Provider, and agrees to the terms and conditions of this Agreement.
This Agreement does not constitute an offer by Microsoft and is not legally
binding until executed by each party. All fields must be completed by Company in
order for Microsoft to accept and execute this Agreement.
- --------------------------------------------------------------------------------
Name of Company: Name of Microsoft:
ebaseOne Corporation Microsoft Corporation
- --------------------------------- ---------------------------------------
/s/ [ILLEGIBLE] for
By: /s/ Charles W. Skamser By: /s/ Richard Kemis
----------------------- ---------------------
(signature) (signature)
Name: Charles W. Skamser Name: Richard Kemis
--------------------- --------------------
(printed) (printed)
Title: President and CEO Title: Group Manager
-------------------- -------------------
(printed) (printed)
Date: 10/28/99 Date: Nov 4, 1999
-------------------- ---------------------
<TABLE>
<S> <C> <C>
This Agreement and attached documents Microsoft Corporation Telephone Number (area code-phone number):
should be sent to the following address for One Microsoft Way (425) 882-8080
processing and approval: Redmond, WA 98052-6399 Facsimile Number (area code-phone number):
Attention: (425) 936-7329
Special Agreements, Dept. 551
</TABLE>
Page 8 of 10
<PAGE>
As provided in Section 9.b above, notices required or permitted under this
Agreement should be addressed to the contact and locations outlined below. If
the information below changes during the term of the Direct Commercial Service
License Agreement, each party will notify the other party in writing on company
letterhead:
Company Information Microsoft Information
- -------------------------------------------------------------------------------
Commercial Service Provider Name Microsoft Corporation
EBASE ONE CORP.
- -------------------------------------------------------------------------------
Street Address and/or post office box Street Address and/or post office box
6060 RICHMOND AVENUE One Microsoft Way
- --------------------------------------------------------------------------------
City and State/Province City and State/Province
HOUSTON TX REDMOND, WA
- --------------------------------------------------------------------------------
Country and Postal Code Postal Code
USA 77057 98052-6399
- -------------------------------------------------------------------------------
Contact Name and title Attention
AMANDA HADEN Special Agreements, Dept. 551
- --------------------------------------------------------------------------------
Phone Number Phone Number
7l3-975-8700 (425) 882-880
- --------------------------------------------------------------------------------
Fax Number Fax Number
713-781-5535 (425) 936-7329
- --------------------------------------------------------------------------------
E-Mail Address
[email protected]
- --------------------------------------------------------------------------------
ALL NOTICES should have Copy To:
Microsoft Corporation
Law and Corporate Affairs
One Microsoft Way
Redmond, Washington USA 98052
Attention: U.S. Legal
- --------------------------------------------------------------------------------
And to:
- --------------------------------------------------------------------------------
Microsoft Account Manager Name
SEAN MAPLE THORNE
- --------------------------------------------------------------------------------
Office Location
22/5052
- --------------------------------------------------------------------------------
E-mail Address (if applicable)
[email protected]
- --------------------------------------------------------------------------------
Company Information regarding Technical Support (check one or more boxes):
- -----------------------------------------------------------------
[_] Company intends to sign a Microsoft Consulting Services
Agreement with Microsoft
- -----------------------------------------------------------------
[x] Company intends to sign a Premier Support Agreement with
Microsoft, or equivalent offering from Microsoft
- -----------------------------------------------------------------
[_] Company intends to sign a service/support agreement with
a Microsoft Solution Provider or Authorized Support Center
- -----------------------------------------------------------------
Page 9 of 10
<PAGE>
ADDENDUM A - SAMPLE ORDER FORM
Direct Commercial Service License Order
================================================================================
Company Name: _____________________________
Agreement Number: _____________________________
Report for the Month Ending: _____________________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Third Party Third Party
Microsoft Third Party Agreement Agreement
Line Part Number Product Usage Country Quantity Unit Price Extended Third Party Agreement Start Date End Date
Description Price Name/Address Number w/Co.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1
- ------------------------------------------------------------------------------------------------------------------------------------
2
- ------------------------------------------------------------------------------------------------------------------------------------
3
- ------------------------------------------------------------------------------------------------------------------------------------
4
- ------------------------------------------------------------------------------------------------------------------------------------
5
- ------------------------------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------------------------------
7
- ------------------------------------------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------------------------------------------
10
- ------------------------------------------------------------------------------------------------------------------------------------
11
- ------------------------------------------------------------------------------------------------------------------------------------
12
- ------------------------------------------------------------------------------------------------------------------------------------
13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The undersigned hereby certifies that to the best of his/her knowledge that this
Direct Commercial Service License Order for the Direct Commercial Service
License Agreement between Microsoft and Company is true and accurate.
______________________ Signature This report should be sent to one
of the following:
______________________ Printed Name Address:
Microsoft Corporation
______________________ Title Attention: Special Agreement
Reporting - Dept. 551
______________________ Date One Microsoft Way
______________________ Telephone Number Redmond, WA 98052-6399
______________________ Email address Fax #: (425) 936-7329
E-mail: [email protected]
---------------------
Page 10 of 10
<PAGE>
EXHIBIT 10.14
[LOGO OF CISCO SYSTEMS]
June 28, 1999
Charles W. Skamser
Chief Executive Officer
ebaseOne
6060 Richmond Ave.
Houston, TX 77057
RE: MEMORANDUM OF UNDERSTANDING (MOU)
Dear Mr. Frazier:
This MOU is the agreement between Cisco Systems, Inc. ("Cisco") and ebaseOne
("ebaseOne") regarding joint marketing and product/service initiatives for the
hosted applications marketplace (the "Program"). The Program is intended to
deliver hosted application solutions that use ebaseOne's applications and
Cisco's networking products with the goal of increasing sales to medium
businesses via third party solution partners.
Program Plan. Attachment 1 is a Program Plan identifying each of our obligations
- ------------
and actions to implement the Program.
MOU Terms and Conditions. At Attachment 2 are the terms and conditions that
- ------------------------
govern this MOU.
Confidential information. This MOU is confidential and neither Cisco nor
- ------------------------
ebaseOne may disclose to any third party the terms of this MOU or any other
information related to this MOU, without the prior written consent of the other
party. Any other disclosures of confidential information shall be subject to
mutually agreeable non-disclosure agreement.
Publicity. Neither Cisco nor ebaseOne shall undertake any advertising,
- ---------
promotional disclosures, press releases or other public announcements, regarding
or related to this MOU, without prior written approval of the other party.
Term. The MOU commences on the date of the last signature to this document and
- ----
will continue in effect for one (1) year, unless otherwise terminated under the
MOU Terms and Conditions.
1
<PAGE>
If you agree with the provisions of this MOU, including the attached Program
Plan and MOU Terms and Conditions, please confirm by signing this letter. Please
return one signed letter to Richard Steranka at the following address:
Richard Steranka
Cisco Systems, Inc.
170 West Tasman Drive
Mail Stop: SJ/4/3
San Jose, CA 95134
We believe this is a significant opportunity for both our companies and we look
forward to working together with you on the Program.
Sincerely,
Cisco Systems, Inc.
By: /s/ Richard Steranka
-------------------------------------
Name: Richard Steranka
-----------------------------------
Title: Sr. Director of Marketing, SMB
----------------------------------
Date:___________________________________
Accepted and Agreed
- -------------------
By: /s/ Charles W. Skamser
---------------------------------
Name: Charles W. Skamser
------------------------------
Title: President and CEO
-----------------------------
Date: 11-5-99
------------------------------
2
<PAGE>
EbaseOne-Cisco Program Plan
Program Overview
----------------
The main objective of the Program is to position ebaseOne and Cisco as complete
solution providers for hosted enterprise-class applications. The foundation of
this program is the engagement of ebaseOne's and Cisco's sales and resale
channels. This Program will initially target small and medium businesses with
20-500 employees. The Program will be deployed in the US and Canada. Additional
market segments will be considered as the program evolves.
The Program will include connecting ebaseOne with Cisco Powered Network (CPN)
Service Providers to provide a complete solution to the end user customers.
Marketing initiatives may include press releases, joint customer support, joint
customer case studies, seminars, exhibitions, conferences, web banners, and
other marketing collateral, which may be used by our mutual partners. Product
initiatives may include participation in Cisco's Internet Application Lab for
performance testing, co-sponsored interoperability demonstrations, and other
tools and guides that optimize the Cisco network infrastructure for ebaseOne's
applications.
Program Tasks (Q3 CY99, July-Sept)
---------------------------------
1. Create joint marketing and product initiative plans
2. Develop, test and validate joint solutions
3. Complete joint marketing strategy and execution plans that may include:
A joint press release
A customer testimonial
A Hosted Applications white paper
Seminars/Events
4. Identify and broker meetings between Cisco, ebaseOne, and CPN service
providers
5. Establish Web links between Cisco and ebaseOne
3
<PAGE>
ebaseOne-Cisco Program MOU Terms and Conditions
- -----------------------------------------------
Rights and Obligations. Except for the Confidentiality, Publicity and
- ----------------------
Consequential Damages Waiver provisions, the provisions of this MOU will not
create any legal rights or obligations between ebaseOne and Cisco. Neither party
will have any liability to the other for discontinuing work on the program.
Costs. Each party will bear its own expenses in connection with the Program and
- -----
any future activities. Any actions in reliance of this MOU are at that party's
sole cost and expense. No costs will be paid by either party unless specifically
agreed to in a written agreement specifically identifying and amending this MOU.
Assignment. Neither this MOU, nor any rights or obligations in this MOU, shall
- ----------
be assigned or otherwise transferred by either party without the written consent
of the other party. If any assignment is made, by operation of law or otherwise,
this agreement shall terminate.
Independent Contractors. The parties to this MOU are independent contractors.
- -----------------------
Neither party is an agent, representative, or partner of the other party.
Neither party shall have any right, power, or authority to enter into any
agreement for, or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other party.
Force Majeure. Neither party shall be liable to the other for violation of this
- -------------
MOU if that party is prevented from performing any of that party's obligations
under this MOU by circumstances that are not within the party's reasonable
control.
Governing Law. This Agreement and any action related thereto shall be governed,
- -------------
controlled, interpreted and defined by and under the laws of the State of
California and the United States, without regard to the conflicts of laws
provisions thereof.
Amendment. No modification of this MOU shall be valid unless set forth in
- ---------
writing and signed by both parties.
Termination and Survival
- ------------------------
Either party may terminate this MOU at any time by providing thirty (30) days
written notice to the other party. In the event of termination of this MOU
neither party shall have any obligation to continue performance of this MOU,
except for the Publicity, Confidentiality and Consequential Damages Waiver
provisions. The Publicity, Confidentiality and Consequential Damages Waiver
provisions will survive expiration or termination of this MOU.
Consequential Damages Waiver. EXCEPT FOR A MATERIAL BREACH OF A PARTY'S
- ----------------------------
CONFIDENTIALITY OBLIGATIONS AND NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY IN
THIS MOU, NEITHER PARTY SHALL BE LIABLE TO THE FOR ANY DIRECT, INCIDENTAL,
INDIRECT, PUNITIVE, SPECIAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND.
Entire Agreement. This MOU sets forth the entire agreement and supersedes any
- ----------------
and all prior or agreements and representations of the parties with respect to
the MOU.
4
<PAGE>
EXHIBIT 10.15
THE GREENSPOINT TECHNOLOGY CENTER, HOUSTON, TEXAS
NET LEASE
BASIC LEASE INFORMATION
-----------------------
Date: December 21, 1999
- ----
Landlord: THE TRUSTEES UNDER THE WILL AND OF THE ESTATE OF JAMES CAMPBELL,
- --------
DECEASED, ACTING IN THEIR FIDUCIARY AND NOT IN THEIR INDIVIDUAL
CAPACITIES
Tenant: EBASEONE CORPORATION
- ------
Lease Reference
---------------
Premises and "Project" address: article I
- ------------------------------
12095 I-45 North
Houston, Texas 77060
Approximate area of Premises: article I
- ----------------------------
18,460 square feet
Approximate area of Project: article I
- ---------------------------
299,703 square feet
"Commencement Date": article I
- -------------------
March 1, 2000
"Termination Date": article I
- ------------------
February 28, 2010
"Base Rent": article II
- -----------
$21,536.67 March, 2000-February, 2005
24,613.33 March, 2005-February, 2010
Initial Monthly Payment: article II
- -----------------------
Base Rent: $21,536.67
Operating Expenses: $ 3,852.27
----------
TOTAL: $25,388.94
"Tenant's Proportionate Share": article I
- ------------------------------
6.16%
"Use": article XIII
- -----
executive and general office use, and
the installation, operation, and
maintenance of equipment and facilities
in connection with Tenant's
telecommunications business,
including, but not limited to, a switch
system
"Security Deposit": article II
- ------------------
$25,388.94
"Tenant's Address for Notices": article XXIV
- -------------------------------
David Tippett, managing director
ebaseOne Corporation
6060 Richmond, suite 190
Houston, Texas 77057
(713) 781-5535 facsimile
with a photocopy to:
--------------------
ebaseOne Corporation
12095 I-45 North
Houston, Texas 77060
_____________facsimile
"Landlord's Address for Notices": article XXIV
- --------------------------------
The Estate of James Campbell
425 California Street, suite 1000
San Francisco, California 94104-2205
(415) 291-5720 facsimile
<PAGE>
attention: Director, Mainland Operations
Broker: article XXVIII
- ------
Trammell Crow Houston, Inc.
Noble C. Ginther, III
<PAGE>
The articles in the Lease identified in the Lease Reference above are those
provisions where references to particular Basic Lease Information first appear.
All such references incorporate the applicable Basic Lease Information. In the
event of any conflict between the Basic Lease Information and the Lease, the
Lease shall control.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
page
----
<S> <C>
Basic Lease Information....................................................................... i
Table of Contents............................................................................. ii
Table of Exhibits and Addenda................................................................. ii
Index to Defined Terms........................................................................ ii
Premises, Term, and Initial Improvements...................................................... 1
Base Rent/Security Deposit.................................................................... 2
Operating Expenses............................................................................ 2
Personal Property Taxes....................................................................... 4
Landlord's Maintenance and Repair Obligations................................................. 4
Tenant's Maintenance and Repair Obligations................................................... 5
Alterations, Additions, Improvements.......................................................... 5
Signs......................................................................................... 6
Utilities..................................................................................... 6
Insurance..................................................................................... 6
Casualty Damage............................................................................... 7
Liability/Indemnification/Waiver of Subrogation............................................... 8
Use........................................................................................... 8
Vacation/Restoration/Holding Over............................................................. 9
Assignment and Subletting..................................................................... 10
Condemnation.................................................................................. 11
Quiet Enjoyment............................................................................... 11
Events of Default............................................................................. 11
Remedies...................................................................................... 12
Landlord Default/Limitation of Liability...................................................... 13
Mortgages..................................................................................... 13
Tenant Encumbrances........................................................................... 14
Landlord's Lien............................................................................... 14
Notices....................................................................................... 14
Hazardous Materials........................................................................... 15
Emergency Power............................................................................... 15
Collocation................................................................................... 16
Miscellaneous................................................................................. 16
</TABLE>
TABLE OF EXHIBITS AND ADDENDA
-----------------------------
<TABLE>
<S> <C>
Exhibit "A"..............................................................................Site Plan
Exhibit "B"...........................................................Legal Description of Project
Exhibit "C"....................................................................Tenant Improvements
Exhibit "C-1"...........................................................................Space Plan
Exhibit "D"..................................................................Rules and Regulations
Exhibit "E"..................................................................Environmental Matters
Exhibit "F"..................................................................Option to Extend Term
Exhibit "G"......................Telecommunication Receiver and Transmission Equipment/Use of Roof
</TABLE>
INDEX TO DEFINED TERMS
----------------------
<TABLE>
<CAPTION>
Defined Term page
- -------------- ----
<S> <C>
Additional Rent............................................................................... 2
Address for Notices........................................................................... i
Base Rent..................................................................................... i
Claimant...................................................................................... 12
Collateral.................................................................................... 14
Commencement Date............................................................................. i
Default Costs................................................................................. 12
Environmental Law............................................................................. 15
Event of Default.............................................................................. 11
Hazardous Substances.......................................................................... 15
Indemnified Parties........................................................................... 8
Landlord...................................................................................... 1
Landlord's Mortgagee.......................................................................... 14
Lease......................................................................................... 1
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Loss.......................................................................................... 8
Mortgage...................................................................................... 13
Operating Expenses............................................................................ 2
Permitted Conditions.......................................................................... 15
Permitted Substances.......................................................................... 15
Premises...................................................................................... 1
Primary Lease................................................................................. 13
Project....................................................................................... i
Project's Structure........................................................................... 4
Security Deposit.............................................................................. i
System 16
Taking........................................................................................ 11
Taxes......................................................................................... 4
Tenant........................................................................................ 1
Tenant's Proportionate Share.................................................................. i
Term.......................................................................................... 1
Termination Date.............................................................................. i
Transfer...................................................................................... 10
Use........................................................................................... i
Vacation Date................................................................................. 9
</TABLE>
<PAGE>
THE GREENSPOINT TECHNOLOGY CENTER, HOUSTON, TEXAS
NET LEASE
---------
This lease agreement (the "Lease") is entered into by and between THE
TRUSTEES UNDER THE WILL AND OF THE ESTATE OF JAMES CAMPBELL, DECEASED, ACTING IN
THEIR FIDUCIARY AND NOT IN THEIR INDIVIDUAL CAPACITIES ("Landlord") and EBASEONE
CORPORATION, a Delaware corporation ("Tenant").
I. PREMISES, TERM, AND INITIAL IMPROVEMENTS
Premises
--------
Landlord leases to Tenant, and Tenant leases from Landlord, for the term of
the Lease, at the rental and upon the terms and conditions set forth below, the
space depicted on the site plan attached to the Lease as Exhibit "A" (the
"Premises"), which is part of the Project located on the real property described
on Exhibit "B". Landlord and Tenant stipulate that, as of the date of the Lease,
regardless of minor variations which may result from methods of measuring, the
size of the Premises and the size of the Project as stated in the Basic Lease
Information is correct. Tenant's Proportionate Share shall be appropriately
adjusted if the size of the Premises or the Project changes after commencement
of the Lease.
Term
----
The term of the Lease (the "Term"), which shall include all renewals and
extensions of the original term, shall begin on the Commencement Date, and shall
end on the Termination Date (unless extended pursuant to any written renewal or
extension agreement), unless sooner terminated as provided under the terms of
the Lease.
Landlord shall have the right to unilaterally adjust the Commencement Date
and Termination Date of the Lease in writing, in the event that adjustment is
necessary due to delay in Landlord's delivery of the Premises on or prior to the
Commencement Date, delay in any initial improvements to the Premises, or any
other cause. In such event, Landlord shall deliver written notice of the
adjustments to the Commencement Date and the Termination Date to Tenant, but in
no event shall the Term of the Lease be reduced by reason of any such
adjustment. Tenant shall indicate its agreement to said adjustments by executing
an original of said notice and delivering same back to Landlord within ten days
after receipt by Tenant. In the event that Tenant shall fail to return said
notice to Landlord, it shall be conclusively deemed that Tenant has approved the
adjustments to the Commencement Date and Termination Date. Any such notice shall
be attached to the Lease.
If Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant on the Commencement Date, the Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting from Landlord's failure to deliver possession, but in said event, and
subject to any provision to the contrary in any agreement with Landlord
concerning initial improvements to the Premises, all rentals due from Tenant
shall be waived for the period between the Commencement Date and the date when
Landlord delivers possession of the Premises to Tenant. No delay in delivery of
possession of the Premises by Landlord to Tenant shall operate to extend the
Term. Notwithstanding anything in the Lease to the contrary, in the event
Landlord is unable to deliver the Premises to Tenant within 90 days after the
execution of the Lease, Tenant shall have the right to terminate the Lease upon
written notice to the Landlord.
Acceptance of Premises/Initial Improvements
-------------------------------------------
Tenant warrants and represents that it has made a complete and thorough
inspection of the Premises, and that the Premises is satisfactory for the Use
which Tenant intends.
If an Exhibit "C" relating to initial improvements to the Premises is
attached to the Lease, then construction of the "Tenant Improvements" (as
defined in Exhibit "C") upon and in the Premises shall be constructed as
described in the plans and specifications referenced in Exhibit "C", and, upon
occupying the Premises, Tenant shall be deemed to have accepted the Premises in
its then-existing condition, subject to completion of any punch-list items
relating to the Tenant Improvements contemplated by Exhibit "C."
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Premises, or the suitability
of the Premises for Tenant's intended Use. TENANT HEREBY WAIVES ANY IMPLIED
WARRANTY BY LANDLORD THAT THE PREMISES IS SUITABLE FOR TENANT'S INTENDED
COMMERCIAL PURPOSE.
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II. BASE RENT/SECURITY DEPOSIT
Base Rent
---------
Tenant shall pay Base Rent to Landlord in advance, without demand,
deduction, or set off, in the amounts and for the periods of time as set forth
in the Basic Lease Information.
The first monthly installment of Base Rent, plus Tenant's first monthly
installment of "Operating Expenses" (as defined below), shall be due upon the
final execution of the Lease by all parties. Thereafter, monthly installments of
Base Rent and Operating Expenses shall be due on or before the first day of each
calendar month following the Commencement Date. If the Commencement Date occurs
on a day other than the first day of a calendar month, or if the expiration of
the Term occurs on a day other than the last day of a calendar month, the Base
Rent and Operating Expenses shall be prorated.
Interest/Late Charge
--------------------
Any amount due from Tenant to Landlord, if not paid when due, shall bear
interest from the date due until paid at the rate of ten percent per annum,
provided that interest shall not be payable on late charges incurred by Tenant
nor on any amounts upon which late charges are paid by Tenant. Payment of
interest by Tenant shall not excuse or cure any "Event of Default" (as defined
below) by Tenant pursuant to the terms of the Lease. All payments received from
Tenant by Landlord shall be applied by Landlord to Tenant's obligations first
accruing.
Tenant hereby acknowledges that late payment by Tenant to Landlord of Base
Rent, "Operating Expenses," or "Additional Rent" (as said terms are defined
below) will cause Landlord to incur costs not contemplated by the Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, late fees
which may be imposed upon Landlord, and inconvenience costs. Accordingly, if any
installment of Base Rent, Operating Expenses, or Additional Rent, or any other
sum due from Tenant under the Lease, shall not be received by Landlord within
five days after written notice of such failure is provided by Landlord to
Tenant. Tenant shall pay to Landlord a late charge equal to six percent of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant, and that said charge does not constitute a penalty.
Acceptance of such late charge by Landlord shall in no event constitute a waiver
of Tenant's default with respect to such overdue amount, nor prevent Landlord
from exercising any of the rights and remedies granted to Landlord under the
Lease.
Security Deposit
----------------
Upon Tenant's execution of the Lease, Tenant shall deposit with Landlord
the Security Deposit, which sum shall be held by Landlord to secure Tenant's
obligations under the Lease. Landlord may apply all or any portion of the
Security Deposit to any unpaid Base Rent, "Operating Expenses," or "Additional
Rent" (as said terms are defined below) due from Tenant, or to cure any other
defaults of Tenant. If Landlord uses all or any portion of the Security Deposit,
Tenant shall restore the Security Deposit to its full amount within ten days
after Landlord's written request. Tenant's failure to do so shall be deemed an
"Event of Default" (as defined below) under the Lease. No interest shall be paid
by Landlord to Tenant on the Security Deposit. Landlord shall not be required to
keep the Security Deposit separate from its other accounts, and no trust
relationship is created with respect to the Security Deposit. The Security
Deposit is not a prepayment of Tenant's monthly rent obligations, and may not be
used by Tenant as such; it is expressly understood that the Security Deposit
does not and shall not constitute Tenant's "last month's rent." Upon any
termination of the Lease not resulting from Tenant's default, and after Tenant
has vacated the Premises in the manner required by the Lease and otherwise
timely performed its obligations pursuant to the Lease throughout the Term,
Landlord shall refund the remaining portion of the Security Deposit to Tenant.
If Landlord assigns its interest in the Lease, the Premises, or the
Building, the Security Deposit shall be deemed to have been assigned to the
assignee. Landlord has no further liability to Tenant for return of the Security
Deposit to Tenant after any such assignment, and Tenant agrees to look solely to
any such assignee for return of the Security Deposit. Tenant may not assign,
encumber, or attempt to assign or encumber the Security Deposit.
III. OPERATING EXPENSES
Additional Rent
---------------
All payments or reimbursements required to be made by Tenant pursuant to
the terms of the Lease, other than Base Rent, shall constitute "Additional
Rent."
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Net Lease
---------
The Lease is a net lease, and Base Rent shall be paid to and received by
Landlord net of all costs and expenses to Landlord, other than taxes upon the
income of Landlord from all sources. Tenant shall pay Tenant's Proportionate
Share of all "Operating Expenses" (as defined below) paid or incurred by
Landlord during the Term.
Operating Expenses
------------------
Tenant shall pay, as Additional Rent, Tenant's Proportionate Share of all
costs incurred by Landlord in owning, operating, and maintaining the Project and
the facilities and services provided for the common use of Tenant and other
tenants of the Project, if any (collectively, "Operating Expenses"). Operating
Expenses shall include, but not be limited to, the following items:
(1) "Taxes" (as defined below), and the cost of any tax consultant
employed to assist Landlord in determining the fair tax valuation
of the Project or reasonably protesting an assessed valuation,
(2) the cost of all utilities used in the Project or upon the real
property where the Project is located, which utilities costs are
not billed separately to a tenant of the Project,
(3) the premiums for all insurance maintained by Landlord with
respect to the Project,
(4) the costs of repairs, replacements, and general maintenance of
the Project (other than replacement of the roof, foundation, and
exterior walls of the Project), including, but not limited to,
sidewalks, landscaping, service areas, mechanical rooms which
service the Project and not a specific tenant, non-exclusive
parking areas, Project exteriors, downspouts, gutters, pipes,
ducts, conduits, wires, and driveways (excluding such costs paid
by proceeds of insurance or by other parties, and alterations
attributable solely to tenants of the Project other than Tenant),
(5) wages and salaries (including management fees) of all employees
engaged in the operation, repair, replacement, and maintenance of
the Project, including payroll taxes, insurance, and benefits
relating to said wages and salaries,
(6) all supplies and materials used in the operation, maintenance,
and repair of the Project,
(7) the cost of all capital improvements made to the Project which,
although capital in nature, may reasonably be expected to reduce
the normal operating costs of the Project, as well as all capital
improvements made in order to comply with any law, rule, or
regulation promulgated after the date of the Lease by any
governmental authority, which cost of capital improvements shall
be amortized over the useful economic life of such improvements
as determined by Landlord, in accordance with generally accepted
accounting principals,
(8) all maintenance, repair, and service costs, including the cost of
service or maintenance contracts with independent contractors for
the operation, maintenance, or repair of the Project, including,
but not limited to, alarm service, window cleaning, elevator
maintenance, and vermin extermination,
(9) the costs of dues, assessments, and other charges applicable to
the Project payable to any property or community owners'
association under restrictive covenants or deed restrictions to
which the Project is subject, and
(10) all other operating, management, and other expenses incurred by
Landlord in connection with the operation of the Project.
Operating Expenses shall not include the following:
(1) any costs for interest, amortization, or other payments on loans
by Landlord,
(2) expenses incurred in leasing or procuring tenants,
(3) legal expenses incurred by Landlord, other than those incurred
for the general benefit of the Project or the Project's tenants,
(4) allowances, concessions, and other costs of renovating or
otherwise improving space for occupants of the Project or vacant
space in the Project,
(5) federal income taxes imposed on or measured by the income of
Landlord from the operation of the Project,
(6) rents under ground leases,
(7) costs incurred in selling, syndicating, financing, mortgaging, or
hypothecating any of Landlord's interest in the Project,
(8) the costs of any capital improvements required by a governmental
authority with regard to another tenant's use, such costs being
paid by the applicable tenant, and
(9) costs for repairs caused by Landlord's gross negligence or
willful misconduct.
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Taxes
-----
Tenant shall pay, as part of the Project's Operating Expenses, Tenant's
Proportionate Share of all real property taxes, assessments, or governmentally
imposed fees or charges (and any tax or assessment levied wholly or partly in
lieu of same, except for late fees, penalties, and interest) levied, assessed,
confirmed, imposed, or which becomes a lien against the Project (which for the
purposes of defining "Taxes" shall include the land underlying the Project) or
which are payable during the Term (collectively, "Taxes"). In the event that the
Project is not separately assessed for tax purposes, then the Taxes paid by
Tenant shall be Tenant's Proportionate Share of the product obtained by
multiplying the total of the Taxes levied against the tax parcel of which the
Project is a part by a fraction, the numerator of which is the rentable area of
the Project, and the denominator of which is the total rentable area of all
improvements located within the tax parcel of which the Project is a part. If,
during the Term, there is levied, assessed, or imposed upon Landlord a capital
levy or other tax directly on the rent or a franchise tax, assessment, levy, or
charge measured by or based, in whole or in part, upon rent, then all such
taxes, assessments, levies, or charges, or the part of same so measured or
based, shall be included within the term "Taxes."
Tenant hereby agrees that any and all protests before the applicable
appraisal review board shall be conducted, if at all, solely by Landlord, and
Tenant shall have no rights to any such protest. Tenant hereby waives any rights
and privileges which it may have pursuant to Texas Tax Code (Property Tax Code)
sections 41.413 and 42.015 (as amended from time to time) to conduct any such
protest.
Payment of Monthly Operating Expenses
-------------------------------------
On the same day that Base Rent is due, Tenant shall pay at the same time
and in the same manner an amount equal to 1/12 of Landlord's estimate of
Tenant's Proportionate Share of annual Operating Expenses for the then-current
calendar year. Said monthly payments are to be based upon Landlord's estimate of
the Operating Expenses for the year in question, and shall be increased or
decreased annually to reflect the projected annual Operating Expenses for that
applicable year. Within 90 days after the close of each calendar year, or as
soon after such 90-day period as is reasonably practicable, Landlord shall
deliver to Tenant a statement of actual Operating Expenses for said calendar
year. If Tenant's total payments for Operating Expenses for any year are less
than Tenant's actual Proportionate Share of Operating Expenses for that year,
Tenant shall pay the difference to Landlord within 30 days after Landlord's
request for payment of same. If Tenant's total payments for Operating Expenses
for any year are more than Tenant's actual Proportionate Share of Operating
Expenses for that year, Landlord shall either retain such excess and credit it
against Tenant's future Base Rent obligations next accruing, or pay such excess
to Tenant within 30 days after determining Tenant's actual Proportionate Share
of Operating Expenses for that year. The obligations of Landlord and Tenant
under this paragraph with respect to reconciliation between estimated payments
and actual Operating Expenses for the last year of the Term shall survive the
termination of the Lease.
In the event Tenant reasonably disputes the annual Operating Expenses,
Tenant, at Tenant's sole cost and expense, shall be entitled to examine, review,
and audit, upon reasonable notice and during Landlord's normal business hours,
the books and records relating to such Operating Expenses at the place where
such books and records are normally kept. In the event that any such examination
reveals that Tenant has overpaid by more than five percent, Tenant shall be
entitled to such overpayment, and the costs incurred in connection with such
audit, not to exceed $500.00, shall be borne by Landlord. Any such audit shall
be made within 12 months after Tenant's receipt of Landlord's annual statement
for such Operating Expenses.
IV. PERSONAL PROPERTY TAXES
Tenant shall 1) before delinquency pay all taxes levied or assessed against
any personal property, fixtures, or alterations placed in the Premises, and 2)
upon the request of Landlord, deliver to Landlord receipts from the applicable
taxing authority or other evidence acceptable to Landlord to verify that such
taxes have been paid. If any such taxes are levied or assessed against Landlord
or Landlord's property and (i) Landlord pays them, or (ii) the assessed value of
Landlord's property is increased as a result and Landlord pays the increased
taxes, then Tenant shall pay to Landlord such taxes within ten days after
Landlord's request for payment.
V. LANDLORD'S MAINTENANCE AND REPAIR OBLIGATIONS
Except as otherwise provided in the Lease, and except for damage caused by
any act or omission of Tenant, its employees, contractors, invitees, or agents,
Landlord shall maintain the foundation, roof, and structural portions of the
exterior walls (collectively, the "Project's Structure") in good order,
condition, and repair; however, Landlord shall neither be responsible nor liable
for 1) any such work until Tenant delivers to Landlord written notice of
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the need for such work, or 2) alterations to the Project's Structure required by
law because of Tenant's use of the Premises (which alterations shall be
performed by Tenant). The Project's Structure does not include skylights,
windows, glass, plate glass, doors, special storefronts, office entries, or the
interior surfaces of walls within the Premises, all of which shall be maintained
by Tenant. All requests for repairs or maintenance that are the responsibility
of Landlord must be made in writing to Landlord, and Landlord shall have a
reasonable time within which to perform such repairs or maintenance. Landlord
shall not be liable to Tenant for any damages or inconvenience, and Tenant shall
not be entitled to any damages, nor to any abatement or reduction of rent, by
reason of any repairs, alterations, or additions made by Landlord under the
Lease. Landlord's liability for any defects, repairs, replacement, or
maintenance for which Landlord is responsible under the Lease shall be limited
to the cost of performing such work. Nothing in this provision shall entitle
Tenant to make any repairs, alterations, or additions to the Premises at
Landlord's expense, or to terminate the Lease based on the physical condition of
the Premises. Tenant hereby expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord's expense, or to terminate the Lease because of Landlord's
failure to keep the Premises or the Project in good order, condition, and
repair.
VI. TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS
Tenant shall keep and maintain the Premises in a good and clean condition
at its sole cost and expense, and Tenant shall perform all maintenance and
perform all repairs on the Premises, and shall replace such portions of the
Premises as may be necessary to maintain the Premises and all parts of the
Premises in good condition, order, and repair. Janitorial services to the
Premises shall be obtained by Tenant, at Tenant's sole expense.
Tenant shall, at Tenant's sole expense, maintain all hot water, heating,
and air conditioning systems for the Premises; provided, however, that if
Landlord deems that Tenant is not adequately maintaining such systems, Landlord
may require Tenant to enter into a regularly-scheduled preventive
maintenance/service contract with a maintenance contractor for servicing all hot
water, heating, and air conditioning systems within the Premises. Any such
maintenance contractor and the contract must be approved by Landlord. Any such
service contract must include all services suggested by the applicable equipment
manufacturer within the operation/maintenance manual, and must become effective
(and a photocopy of said contract delivered to Landlord) within 30 days of the
date Tenant takes possession of the Premises. Tenant expressly covenants and
warrants to keep that portion of the Premises not required to be maintained by
Landlord in good order, condition, and repair, promptly making all necessary
repairs and replacements, including, but not limited to, windows, glass, plate
glass, doors, any special office entry, interior walls and finish work, floors
and floor covering, heating and air conditioning systems, dock boards, truck
doors, dock bumpers, paving, plumbing work and fixtures, pest extermination. In
addition, Tenant shall, at Tenant's sole expense, repair any damage to the
Project caused by the acts or omissions of Tenant, its employees, contractors,
agents, or invitees. It is the intention of Landlord and Tenant that, at all
times during the Term, Tenant shall maintain the area in front of and in the
rear of the Premises in an attractive, well-maintained, and fully operative
condition.
Tenant shall maintain, at Tenant's sole cost and expense, any existing fire
sprinkler system within the Premises in accordance with all applicable federal,
state, county, or city regulations. In addition, Tenant shall, within 90 days
following the Commencement Date, and at Tenant's sole cost and expense, install
and maintain such additional fire sprinkler equipment in the Premises as may be
required for Tenant's Use by applicable state or local building regulation,
municipal ordinance, or regulation of the local fire marshall having
jurisdiction over the Premises.
In the event Tenant fails to maintain the Premises in accordance with the
Lease, Landlord shall have the right, but not the obligation, to enter upon the
Premises and perform needed maintenance and repairs, and, in such event, Tenant
shall promptly reimburse Landlord for the cost of such entry, repairs, and
maintenance, which reimbursement shall be collectible as Additional Rent. Any
such Additional Rent shall be payable to Landlord within 30 days after receipt
by Tenant of written invoice and notice from Landlord.
VII. ALTERATIONS, ADDITIONS, IMPROVEMENTS
Tenant shall not make any alterations, additions, or improvements to the
Premises without the prior written consent of Landlord, which shall not
unreasonably be withheld. Landlord shall not be required to notify Tenant as to
whether it consents to any proposed alteration, addition, or improvement until
Landlord has 1) received completed plans and specifications for the proposed
alteration, addition, or improvement, which plans are sufficiently detailed to
allow construction of the work depicted to be performed in a good and
workmanlike manner, 2) received completed cost estimates for the proposed
alteration, addition, or improvement, and 3) had a reasonable opportunity (not
to exceed 30 days) to review said plans and specifications and cost estimates.
If the proposed alteration, addition, or improvement will affect the Project's
Structure, HVAC system, or mechanical, electrical, or plumbing systems, then the
plans and specifications must be prepared by a licensed engineer
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reasonably acceptable to Landlord. Landlord's approval of any plans and
specifications shall not be a representation that the plans or the work depicted
will comply with law or be adequate for any purpose, but shall merely be
Landlord's consent to performance of the work. Upon completion of any
alteration, addition, or improvement, Tenant shall deliver to Landlord accurate,
reproducible, "as built" plans for same.
Tenant may without Landlord's consent erect shelves, bins, machinery, and
trade fixtures provided that such items 1) do not alter the basic character of
the Premises or the Project, 2) do not overload or damage the Project's
Structure, and 3) may be removed without damage to the Premises.
Unless Landlord specifies in writing otherwise, all physically attached
alterations, additions, and improvements shall be Landlord's property when
installed in the Premises. All work performed by Tenant in the Premises
(including that relating to the installation, repair, replacement, or removal of
any item) shall be performed in accordance with applicable law and with
Landlord's specifications and requirements, in a good and workmanlike manner,
and so as not to damage or alter the Project's Structure or the Premises. Tenant
shall pay all costs incurred or arising out of all alterations, additions, or
improvements in or to the Premises (unless the parties have agreed to the
contrary in an Exhibit "C" to the Lease), and Tenant shall not permit a
mechanics' or materialmen's lien to be asserted against the Premises. Upon
request by Landlord, Tenant shall deliver to Landlord proof of payment
reasonably satisfactory to Landlord of all costs incurred or arising out of any
alterations, additions, or improvements. In connection with any such
alterations, additions, or improvements, Tenant shall pay to Landlord an
administration fee of five percent of all costs incurred for such work.
VIII. SIGNS
Tenant shall not place, install, or attach any signage, decorations,
advertising media, blinds, draperies, window treatments, bars, or security
installations to the Premises or the Project without Landlord's prior written
approval. Tenant shall repair, paint, and/or replace any portion of the Premises
or the Project damaged or altered as a result of Tenant's signage when same is
removed (including, without limitation, any discoloration of the Project).
Tenant shall not (a) make any changes to the exterior of the Premises or the
Project, (b) install any exterior lights, decorations, balloons, flags,
pennants, banners, or paintings, or (c) erect or install any signs, window or
door lettering, decals, window or storefront stickers, placards, decorations, or
advertising media of any type visible from the exterior of the Premises without
Landlord's prior written consent. Landlord shall be required to notify Tenant as
to whether it consents to any sign within 30 days after it has received
detailed, to-scale drawings of the proposed sign specifying design, material
composition, color scheme, and method of installation. Notwithstanding anything
to the contrary within this paragraph, Tenant's signage must comply with the
Project's sign criteria as established by Landlord from time-to-time.
IX. UTILITIES
Tenant shall obtain and pay for all water, gas, electricity, heat,
telephone, sewer, sprinkler, and other utilities and services used at the
Premises, together with any deposits, taxes, penalties, surcharges, maintenance
charges, and the like pertaining to Tenant's use of utilities in the Premises.
All utilities shall be obtained by Tenant, separately metered, and opened in
Tenant's name and for Tenant's account with the applicable utility companies.
Landlord shall not be liable for any interruption or failure of utility service
to the Premises. Tenant shall be solely responsible for providing janitorial
services to the Premises at Tenant's sole cost and expense.
X. INSURANCE
Worker's Compensation/Employer's Liability/
-------------------------------------------
Tenant's Property
-----------------
Tenant shall procure and maintain throughout the Term, for the protection
of Tenant and Landlord as their interests may appear, policies of insurance
which afford the following coverages:
1. worker's compensation - statutory limits;
2. employer's liability, in amounts not less than $250,000.00 each
accident, bodily injury by accident; $250,000.00 policy limit each
employee, bodily injury by disease; and
3. property insurance insuring Tenant's business personal property and
tenant improvements against direct risk of loss, broad form coverage,
and insuring Tenant's business income, with 100 percent current
replacement cost valuation for business personal property, and one
year's total anticipated net earnings for business income.
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Commercial General Liability
----------------------------
Tenant shall procure and maintain throughout the Term a policy or policies
of commercial general liability insurance, at Tenant's sole cost and expense, in
amounts of not less than $2,000,000.00 each occurrence limit, $2,000,000.00
general aggregate limit, $2,000,000.00 products/completed operations aggregate
limit, and $2,000,000.00 personal injury and advertising injury limit, or such
other amounts as Landlord may from time to time reasonably require, covering
bodily injury and property damage liability, and including contractual liability
coverage, written by insurance companies rated "A" or better, with a financial
rating of not less than Class "X" by A.M. Best Company Inc., and otherwise
acceptable to Landlord, insuring Tenant, and Landlord as an additional insured,
against any and all liability to the extent obtainable for injury to or death of
a person or persons or damage to property occasioned by or arising out of or in
connection with the use, operation, and occupancy of the Premises, during the
policy period, regardless of when the claim is made. All coverage shall be
primary to Landlord's insurance. Landlord's insurance shall be noncontributory
with and in excess to such insurance. Tenant shall furnish to Landlord,
concurrent with execution of the Lease, certificates of insurance and such other
evidence satisfactory to Landlord of the maintenance of all insurance coverage
required under this article, including a photocopy of the Additional Insured-
Managers or Lessors of Premises Endorsement, and Tenant shall obtain and deliver
to Landlord a written obligation on the part of each insurance company to notify
Landlord at least 30 days prior to cancellation or material change of any such
insurance. Tenant shall deliver renewal certificates at least 30 days prior to
the expiration of each policy. Landlord makes no representation that the limits
of liability specified by the Lease to be carried by Tenant are adequate to
protect Tenant. Tenant shall provide any such additional coverage as Tenant
deems adequate.
Tenant's Failure To Acquire
---------------------------
If Tenant shall fail to acquire the insurance required pursuant to this
article, or fail to pay the premiums for said insurance, or fail to deliver the
required certificates or policies to Landlord within ten days after written
notice from Landlord that it has not received such certificates or policies,
Landlord may, but is not obligated to, in addition to any other rights or
remedies available to Landlord under the Lease, without the necessity of any
notice to Tenant or time to cure, each of which are expressly waived, acquire
such insurance and pay the requisite premiums for said insurance, which premiums
shall be payable as Additional Rent by Tenant to Landlord upon demand, together
with accrued interest as provided in the Lease.
XI. CASUALTY DAMAGE
Tenant shall give immediate written notice to Landlord of any damage caused
to or suffered by the Premises or the Project. Tenant shall be responsible for
any subsequent waste which may occur to the Premises or the Project in the event
Tenant fails to timely notify Landlord of any damage to the Premises or the
Project.
If the Premises or the Project are totally destroyed, or so partially
damaged such that Tenant's use of the Premises is materially interfered with,
from a risk which is wholly covered by insurance proceeds made available to
Landlord for such purpose, Landlord shall proceed with reasonable diligence to
repair the damage or destruction, and the Lease shall not terminate; provided,
however, that if in the opinion of Landlord's architect the Project or repairs
cannot reasonably be completed within 180 days after the date of Landlord's
actual knowledge of such damage, either party may at its election terminate the
Lease by delivering written notice of said election to the other party, in which
event the rent payable for any unexpired portion of the Lease shall be abated,
effective upon the date such damage occurred.
If the Premises or the Project are substantially damaged, in such a way
that Tenant's use of the Premises is materially interfered with, from a risk not
wholly covered by insurance made available to Landlord for repair or
reconstruction, Landlord may terminate the Lease by delivering written notice of
said termination to Tenant, in which event all rights and obligations under the
Lease shall cease and terminate, effective upon the date such damage occurred,
except any liability of Tenant accruing prior to the Lease being terminated.
If the Premises or the Project are substantially damaged during the final
24 months of the Term or any renewal Term, Landlord shall not be required to
rebuild or repair the damage to the Project or the Premises unless Tenant
exercises a renewal option, if any, within 15 days after the date of receipt by
Landlord of Tenant's notification of the occurrence of the damage. If Tenant
does not elect to exercise its renewal option, or if there is no previously
unexercised renewal option contained within the Lease, Landlord shall have the
option to terminate the Lease, and rent shall be abated for the unexpired
portion of the Term, effective upon the date such damage occurred.
If the Lease is not terminated pursuant to the preceding paragraphs, then
Landlord shall proceed immediately and shall use reasonable diligence to rebuild
or repair the Project and the Premises to substantially the condition in which
they existed prior to the damage; provided, however, that Landlord shall not be
required to rebuild, repair, or replace any part of the partitions, fixtures,
additions, or other improvements or personal property required to be covered by
Tenant's insurance described in article XI above. If the Premises is untenable,
in
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whole or in part, during the period beginning on the date such damage occurred,
and ending on the date of substantial completion of Landlord's repair or
restoration work, then, under such circumstances, the rent for such period shall
be reduced to such extent as may be fair and reasonable under the circumstances,
as determined by that portion of the Premises which may reasonably be utilized
by Tenant. Except for abatement of rent, Tenant shall have no claim against
Landlord for any loss suffered by Tenant due to damage or destruction of the
Project or the Premises, or for any work or repair undertaken by Landlord as the
result of any such damage or destruction.
XII. LIABILITY/INDEMNIFICATION/WAIVER OF SUBROGATION
Landlord's Liability
--------------------
Landlord shall not be liable to Tenant, or those claiming by, through, or
under Tenant, including, but not limited to, Tenant's agents, officers,
directors, employees, or invitees, for any injury to, or death of, any person or
persons, or the damage, theft, destruction, loss, or loss of use of any property
or inconvenience (a "Loss") caused by casualty, theft, fire, third parties, or
any other matter, specifically including, but not limited to, injury or damage
from fire, steam, electricity, gas, water, rain, snow, ice, or hail which may
leak or flow from or into any part of the Premises, the breakage, leakage,
destruction, or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning, or lighting fixtures of the Premises or the Project, and
including losses arising through repair or alteration of any part of the
Premises or the Project, or failure to make repairs, or from any other cause,
unless such Loss is caused by Landlord's gross negligence or willful misconduct.
This exculpation of Landlord shall specifically include any damage arising from
any act or neglect of any other tenant of the Project.
Indemnification by Tenant
-------------------------
Tenant shall indemnify, defend, and hold harmless Landlord, its successors,
assigns, agents, employees, contractors, partners, directors, officers, and
affiliates (collectively, the "Indemnified Parties") from and against all fines,
suits, losses, costs, liabilities, claims, demands, actions, and judgments of
every kind or character 1) arising from Tenant's failure to perform its
covenants under the Lease, 2) recovered from or asserted against any of the
Indemnified Parties on account of any Loss to the extent that any such Loss may
be incident to, arise out of, or be caused, either proximately or remotely,
wholly or in part, by Tenant or any other person entering upon the Premises
under or with Tenant's express or implied invitation or permission, 3) arising
from or out of the occupancy or use by Tenant, or arising from or out of any
occurrence in the Premises, however caused, or 4) suffered by, recovered from,
or asserted against any of the Indemnified Parties by the employees, agents,
contractors, or invitees of Tenant or its subtenants or assignees, regardless of
whether Landlord's negligence caused such loss or damage. However, such
indemnification of the Indemnified Parties by Tenant shall not be applicable if
such loss, damage, or injury is wholly caused by the gross negligence or willful
misconduct of Landlord or any of its duly authorized agents or employees.
Waiver of Subrogation
---------------------
The parties desire to avoid liability to each other's insurance companies.
Accordingly, Landlord and Tenant, each for itself and for any person or entity
claiming through it (including any insurance company claiming by way of
subrogation), hereby waive any and every claim which arises or may arise in its
favor against the other party to the Lease, and the other party's officers,
directors, and employees, for any and all loss or damage to property, to the
extent (but only to the extent) that the waiving party who suffers such loss or
damage is actually compensated by insurance, or would be compensated by the
insurance policies contemplated in article XI above, if such policies were
maintained as required by the Lease. Each party agrees to have such insurance
policies properly endorsed so as to make them valid notwithstanding this waiver,
if such endorsement is required to prevent a loss of insurance.
XIII. USE
Premises
--------
The Premises shall be used only for the permitted Use as stated in the
Basic Lease Information. No other use of the Premises may be made without
Landlord's prior written approval, which shall be granted or withheld at
Landlord's sole discretion. Without Landlord's prior written approval, which
shall be granted or withheld at Landlord's sole discretion, Tenant shall not use
the Premises to receive, store, or handle any product, material, or merchandise
that is explosive, highly flammable, or hazardous. Outside storage is
prohibited. Tenant shall be solely responsible for complying with all laws
applicable to the Use, occupancy, and condition of the Premises. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, light,
noise, or vibrations to emanate from the Premises; nor take any other
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action that would constitute a nuisance or would disturb, unreasonably interfere
with, or endanger Landlord or any other person; nor permit the Premises to be
used for any purpose or in any manner that would 1) void any insurance on the
Premises or the Project, 2) increase the insurance risk, or 3) cause the
disallowance of any sprinkler credits. Tenant shall pay to Landlord on demand
any increase in the cost of any insurance on the Premises or the Project
incurred by Landlord that is caused by Tenant's use of the Premises or because
Tenant vacates the Premises.
Tenant represents and warrants to Landlord that Tenant's intended Use of
the Premises is solely for business or commercial purposes, and not for
personal, family, or household purposes.
Parking Areas
-------------
Tenant and its employees and invitees shall have the non-exclusive right to
use, in common with others, any parking areas associated with the Premises which
Landlord may from time-to-time designate for such use, at an allocation of no
less than one parking spaces per 1500 square feet of the Premises, subject to 1)
such reasonable rules and regulations as Landlord may promulgate from time to
time, and 2) rights of ingress and egress of other tenants and their employees,
agents, and invitees. Landlord shall not be responsible for enforcing Tenant's
parking rights against third parties.
XIV. VACATION/RESTORATION/HOLDING OVER
Inspection
----------
Landlord and Landlord's agents and representatives may enter the Premises
during business hours to inspect the Premises; to make such repairs as may be
required or permitted under the Lease; to perform any unperformed obligations of
Tenant under the terms of the Lease; and to show the Premises to prospective
purchasers, mortgagees, ground lessors, and (during the last nine months of the
Term) prospective tenants, provided that such activities shall not unreasonably
interfere with Tenant's occupancy or Use. During the last 12 months of the Term,
Landlord may erect a sign on the Premises indicating that the Premises is
available for lease.
Vacation
--------
Tenant shall notify Landlord in writing of its intention to vacate the
Premises at least 60 days before Tenant will vacate the Premises, unless such
vacation will occur upon expiration of the Term or any extended term of the
Lease. Such notice shall specify the date on which Tenant intends to vacate the
Premises (the "Vacation Date"). At least 30 days before the Vacation Date,
Tenant shall arrange to meet with Landlord for a joint inspection of the
Premises. After such inspection, Landlord shall prepare a list of items that
Tenant must perform before the Vacation Date. If Tenant fails to arrange for
such inspection, then Landlord may conduct such inspection. If Tenant fails to
perform such work before the Vacation Date, then Landlord may perform such work
at Tenant's cost. Tenant shall pay as Additional Rent all costs incurred by
Landlord in performing such work, less the Security Deposit, within 30 days
after Landlord's request for payment.
Notwithstanding anything in this paragraph to the contrary, Tenant shall
not be responsible for any items or costs which are Landlord's obligations
pursuant to the Lease.
Restoration of Premises
-----------------------
Upon the Termination Date, or the earlier termination of the Lease, Tenant
shall 1) deliver the Premises to Landlord with all improvements located upon the
Premises in good repair and condition, reasonable wear and tear excepted
(subject to Tenant's maintenance obligations), and with the HVAC system and hot
water equipment, light and light fixtures (including ballasts), and overhead
doors and related equipment in good working order, 2) deliver to Landlord all
keys to the Premises, and 3) remove all signage placed by or at Tenant's request
upon the Premises, the Project, or the land upon which the Project is located.
All fixtures, alterations, additions, and improvements (whether temporary or
permanent) shall be Landlord's property and shall remain on the Premises, except
as provided in the next two sentences. Provided that Tenant has performed all of
its obligations pursuant to the Lease, Tenant may remove all unattached trade
fixtures, furniture, and personal property placed on the Premises by Tenant (but
Tenant shall not remove any such item which was paid for, in whole or in part,
by Landlord). Additionally, Tenant shall remove all alterations, additions,
improvements, fixtures, equipment, wiring, furniture, and other property as
Landlord may instruct Tenant in writing at least 90 days prior to the
Termination Date (or the termination date under any applicable option to extend
Term), or within 30 days after the earlier termination of the Lease, and, in
such event, restore the Premises to the condition as received by Tenant prior to
the Commencement Date. All items not so removed shall, at the option of
Landlord, be deemed abandoned by Tenant and may be appropriated, sold, stored,
destroyed, or otherwise disposed of by Landlord without notice to Tenant, and
without any obligation to
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account for such items, and Tenant shall pay as Additional Rent the costs
incurred by Landlord in connection with such disposition. All work required of
Tenant under this paragraph shall be coordinated with Landlord, and shall be
performed in a good and workmanlike manner in accordance with all laws, and so
as not to damage the Premises or the Project, or unreasonably interfere with
other tenants' use of their premises. Tenant shall, at its sole expense, repair
all damage to the Premises or the Project caused by any work performed by Tenant
pursuant to this paragraph. Tenant's obligation to perform under this covenant
shall survive the expiration or earlier termination of the Lease.
Holding Over
------------
If Tenant fails to vacate the Premises at the end of the Term, or upon the
earlier termination of the Lease, then Tenant shall be a tenant at will, and
Tenant shall pay, in addition to all applicable Additional Rent due under the
Lease, a daily Base Rent equal to 150 percent of the daily Base Rent payable
during the last month of the Term. Additionally, Tenant shall reimburse Landlord
for, and defend, indemnify, and hold harmless Landlord from, any damage,
liability, and expense (including attorneys' fees and expenses) incurred because
of such holding over. No payments of money by Tenant to Landlord after the
expiration of the Term or the earlier termination of the Lease shall reinstate,
continue, or extend the Term, and no extension of the Term shall be valid unless
it is in writing and signed by Landlord and Tenant.
XV. ASSIGNMENT AND SUBLETTING
Transfer
--------
Tenant shall not, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, 1) advertise that any
portion of the Premises is available for lease, or cause or allow any such
advertisement, 2) assign, transfer, or encumber the Lease or any estate or
interest in the Lease, whether directly or by operation of law, 3) permit any
other entity to become Tenant under the Lease by merger, consolidation, or other
reorganization, 4) if Tenant is an entity other than a corporation whose stock
is publicly traded, permit the transfer of an ownership interest in Tenant so as
to result in a change in the current control of Tenant, 5) sublet any portion of
the Premises, 6) grant any license, concession, or other right of occupancy of
any portion of the Premises, or 7) permit the use of the Premises by any parties
other than Tenant (any of the events listed above being a "Transfer").
Landlord's Consent
------------------
If Tenant requests Landlord's consent to a Transfer, then Tenant shall
provide Landlord with a written description of all terms and conditions of the
proposed Transfer, photocopies of the proposed documentation, and the following
information about the proposed transferee: name and address; reasonably
satisfactory information about its business and business history; its proposed
use of the Premises; banking, financial, and other credit information; and
general references sufficient to enable Landlord to determine the proposed
transferee's creditworthiness and character. Tenant shall reimburse Landlord for
its reasonable attorneys' fees and other expenses incurred in connection with
considering any request for its consent to a Transfer. Landlord's consent to any
Transfer shall not be unreasonably withheld. If Landlord consents to a proposed
Transfer, then the proposed transferee shall deliver to Landlord a written
agreement whereby it expressly assumes Tenant's obligations under the Lease
(provided, however, that any transferee of less than all of the space in the
Premises shall be liable only for obligations under the Lease that are properly
allocable to the space subject to the Transfer, and only to the extent of the
rent it has agreed to pay Tenant for said space). Landlord's consent to a
Transfer shall not release Tenant from performing its obligations under the
Lease, but rather Tenant and its transferee shall be jointly and severally
liable for performance of the Lease. Landlord's consent to any Transfer shall
not waive Landlord's discretion or rights as to any subsequent Transfer. If an
"Event of Default" (as defined below) occurs while the Premises or any part of
the Premises is subject to a Transfer, then Landlord, in addition to its other
remedies, may collect directly from such transferee all rents becoming due to
Tenant and apply such rents against Tenant's rent obligations. Tenant authorizes
its transferees to make payments of rent directly to Landlord upon receipt of
written notice from Landlord to do so.
Landlord's Option to Terminate
------------------------------
Landlord may, within 30 days after submission of Tenant's written request
for Landlord's consent to a Transfer, terminate the Lease as of the date the
proposed Transfer was to be effective. If Landlord exercises this option to
terminate, Tenant may, within ten days of receipt of Landlord's election to
terminate, rescind its request for Landlord's consent to a Transfer, in which
event the Lease shall be reinstated. If the Lease is terminated, Landlord may
thereafter lease the Premises to the prospective transferee (or to any other
person or entity) without liability to Tenant.
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Excess Rental
-------------
Tenant hereby assigns, transfers, and conveys all consideration received by
Tenant under any Transfer, which is in excess of the rents payable by Tenant
under the Lease, and Tenant shall hold such amounts in trust for Landlord and
pay them to Landlord within ten days after receipt by Tenant. The determination
of such excess rental shall exclude all direct, reasonable, and documented
buildout costs, legal fees, and brokerage expenses incurred by Tenant in
connection with the Transfer, said costs to be amortized on a straight line
basis over the entire term of the Transfer. Any "free rent" to the transferee
shall expressly not, however, be excluded in the determination of excess rental.
XVI. CONDEMNATION
If more than 50 percent of the Premises is taken for any public or quasi-
public use by right of eminent domain or private purchase in lieu of eminent
domain (a "Taking"), and the Taking prevents or materially interferes with the
use of the remainder of the Premises for the purpose for which it was leased to
Tenant, either party may terminate the Lease by delivering to the other written
notice of such termination within 30 days after the Taking, in which case rent
shall be abated during the unexpired portion of the Term, effective on the date
of such Taking. If (a) less than 50 percent of the Premises is subject to a
Taking, or (b) more than 50 percent of the Premises is subject to a Taking, but
the Taking does not prevent or materially interfere with the use of the
remainder of the Premises for the purpose for which it was leased to Tenant,
then neither party may terminate the Lease, but the rent payable during the
unexpired portion of the Term shall be reduced to such extent as may be fair and
reasonable under the circumstances. All compensation awarded for any Taking
shall be the property of Landlord, and Tenant assigns any interest it may have
in any such award to Landlord; provided, however, that Landlord shall have no
interest in any award made to Tenant for loss of business, goodwill, or for the
taking of Tenant's trade fixtures, if a separate award for such items is made to
Tenant. Landlord shall have complete procedural control over eminent domain
proceedings affecting the Premises, and shall have complete control over
decisions regarding the acceptance or rejection of any offer made in eminent
domain, other than a separate award made to Tenant. The terms of this paragraph
shall also be applicable in the event Landlord conveys in lieu of condemnation.
XVII. QUIET ENJOYMENT
Provided Tenant pays all Base Rent, Operating Expenses, and Additional
Rent, and no "Event of Default" (as defined below) exists, Tenant may peaceably
and quietly enjoy the Premises during the Term, without disturbance or hindrance
from Landlord or any party claiming by, through, or under Landlord, but not
otherwise, subject to the terms of the Lease and any deed of trust, mortgage,
ground lease, ordinance, lease, utility easement, and/or other agreements to
which the Lease is subordinate.
XVIII. EVENTS OF DEFAULT
Tenant shall be in default under the Lease upon the occurrence of any of
the following events (an "Event of Default"):
(a) Tenant fails to pay any portion of any Base Rent, Operating Expenses,
Additional Rent, or any other payment or reimbursement required under the Lease,
when due, and said failure continues for a period of five days from the date
such payment was due; or
(b) Tenant fails to perform or comply with or violates any term,
provision, or covenant of the Lease, and such failure of performance,
noncompliance, or violation continues for ten days after notice of same by
Landlord to Tenant; or
(c) Tenant makes a transfer of the bulk of its assets or a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors; or
(d) Tenant files or consents or acquiesces to the filing of a petition in
bankruptcy, or a petition seeking postponement or relief of indebtedness under
the federal bankruptcy laws, or under the laws of the United States or of any
state; or
(e) Tenant files or consents or acquiesces to the filing of a request for
the appointment of a trustee or receiver for all or any portion of Tenant's
property; or
(f) a petition or request for relief is filed against Tenant in any court
of the United States or in any state seeking relief in any bankruptcy,
reorganization, composition, extension, arrangement, or insolvency proceeding,
or under any plan for the cancellation, postponement, or adjustment of
indebtedness, which petition or request for relief was not consented or
acquiesced to by Tenant, as the case may be, and subsequently said petition or
request is approved or granted or Tenant shall be adjudicated bankrupt or
such proceedings are not dismissed or vacated within 30 days after filing; or
(g) Tenant (i) fails to take possession of the Premises within 30 days
after the Commencement Date, unless such failure is not caused by Tenant, or
(ii) abandons or vacates
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all or a substantial portion of the Premises, or (iii) fails to continuously
operate its business at the Premises for the permitted use as set forth above;
or
(h) Tenant makes a Transfer of the Premises without the consent of
Landlord; or
(i) Tenant or its agents or employees are convicted of a criminal
violation of law for conduct allegedly occurring on or related to the Premises;
or
(j) Tenant fails to discharge any lien placed upon the Premises within 20
days after any such lien or encumbrance is filed against the Premises.
XIX. REMEDIES
Termination of Lease/Possession
-------------------------------
Upon any Event of Default, Landlord may, in addition to all other rights
and remedies afforded Landlord under the Lease or by law, take any of the
following actions:
(1) terminate the Lease by giving Tenant written notice of said
termination, in which event Tenant shall pay to Landlord the sum of all rent
accrued under the Lease through the date of termination, plus all "Default
Costs" (as defined below), plus an amount equal to (a) the total rent that
Tenant would have been required to pay for the remainder of the Term, discounted
to present value at a per annum rate equal to the "prime rate" as published on
the date the Lease is terminated by the Wall Street Journal, Southwest Edition,
in its listing of "money rates," minus (b) the then-present fair rental value of
the Premises for such period, similarly discounted; or
(2) terminate Tenant's right to possess the Premises without terminating
the Lease by giving Tenant written notice of said termination, in which event
Tenant shall pay to Landlord all rent and other amounts accrued under the Lease
to the date of termination of possession, plus all "Default Costs" (as defined
below) due from time to time, plus all rent and other sums required under the
Lease to be paid by Tenant during the remainder of the Term, diminished by any
net sums thereafter received by Landlord through reletting the Premises during
such period. Landlord shall utilize commercially reasonable efforts to mitigate
damages when Tenant has breached the Lease and abandoned the Premises. Without
limiting the generality of the preceding sentence, the parties expressly agree
that Landlord (i) may lease other comparable available premises in the Project
without being first obligated to re-let the Premises, (ii) will not be required
to incur out-of-pocket expenses to clean and/or refurbish the Premises, other
than customary commissions and legal fees, (iii) will not be obligated to re-let
the Premises at rental rates below then-prevailing market rental rates, (iv) may
elect to assign or sublet the Premises to an existing tenant of the Building
prior to reletting the Premises to a third party, (v) may decline to re-let the
Premises to a prospective tenant not consistent with the existing tenant mix of
the Building, and (vi) may require any prospective tenant to demonstrate
financial capacity commensurate with other tenants of the Building. Tenant shall
not be entitled to the excess of any consideration obtained by reletting over
the rent due under the Lease. Reentry by Landlord in the Premises shall not
affect Tenant's obligations under the Lease for the unexpired Term; rather,
Landlord may, from time to time, bring action against Tenant to collect amounts
due by Tenant, without the necessity of Landlord waiting until the expiration of
the Term. Unless Landlord delivers written notice to Tenant expressly stating
that it has elected to terminate the Lease, all actions taken by Landlord to
exclude or dispossess Tenant of the Premises shall be deemed to be taken under
this paragraph. If Landlord elects to proceed under this paragraph, it may, at
any time thereafter, elect to terminate the Lease under the preceding paragraph.
Additionally, without notice, Landlord may alter locks or other security
devices at the Premises to deprive Tenant of access to the Premises.
Default Costs
-------------
Tenant shall pay to Landlord all costs ("Default Costs") incurred by
Landlord (including court costs and reasonable attorneys' fees and expenses) in
1) obtaining possession of the Premises, 2) removing and storing Tenant's or any
other occupant's property, 3) repairing, restoring, altering, remodeling, or
otherwise putting the Premises into condition acceptable to a new tenant, 4) if
Tenant is dispossessed of the Premises and the Lease is not terminated,
reletting all or any part of the Premises (including brokerage commissions, cost
of tenant finish work, and other costs incidental to such reletting), 5)
performing Tenant's obligations which Tenant failed to perform, and 6)
enforcing, or in advising Landlord of, its rights, remedies, and recourses due
to Tenant's default.
Tenant's Personal Property
--------------------------
If Landlord repossesses the Premises pursuant to the authority granted by
the Lease, then Landlord shall have the right to 1) keep in place and use, or 2)
remove and store, at Tenant's reasonable expense, all of the furniture,
fixtures, equipment, and other property in the Premises, including that which is
owned by or leased to Tenant. Landlord may relinquish possession of all or any
portion of such furniture, fixtures, equipment, and other property to any person
(a "Claimant") who presents to Landlord a photocopy of any instrument
represented by Claimant to have been executed by Tenant (or any predecessor of
Tenant)
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granting Claimant the right, under various circumstances, to take possession of
such furniture, fixtures, equipment, or other property, without the necessity on
the part of Landlord to inquire into the authenticity or legality of the
instrument. Landlord may, at its option and without prejudice to or waiver of
any rights it may have, 1) escort Tenant to the Premises to retrieve any
personal belongings of Tenant and/or its employees not covered by Landlord's
statutory lien or the security interest described below, or 2) obtain a list
from Tenant of the personal property of Tenant and/or its employees that is not
covered by Landlord's statutory lien or the security interest described below,
and make such property available to Tenant and/or Tenant's employees; however,
Tenant first shall pay in cash all costs and estimated expenses to be incurred
by Landlord in connection with the removal of such property.
Non-Waiver by Landlord
----------------------
Landlord's acceptance of rent following an Event of Default shall not waive
Landlord's rights regarding such Event of Default. Landlord's receipt of rent
with knowledge of any Event of Default by Tenant under the Lease shall not be a
waiver of such Event of Default, and no waiver by Landlord of any provision of
the Lease shall be deemed to have been made unless set forth in writing and
signed by Landlord. The failure of Landlord to insist at any time upon strict
performance of any of the terms of the Lease, or to exercise any option, right,
power, or remedy contained in the Lease is not a waiver of said right or remedy
in the future.
Rights Cumulative
-----------------
The rights of Landlord stated above are in addition to any and all other
rights that Landlord has or may have either at law or in equity, and Tenant
agrees that the rights granted by the Lease to Landlord are commercially
reasonable.
XX. LANDLORD DEFAULT/LIMITATION OF LIABILITY
As used in the Lease, the term "Landlord" shall mean only the current owner
or owners of the fee title to the Premises, or the leasehold estate under a
ground lease to the Premises, at the applicable time. Each Landlord shall be
obligated to perform the obligations of Landlord under the Lease only during the
time that the particular Landlord holds or owns such interest or title. Any
Landlord who transfers his, her, or its title or interest shall be relieved of
all liability with respect to the obligations of Landlord under the Lease
performable on or after the date of transfer. However, each Landlord shall
deliver to its transferee all funds previously paid by Tenant, if the funds have
not yet otherwise been applied or earned under the terms of the Lease.
Tenant shall give written notice to Landlord of any failure by Landlord to
perform any of its obligations under the Lease, and to any ground lessor,
mortgagee, or beneficiary under any deed of trust encumbering the Premises whose
name and address shall have been previously furnished by Landlord to Tenant in
writing. Landlord shall not be considered in default under the terms of the
Lease unless Landlord fails to cure within 30 days after receipt of Tenant's
notice. However, if the failure requires more than 30 days to cure, Landlord
shall not be in default if such cure is commenced within the 30-day period, and
if Landlord further diligently pursues said cure to completion.
Neither Landlord nor Tenant shall not be required to perform any obligation
under the terms of the Lease or be liable or responsible for any loss or damage
resulting from its failure to perform so long as performance is delayed or
prevented by force majeure, acts of God, strikes, lockouts, material or labor
shortages, embargo, civil riot, war, revolution, rebellion, civil war,
insurrection, flood, natural disaster, and any other cause not reasonably within
the control of the respective party.
Notwithstanding anything to the contrary set forth in the Lease, it is
specifically understood and agreed by Tenant that there shall be absolutely no
personal liability on the part of Landlord with respect to any of the terms,
covenants, or conditions of the Lease, and Tenant shall look solely to the
equity, if any, of Landlord in the Premises for the satisfaction of each and
every remedy of Tenant, in the event of any breach by Landlord of any of the
terms, covenants, or conditions of the Lease to be performed by Landlord; such
exculpation of personal liability to be absolute and without any exception
whatsoever, and no other property or assets of Landlord shall be subject to
levy, execution, or other enforceable procedure for the satisfaction of Tenant's
remedies. Notwithstanding anything to the contrary as set forth in the Lease, it
is specifically understood and agreed that any liability which may arise as a
consequence of the execution of the Lease by or on behalf of the Trustees under
the Will and of the Estate of James Campbell, Deceased, shall be a liability of
the Estate of James Campbell and not the personal liability of any trustee,
corporate officer of a trustee, employee, or beneficiary of the Estate of James
Campbell.
XXI. MORTGAGES
The Lease shall be subordinate to any deed of trust, mortgage, or other
security instrument (a "Mortgage"), and any ground lease, master lease, or
primary lease (a "Primary
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Lease") that now or hereafter covers any portion of the Premises and Project
(the mortgagee under any Mortgage or the lessor under any Primary Lease is
referred to as "Landlord's Mortgagee"), and to increases, renewals,
modifications, consolidations, replacements, and extensions of same. However,
any Landlord's Mortgagee may elect to subordinate its Mortgage or Primary Lease
(as the case may be) to the Lease by delivering written notice of such
subordination to Tenant. The provisions of this paragraph shall be self-
operative, and no further instrument shall be required to effect such
subordination; however, Tenant shall, from time to time, within ten days after
written request to do so by Landlord, execute any instruments that may be
required by any Landlord's Mortgagee to evidence the subordination of the Lease
to any such Mortgage or Primary Lease. If Tenant fails to execute the same
within such ten-day period, Landlord may execute the same as attorney-in-fact
for Tenant.
Tenant shall attorn to any party succeeding to Landlord's interest in the
Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power
of sale, termination of lease, or otherwise, provided that the successor agrees
to assume the obligations and liabilities of Landlord, and upon such party's
request, Tenant shall execute such agreements confirming such attornment as such
party may reasonably request. Tenant shall not seek to enforce any remedy it may
have for any default on the part of Landlord without first giving written notice
by certified mail, return receipt requested, specifying the default in
reasonable detail to any Landlord's Mortgagee whose address has been previously
given to Tenant, and affording such Landlord's Mortgagee a reasonable
opportunity to perform Landlord's obligations under the Lease.
Notwithstanding any such attornment or subordination of a Mortgage or
Primary Lease to the Lease, Landlord's Mortgagee shall not be liable for any
acts of any previous landlord, shall not be obligated to install any Tenant
improvements, and shall not be bound by any amendment to which it did not
consent in writing, nor to any payment of rent made more than one month in
advance.
XXII. TENANT ENCUMBRANCES
Tenant has no authority, express or implied, to create or place any lien or
encumbrance of any kind or nature whatsoever upon, or in any manner to bind,
Landlord's property, the interest of Landlord or Tenant in the Premises, or the
rent due under this Lease in favor of any person dealing with Tenant, including
those who may furnish materials or perform labor for any construction or
repairs. Tenant shall pay or cause to be paid all sums due for any labor
performed or materials furnished in connection with any work performed on the
Premises by or at the request of Tenant. Tenant shall give Landlord immediate
written notice upon Tenant learning of the placement of any lien or encumbrance
against the Premises.
XXIII. LANDLORD'S LIEN
In addition to the statutory landlord's lien, Tenant grants to Landlord, to
secure performance of Tenant's obligations under the Lease, a security interest
in all goods, inventory, equipment, fixtures, furniture, improvements, chattel
paper, accounts, general intangibles, and other personal property of Tenant now
or hereafter situated on or relating to Tenant's use of the Premises, and all
proceeds of same (the "Collateral"), and the Collateral shall not be removed
from the Premises without the consent of Landlord until all obligations of
Tenant under the Lease have been fully performed. Upon the occurrence of an
Event of Default, Landlord may, in addition to all other remedies provided by
law or under the Lease, without notice or demand except as provided below,
exercise the rights afforded a secured party under the Uniform Commercial Code
as adopted by the State of Texas. In connection with any public or private sale,
Landlord shall give Tenant ten days' prior written notice of the time and place
of any public sale of the Collateral, or of the time after which any private
sale or other intended disposition of the Collateral is to be made, which is
agreed by Tenant to be a reasonable notice of such sale or other disposition.
Landlord may also file a photocopy of the Lease or this provision as a financing
statement to perfect its security interest in the Collateral. Landlord agrees to
subordinate its landlord's lien to that of a bona-fide third party commercial
lender.
XXIV. NOTICES
Each provision of the Lease or of any applicable laws and other
requirements with reference to the sending, mailing, or delivering of notice or
the making of any payment under the Lease shall be deemed to be complied with
when and if the following steps are taken:
(a) all Base Rent, Operating Expenses, and Additional Rent shall be
payable to Landlord at Landlord's Address for Notice, or at such other address
as Landlord may specify from time to time by written notice delivered in
accordance with this article. Tenant's obligation to pay rent shall not be
deemed satisfied until such rent has been actually received by Landlord;
(b) all payments required to be made by Landlord to Tenant under the
Lease shall be payable to Tenant at Tenant's Address for Notice, or at such
other address as Tenant may specify from time to time by written notice
delivered in accordance with this article; and
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<PAGE>
(c) any written notice or document required or permitted to be delivered
shall be deemed to be delivered upon the earlier to occur of 1) tender of
delivery (in the case of a hand-delivered notice), 2) deposit in the United
States mail, postage prepaid, certified mail, return receipt requested, or 3)
receipt by facsimile transmission with a confirmation notice by United States
first-class mail, in each case addressed to the parties at the respective
Address for Notice, or at such other address as they have previously specified
by written notice delivered in accordance with this article. If Landlord has
attempted to deliver notice to Tenant at Tenant's Address for Notice, or at such
other address as Tenant may have previously specified by written notice
delivered in accordance with this article, but such notice was returned or
acceptance of same was refused, then Landlord may post such notice in or on the
Premises, which notice shall be deemed delivered to Tenant upon the posting of
said notice.
XXV. HAZARDOUS MATERIALS
The term "Hazardous Substances," as used in the Lease, shall mean
pollutants, contaminants, toxic or hazardous wastes, or any other substances,
the removal of which is required or the use of which is restricted, prohibited,
or penalized by any "Environmental Law," which term shall mean any law relating
to health, pollution, or protection of the environment. Tenant hereby agrees
that 1) no activity will be conducted on the Premises that will produce any
Hazardous Substances, except for such activities that are part of the ordinary
course of Tenant's business activities (the "Permitted Conditions"), provided
such Permitted Conditions are conducted in accordance with all Environmental
Laws and have been approved in advance in writing by Landlord; 2) the Premises
will not be used in any manner for the storage of any Hazardous Substances
except for any temporary storage of such materials that are used in the ordinary
course of Tenant's business (the "Permitted Substances"), provided such
Permitted Substances are properly stored in a manner and location satisfying all
Environmental Laws and approved in advance in writing by Landlord; 3) no portion
of the Premises will be used as a landfill or a dump; 4) Tenant will not install
any underground tanks of any type; 5) Tenant will not allow any surface or
subsurface conditions to exist or come into existence that constitute, or with
the passage of time may constitute, a public or private nuisance; and 6) Tenant
will not permit any Hazardous Substances to be brought onto the Premises, except
for the Permitted Substances. If at any time during or after the Term, the
Premises is found to be contaminated with Hazardous Substances, Tenant shall
defend, indemnify, and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, damages, and obligations of any nature arising
from or as a result of the use of the Premises by Tenant. Unless expressly
identified on an addendum to this Lease, as of the date of the Lease there are
no Permitted Conditions or Permitted Substances for purposes of the foregoing
provision, and none shall exist unless and until approved in advance and in
writing by Landlord. Landlord may enter the Premises and conduct environmental
inspections and tests as it may require from time to time, provided that
Landlord shall use reasonable efforts to notify Tenant 24 hours in advance and
minimize any interference with Tenant's business. Such inspections and tests
shall be conducted at Landlord's expense, unless they reveal the presence of
Hazardous Substances (other than any Permitted Substances), or that Tenant has
not complied with the requirements set forth in this article, in which case
Tenant shall reimburse Landlord for the cost of such inspections and tests
within ten days after Landlord's request for payment of same.
See, Exhibit "E" for additional terms and conditions of the Lease relating
to environmental matters.
XXVI. EMERGENCY POWER
Auxiliary HVAC/Diesel Generator/Fuel Storage Tank Outside of Premises
---------------------------------------------------------------------
Tenant shall have the right, subject to 1) all regulations of applicable
jurisdictional authorities, 2) the terms of exhibit "E" of the Lease, and 3)
Landlord's prior written approval as to location, size, and capacity to install
a) auxiliary HVAC to the Premises, b) one diesel generator, and c) a maximum 500
gallon fuel storage tank for emergency back-up power. To the extent that the
placement of the auxiliary HVAC, diesel generator, or fuel storage tank may
displace parking spaces, such displaced parking spaces shall be subtracted from
Tenant's allotment of parking spaces described above. Tenant shall have the
right to test the generator one time per week at a time mutually-agreed upon in
writing between Landlord and Tenant.
Revocation of Approval
----------------------
The parties expressly agree that any right granted by the preceding
paragraph to utilize auxiliary HVAC, a diesel generator, or a fuel storage tank
outside of the Premises may be unilaterally and immediately rescinded by
Landlord 1) in the event of written notification from any governmental authority
that such usage of auxiliary HVAC or the diesel generator, or use of the fuel
storage tank outside of the Premises is unlawful or constitutes a public or
private nuisance, if said condition is not corrected within ten days after said
notice, or 2) in the event of the issuance of any criminal or civil citation by
any governmental authority with regard to
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<PAGE>
Tenant's usage of the auxiliary HVAC, diesel generator, or the fuel storage tank
outside of the Premises. In any of the above events, Landlord may, without
further notice to Tenant, rescind any prior authorization for auxiliary HVAC, a
diesel generator, or a fuel storage tank outside of the Premises, and, upon said
rescission, Tenant shall immediately cease usage of and remove the auxiliary
HVAC, or the diesel generator, or the fuel storage tank from the outside of the
Premises.
XXVII. COLLOCATION
Collocation
-----------
Tenant shall have the right to collocate certain customer equipment in the
Premises, for the purpose of connecting such customer equipment to Tenant's
facilities related to the provision of Tenant's telecommunications services to
Tenant's customers. Tenant shall defend, indemnify, and hold Landlord harmless
from and against, any and all claims of and from such customers relating to such
collocation. So long as such collocation does not over-burden the Premises or
the building of which the Premises is a part, Tenant shall not be required to
pay to, or share with Landlord, any profits, collocation fees, or charges
received by Tenant from the customers whose equipment is collocated. No tenancy
or subtenancy shall be created by collocation of equipment allowed pursuant to
this paragraph.
Right to Serve Other Tenants
----------------------------
Tenant shall have the right to provide telecommunications services to
other tenants of the Project. Tenant shall be permitted reasonable access to
the Project for the purposes of installing, operating, repairing, and
maintaining the fiber optic cable, facilities, and equipment (collectively, the
"System") connecting Tenant's network to interested tenants of the Project.
Tenant may offer its services through its fiber optic network to other tenants
in the Project in the same manner as any third-party vendor. Prior to any
installation of the System, Tenant shall consult with Landlord to determine an
appropriate entrance plan, and Tenant shall not proceed with installation of the
System until Landlord's written approval has been obtained. Tenant will perform
any installation in such a manner so as not to interrupt operations at the
Project. Tenant will restore the Project to its original condition and bear all
costs for rearrangement or restoration, as necessary.
XXVIII. MISCELLANEOUS
Context/Captions
----------------
Words of any gender used in the Lease shall include any other gender, and
words in the singular shall include the plural, unless the context otherwise
requires. The captions inserted in the Lease are for convenience only and in no
way affect the interpretation of the Lease.
Transfer/Authorization
----------------------
Landlord may transfer and assign, in whole or in part, its rights and
obligations in the Premises, the Project, and the real property that are the
subject to the Lease, in which case Landlord shall have no further liability
under the Lease, other than obligations accruing prior to such transfer. Each
party shall furnish to the other, promptly upon demand, a corporate resolution,
proof of due authorization by partners, or other appropriate documentation
evidencing the due authorization of such party to enter into the Lease.
Time of the Essence
-------------------
Time is of the essence in the performance of all of Landlord's and Tenant's
duties and obligations pursuant to the Lease.
Tenant Documentation
--------------------
Tenant shall, from time to time, within ten days after written request by
Landlord, deliver to Landlord, or Landlord's designee, 1) a certificate of
occupancy for the Premises, 2) audited financial statements for Tenant and any
guarantor of Tenant's obligations under the Lease, 3) evidence reasonably
satisfactory to Landlord that Tenant has performed its obligations under the
Lease (including evidence of payment of the Security Deposit), and 4) an
estoppel certificate stating that the Lease is in full effect, the date to which
rent has been paid, the unexpired Term, the status of any alleged Landlord
defaults, and such other factual matters pertaining to the Lease as may be
requested by Landlord. Tenant's obligation to furnish the above-described items
in a timely fashion is a material inducement for Landlord's
-16-
<PAGE>
execution of the Lease, and Tenant's failure to timely deliver any such items
within ten days after written notice shall constitute an Event of Default under
the Lease. If Tenant fails to execute any such estoppel certificate within such
ten-day period, Landlord may do so as attorney-in-fact for Tenant.
Entire Agreement
----------------
The Lease constitutes the entire agreement between Landlord and Tenant with
respect to the subject matter of the Lease, and contains all of the covenants
and agreements of Landlord and Tenant with respect to the Lease. Landlord and
Tenant each acknowledge that no representations, inducements, promises, or
agreements, whether oral or written, have been made by Landlord or Tenant, or
anyone acting on behalf of Landlord or Tenant, which are not contained within
the Lease, and any prior agreements, promises, negotiations, or representations
not expressly set forth in the Lease are of no effect. The Lease may not be
altered, changed, or amended except by an instrument in writing signed by both
parties.
Survival of Obligations upon Vacating
-------------------------------------
All obligations of Tenant not fully performed by the end of the Term shall
survive, including, without limitation, all payment obligations concerning the
condition and repair of the Premises. Upon the expiration of the Term, and
within ten days after Tenant vacates the Premises, Tenant shall pay to Landlord
any amount reasonably estimated by Landlord as necessary to put the Premises in
good condition and repair, reasonable wear and tear excluded. Tenant shall
also, prior to vacating the Premises, pay to Landlord the amount, as estimated
by Landlord, of Tenant's obligation for Operating Expenses for the year in which
the Term ends, less any credits due Tenant. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant, with Tenant being
liable for any additional costs for such items upon demand by Landlord, with any
excess to be returned to Tenant after all such obligations have been determined
and satisfied, as the case may be. Any Security Deposit held by Landlord may be
credited against the amount due by Tenant under this paragraph.
No Surrender
------------
No act by Landlord shall be an acceptance of a surrender of the Premises,
and no agreement to accept a surrender of the Premises shall be valid unless it
is in writing and signed by Landlord.
Illegality/Invalidity/Unenforceability
--------------------------------------
If any provision of the Lease is illegal, invalid, or unenforceable, then
the remainder of the Lease shall not be affected, and in lieu of each such
provision, there shall be added, as a part of the Lease, a provision as similar
in terms to such illegal, invalid, or unenforceable clause or provision as may
be possible and be legal, valid, and enforceable.
Broker Indemnification
----------------------
Landlord and Tenant each warrant to the other that it has not dealt with
any broker or agent in connection with the Lease, except as identified in the
Basic Lease Information. Tenant and Landlord shall each indemnify the other
against all costs, attorneys' fees, and other liabilities for commissions or
other compensation claimed by any broker or agent claiming the same by, through,
or under the indemnifying party.
Confidentiality
---------------
The terms and conditions of the Lease are confidential, and neither
Landlord nor Tenant shall disclose the terms of the Lease to any third party
except as may be 1) required by law or regulatory agency, 2) mutually agreed to,
or 3) required to enforce the parties' rights under the Lease.
Governing Law/Place of Performance
----------------------------------
The Lease shall be governed by and construed in accordance with the laws of
the State of Texas, and all obligations of the parties under the Lease are
performable in Harris County, Texas.
Representation of Authority
---------------------------
If Tenant is a corporation, each individual executing the Lease on behalf
of Tenant represents and warrants to Landlord that he or she is duly authorized
to execute and deliver the Lease on behalf of the corporation, in accordance
with a duly adopted resolution of the board of directors of said corporation,
and that the Lease is binding upon said corporation.
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<PAGE>
Exhibits
--------
The exhibits specified in the Basic Lease Information are attached to the
Lease and are hereby incorporated into the Lease for all intents and purposes as
if fully set forth at length verbatim.
Facsimile Execution/Counterpart Execution
-----------------------------------------
The parties agree that execution of the Lease by either party may be done
by facsimile execution, which shall be binding for all intents and purposes.
Further, the Lease may be executed in one or more signature page counterparts,
each of which when combined with the remainder of the Lease shall constitute one
and the same document.
No Security Services
--------------------
Tenant acknowledges and represents to Landlord that Tenant recognizes that
Landlord is not obligated to and will not provide any security services for the
Premises or the Project.
TENANT ACKNOWLEDGES THAT 1) IT HAS INSPECTED AND ACCEPTS THE PREMISES IN AN
"AS IS, WHERE IS" CONDITION, 2) THE PROJECT AND IMPROVEMENTS COMPRISING THE SAME
ARE SUITABLE FOR THE PURPOSE FOR WHICH THE PREMISES IS LEASED, AND FOR TENANT'S
INTENDED COMMERCIAL PURPOSE, AND LANDLORD HAS MADE NO WARRANTY, REPRESENTATION,
COVENANT, OR AGREEMENT WITH RESPECT TO THE MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE PREMISES, 3) THE PREMISES IS IN GOOD AND SATISFACTORY
CONDITION, 4) NO REPRESENTATIONS AS TO REPAIR OF THE PREMISES, NOR PROMISES TO
ALTER, REMODEL, OR IMPROVE THE PREMISES HAVE BEEN MADE BY LANDLORD (UNLESS AND
EXCEPT AS MAY BE SET FORTH IN EXHIBIT "C" ATTACHED TO THE LEASE, IF ONE SHALL BE
ATTACHED, OR AS MAY BE OTHERWISE EXPRESSLY SET FORTH IN THE LEASE), AND 5) THERE
ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, THAT
EXTEND BEYOND THE DESCRIPTION OF THE PREMISES.
Executed by Tenant on this 21/st/ day of December, 1999.
TENANT:
- ------
EBASEONE CORPORATION
APPROVED AS TO FORM:
-------------------
by: /s/ Scott Feuless
--------------------------------
name: Scott Feuless
------------------------------
/s/ Margaret C. Fitzgerald
--------------------------
title: Chief Technology Officer counsel for Tenant
-----------------------------
Executed by Landlord on this 22/st/ day of December, 1999.
LANDLORD:
- --------
THE TRUSTEES UNDER THE WILL
AND OF THE ESTATE OF JAMES
CAMPBELL, DECEASED, ACTING IN
THEIR FIDUCIARY AND NOT IN
THEIR INDIVIDUAL CAPACITIES
APPROVED AS TO FORM:
-------------------
by: /s/ Dorine Holsey Streeter
--------------------------------
[ILLEBIBLE]^^
--------------------------
its: Director Mainland Properties JONES & CANNON,
-------------------------------
a professional corporation
by: /s/ Sydni L. Roberson, CPM, CCIM 440 North Center
-------------------------------- Arlington, Texas 76011
its: Senior Asset Manager
-------------------------------
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<PAGE>
EXHIBIT "A"
[SITE PLAN APPEARS HERE]
<PAGE>
EXHIBIT "B"
EXHIBIT A
---------
THE LAND
--------
That certain parcel or parcels of land consisting of approximately twenty-
one and four hundred ninety-eight thousandths (21.498) acres, located in the
County of Harris, State of Texas, legally described as follows:
All of that certain 21.498 acres of land comprised of 21.454 acres being
all of the Restricted Reserve "A", Commons at Greenspoint, according to the plat
thereof filed at Volume 342, Page 126 Harris County Map Records and 1,921 square
feet being out of the Pierce Sullivan Survey, A-749, Harris County, Texas and
being a portion of that certain 2,014 square foot tract as described in a deed
dated May 12, 1989 from AT&T Communications of the Southwest, Inc. to The
Commons at Greenspoint Joint Venture filed in the Official Public Records of
Real Property of Harris County, Texas at Clerk File No. M-173117, Film Code No.
###-##-####.
<PAGE>
EXHIBIT "C"
INITIAL IMPROVEMENTS OF THE PREMISES
(TENANT IMPROVEMENTS BY TENANT)
-------------------------------
Improvements at Tenant's Expense
--------------------------------
(a) Alterations at Tenant's Expense
Tenant accepts the Premises in its present condition, "AS IS", without
calling upon Landlord to make any expenditures or to perform any work whatsoever
for the preparation of the Premises for Tenant's use. Tenant shall, at its sole
expense, make the necessary improvements, alterations, and installations (the
"Tenant Improvements") in the Premises required for its business, using a
contractor or contractors who have been approved in writing by Landlord, such
approval not to be unreasonably withheld. Tenant shall comply at its sole
expense with all present and future governmental requirements arising out of, in
connection with, or necessitated by such Tenant Improvements.
(b) Approval of Plans
All Tenant Improvements shall be completed pursuant to working plans and
specifications prepared by a duly registered architect employed by Tenant, at
Tenant's sole expense. Any deficiency in design or construction shall be
Tenant's sole responsibility, regardless of whether such plans and
specifications were previously approved by Landlord. Approval by Landlord of any
of Tenant's drawings, plans, and specifications prepared in connection with any
Tenant Improvements within the Premises shall not constitute a representation or
warranty by Landlord as to the adequacy or sufficiency of such drawings, plans,
and specifications, or the improvements to which they relate, for any use,
purpose, or condition. Any such approval by Landlord shall merely be the consent
of Landlord as required pursuant to this subparagraph. Landlord has made no
representations as to the condition of the Premises, or the Building, or the
need for Tenant to remodel, repair, or decorate.
Prior to commencing the Tenant Improvements, Tenant shall submit plans and
specifications for such Tenant Improvements to Landlord or its agent, for
Landlord's written approval, which approval shall not unreasonably be withheld,
and for which Landlord shall approve or disapprove within ten days of submission
of said documents by Tenant to Landlord. Landlord's approval of said plans and
specifications may be contingent upon the removal of any or all of the Tenant
Improvements from the Premises, and restoration of the Premises to the condition
existing prior to completion of the Tenant Improvements upon the expiration or
earlier termination of the Lease. All Tenant Improvements to be performed and
completed by Tenant shall be performed in strict accordance with the approved
plans and specifications. Without Landlord's prior written consent, no Tenant
Improvements shall be constructed, nor shall there be any deviation from the
approved plans and specifications, for such Tenant Improvements.
Unless designated to be removed as discussed in the Lease, and excluding
Tenant's trade fixtures, all Tenant Improvements (whether temporary or permanent
in character, and including, but not limited to, all HVAC equipment and all
other equipment that is in any manner connected to the Building's plumbing
system) made in or upon the Premises, either by Landlord or Tenant, shall become
Landlord's property at the end of the Lease, and shall remain on the Premises,
without compensation to Tenant.
C-1
<PAGE>
(c) Permits
Tenant, at its sole cost and expense, shall file all drawings, plans, and
specifications, pay all fees, and obtain all permits and applications from the
local building department, the department of labor, and other competent
governmental authorities, and shall also obtain a certificate of occupancy (or
equivalent) and such other approvals as may be required to enable Tenant to
lawfully operate within the Premises. Tenant shall promptly furnish to Landlord
true and correct photocopies of all certificates and approvals required by the
applicable governmental authorities. Landlord shall sign all applications
requiring the owner's signature. No work shall be started, or equipment
installed, until all such necessary consents, authorizations, and licenses shall
have first been duly obtained by the Tenant, its contractor, or other persons
performing Tenant Improvements or installing equipment in the Premises on
Tenant's behalf.
(d) Performance of Work
On or before the Commencement Date, Tenant shall, at its sole cost and
expense, substantially complete all work required of it pursuant to the
Landlord-approved plans and specifications. Tenant will be permitted to
enter thePremises for the purpose of performing its obligations to build the
Tenant Improvements, and for the purpose of installing its fixtures and other
equipment, provided (a) Tenant shall have obtained Landlord's written approval
of the plans and specifications for said Tenant Improvements, and (b) Tenant
shall have deposited with Landlord the policies or certificates of insurance
required below. Tenant's activities shall be conducted so as not to unreasonably
interfere with Landlord's activities. Tenant shall, at its sole expense,
promptly remove from the Premises and from the Building all trash which may
accumulate during Tenant's construction of the Tenant Improvements. During such
construction, Tenant shall perform all duties and obligations imposed by this
Lease, including, but not limited to, those provisions relating to insurance and
indemnification, saving and excepting only the obligation to pay rent, which
obligation shall commence on the Commencement Date. All work described in this
paragraph shall be performed only by contractors and subcontractors approved in
writing by Landlord. All such work shall be performed in accordance with all
legal requirements, and in a good and workmanlike manner, so as not to damage
the Premises, the primary structure or structural qualities of the Building, or
plumbing, electrical lines, or other utility transmission facility. All such
work which may affect the HVAC, electrical system, or plumbing must be performed
by workers duly licensed and skilled in their profession and trades. All
materials shall be new, and both workmanship and materials shall be of first-
class quality.
(e) Mechanics' Liens
Tenant shall not permit any mechanics' or materialmen's liens to be filed
against the Premises or the Building for any work performed, materials
furnished, or obligation incurred by or at the request of Tenant. If such a lien
is filed, Tenant shall, within ten days after Tenant has knowledge of such
filing, or within ten days after Landlord has delivered notice of the filing to
Tenant, whichever comes first, either pay the amount of the claim or diligently
contest such lien and deliver to Landlord a bond or other security reasonably
satisfactory to Landlord. If Tenant fails to timely take either such action,
then Landlord may pay the lien claim without inquiry as to the validity of said
claim, and any amount so paid, including expenses and interest, shall be paid to
Landlord within ten days after Landlord has delivered to Tenant an invoice for
such amount.
C-2
<PAGE>
(f) Insurance
Tenant shall require any contractor and subcontractor who is to perform
Tenant Improvements on the Premises to procure and keep in force at said
contractor's expense during such time as work is being performed on the
Premises: comprehensive general liability insurance, including contractor's
liability coverage, contractual liability coverage, completed operations
coverage, broad form property damage endorsement, and contractor's protective
liability coverage to afford protection to the limit, per occurrence, of not
less than the combined single limit of $2,000,000.00 with respect to death,
personal injury, and property damage. All insurance required by the terms of
this Lease shall be maintained with an insurance company authorized to do
business in Texas, and which is reasonably satisfactory to Landlord. Tenant will
cause Tenant's contractors to deposit the policy or policies of such insurance
or certificates of insurance with Landlord prior to commencing any such work,
which policies shall name Landlord or its designee as an additional named
insured, and shall also contain a provision stating that such policy or policies
shall not be cancelled except after 30 days' written notice to Landlord. Such
policy or policies shall include a waiver of subrogation in favor of Landlord.
(g) Indemnification
All work with regard to the Tenant Improvements, including work done at the
Premises or at the Building, shall be at the sole risk of Tenant, and Tenant
shall indemnify and hold Landlord, its trustees, agents, beneficiaries, and
employees, harmless from and against all liability, claims, judgments, or
demands, including attorneys' fees (collectively, the "Liability") arising
directly or indirectly from the obligations undertaken by Tenant with regard to
the Tenant Improvements, excepting only as may be caused by Landlord's gross
negligence or willful misconduct. This indemnity shall include, but not be
limited to, any and all Liability attributable to any bodily injury, sickness,
disease, or death of any person, including Tenant or any contractors, employees,
agents, subcontractors, or independent contractors, or to any injury, damage, or
destruction of or to any tangible property, including the loss of use resulting
from such injury, damage, or destruction; excepting, however, any Liability to
any person or property occasioned or resulting solely from the willful injury of
such person or property by Landlord. The parties hereby expressly agree to this
allocation of risk, and represent that this allocation of risk is a material
inducement for Landlord to enter this Lease. Tenant shall, upon demand by
Landlord, defend any actions or proceedings brought against Landlord with
respect to the matters and items indemnified against in this paragraph, through
counsel fully satisfactory to Landlord provided, however, that Landlord shall
have the right to conduct any such defenses at Tenant's sole cost and expense,
if Landlord chooses to so do.
(h) Records
Tenant shall keep, maintain, and operate full, true, and accurate books of
account and full, true, and complete records with respect to the Tenant
Improvements. Landlord and its representatives shall have full access to such
books and records at all times during regular business hours, and may examine
and audit them. Tenant shall furnish Landlord all statements, information,
vouchers, invoices, and supporting data it reasonably requires with respect to
the Tenant Improvements.
(i) Inspections
Landlord may place its supervisory personnel and representatives on the job
during the course of construction, at Landlord's expense, for the purpose of
making inspections and ensuring that Tenant and Tenant's
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<PAGE>
contractors, suppliers, and materialmen comply with these requirements.
Notwithstanding the foregoing enumeration of restrictions and conditions,
Landlord may at any time during the course of the work on the Tenant
Improvements impose such other restrictions, rules, and conditions as may be
reasonably necessary to ensure the proper completion of the work.
(j) Consent
Nothing contained within this paragraph shall imply any consent or
agreement by the Landlord to subject Landlord's ownership estate to liability
under any mechanics', materialmen's, or other lien law.
(k) Americans with Disabilities Act
Tenant shall be responsible for all costs and expense necessary to ensure
compliance with the Americans with Disabilities Act of 1990.
APPROVED AS TO FORM: INITIALED:
- ------------------- ---------
/s/ [ILLEGIBLE]^^ /s/ [ILLEGIBLE]^^
- --------------------------- ----------------------
JONES & CANNON, LANDLORD
a professional corporation /s/ [ILLEGIBLE]^^
440 North Center ----------------------
Arlington, Texas 76011 TENANT
C-4
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
---------------------
1. All deliveries shall be made to designated service or receiving areas and
Tenant shall request delivery trucks to approach their service or receiving
areas by designated service routes and drives. All delivered goods shall be
moved into Tenant's Premises within a reasonable period of time, and shall
not be left in parking or receiving areas beyond a reasonable period of
time. Tenant shall not store equipment or pallets outside the Premises.
2. Tractor trailers which are unhooked or parked such that the dolly wheels
are beyond the concrete loading apron shall use steel plates under dolly
wheels to prevent damage to the asphalt paving surface. In addition, wheel
blocking shall be available for use. Tractor trailers are to be parked only
at loading docks during loading or unloading. No parking or storing of such
trailers shall be permitted on streets adjacent to the Premises.
3. Forklifts which operate on asphalt paving areas shall not have solid rubber
tires, but rather shall have tires which will not damage the asphalt.
4. Tenant is responsible for storage and removal of all Tenant's trash,
refuse, and garbage. All trash shall be contained in suitable receptacles
stored behind a screened enclosure at locations approved by Landlord.
5. Tenant shall not dispose of the following items in sinks or commodes:
plastic products (plastic bags, straws, boxes); sanitary napkins, tea bags;
cooking fats, cooking oils; any meat scraps or cutting residue; petroleum
products (gasoline, naptha, kerosene, lubricating oils); paint products
(thinner, brushes); or any other items which the same are not designed to
receive. All areas of the Premises, including vestibules, entrances, doors,
fixtures, windows and plate glass shall be maintained in a safe, neat, and
clean condition.
6. Walls, floors, and ceilings shall not be defaced in any way and no one
shall be permitted to mark, nail, screw, or drill into, paint or in any way
mar any Building surface, except that pictures, certificates, licenses, and
similar items normally used in Tenant's business may be carefully attached
to the walls by Tenant in a manner to be prescribed by Landlord. Upon
removal of such items by Tenant any damage to the walls or other surface,
except minor nail holes, shall be repaired by Tenant.
7. Tenant shall not permit or suffer the use of any advertising medium which
extends outside of the Premises, including, without limiting the generality
of the foregoing, flashing lights, searchlights, loudspeakers, phonographs,
radios, or television. No radio, television, or other communication antenna
equipment or device is to be mounted, attached, or secured to any part of
the roof, exterior surface, or anywhere outside the Premises, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned, or delayed.
8. Tenant shall not permit or suffer merchandise of any kind at any time to be
placed, exhibited, or displayed outside its Premises, nor shall Tenant use
the exterior sidewalks or exterior walkways of the Premises to display,
store, or place any merchandise or goods. No sale of merchandise by tenant
sale, truckload sale, or the like shall be permitted within the Premises.
9. Tenant shall not permit or suffer any portion of the Premises to be used
for lodging purposes.
10. Tenant will install monitored electronic door locking mechanisms for
entryways; provided however, Landlord shall be provided access to the
Premises by Tenant providing keys or passcodes to the Premises.
11. No windows, doors, or other light or air sources that reflect or admit
light or air into the office areas shall be covered or obstructed, except
for suitable and
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<PAGE>
approved window drapes or blinds, nor shall any articles be placed on
window sills.
12. No awning or other projections shall be attached to, or be visible from,
the exterior of the Building. No blinds or drapes shall be attached to,
hung in, or used in connection with any window or door of the Premises
except in accordance with the standards adopted by Landlord with Landlord's
prior written approval; in all events where applicable, any blinds, shades,
or drapes shall be installed on the interior side of windows or doors.
13. Tenant shall not make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with in any manner whatever occupants of the
Premises or neighboring buildings or premises, or those having business
with them. Tenant shall not throw anything out of doors or windows, or onto
public or common areas of the Premises.
14. Canvassing, soliciting, and peddling in the Premises are prohibited.
Landlord reserves the right to eject from the Premises any solicitors,
canvassers, or peddlers and any other persons who, in the judgment of
Landlord, are annoying or interfering with Tenant's or Landlord's
operations or who are otherwise undesirable.
15. Tenant acknowledges that the appearance of its offices exposed to public
view from outside the Building must be maintained with particular attention
to orderliness, cleanliness, and an image of professional quality and high
standards.
16. Tenant and its employees shall be deemed to have read these rules and
regulations, and to have agreed to abide by them.
17. Landlord reserves the right to make such other and further reasonable rules
and regulations as in Landlord's judgment may be helpful for the safety,
care, and cleanliness of the Premises and for the preservation of good
order in the Premises. Tenant agrees to abide by all the rules and
regulations above stated and any additional reasonable rules and
regulations which are adopted by Landlord.
INITIALS:
---------
Landlord: /s/[ILLEGIBLE]^^
------------------
Tenant: /s/[ILLEGIBLE]^^
------------------
D-2
<PAGE>
EXHIBIT "E"
ENVIRONMENTAL MATTERS
---------------------
A. Definitions.
For purposes of this Lease, the following terms have the definitions
ascribed below:
(1) "Environmental Laws" shall mean all present and future federal, state,
and local laws, statutes, ordinances, rules, regulations, standards, directives,
interpretations and conditions of approval, all administrative or judicial
orders or decrees, and all guidelines, permits, licenses, approvals, or other
entitlements, or rules of common law, pertaining to the protection of the
environment or human or animal health or safety.
(2) "Hazardous Substances" shall mean any chemical, substance, medical, or
other waste, living organism, or combination of same which is or may be
hazardous to the environment or human or animal health or safety due to its
radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity,
carcinogenicity, mutagenicity, phytotoxicity, infectiousness, or other harmful
or potentially harmful properties or effects. "Hazardous Substances" shall
include, without limitation, petroleum hydrocarbons, including crude oil or any
fraction of same, asbestos, radon, polychlorinated biphenyls (PCBs), methane,
and all substances which now or in the future may be defined as "hazardous
substances," "hazardous wastes," "extremely hazardous wastes," "hazardous
materials," or "toxic substances," or which are otherwise listed, defined or
regulated in any manner pursuant to any Environmental Laws.
(3) "Environmental Damages" shall mean all claims, suits, judgments,
damages, losses, penalties, fines, liabilities, encumbrances, liens, costs, and
expenses of whatever kind or nature, contingent or otherwise, matured or
unmatured, foreseeable or unforeseeable, and including, without limitation: (a)
damages for personal injury, or injury to property or natural resources
occurring on or off the Premises, including, without limitation, lost profits,
consequential damages, the cost of demolition and rebuilding, interest and
penalties, and claims brought by or on behalf of employees of Tenant, with
respect to which Tenant waives any immunity to which it may be entitled under
any industrial or workers' compensation laws; (b) fees incurred for the services
of attorneys, consultants, contractors, experts, laboratories, the preparation
of any feasibility studies or reports, or the performance of any investigation,
remediation, removal, abatement, containment, closure, restoration, or
monitoring work required by any federal, state, or local governmental agency or
political subdivision, or reasonably necessary to make full economic use of the
Premises or other property; (c) liability to any third person or governmental
agency to indemnify such person or agency for costs expended or liabilities
incurred in connection with the items referenced in clauses (a) and (b) above;
and (d) diminution of the value of the Premises and damages for loss or
business, restrictions on use, or adverse impacts on marketing rentable or
usable space, or of any amenity, of the Premises.
(4) "Manage" or "Management" shall mean any use, generation, storage,
treatment, disposal, transportation, handling, or other management of Hazardous
Substances .
(5) "Release" shall mean any accidental or intentional spilling, leaking,
pumping, pouring, emitting, discharging, injecting, escaping, leaching,
migrating, dumping, or disposing into the air, land, surface water, ground
E-1
<PAGE>
water, or the environment (including, without limitation, the abandonment or
discarding of receptacles containing any Hazardous Substances).
B. Permitted Conditions and Substances.
Except to the extent expressly permitted in the Schedule of Permitted
Conditions ("Permitted Conditions") and Permitted Substances ("Permitted
Substances") attached as Exhibit "E-1," Tenant shall not generate, use, store,
treat, process, handle, or Release any Hazardous Substances on or about the
Premises. Permitted Conditions may be created or maintained, and Permitted
Substances may be Managed, only in strict compliance with this Lease and all
Environmental Laws. The Schedule of Permitted Conditions and Permitted
Substances shall not be modified in any respect without Landlord's prior written
consent, which may be granted, withheld, or conditioned in Landlord's sole
discretion.
C. Compliance with Environmental Laws.
Tenant at its sole cost shall comply with all applicable Environmental
Laws, including, without limitation, procuring and maintaining in effect any
permits or licenses required for Tenant's operations on or about the Premises.
Tenant shall provide Landlord with a photocopy of each such permit or license.
Where applicable Environmental Laws or a permit or license requires a closure
plan, Tenant shall not commence operations or construction of any improvements
until (1) the appropriate governmental authorities, and Landlord, have approved
such closure plan and (2) Tenant has provided evidence satisfactory to Landlord
of its ability to fund the estimated cost of implementing the approved closure
plan.
D. Storage Tanks.
Tenant shall not under any circumstances install, use, or operate any
underground storage tanks. Tenant shall not install, use, or operate any
aboveground storage tanks unless specifically approved in advance and in writing
by Landlord. Such approval may be granted, withheld, or conditioned in
Landlord's sole discretion. If Landlord approves the installation, use, or
operation of any aboveground storage tank, Tenant shall be solely responsible
for complying with all requirements which may apply to Landlord as owner of the
Premises, including, without limitation, any financial assurance requirements,
and Tenant shall furnish evidence satisfactory to Landlord of such compliance.
Tenant also shall test the soil for settling and conduct appropriate tests of
the tank and associated piping and equipment at the time of installation to
assure that the tank has been properly installed.
E. Tenant's Plans.
Tenant promptly shall provide to Landlord any and all operating, emergency,
contingency, and other plans, procedures or documents pertaining to the
Management or Release of Hazardous Substances on or about the Premises which are
required pursuant to Environmental Laws. In addition, Tenant shall provide to
Landlord:
(1) Waste Disposal Plan. Within 30 days after execution of this Lease,
Tenant shall submit to Landlord a written waste disposal plan. Such plan shall
identify, in detail, the anticipated nature, constituents, and average and
maximum monthly quantities of all solid waste Managed at the Premises, whether
or not such waste is or may be a Hazardous Substance. Tenant shall dispose of
all waste that is or may be a Hazardous Substance at off-site
E-2
<PAGE>
locations in accordance with all applicable Environmental Laws, and shall
provide Landlord with a photocopy of any hazardous waste manifest. No waste that
is or may be a Hazardous Substance shall be disposed of in, on, under, or about
the Premises. If Landlord reasonably suspects any waste present at the Premises
to be a Hazardous Substance, Tenant shall sample and analyze such waste in
accordance with applicable Environmental Laws; provided, however, that in the
event any such sample and analysis instigated by Landlord shall fail to indicate
the existence of a Hazardous Substance, Landlord shall pay for such sampling and
analysis. Tenant promptly shall submit a photocopy of the results of such tests
to Landlord.
(2) Emergency Plan. Within 30 days after execution of this Lease, Tenant
shall submit to Landlord a written plan for handling any emergency situations
that reasonably may be anticipated to occur on or about the Premises, including,
without limitation, fires, tsunami, flood, earthquake, explosion, and the
Release of any Hazardous Substances. At a minimum, the emergency plan shall (a)
comply with all Environmental Laws, (b) contain building evacuation procedures,
Release control and containment procedures for each type of Hazardous Substance
present on the Premises, and (c) include notification procedures and security
measures to limit public access and exposure to any Hazardous Substances.
(3) General. Tenant shall not create or maintain the Permitted Conditions,
or introduce Permitted Substances onto the Premises, until Tenant has submitted
to Landlord the waste disposal plans, emergency plans, and any other plans or
similar contingency measures that may be required pursuant to Environmental
Laws. If there is any change in Tenant's operations, or any Permitted Condition
or Permitted Substance is added to Exhibit "E-1," Tenant shall revise and update
such plans and submit them to Landlord. Tenant shall not create the new
Permitted Condition or introduce the new Hazardous Substance onto the Premises
until Tenant has submitted to Landlord such revised and updated plans and
obtained any necessary approvals required pursuant to Environmental Laws. Tenant
at all times shall ensure that its employees are fully trained to execute the
procedures and measures contained in such plans.
F. Precautionary Measures.
Tenant, at Tenant's sole cost, shall take all reasonable precautionary
measures ("Precautionary Measures") to prevent structural damage to the Premises
as a result of Tenant's Management of Hazardous Substances. Such Precautionary
Measures shall include, as necessary, but shall not be limited to, installation
and use of secondary containment facilities; seal coating the floors and roof
structures on a routine basis; continuous monitoring of aboveground and
underground storage tanks; continual monitoring of concrete floors and paved
areas for any pitting or cracks; installation and maintenance of special exhaust
systems or drains for prevention of rusting or corrosion within the Premises;
and, to the extent required by Environmental Laws, maintenance of special waste
water treatment or sewer discharge systems for the lawful discharge of any
Hazardous Substances. Tenant, at Tenant's sole cost, shall maintain the
Premises in good condition, ordinary wear and tear excepted, and repair any
damage to the Premises resulting directly or indirectly from Tenant's
Management, or the Release or presence of Hazardous Substances in, on, under, or
about the Premises.
E-3
<PAGE>
G. Reports; Notifications.
For any year in which any Hazardous Substances have been Managed or
otherwise been present in, on, under, or about the Premises, Tenant shall
provide Landlord with a written report listing the Hazardous Substances which
were present in, on, under, or about the Premises; all Releases of Hazardous
Substances that occurred or were discovered in, on, under, or about the
Premises; Hazardous Substance-related compliance activities; and all manifests,
business plans, consent agreements, or other contracts relating to Hazardous
Substances executed or requested during that time period. The report shall
include copies of all documents and correspondence related to such activities.
Tenant shall keep Landlord fully informed at all times regarding all
environmental-related matters affecting Tenant or the Premises. Tenant shall
give Landlord immediate written notice of (1) any investigation, enforcement,
remediation, or other regulatory action or order taken, issued, or threatened in
connection with the presence, Release, or threatened Release of any Hazardous
Substances in, on, under, or about the Premises or otherwise resulting from the
occupancy, use, or activities of Tenant in, on, under, or about the Premises;
(2) any claims made or threatened by any third party against Tenant, or any
report, notice, or complaint filed or threatened to be filed with any government
agency, in connection with the presence, Release, or threatened Release of any
Hazardous Substance in, on, under, or about the Premises or otherwise resulting
from the occupancy, use, or activities of Tenant in, on, under, or about the
Premises; (3) any Release of Hazardous Substances in, on, under, or about the
Premises, or other property in the vicinity of the Premises, or Tenant's
discovery of any environmental condition which could subject Landlord or the
Premises to any restrictions on ownership, occupancy, transferability, or use of
the Premises; and (4) all incidents or matters as to which Tenant is required to
give notice to any governmental entity pursuant to any Environmental Law.
Tenant shall promptly provide Landlord with photocopies of all claims,
complaints, warnings, materials, reports, technical data, notices,
correspondence, and other information or documents relating to any
environmental-related incidents or matters which are the subject of any notice
required under this Section.
Tenant acknowledges and agrees that all reporting and warning obligations
required under Environmental Laws are the sole responsibility of Tenant, and
Tenant shall be solely responsible for complying with Environmental Laws
regarding the disclosure of, the Release, threatened Release, presence, or
danger of Hazardous Substances.
H. Remediation.
(1) Environmental Condition. The generation, presence, use, storage,
treatment, disposal, handling, or Release of any Hazardous Substance in
violation of this Lease, or any Environmental Laws, is referred to as an
"Environmental Condition." In the event an Environmental Condition exists on or
about the Premises, Tenant shall promptly undertake and diligently complete, at
its sole cost, and in strict compliance with this Lease and all applicable
Environmental Laws, all investigative, corrective, and remedial measures
required to respond to the Environmental Condition. Such measures shall
include, without limitation, removal and proper disposal of the Hazardous
Substance, and restoration of all land, improvements, and other affected areas
so that, upon completion of the investigation, corrective, or remedial measures,
the Premises and any other areas affected by the Environmental Condition
E-4
<PAGE>
shall be in the same or better condition, character, and quality as before the
Environmental Condition occurred.
(2) Landlord's Approval. Unless an emergency situation exists that
requires immediate action, Tenant shall obtain Landlord's prior written approval
of all contemplated investigative, corrective, or remedial measures. Such
approval shall not be unreasonably withheld. Examples of measures subject to
Landlord's prior approval include the selection of any environmental consultant
or contractor, determination of the scope of work and sampling activities to be
performed by the consultant or any contractor, and the form and substance of all
draft reports prepared by any consultant (before such reports are finalized).
------
Tenant shall provide Landlord with at least three business days' advance notice
of any proposed sampling and, if Landlord requests, Tenant shall split samples
with Landlord. Tenant shall also promptly provide Landlord with the results of
any test, investigation, or inquiry conducted by or on behalf of Tenant in
connection with the presence or suspected presence of Hazardous Substances on or
about the Premises. Tenant shall provide Landlord with reasonable advance
notice, and Landlord shall have the right, but not the obligation, to
participate in all oral or written communications with governmental entities
concerning Environmental Conditions on or about the Premises.
(3) Landlord's Right to Act. If Tenant fails to comply with this provision
of the Lease, and such failure continues for more than 72 hours after delivery
of written notice from Landlord or a governmental agency, Landlord shall have
the right (but not the obligation), in its sole discretion, and without limiting
any other remedy which may be available to Landlord under this Lease, at law, or
in equity, to respond to the Environmental Condition in any manner it may deem
appropriate. Such right shall include, without limitation, the right to engage
environmental consultants and contractors, conduct any sampling, coring,
testing, digging, drilling, monitoring, and analyses, perform any investigation,
corrective, remedial, or other work required or recommended to correct any
alleged violations, conditions, deficiencies, or hazards noted by any
governmental entity or environmental consultant, and take all steps necessary to
terminate or close any tanks or other facilities. If Landlord performs the
remediation, Tenant shall reimburse Landlord within five business days after
receipt of Landlord's invoice for any amount incurred or expended by Landlord in
connection with such remediation (including consultants', experts' and
attorneys' fees and costs), together with interest at the highest rate permitted
by law, calculated from the date of Landlord's expenditure until paid.
I. Landlord's Right of Entry; Closure.
(1) Right of Entry. Landlord and its representatives shall have the
right, exercisable by Landlord in its sole discretion, upon reasonable prior
notice to Tenant, to enter the Premises in a manner so as not to unreasonably
interfere with Tenant's occupancy or Use to: (a) conduct any sampling, testing,
monitoring and analysis for Hazardous Substances, including soil or water
sampling, testing, monitoring, digging and drilling, or structural analyses; (b)
inspect any documents, materials, inventory, financial data, or notices or
correspondence to or from private parties or governmental or regulatory
authorities in connection with Hazardous Substances; (c) review all storage,
use, transportation, and disposal facilities and procedures associated with the
use of Hazardous Substances; and (d) assess the Premises or the Tenant's use of
the Premises (collectively, an "Inspection"). Landlord shall exercise such
right so as to minimize interference with Tenant's activities on the Premises,
to the extent consistent with the full exercise of Landlord's rights.
E-5
<PAGE>
A representative of Tenant shall be permitted to accompany Landlord and its
representatives during an Inspection. If the results of an Inspection indicate
that there has been a Release of a Hazardous Substance on or about the Premises,
and Landlord in its reasonable discretion believes, on the basis of the
Inspection, that the Release was caused by an act or omission of Tenant, or
Tenant's employees, agents, sublessees, contractors, representatives, or
invitees, or that Tenant has not complied with this Lease or with Environmental
Laws, Tenant shall pay for the cost of performing the Inspection, including, but
not limited to, the costs of soil or water sampling, testing, or monitoring,
digging and drilling, or structural analysis, and Landlord may pursue all of its
rights and remedies under the Lease, at law, or in equity.
J. Environmental Tests and Audits.
Unless otherwise required by Environmental Laws, Tenant shall not perform
or cause to be performed any Hazardous Substances surveys, studies, reports, or
inspections relating to the Premises without obtaining Landlord's advance
written consent. If, following receipt of Landlord's approval, such activities
are undertaken and the presence of Hazardous Substances in, on, under, or about
the Premises, or likelihood same is confirmed, Tenant shall immediately commence
all necessary remediation, abatement, removal, and cleanup actions in accordance
with that section of this exhibit entitled "Remediation."
K. Confidentiality.
(1) Confidentiality of Environmental Matters. From and after the effective
date of this Lease, Tenant shall exert its best efforts to maintain all matters
relating to Hazardous Substances on the Premises in strict confidence. Except
with the prior written consent of Landlord, and except as may be necessary to
exercise its rights and fulfill its obligations under this Lease, Tenant shall
not disclose to third parties the existence of any matters relating to Hazardous
Substances, and Tenant shall not issue, encourage, or cooperate in the issuance
of, any press releases, media articles, or other public announcements,
including, without limitation, any disclosure with respect to the presence of
any Hazardous Substances at or around the Premises, the terms of this Lease, or
the perceived or known plans and intentions of Landlord with respect to any
matters relating to Hazardous Substances. Nothing within this paragraph shall
preclude Tenant from complying with any laws, regulations, or ordinances
propounded by any court or governmental authority.
(2) Confidentiality of Premises Documents and Characteristics. Tenant
understands that Tenant may be granted certain access rights to certain
confidential information relating to the Premises and Hazardous Substances
during the course of this Lease. All records, documents, and information with
respect to Hazardous Substances are confidential in nature, including, without
limitation, technical data concerning the Premises, financial, geological
reports, structural reports, and reports regarding Hazardous Substances relating
to the Property, for purposes of this Lease. Tenant agrees to hold same in
strictest confidence, to not disclose or permit disclosure to any person or
entity, and to not make any unauthorized use of any confidential information
without the prior written consent of Landlord. Nothing within this paragraph
shall preclude Tenant from complying with any laws, regulations, or ordinances
propounded by any court or governmental authority.
E-6
<PAGE>
(3) Property of Landlord. All confidential information and communications
shall be and remain the property of Landlord, and Tenant shall promptly deliver
any and all information, documents, reports, and correspondence relating to the
Premises to Landlord within five days after termination of this Lease.
L. Financial Assurances.
Tenant shall strictly comply with any and all financial assurance
requirements that may be required pursuant to any Environmental Laws for the
occupancy, use, or conduct of activities at and about the Premises. Upon the
request of Landlord, Tenant shall promptly provide to Landlord photocopies of
documents confirming Tenant's compliance with such requirements. In addition,
Tenant shall provide to Landlord financial assurances in the form of pollution
liability insurance in the amount of $1,000,000.00, which shall assure Landlord
that adequate funds are available to remedy any Environmental Damage or
Environmental Condition which Tenant or the Premises may incur or sustain as a
result of or relating to the Release or Management of Hazardous Substances in,
on, under, or about the Premises.
M. Termination.
(1) Termination of Lease. Landlord shall have the right to terminate the
Lease in Landlord's sole and absolute discretion in the event that (a) any use
of the Premises by Tenant involves Hazardous Substances in a manner or for a
purpose prohibited by any governmental agency or authority; (b) Tenant has been
required by any lender or governmental authority to take remedial action in
connection with Hazardous Substances at, on, under, or in the vicinity of the
Premises resulting from Tenant's action or use of the Premises (unless Tenant is
diligently seeking compliance with such remedial action); or (c) Tenant is
subject to an enforcement order issued by any governmental authority in
connection with a Hazardous Substance on the Premises (unless Tenant is
diligently seeking compliance with such enforcement order). Upon termination or
expiration of the Lease, Tenant shall, at its own expense, cause all Hazardous
Substances placed in, on, under, or about the Premises by Tenant or at Tenant's
direction to be removed from the Premises and transported off-site for
treatment, for storage, disposal, or other management in compliance with all
applicable Environmental Laws.
(2) Tenant's Post-Termination Obligations. During any period of time
employed by Tenant after the termination of this Lease to complete the removal
from the Premises or remediation of any such Hazardous Substances, Tenant shall
continue to pay the full rental in accordance with this Lease, which rental
shall be prorated daily at the holdover rate pursuant to the terms of the Lease.
Such payment shall be in addition to any other rights and remedies of Landlord
under this Lease, at law, or in equity.
N. Assignment and Subletting.
Notwithstanding any other provisions in this Lease, if (1) any anticipated
use of the Premises by any proposed assignee or subtenant involves the
Management of Hazardous Substances in a manner or for a purpose prohibited by
any governmental agency or authority, or that differs materially from Tenant's
use, (2) Tenant is subject to any claim, enforcement action, action, or
violation relating to Hazardous Substances, or (3) any Hazardous Substances have
been Released in, on, under, or about the Premises, or (4) the proposed assignee
or subtenant has been required by any prior landlord, lender, or governmental
authority to take remedial action in connection with Hazardous
E-7
<PAGE>
Substances contaminating a property, if the contamination resulted from such
party's action or use of the property in question, or (5) the proposed assignee
or subtenant is subject to an enforcement order issued by any governmental
authority in connection with the use, disposal, or storage of any Hazardous
Substances, it shall not be unreasonable for Landlord to withhold its consent to
an assignment or subletting to such proposed assignee or subtenant.
O. Tenant's Release and Indemnification of Landlord.
(1) No Representation by Landlord. Prior to execution and delivery of this
Lease, Tenant has made such inspections and investigations of environmental
conditions in and around the Premises as Tenant desires and deems appropriate.
Tenant, in entering into this Lease, is leasing its Premises "AS IS", subject to
Landlord's indemnity below, in reliance solely on its own inspections and
investigations, and not on any representations, warranties, statements, or other
information from Landlord or its representative, whether express or implied,
except as may be expressly warranted by Landlord in this exhibit.
(2) Tenant's Indemnification of Landlord. In addition to, and without
limiting the scope of, all other indemnities provided by Tenant to Landlord
under this Lease or Environmental Laws, Tenant shall indemnify, defend (with
counsel acceptable to the indemnitees), and hold harmless Landlord and
Landlord's officers, directors, employees, agents, trustees, beneficiaries,
successors, successors in trust, and assigns, from and against any and all
Environmental Damages, directly or indirectly, in whole or in part, arising out
of or in connection with the use or occupancy of the Premises by Tenant or
Tenant's employees, agents, contractors, invitees, or any other person claiming
under Tenant, and related to Hazardous Substances, including, without
limitation, non-compliance with this Lease or any Environmental Laws and the
Release of any Hazardous Substances in, on, under, or about the Premises, and
from the Premises on, to, or into the surrounding lands, air, or water.
(3) Landlord's Indemnification of Tenant. Landlord shall indemnify, defend
(with counsel reasonably acceptable to the indemnitees) and hold harmless Tenant
and Tenant's officers, directors, employees, agents, affiliated corporations,
successors, and assigns, from and against any and all Environmental Damages
directly or indirectly, in whole or in part, arising out of or in connection
with Environmental Conditions that 1) existed on or about the Premises as a
result of activities conducted on or near the Premises prior to Tenant's
occupancy of the Premises, or 2) were caused solely by Landlord's gross
negligence or wilful misconduct.
P. No Shift of Liability.
Landlord's exercise or failure to exercise the rights granted in this
exhibit to the Lease shall not in any way shift responsibility for Hazardous
Substances or compliance with Environmental Laws from Tenant to Landlord, nor
impose any liability on Landlord.
Q. Survival.
The obligations of Tenant under this exhibit to the Lease shall survive any
termination or expiration of this Lease, and any conveyance by Landlord of its
interest in the Premises, and shall continue in full force and effect.
E-8
<PAGE>
APPROVED AS TO FORM:
- -------------------
/s/ Margaret C. Fitzgerald
- ---------------------------
counsel for Tenant
APPROVED AS TO FORM:
- -------------------
/s/ [ILLEGIBLE]^^
- ---------------------------
JONES & CANNON,
a professional corporation
440 North Center
Arlington, Texas 76011
E-9
<PAGE>
EXHIBIT "E-1"
Permitted Conditions
--------------------
- --Installation, operation and maintenance of one diesel-fired emergency power
generator and ancillary or related equipment and activities including fuel and
Hazardous Substance storage in above-ground tanks and containers
- --Installation, operation and maintenance of lead-acid, nickel-cadmium and any
other type of electrical power storage batteries
- --Installation, operation and maintenance of telecommunications, computer,
printing, HVAC, electrical, lighting, satellite and ancillary or related
equipment and activities which may contain or lawfully Release Hazardous
Substances
Permitted Substances
--------------------
- --diesel fuel
- --batteries
- --ordinary office supplies
E-10
<PAGE>
EXHIBIT "F"
OPTION TO EXTEND TERM
---------------------
This exhibit is attached to and made a part of that certain lease dated
December 21, 1999 by and between THE TRUSTEES UNDER THE WILL AND OF THE ESTATE
OF JAMES CAMPBELL, DECEASED, ACTING IN THEIR FIDUCIARY AND NOT IN THEIR
INDIVIDUAL CAPACITIES ("Landlord"), and EBASEONE CORPORATION ("Tenant"),
covering the property commonly known as 12095 I-45 North, Houston, Texas 77060
(the "Premises").
I. OPTION TO EXTEND TERM
Landlord hereby grants to Tenant one Option (the "Option") to extend the
Term for an additional term of five years (the "Extension"), on the same terms,
conditions, and covenants set forth in the Lease, except as provided below. The
Option shall be exercised only by written notice delivered to Landlord not more
than 12 months nor less than six months prior to the expiration of the Term. If
Tenant fails to deliver to Landlord written notice of the exercise of the Option
within the prescribed time period, the Option shall lapse, and there shall be no
further right of Tenant to extend the Term. The Option shall be exercisable by
Tenant on the express condition that, at the time of the exercise, and at all
times prior to the commencement of the Extension, Tenant shall not be in default
under any of the provisions of the Lease. The foregoing Option is personal to
Tenant and may not be exercised by any assignee or subtenant of Tenant.
II. CALCULATION OF RENT
Fair Rental Value Adjustment
----------------------------
The Base Rent shall be increased on the first day of the Extension to the
"Fair Rental Value of the Premises" (as defined below), determined in the
following manner:
a. Landlord and Tenant shall endeavor in good faith upon Tenant's
exercise of the Option to agree upon the Fair Rental Value of the Premises. If
Landlord and Tenant have not been able to agree on the Fair Rental Value of the
Premises within 30 days after Tenant's exercise of the Option, the Base Rent for
the Extension shall be determined as follows: within 45 days following the
exercise of the Option, Landlord and Tenant shall endeavor in good faith to
agree upon a single appraiser. If Landlord and Tenant are unable to agree upon
a single appraiser within said 45 day period, each shall then, by written notice
to the other, within ten days after said 45 day period, appoint one appraiser.
Within ten days after the two appraisers are appointed, the two appointed
appraisers shall appoint a third appraiser. If either Landlord or Tenant fails
to appoint its respective appraiser within the prescribed time period, the
single appraiser appointed shall determine the fair rental value of the
property. If the two appointed appraisers fail to agree on the third appraiser,
he or she shall be appointed by the then president of the Houston Board of
Realtors. Each party shall bear the cost of the appraiser appointed by it, and
the parties shall share equally the cost of the third appraiser.
b. The term "Fair Rental Value of the Premises" shall mean the rent that a
ready and willing tenant would pay, at the time of the commencement of the
Extension, as monthly Base Rent to a ready and willing lessor of property
comparable to the Premises, if such property were exposed for lease on the open
market for a reasonable period of time, and taking into account all of the
purposes for which such property may be used, and not just the use proposed to
be made of the property by Tenant. The Fair Rental Value of the Premises
F-1
<PAGE>
shall be the average of the two of the three appraisals which are closest in
amount, and the third appraisal shall be disregarded. In no event shall the Base
Rent be reduced by reason of such computation. If the Fair Rental Value of the
Premises is not determined prior to the commencement of the Extension, then
Tenant shall continue to pay to Landlord the Base Rent applicable to the
Premises immediately prior to the Extension, until the Fair Rental Value of the
Premises is determined, and when it is determined, Tenant shall pay to Landlord
within ten days after receipt of written notice the difference between the Base
Rent actually paid by Tenant to Landlord and the new Base Rent determined under
this provision.
INITIALS:
---------
Landlord: /s/ [ILLEGIBLE]^^
------------------------
Tenant: /s/ [ILLEGIBLE]^^
---------------------------
approved as to form:
- --------------------
/s/ Margaret C. Fitzgerald
- ---------------------------
counsel for Tenant
approved as to form:
- -------------------
/s/ [ILLEGIBLE]^^
- ---------------------------
JONES & CANNON,
a professional corporation
440 North Center
Arlington, Texas 76011
F-2
<PAGE>
EXHIBIT "G"
TELECOMMUNICATION RECEIVER AND
TRANSMISSION EQUIPMENT/USE OF ROOF
----------------------------------
Grant of Permission
-------------------
Subject to the terms below, Landlord hereby grants Tenant the right to
utilize a portion of the roof of the Project above the Premises solely for the
installation, operation, and maintenance of telecommunication receiver and
transmission equipment ("Satellite Equipment").
Landlord's Prior Written Approval
---------------------------------
Tenant shall not install or operate any Satellite Equipment until and
unless it receives the prior written approval of Landlord, which approval shall
not be unreasonably withheld. Landlord shall approve or reject the proposed
installation and operation of the Satellite Equipment within ten business days
after Tenant submits 1) plans and specifications for the proposed installation
of the Satellite Equipment, 2) photocopies of all required governmental and
quasi-governmental permits, licenses, and authorizations, and 3) all
certificates of insurance as required pursuant to the terms of the Lease.
Landlord shall have the right to reasonably disapprove any such information
or plans, and such disapproval shall negate any right of Tenant to install
Satellite Equipment upon the Project. Notwithstanding anything within this
provision to the contrary, Tenant shall not permit or cause any Satellite
Equipment, or the installation and/or operation of any Satellite Equipment, to
damage the structural integrity of the Project, penetrate or damage the roof of
the Project, interfere with any service provided by Landlord to any tenant of
the Project, reduce the amount of leasable space in the Project, detract from
the aesthetic value of the Project, or invalidate any applicable roof warranty.
Installation and Operation of Satellite Equipment
-------------------------------------------------
Tenant covenants and agrees that neither Tenant nor its agents will cause
any damage to the roof of the Project, or any part of the common area of the
Project, during the installation and/or operation of any Satellite Equipment.
If any such damage is caused, Tenant shall be responsible for all damages which
may occur to the roof of the Project or to the Project.
Insurance
---------
During any time that Tenant utilizes Satellite Equipment, Tenant shall
maintain insurance coverage as required in article X of the Lease, and such
coverage shall reference and include the use of the area of the roof of the
Project utilized for the Satellite Equipment, and Tenant's use of the Satellite
Equipment shall be so noted in the certificate of insurance provided to Landlord
pursuant to the terms of the Lease. Prior to Tenant's installation and
operation of any Satellite Equipment, and throughout the term of the Lease,
Tenant shall provide Landlord with evidence of such additional insurance
satisfactory to Landlord, in its sole discretion, that Landlord deems reasonably
necessary for the installation and operation of the Satellite Equipment. All
such policies shall name Landlord and such other individuals or entities as
Landlord may from time to time designate as "additional insureds."
<PAGE>
Termination and Relocation Rights
---------------------------------
Landlord may, in its sole judgment and discretion, terminate Tenant's right
to install Satellite Equipment upon 24 hours' written notice, in the event that
the Satellite Equipment is 1) causing physical damage to the structural
integrity of the Project, or 2) is interfering with the safety, access, or use
of any part of the common area of the Project, or 3) invalidates any applicable
roof warranty for the Project.
Landlord may, in its sole judgment and discretion, require Tenant, upon 15
days' prior written notice, to relocate the Satellite Equipment to another
location upon the roof of the Project as may be designated by Landlord. Any
such relocation cost shall be at Landlord's sole expense.
Removal of Satellite Equipment
------------------------------
Upon revocation of the right granted by this exhibit, or upon the
Termination Date or earlier termination of the Lease, Tenant shall be required
to remove the Satellite Equipment from the Project at Tenant's sole cost and
expense. Tenant shall leave the portion of the roof of the Project where the
Satellite Equipment was located in good order and repair, and Tenant shall be
responsible for repairing the roof of the Project, and for all damages that may
occur to the roof or the Project caused by the installation, operation, or
removal of the Satellite Equipment.
In the event that Tenant does not remove the Satellite Equipment when
required, Tenant hereby authorizes Landlord to remove and dispose of the
Satellite Equipment, and Tenant expressly authorizes Landlord to charge Tenant
for all costs and expenses incurred by Landlord as a result of such removal and
disposition. Tenant agrees that Landlord shall not be liable in any manner for
any such property disposed of or removed by Landlord.
Licenses, Permits, Laws, and Rules
----------------------------------
Tenant shall secure at its sole cost and expense from the proper
governmental authorities all licenses or permits required by law for the
installation, maintenance, or operation of any Satellite Dish. Tenant shall at
its own expense promptly observe and comply with all laws, rules, or
requirements of all federal, state, or local governmental units or agencies, as
such laws, rules, or requirements may relate to the installation or operation of
Satellite Equipment. Tenant shall pay any fines, penalties, damages, or costs
arising directly or indirectly from Tenant's failure to observe or comply with
said laws, rules, or regulations.
Release and Indemnification
---------------------------
Tenant hereby waives all claims against Landlord for damage upon or about
the Premises or the Project arising from any use or operation of the Satellite
Equipment, and Tenant hereby agrees that the provisions of article XII shall
apply to any usage of the roof of the Project by Tenant for utilization of
Satellite Equipment.
Emergencies
-----------
In the event of any emergency affecting the Project, Landlord shall have
the right at any such time to take any and all reasonable measures, including
inspection, repair, or removal of any Satellite Equipment, as may be necessary
or desirable for the safety, protection, or preservation of the Premises or the
Project, or in order to comply will all laws, orders, or requirements of
governmental or other authorities. Landlord's rights pursuant to this
G-2
<PAGE>
paragraph shall not otherwise diminish the rights granted to Tenant under this
exhibit.
INITIALS:
---------
Landlord: /s/ [ILLEGIBLE]^^
------------------------
Tenant: /s/ [ILLEGIBLE]^^
---------------------------
APPROVED AS TO FORM:
- --------------------
/s/ Margaret C. Fitzgerald
- -----------------------------
counsel for Tenant
APPROVED AS TO FORM:
- -------------------
/s/ [ILLEGIBLE]^^
---------------------------
JONES & CANNON,
a professional corporation
440 North Center
Arlington, Texas 76011
G-3
<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.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Houston, Texas
February 7, 2000
<TABLE> <S> <C>
<PAGE>
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